KAMN - Earnings call transcript Q1 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day ladies and gentlemen, and welcome to the Kaman Corporation First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference call is being recorded.

Now like to turn the call over to Jamie Coogan, Vice President, Investor Relations. Sir, you may begin.

Jamie Coogan

morning. Good welcome first to call. XXXX to everyone like quarter Kaman’s earnings I’d and the Keating, Rob Officer; President Neal today Starr, Financial President Vice Conducting are; Executive Chairman, call and Chief Executive Chief Officer. and

information These forth from company its would current of I quarterly forward-looking filed our earnings actual the consist note company’s regarding of latest any call begin, Form The the XX-K company’s the we factors, statements including Commission, statements expectations discussed financial statements release. due the include the and with the other the economy on events. like projections with Exchange filings these to underlying other the company report in on future setting most Before earnings with during forward-looking future are and described indicated performance; our current and that the statements on which and business, items; those evening revenue, to of assumptions statements some management; important many of of together Securities plans economic in the of differ our report of objectives business. Form materially to the will first company’s and results its respect and or the and yesterday could X-K future

measures the the Keating. GAAP as that, I’ll non-GAAP In With applicable addition, company’s to we filed call expect included SEC Reconciliations to with over Neal measures earnings and defined release in measures to X-K. and discuss that are in certain turn Neal? information yesterday’s financial rules the regulations. are

Neal Keating

and continued improve to quarter each today today's Starting review thank to our outlook XXXX. first I you the segment the with the to call financial call. morning for updated an Good to I'd joining growth for Jamie. results sales sequentially. business, in has of on top our the and us discuss distribution, food, you, in Rob balance turn over with sales to over up modest before the of see volume sales year in update on begin like prior X.X% by of day with especially end were mining. and our machinery a to transportation, per pleased XX led sales from increased and sales saw in seven We step a across national light markets up relatively We X.X% accounts. in our manufacturing, increase Thank

have new national we these accounts near carried costs customers. new won several which some term we as However, onboard

significantly a accounts, then transition benefit Although will it expect in remainder of we the year. time ramp up takes through to more slight which these the second quarter, the

we year the coupled in Additionally, national saw our backlog when and us for our growth. the position helps balance provides a account a to revenue $XX drive increase activity, us continued million this and backdrop positive with of

a for results sales in of commercial and the aerospace, design. to generation transitions to our performance next structure strong this platform into XXX programs Turning a military decline programs, defense the on number lower our reflect sales quarter commercial and offset K-MAX legacy as due by

that platforms in successful on beyond. continued applications been a new aerospace of in position and XXXX have We securing for number growth

requirements. XX,XXX to program, largest portion expect JPFs significant government of with satisfy X,XXX a deliveries XXXX DCS contracts. our with the with Moving to deliveries we our US deliver X,XXX We approximately delivered in of the to quarter associated between these during XX,XXX going over still fuses to

process the aerospace pressure significantly that of product. contracts mix Interest and higher the US While, this favorable new in will put we're order for quarter, the the operating negotiating remains mix from for in modest sales DCS on for benefited full expand would JPF performance. margin the year strong of government we've book the the

next new These open our machine production strategic of investments a number our facility reduce the customers in Bloomfield of we engineers that underscoring celebration bring and platforms. relationship During And XXXX, test capabilities lower held will of to applications of have challenging a considerable product them on to our offerings. tools, by applications. over to investment costs we and Airbus in design to reduce Airbus, will Recently, our made and campus aircraft. robotics for state-of-the-art helping to specialty and our have allowing test we've we in our past few selection support expand advanced in technology in on enable with years, to generation And allowed we engineered the the and honor worked a increased automation have new number their lead bearings most our as our past times. years, time our products partner, while our meet and market a content us to us

proud are look relationship. Airbus this expand to been We to continuing to recognized by have and forward

announced our of For on to actions weighed and performance for composite aerospace the quarter year. are continue for make and the Cost steps structures transition we last restructuring expected year. weighted to half progress first the we to on programs, these be margin the

providing aerospace from $XXX the positions full JPF, future Black through the by grew like of quarter. of critical rate, increase specialty to most us AH-XZ year and successful in end and rate expect actions watermark engineered This backlog aerospace and programs million the will benefits run high reaching our well slides. XXXX. bearings the for our Driven across product for execution We these backlog as Hawk, over move recent JPF by the the at we contract, K-MAX

