Kaman Reports 2019 Third Quarter Results
Third Quarter Highlights:
-
Completed Sale of the Distribution segment for
$700 million in cash -
Net sales from continuing operations up 16% to
$183.0 million versus prior year - Aerospace GAAP operating margin increased to 18.7% from 4.6% in the prior year; Adjusted operating margin* increased 570 basis points compared to the prior year period
-
Earnings from continuing operations increased
$19.6 million ; Adjusted EBITDA* increased$9.7 million for an Adjusted EBITDA margin* of 14.7%, up 380 basis points over the prior year -
Diluted earnings per share from continuing operations increased
$0.70 to $0.36
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Table 1. Summary of Financial Results (unaudited) |
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In thousands except per share amounts |
For the Three Months Ended |
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September 27,
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September 28,
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Change |
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Net sales from continuing operations |
$ |
182,670 |
|
|
$ |
157,134 |
|
|
$ |
25,536 |
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Operating income from continuing operations: |
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Aerospace |
$ |
34,142 |
|
|
$ |
7,206 |
|
|
$ |
26,936 |
|
|
|
% of sales |
18.7 |
% |
|
4.6 |
% |
|
14.1 |
% |
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|||
|
Net (loss) gain on sale of assets |
(416 |
) |
|
(30 |
) |
|
(386 |
) |
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|||
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Corporate expense |
(18,099 |
) |
|
(14,174 |
) |
|
(3,925 |
) |
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|||
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Operating income from continuing operations |
$ |
15,627 |
|
|
$ |
(6,998 |
) |
|
$ |
22,625 |
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Adjusted EBITDA*: |
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Earnings from continuing operations |
$ |
10,130 |
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|
$ |
(9,503 |
) |
|
$ |
19,633 |
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Adjustments |
16,767 |
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|
26,661 |
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|
(9,894 |
) |
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Adjusted EBITDA* |
$ |
26,897 |
|
|
$ |
17,158 |
|
|
$ |
9,739 |
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% of sales |
14.7 |
% |
|
10.9 |
% |
|
3.8 |
% |
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Earnings per share: |
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Diluted earnings per share from continuing operations |
$ |
0.36 |
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|
$ |
(0.34 |
) |
|
$ |
0.70 |
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Adjustments |
0.10 |
|
|
0.48 |
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|
(0.38 |
) |
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Adjusted diluted earnings per share from continuing operations* |
$ |
0.46 |
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$ |
0.14 |
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$ |
0.32 |
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We are also undertaking a comprehensive review of our general and administrative functions in order to improve operational efficiency and to align our costs with revenues. The objective of this initiative is to ensure that we have an organizational structure that will enable us to successfully compete, while streamlining processes, reducing costs, and providing a scalable infrastructure that will allow us to more effectively integrate new acquisitions. Based on the work we have performed to date, we expect full year run rate savings from these actions to be towards the high end of our prior range of
In addition, we look to build upon our legacy as a premier designer and manufacturer of highly engineered products across the aerospace and defense, medical and industrial markets. These efforts incorporate investments to drive organic growth including expanded unmanned capabilities and new composite rotor blades for the K-MAX®, laser guided height of burst sensor and next generation safe and arm technologies, and investments in new specialty bearings and engineered products families including titanium diffusion hardening. We have also been investing in facility expansions and upgrades in the U.S.,
Chief Financial Officer,
Sales for the quarter increased 16.3% to
Operating profit of
Through the first nine months of 2019 we had cash flows from continuing operations of
2019 Outlook
Our 2019 outlook for Aerospace performance:
-
Aerospace:
-
Sales of
$740.0 million to $760.0 million - Operating margins of 16.7% to 17.2%
-
Depreciation and amortization expense of approximately
$21.0 million
-
Sales of
Please see the MD&A section of the Company's Form 10-Q filed with the
A conference call has been scheduled for tomorrow,
About
Table 2. Summary of Segment Information (in thousands) (unaudited) |
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For the Three Months Ended |
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For the Nine Months Ended |
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September 27,
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September 28,
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September 27,
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September 28,
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Net sales from continuing operations: |
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Aerospace |
|
$ |
182,670 |
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|
$ |
157,134 |
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$ |
523,816 |
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$ |
515,135 |
