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27 Oct 16. Kaman Reports 2016 Third Quarter Results. Kaman Corp. (KAMN) today reported financial results for the third fiscal quarter ended September 30, 2016.
Neal J. Keating, Chairman, President and Chief Executive Officer, commented, “In the third quarter, we earned $0.62 per diluted share, or $0.64 of Adjusted Diluted Earnings Per Share*, reflecting the strength of our diverse business and customer mix. While net earnings were up slightly to $17.5m, Adjusted EBITDA* increased 8.4% to $42.3m when compared to the prior year.
“At Distribution, sales decreased 7.4% when compared to the prior period. Organic Sales per Sales Day* declined 6.3% when compared to the prior year and declined 2.7% sequentially, which reflects weaker than expected market conditions. Operating margin was 4.3% in the third quarter, a 60 bps decrease from the 4.9% achieved in the third quarter of last year largely due to the deleveraging impact of the lower sales volume.
“While disappointed in the overall market environment, we continue to invest in our productivity initiative at Distribution which includes operational process improvements and data analytics, primarily focused on expanding operating margins. Although this initiative has been successful in those locations where it has been deployed, the benefits we have seen to date have been largely offset by ongoing implementation costs.
“At Aerospace, sales increased approximately 30% with Organic Sales* increasing 17.2%. The increase in Organic Sales* for the third quarter is primarily due to increased deliveries of the JPF to the U.S. Government. During the quarter, we delivered approximately 9,500 fuzes to the U.S. Government, demonstrating our ability to increase production to meet both U.S. Government and foreign customer demand. With this performance, we expect to deliver approximately 33,000 to 35,000 fuzes for the year, a record for our JPF program. Finally, our 2015 acquisitions continue to deliver positive results and, as expected, were accretive on a GAAP basis in the third quarter and contributed to our strong cash flow performance for the year-to-date period.”
Chief Financial Officer Robert D. Starr, commented, “The third quarter generated strong cash flow performance bringing year-to-date operating cash flows to $70.0m leading to Free Cash Flow* generation of $46.1m, giving us confidence in our cash flow outlook for the year. Net earnings for the period benefited from corporate expenses that were 16% lower than the prior year and 28% lower than the second quarter of 2016. This improved performance, relative to our expectations, was driven by numerous factors, including better than expected experience for healthcare costs, lower incentive compensation expense and continued overall expense management.
“We are revising our outlook for 2016, to reflect our performance through the first nine-months of the year, specifically, the reduced sales volumes we have experienced at Distribution and the shift in the product mix and timing of deliveries at Aerospace.
“At Distribution we have lowered our sales outlook for the year due to our expectations for continued weakness in the industrial markets. We now expect sales in the range of $1,110m to $1,120m as compared to our previously reported range of $1,125m to $1,150m. We have also lowered our outlook for operating margin by 20 bps at the low end and 40 bps at the high end, reducing the expected range to 4.3% to 4.4% due to the negative impact of deleveraging from the lower sales volume; lower vendor incentives and the timing of deliveries for our engineered products.
“Looking forward to the remainder of the year at Aerospace, a number of programs scheduled for delivery in 2016 have shift