strategy about increase spend compared half debt stronger flexibility to saw cash of a with a acquisition flow flow generation call passing in our have reduced significant talking our wanted our XXXX, the increased latter on quarter year the the when cash prior Before off execute in and I to The Rob, acquisition to strategy. providing moving combined forward. our we significantly to load, moment

our capabilities engineer would offerings leveraging products We are which current our enhance synergies. largely evaluating help on potential business, our drive targets focused while aerospace to

will Rob. Rob? we our process, this of approach the metrics. to through disciplined to our over And turn mindful in return I'll valuation, move remain now call internal invested capital on we As

Robert Starr

I and will Neal the the begin revenue is you recognition everyone. in accounting, good by touching quarter. which for results change Thank our on reflective in today morning

Before to outlook of moving the adopted our and old and for XXXX. discuss performance to moment an recognition the on year, reflect of the With results. still the with update how quarter a new would results to this We take accounted under at results affects our start adoption new standard. our prior period standard. revenue the revenue like I finishing standard the our for first

the same impact remain relatively for recognition immaterial. and For the quarter distribution, was the method the of revenue substantially

was these progresses of a new Prior does of the related impact adoption, these ,program that the of the timing our to It not or is on the prior to work Under our delivery new affect these total receipts means product aerospace, basis. our the of amount while revenue the speaking, recognized a revenue this units note to adoption impacts on as recognize revenue now using to important of standard, of upon For delivery contracts. on customers. as we contracts majority recognition, timing contracts on products we to the a of that standard more it the of will revenue the of incurred when Generally measurement contracts costs significant. are recognize to majority the revenue we cash the recognize delivery or revenue long-term we our customers. a payments

and does program this this the K-MAX our So change USD largest programs The what results our mean are forward? JPF from moving with impact on program.

as costs JPF our Our recognized past delivery revenue program. to recognition USD we to Eliminating incurred recognize are experienced on this be customer. the that smoother often volatility in quarter the only will quarter, we revenue was upon revenue when as

new the of economics payments as we better the cost the government method as is revenue recognition Importantly, from program US this receive with progress aligns incurred.

JPF that meant prior this XX recognize program, of we Option our quarter first the revenue delivery. to on For

revenue K-MAX, For we've this recognize delivery. moving was prior as in from meant model will noted where to of was In to X.X is on recognize above, first revenue as delivery lower timing. increase the on income the associated The during the with one as the we related the revenue revenue customer, operating recognized adoption progress to which million a made quarter upon quarter current standard away in the our primarily K-MAX we title aircraft quarter. transfer now of aircraft

refer our prepared and included the these quarter we The adjusted we our in Diluted last earnings earnings season for to operating revenue benefited fourth exchange costs call. in per programs. Black the in new recognition recognize $X.XX the in the detailed increase profit $X.XX the XXX from for to achieved increased JPF, With segments year. of adjusted let's compared filed per foreign discussion reminder, increase result new impact restructuring to adoption diluted to AH-XZ prior is our standard said, Form results it to Hawk When our share sales and would the quarter. earnings sales as diluted severance of first year outlook quarter a related $X.XX under in share million, the of move standard. the on for X.X% currency at the favorable that and items, anticipated of per that and Consolidated incurred both share a rates. on XX-Q Please an quarter. more in XXXX the as highlighted As the income increase result for

significant included reduction performance, and began USG effective XXX.X XX million in Additionally, Aerospace contract. under in increased for increase a earnings deliveries the improved benefited the year JPF, Option in an to of delivered X.X$ mix as for compared the quarter prior Sales USG JPF of the tax sales our our we the from and on to pension XXX.X recognizing plan. period DCS revenue revenue rate period. higher our million we