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Operating income from continuing operations: |
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Aerospace |
|
$ |
34,142 |
|
|
$ |
7,206 |
|
|
$ |
85,352 |
|
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$ |
52,609 |
|
Net (loss) gain on sale of assets |
|
(416 |
) |
|
(30 |
) |
|
(351 |
) |
|
1,559 |
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Corporate expense |
|
(18,099 |
) |
|
(14,174 |
) |
|
(46,430 |
) |
|
(45,324 |
) |
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Operating income from continuing operations |
|
$ |
15,627 |
|
|
$ |
(6,998 |
) |
|
$ |
38,571 |
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$ |
8,844 |
|
Table 3. Depreciation and Amortization from
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For the Three Months Ended |
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For the Nine Months Ended |
||||||||||||
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September 27,
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September 28,
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September 27,
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September 28,
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Depreciation and Amortization: |
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Aerospace |
|
$ |
6,156 |
|
|
$ |
6,049 |
|
|
$ |
16,931 |
|
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$ |
18,561 |
|
Corporate |
|
787 |
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|
840 |
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|
2,377 |
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|
2,519 |
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Consolidated Total |
|
$ |
6,943 |
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$ |
6,889 |
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$ |
19,308 |
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$ |
21,080 |
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Non-GAAP Measures Disclosure
Management believes that the Non-GAAP financial measures (i.e. Financial measures that are not computed in accordance with Generally Accepted Accounting Principles) identified by an asterisk (*) used in this release or in other disclosures provide important perspectives into the Company's ongoing business performance. The Company does not intend for the information to be considered in isolation or as a substitute for the related GAAP measures. Other companies may define the measures differently. We define the Non-GAAP measures used in this release and other disclosures as follows:
Organic Sales - Organic Sales is defined as "Net Sales" less sales derived from acquisitions completed during the preceding twelve months. We believe that this measure provides management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, which can obscure underlying trends. We also believe that presenting Organic Sales separately for our segments provides management and investors with useful information about the trends impacting our segments and enables a more direct comparison to other businesses and companies in similar industries. Management recognizes that the term "Organic Sales" may be interpreted differently by other companies and under different circumstances. No other adjustments were made during the three-month and nine-month fiscal periods ended
Table 4. Organic Sales from continuing operations
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For the Three Months Ended |
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For the Nine Months Ended |
||||||||||||
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September 27,
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September 28,
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September 27,
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September 28,
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Aerospace |
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Net sales |
|
$ |
182,670 |
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|
$ |
157,134 |
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|
$ |
523,816 |
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|
$ |
515,135 |
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Acquisition Sales |
|
— |
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— |
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— |
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— |
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Organic Sales |
|
$ |
182,670 |
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|
$ |
157,134 |
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$ |
523,816 |
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|
$ |
515,135 |
|
Adjusted EBITDA from continuing operations - Adjusted EBITDA from continuing operations is defined as earnings from continuing operations before interest, taxes, other expense (income), net, depreciation and amortization and certain items that are not indicative of the operating performance of the Company's segments or corporate function for the period presented. Adjusted EBITDA from continuing operations differs from earnings from continuing operations, as calculated in accordance with GAAP, in that it excludes interest expense, net, income tax expense, depreciation and amortization, other expense (income), net and certain items that are not indicative of the operating performance of the Company's segments or corporate function for the period presented. We have made numerous investments in our business, such as acquisitions and capital expenditures, including facility improvements, new machinery and equipment, improvements to our information technology infrastructure and new ERP systems, which we have adjusted for in Adjusted EBITDA from continuing operations. Adjusted EBITDA from continuing operations also does not give effect to cash used for debt service requirements and thus does not reflect funds available for distributions, reinvestments or other discretionary uses.