Additionally, X.X Specialty for our were miniature margins XX.X% to Operating Bearing for and restructuring sales, of for the XXX related severance increase we point primarily a volume in when over adjusted PMA product million prior saw increase bearings year. or our higher expenses, aerospace basis the XX.X% offerings. an and

across margins from the as increase the XXX.X second sales million million year, products. daily prior XXXX. of expect prior X.X% bearings total, We platforms second to Daily saw per our increase sales and with bearing the million X.X% year sales through our increases our growth over a sales the coming increase year. X from day to distribution X.X in At all in XXX.X the specialty product the power period. contribution of representing products quarter million We compared in rates notable our improvement most for our since quarter the transmission the half highest of aerospace

of X.X% was margin with operating expectations. in line quarter First performance our

quarters. as impact The contributing from the expenses. As disproportionately these costs quarter is higher certain such lessens margins in impacted to payroll and subsequent the related taxes first employee XXXk costs vacation year were margins by typical, through to

of the discussion for a to our cash move income change the for in I want the to flow I touch related and Before expense. on performance quarter, accounting pension

and items costs. the aerospace reclassification the delivered while basis a As X.X% for basis this income. accountant have we approximately for the or what delivered adjusted Absent, call, changes the reclassification of distribution these margin million respectively the distribution lowered discussed have X when from quarter points of the accounting in operating would on This XX.X%, approximately in accounting under restructuring margin, margins would prior fourth have treatment. points their change, aerospace of an in resulted XXX operating XX.X% disclosed of below would pension quarter expense for operating operating for XX calculation by

cash the million leverage prior end of of use low cash led million, two long a ratio Our from to of to down reducing period year were cash XX.X flow flow our compared This XX.X free XX debt, to to the times use operations term range. we which million pay improvement. at our XX.X million,

acquisition performance agreement have With anticipated we availability to revolving cash our financing year, strategy. the capacity under on increased execute our ample for flow the credit and the

continue expect for with XX.X% transition the million of restructuring adjusted to sales X.X million be to in the and to XX.X% Moving aerospace margins we XXX XX.X% XXX to XX.XX, operating million when to cost. of at approximately our of outlook, range or

In are to accounts. We defined million expect XX billion for X.X to for national billion our margin, confidence million, expectations raising We X the as our to us effectively for our from incentives. from our April, the hold are first of underlying income year million margins finalized. to segments employee provides underlying distribution the our range of operating This to previous for had calculation been the sales XX.X in operating plan X.XX year. of range expectations was million the quarter now due in expectations increasing announced by the in the segments our X.X in the performance for we expense prior assumptions by anticipated outlook. X.X% We previously not with prior our the Despite contemplated time the sales XXXX expectations of ramping this, X.X% benefit pension for one performance our in sales increasing

elected In addition, maintaining to operations will pension our receive an to additional million cash our for still XXX flow flow free cash Taking additional tax consideration, our effective or which XXXX million rate. from $XXX contribute into plan, million a XX expectations XXX we are at to million tax million. to this we $XXX benefit of contribution

net quarter our last has cash long goal term free our the averaged XXX% over XX% years, As well we earnings. above flow four mentioned percent conversion to of of last XXX%

to expect balance continue XXXX. this through the We of

the expect XX% half year, I'll the turn we the in the of Neal. the that, of into over With year. Moving to earnings for of call second cadence still our earnings approximately back

Neal Keating

I'd well our Thank investors than employees their for as and every dedication our delivering customers services as thank support to for products X,XXX interest day. like and to more commitment the our in Rob. of world-class

turn over the Jamie? call I'll to Now Jamie. back

Jamie Coogan

question, the first Operator, please? can we have

Operator

our first question Marshall Edward & with Sidoti Instructions] And from Company. [Operator is

Edward Marshall

Morning guys, are you? how

Neal Keating

you are how Ed, doing? Good.

Edward Marshall

okay. Thanks. I'm

JPF with of split year? was that that XX/XX shipped there DCS timing, of in secondly, the that other the the the rest large is the of XXX -- QX? through order, So that specifically option in XQ margin remainder is why is smoothing, of curious large the then wearing I'm rest and still the on and or something the Is

Robert Starr

Yeah.

So portion order. related a this remaining first that DCS were quarter -- shipped The million the in of $XX units things. DCS Rob, order, that couple the the really is to that the was

the are you correct. of terms In cadence,

driving You year. the a in to half prior what's earnings things, -- might more to the the XXX. expect few a we years, given which we where a that calculation the ramp those back under really majority of as there be ASC similar our USG bearings, the have But expect is up in of smoothing,

are expecting structures, in as also improved And see distribution profit also half restructuring delivery that we're loaded. also in of going We are front unit improvement costs to from as well. our

those So all guidance. back when those, you kind of the contribute earnings half to combined loaded

Edward Marshall

Got you.

Okay. margin, -- with with about I'm lot through the kind of you're look as. more at And quarter, the margin, wondering, faces seeing And that Just through the There's curious, made new year some and maybe accounts I'm then the built because started the at cadence tail-off anticipated for strongest which you've lower the the volume. talked timing fourth a a that distribution year, QX does strongest? or some fourth I'm your year. but investments. we increased of to the and seasonality, you for year still is is of be typically wondering quarter

Neal Keating

you probably quarter. I would noted, third particular first the as be accounts In expect during that we've would the strongest quarter cost the to onboard had the Ed.

volume we though, to holidays fall even little quarter in the from be expect gets the incremental like that quarter third some see the from bit in up volume fourth cost. of look to year. then second fourth them would absorb I continued harder fixed ramp quarter with But to just And likely expect We would, that strongest. would the would growth it at and the balance start the the in a

Edward Marshall

revenue it as the you mentioned I'm was bearings items business power think kind time some I that curious, I'm seeing the get forth. the of seeing automation, I seeing Are And the creates. that the the lead a and of within of for the strongest up electrical saw so distribution? longer in you're orders? stuff it strength that just Okay. the the yet? flow, is of you Rob of such wondering am sense picked BW you you maybe side some Are

Robert Starr

We're, for we higher little orders million than add we we're noted, of and seeing good normal the bit pretty about in as a in quarter. strength through added -- which backlog, us $XX

that we the would been to know, growth. and So slowed you organic in had X% shipments half during between down of quarter, if X% have

of well. suppliers on struggling little dues but orders, So some our past are we've up that had that, a then bit catching seen are some we as and the us

Edward Marshall

managing for inflation? me, freight you one how Final

Robert Starr

Yeah.

In of a that be to freight terms continue focus ours. of does Ed, that

fuel certainly certainly increased are freight. prices We will seeing that to rising contribute

very and managing of are we So on we're freight. that closely We're certainly team the that aware is changing dynamics seeing the in focused it.

Edward Marshall

It. guys much. Got Appreciate very it. Thanks

Robert Starr

Thank you, Ed.

Neal Keating

Ed. you, Thank

Operator

you. Thank

Hamilton. from Drexel comes question next Our with Pete Skibitski

open. Your line is

Pete Skibitski

morning Good guys.

Robert Starr

Pete. morning, Good

Neal Keating

Pete. morning, Good

Pete Skibitski

distribution acceleration there, underlying if is you a distinct growth curious economy kind onboarding? the distribution, I'm just giving if tax tailwind the talking just, national accounts any in accounts. so feeling on you about it's the for of you Just the national Are are in more than side, or reform US? the

Robert Starr

not Pete to accounts. the time point through it is this first quarter, in national

our, down me, excuse fact, from year. than accounts to slightly year In we last were had growth, in it year lower or lower we national growth was

really we don't new to clearly in relate we quarter. specifically ISM I production. seeing, seeing numbers but we know the above accounts in volume reform, second it some anticipate fact We're industrial XX%. will So if above tax strong contributing in well begin national our uptick are can XX%, to

is the it I'm So, to and be I glad certainly participating see to think is of that. we're manufacturing it recovering glad economy right part certainly now. in

Pete Skibitski

going than you a So had it years distribution for topline you has it? know, it's obviously because since awhile feels story an, it's in it better to real several been been organic

Robert Starr

better about and it's for the know, which Pete consistent, occasionally. also good We, it. a also, and cadence you we relatively is us sign Yeah. a at feel daily do lot look we

a capital be of providing to. from cap of because Now us day equipment we that order to day supplying a for will is up consistency than the or and for capital much orders in better pop might But it's been expenditures larger recently. see daily we rate the for

Pete Skibitski

side, still more happened. just just that nice and I you're on significant there's ask the statements thought million a Okay. new a, want saying what is booked which given to order you've a JP yet there. $XXX I opportunities,

degree, to know orders So timing in color? some of I new of some but these relative any sizing? and of of sense can it's probably types add you anything terms

Robert Starr

we'll tell you into up about -- will parts. two I it break

receipt of with government XX know, XX The the second We fourth first be the Option size you was early or -- range over just last million XX anticipate are plus would roughly that additional same that quarter a We, the XX $XXX up in in XX Option million as which million for million orders. quarter, we of would quarter total. anticipate in third of so US to XXX year, a closed million. originally an the

In addition, likely they be also in XX and that the Option same and XX, Air Force the announced late US awarded year, last anticipated we would range.

be So anticipate that from year this sole would a awarded we to was later source being those stated command. and

we luck service and the We've which million a foreign USG of those earned let's continue deliver. on our of good sales. the had So to work by number $XXX And the quality we for pleased think reliability ability with million in $XXX governments to and and commercial with capabilities also call somewhere recently we're we position between, it the the of side, direct product, both and see it very there, with.

we expand our we'll I be we think confident to book. to So able order are, DCS continue remain that

Pete Skibitski

back Thanks great. great. guys. queue. in That's get That's I'll

Robert Starr

Pete. Thanks

Operator

Thank you.

Our Cieslak with is Research. question next Northcoast from Ryan

Ryan Cieslak

guys. morning Hey, good

Robert Starr

Ryan. Morning

Ryan Cieslak

am think like you based maybe basis? sales range X% dip on progress? distribution, Obviously, the year up quarter? it year if give well February I call bit in as to I'm mentioned first that color on some how you little trended way were just a over last maybe wondering conference I could a April you the guess on Neal I March the all And on then played a out. looks finished down quarter

Robert Starr

date. from thing, our was quarter through the we Actually actually year. look comps first the And January to in I Sure Ryan. quarter, we're got but fractionally at, up when the April March, last think that fact were up through best And tougher. XX% we month cadence

know, we're were we've a pleased sequential did from, we -- second our And month increase, rate, strong weakened maintained although conference a we incoming have the call. the pretty which in had you with. we actually So after February order half nice of

Ryan Cieslak

specific you And to point know was quarter? of was terms see there or where something saw guys Neal, the in of the it that that would typically that at anything just weakness you

Neal Keating

can't has I thing, any point say one nicely pick that to maintained Yeah, it did we Ryan, that. up back and could and March in

right balance led our pretty of we're million the with that's the are XX the increasing by and pleased we for outlook year. So us what really to where now

Ryan Cieslak

guys? comps you May to relative And in and June easier the for get there April

Neal Keating

They do, right. that’s

Ryan Cieslak

within that any there? spread now, right your Okay, the the it's out comment cost might can on that great. distribution play having the pricing And of just seeing what maybe and and provide price then you right balance you trend now impact on you're for Maybe year.

Neal Keating

now. Ryan, over we continue price the to us could price to few believe the between of we're course and increases see X% impact X% year. that a beginning Obviously

I the think more we July will see timeframe. in

from gauge the probably better that second year. have right expect But some we little that think than our X% much quarter would to now. and squeeze a in be benefit early we what in a later X%. from should then it So We we'll margin see, call of

Ryan Cieslak

to got additional of account us these maybe us and wins size cadence can on some ramp sort maybe incremental also of And Neal, you sales help color Okay, guys margins or the or the you. contribution forward? can the incremental going with growth? of the give the the cadence of maybe Just have quantify it for national the you and

Neal Keating

you, were you competitive me question but would for Ryan, much. were appreciate If if we're know, there. not reasons, you wouldn't answer to going the it, I it. ask I very go I You

Ryan Cieslak

going asked to cadence. And here, the split the year, ones about question then earnings back the for last enough. the Fair of a just couple

JPF from just of at color to year I the I with, second step sort the think of again, lot half has the guess it the first a basically that quarter. pretty quarter. was the you do just on about again those adopt down. quarter? how me need aerospace about to the for thinking first feels the in to second? sequentially what's terms earnings really help would do the just any implies Rob drop here big can It maybe just of of from timing we margins the us earnings to a first to provide and in the in But step first shift in XX% from think second made first out in impacting like maybe to Thanks. of I

Robert Starr

good we Yeah, of A question. the word Ryan's a couple things, do approximate. use

XX% approximately. the So is

as of quarters terms significantly in really second - the In aerospace, we improvement, And the to expect aerospace we see margin notable restructure a don't improve front do four end expectations margin we see that we bearings. to a mentioned. for and to also decline move And costs in we quarter. loaded to as have as through as I deliver under three we or clearly

in of wise, margin based at we're in expecting a your but we the again, material. second quarter slight aerospace. in perhaps just to would terms the see on timing degradation meaningful a nothing reduction all aerospace, that Certainly sales in the answer question attribution, not at to So, second quarter expect

of the a relative quarter just we really relative ramp meaningful it's the more that So degradation. see fourth a question in to

Ryan Cieslak

Okay.

thinking all plays the into to the about well? there's something some baked your the relative out year there's quarter and conservatism maybe rest as second So of

Robert Starr

forecasting. to quarter. aerospace, decent we're of trying we seen performance a pretty a what earnings But what rough in second we're expecting we're certainly we, we've given think the because framework and provide terms that cadence the I the in Yeah, think

Ryan Cieslak

pulled in sort change what backlog way forward ability do of potentially or capacities great. then last going Okay, have your to been obviously at mentioned deliver for sales capacity maybe you some your aerospace. some view just your my any you about ramping to guys there you sooner And or of one the production realize maybe forward? to investments Thanks. aerospace in Is the ability as does that about

Neal Keating

bit earlier, positioning industry continue growth see view us is need we us to so lead we think years. is quarter as able all strong even times, to as If that. that It we're seasonally leading interesting as to business. Ryan, has most several been have the product the a to serve of and support I it in it fourth customers is little for that that we

to They new I to for investments the maintain the those those applications business. it and important to cost very lead the and also that, a be good growth leading continue we us market. is in also most through support industry so allow that us think continue So responsive gain maintain positions hopefully share that can to thing in us in times position

Ryan Cieslak

Okay, great. Thanks a lot guys.

Operator

you. Thank

Our Barger question next comes from Capital Steve Markets. with KeyBanc

Neal Keating

Steve. Morning

Steve Barger

Were the or distributors other from win? really what account competitors? national market wins that national over And conquests drove local the

Neal Keating

differentiator a of service and power go factors -- criteria. customer as command that products that by customers us make kind very one bearing range our provide accounts very and think or national and platforms Normally definition application of we are can automation fluid we decisions across We a differentiates added that important experience. believe are a they Steve for have of And well the across broad services The three the distributor. transmission, we the main fact today. value of power national a and

we So those are help win the things think accounts. national differentiate that us these and new

Steve Barger

over? for a can you sight have a on take line comment maybe that How national account the is to You it a switch? how have wait have to And of month contract? it to -- sense long end if and get I'm accounts you selling of trying have agree just the repeatable do to process? talk you in six you to Is do make general they'll to others before a till potential

Neal Keating

is contract committed typically It to are competitor. Sure. at they the a, period simply end the a of because

that accounts So our have the currently like we good And and have on certainly be to the normally we can recently those we at that would I one contract add we that end would period, of list. to in pretty say command. for to visibility don't that a customer then positioned be be and work to win well with that and and get begin of a able transitioning us year, a customer customer the to it in column was year actually half win to excess acquired to to it

be long can it So process. a

Steve Barger

talk Sure. sensitivity around year the accounts are a in similar from margin new not once running, And But the national or accounts to impact other those I And and size. about quarter to up to you them? the quantify will your they onboarding full wanting have understand guidance? or, the can margin

Robert Starr

XX Sure. that first the quarter. of a this cost onboarding on Steve, took about basis in terms quarter, point we during the impact

Steve Barger

Okay.

Robert Starr

terms are we in a across that going normally expect, these we national to in account the expect would be with what our national of roughly line pretty margin would then, portfolio. much And accounts

So, take of mentioned lower a accounts to Neil we three contracted allow a areas. rebate a other provide product to a all benefit And terms platform. that the strategic margin but of given do are volumes these rate, and speaking, certainly we us, also service differentiated across largely the bit just in as

So good it's, really it's for a growth opportunity us.

Steve Barger

I'm the just from? rest bigger customers? Or cycle XQ said in, how year year? the you in see to And lower year Well, point, about writing with outgrows more Sure. they you start of growth in do the half growth do back going more over you contribute had the opportunity or trying that smaller side quarter. think national think yeah. comes with of through I and the in customers rate the to the the just think Why to we're

Robert Starr

Yeah.

national a ramp not transitioning takes that to about disrupt a what's you up bit think that to will. project you time It really account, because your customer. when of critical is if So,

And the operations so accounts. worked procurement very with these at we closely national

national period, the though we're is year. growth in accounts, back was even why we transition more why that's So there a the expecting half of the won which had

the Just that on want. based accounts we

across though it terms a seen we definitely the really growth of growth are is the past. than have weighted we growth overall the In in seeing heavier normally national but board, is accounts would towards

Neal Keating

national a do by lot definition. that have mix, towards have interesting -- a Steve, our mix, Yeah. OEMs customer a more we accounts And product of it's a, is of because higher well, a you OEM, portion of so therefore because we those that, when not know,

growth OEM us percentage little bit strong first of a with the, because a pretty So just bit accounts basis lower quarter, national a that. simply as in that the little well, we in had so being on probably a impacted

Steve Barger

strategy me aerospace margins return to to units on get margin looking have various fall that obviously Understood. And see are spectrum? been have focused we your across any lower and then remarks, question expect acquisition to business acquisitions scale comments units? historically as the around profit aerospace for the your what on to Should the segment prepared business last things oppose of in accretive

Neal Keating

that that we engineered we'd what our almost that our bearings think products, engineered other try see you we But be to focused trying categories those fusing, memory scale was to in and focused have would really and I specialty than including areas today, rather measurement convey in of on products and I lower do in our build primarily businesses. additional think us and margin areas. solely fact in several

Steve Barger

That's very good. Thank you.

Neal Keating

you Steve. Thank

Operator

you. Thank

Research. from Our Dankert next question with comes Longbow Chris

Chris Dankert

guys. morning Good

past, you've first of you'd out? the the that the at meaningful core on call looking margin I now impact the pruning there was optimize through in there been to KIT looking guess So any profile pruning. kind

Robert Starr

that don't I Chris. there think is

Chris Dankert

those the Okay. units but six But still of I apologies is missed being K-MAX if ship guys it, plan then years? officially the into any kind you far Here I in those March or in of the for did shipped slip goes, did as three guess, units as April?

Neal Keating

shipped Chris, being the the still plan is year. six for

delivered one second one had that April. one You're asked and in us accepted was aircraft the or one right. he's might -- through that working And in we're them to to to slipped the time be what right second that a aircraft with We delivered of and a delivery work April. asked defer a later into year They've now. customer March March, the that in the schedule to the in

Chris Dankert

I a since pushes guess thinking any get a other events actually up came, have bit here to want demonstrations, the big kind on coming and marketing downtime there's fire little of about of season? I we

Neal Keating

is already season in which of it fire interesting it's is and actually because kind the ways surprised many unfortunate. started Well, us

later K-MAX manned unmanned. talking a about We this be with both just will week. actually group and I'm

And it been aircraft we in has for the for both clearly of a for work continue to construction, So we hard. of firefighting, the continue to, things that to Marines, provides customers for now. commercial US differentiated and a decades that unmanned, noted logging, manned many for quite itself lot believe capability that both

Chris Dankert

if or aerospace Got down supply looking related, have kind slowing you anything It. at market there broader I some issues shipments along guys the the, guess And the those due to could market, just command necessarily, one anything broader more, I lines? here. any, of into but bottlenecks? run issues of Not or

Neal Keating

Chris to in time, haven't. point this we

and that know the issues of talk talk, meet us. some and, the So There's able now fuselage in was seen ago rates. But some of the that been been you we ramp about it we guys recently that had. a there's supply a to seen of issues I companies know, up right to haven't in year and being interior there some haven't about the chain terms press

to ready and deliver them. take we're more orders So

ready. that where So if we anybody wants stand do to

Chris Dankert

so good. Thanks Sounds much guys.

Neal Keating

Okay, thanks Chris.

Operator

line with And Skibitski Thank the up have follow a you. of [Operator Drexel Instructions] Hamilton. we Pete from

Pete Skibitski

guys, I margin it's expand materials, issue, or just wonder Yeah lower if you know, it pricing or volume is the Q gross about bearings. if steel, I'm wondering it's if could aerospace on temporary just in that? just talks think you aluminum

Robert Starr

our a aren't it's think high. actually the higher in I areas quite where as growth margins

our you etcetera lower But K-FLEX product our me, excuse in our Pete shaft couple in as bearings bearing product lines we've K-MAX, GRW a amortization than now. of imagine example, of because For and growth drive intangibles, had specialized good or the margins those lube lines. ago example years a, industrial in miniature our from bearings self for acquisition come would

slight by degradation think mix. I that be so a likely So driven changes more product in that would

Pete Skibitski

I see.

couple going then in to us? incentives more. Rob, quarter? for $X.X this the I up And just segments that million was you Okay. employee the between break could a if ask

Robert Starr

second of impact Pete be Yeah, and between first, split quarters. really things, a will third that the couple

the So incentive. to relating there the was impact employee quarter first no in

Pete Skibitski

see. I

Okay.

Robert Starr

it's XX/XX between of roughly rough distribution. and aerospace order then, magnitude, And

Pete Skibitski

Got it.

great Okay. That's pretty helpful. wondering thinking And that not? as how And sizable. then are the offset agreement potential for achieving a the you margins guys be big there JPF that? it's if the or could to DCS just I'm about contract,

Robert Starr

good Pete question. Yeah.

relates to are agreements contracts. fairly the these in it thing common would I of As say, first these offset; kinds

about really it. that So, nothing there's would it's I atypical say

of terms million the be not would the over maximum the penalty should working customer life an achieving would enable that the maximum any obligations, that penalty currently agreement team the us contract. the with we achieve about at to In of offset is $XX of to our develop meet In contract that, that.

towards they that levels in too, working of developing the depending with Keep certainly works the is are you mind one allows. we multipliers. agreement on different get type if credit offset that engage way will, or We the that that of activity

obligation, even notional though offset that's value. million a So it's $XXX

are that terms reaching in are working there towards options we an agreement. So of and many, to us we're how meet available many that

Pete Skibitski

That's Okay. that maybe helpful. quarter, there, it. Neal. composites. capital Vermont are one sort volumes Neal you appreciate some during guys announced I site? higher you Last or that related efficiency for seeing that investments through the Was coming of

Neal Keating

equipment capability. Wichita moving ramp as It's that primarily work right, up we're into are program. autoclave was you exactly facilities new Royce also into as support Pete. a our, and we composites the you're consolidate And Vermont our we Yeah, know, Rolls our on putting

we we support work make that transfer capital to ramp well as as sure that up wanted we to So Rolls had on equipment adequate Royce.

Pete Skibitski

That's great. Appreciate it guys.

Neal Keating

Pete. Thanks Okay.

Operator

Northcoast of follow we the Ryan from a up And you. with Research. line do Thank have Cieslak

Ryan Cieslak

ups. Yeah, Thanks. two just follow really quick

First, the and impact ramp in bit quarter? that overcome to the the start assumption is this, ongoing the And into a from forward? first basis in Rob, that onboarding XX cost going quarter, point if second sales little so, distribution is it the more that the

Robert Starr

Yeah, no.

onboarding through But onboarding continued even national of certainly We those a that's and see contribution portion from accounts costs expect will sales ramp, begin to probably QX. margin exactly upfront sales I the QX as think outweigh right. those the of would to Ryan. relating to the the costs.

Ryan Cieslak

last then about spend guys And time the plan we again in my ERP did delayed. the think provide the is implementation or to back you update start kick half the the started of distribution just of of great. one going to can forward? that on do Okay, here something within Is how this you year any that you Thanks.

Robert Starr

anticipate uh, year. the, next that's the think the correct, deployed in half I second being of Ryan. the We upgrade

Ryan Cieslak

I am Thank you. okay.

Operator

session final call Okay. gentlemen, back turn our Thank and concludes ladies this would like for for to to Mr. remarks. I today. his Coogan you. And the Q&A Jamie

Jamie Coogan

you record when conference look you again we joining us second Thank speaking quarter for with today's on our We call. forward to results.

Operator

a conference. participating all the wonderful and you today's that you for program with we Have This disconnect. thank in day. And concludes may

Kaman (KAMN) 8 May 182018 Q1 Earnings call transcript