Management believes Adjusted EBITDA from continuing operations provides an additional perspective on the operating results of the organization and its earnings capacity and helps improve the comparability of our results between periods because it provides a view of our operations that excludes items that management believes are not reflective of operating performance, such as items traditionally removed from net earnings in the calculation of EBITDA as well as Other expense (income), net and certain items that are not indicative of the operating performance of the Company's segments or corporate function for the period presented. Adjusted EBITDA from continuing operations is not presented as an alternative measure of operating performance, as determined in accordance with GAAP. No other adjustments were made during the three-month and nine-month fiscal periods ended
Table 5. Adjusted EBITDA from continuing
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For the Three Months Ended |
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For the Nine Months Ended |
||||||||||||
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|
September 27,
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September 28,
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|
September 27,
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September 28,
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Adjusted EBITDA from continuing operations |
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Consolidated Results |
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Sales from continuing operations |
|
$ |
182,670 |
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$ |
157,134 |
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$ |
523,816 |
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$ |
515,135 |
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Earnings (loss) from continuing operations |
|
$ |
10,130 |
|
|
$ |
(9,503 |
) |
|
$ |
22,341 |
|
|
$ |
245 |
|
|
|
|
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Interest expense, net |
|
4,058 |
|
|
5,084 |
|
|
14,595 |
|
|
15,407 |
|
||||
Income tax expense |
|
2,297 |
|
|
559 |
|
|
3,244 |
|
|
2,376 |
|
||||
Other (income) expense, net |
|
185 |
|
|
(163 |
) |
|
(367 |
) |
|
(141 |
) |
||||
Depreciation and amortization |
|
6,943 |
|
|
6,889 |
|
|
19,308 |
|
|
21,080 |
|
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Other Adjustments: |
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|
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|
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Restructuring and severance costs |
|
81 |
|
|
1,214 |
|
|
553 |
|
|
4,711 |
|
||||
Non-cash intangible asset impairment charge |
|
— |
|
|
10,039 |
|
|
— |
|
|
10,039 |
|
||||
Non-cash write-off of inventory |
|
— |
|
|
709 |
|
|
— |
|
|
709 |
|
||||
Employee tax-related matters in foreign operations |
|
— |
|
|
1,279 |
|
|
— |
|
|
1,279 |
|
||||
Cost associated with corporate development activities |
|
2,993 |
|
|
1,051 |
|
|
2,993 |
|
|
1,051 |
|
||||
Costs from transition services agreement |
|
1,154 |
|
|
— |
|
|
1,154 |
|
|
— |
|
||||
Income from transition services agreement |
|
(944 |
) |
|
— |
|
|
(944 |
) |
|
— |
|
||||
Gain on the sale of land |
|
— |
|
|
— |
|
|
— |
|
|
(1,520 |
) |
||||
Adjustments |
|
$ |
16,767 |
|
|
$ |
26,661 |
|
|
$ |
40,536 |
|
|
$ |
54,991 |
|
|
|
|
|
|
|
|
|
|
||||||||
Adjusted EBITDA from continuing operations |
|
$ |
26,897 |
|
|
$ |
17,158 |
|
|
$ |
62,877 |
|
|
$ |
55,236 |
|
Adjusted EBITDA margin |
|
14.7 |
% |
|
10.9 |
% |
|
12.0 |
% |
|
10.7 |
% |
Free Cash Flow from continuing operations - Free Cash Flow from continuing operations is defined as GAAP “Net cash provided by (used in) operating activities” in a period less “Expenditures for property, plant & equipment” in the same period. Management believes Free Cash Flow from continuing operations provides an important perspective on our ability to generate cash from our business operations and, as such, that it is an important financial measure for use in evaluating the Company's financial performance. Free Cash Flow from continuing operations should not be viewed as representing the residual cash flow available for discretionary expenditures such as dividends to shareholders or acquisitions, as it may exclude certain mandatory expenditures such as repayment of maturing debt and other contractual obligations. Management uses Free Cash Flow from continuing operations internally to assess overall liquidity. The following table illustrates the calculation of Free Cash Flow from continuing operations using “Net cash provided by (used in) operating activities from continuing operations” and “Expenditures for property, plant & equipment”, GAAP measures from the Condensed Consolidated Statements of Cash Flows included in this release.
Table 6. Free Cash Flow from continuing operations (in
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For the Nine
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For the Six
|
|
For the Three
|
||||||
|
|
September 27,
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|
June 28,
|
|
September 27,
|
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Net cash provided by operating activities from continuing operations |
|
$ |
11,336 |
|
|
$ |
10,862 |
|
|
$ |
474 |
|
Expenditures for property, plant & equipment |
|
(17,411 |
) |
|
(11,375 |
) |
|
(6,036 |
) |
|||
Free Cash Flow from continuing operations |
|
$ |
(6,075 |
) |
|
$ |
(513 |
) |
|
$ |
(5,562 |
) |
Debt to Capitalization Ratio - Debt to Capitalization Ratio is calculated by dividing debt by capitalization. Debt is defined as GAAP “Current portion of long-term debt” plus “Long-term debt, excluding current portion”. Capitalization is defined as Debt plus GAAP “Total shareholders' equity”. Management believes that Debt to Capitalization Ratio is a measurement of financial leverage and provides an insight into the financial structure of the Company and its financial strength. The following table illustrates the calculation of Debt to Capitalization Ratio using GAAP measures from the Condensed Consolidated Balance Sheets included in this release.
Table 7. Debt to Capitalization Ratio (in thousands) (unaudited) |
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|
||||
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|
September 27, 2019 |
|
December 31, 2018 |
||||
Current portion of long-term debt |
|
$ |
— |
|
|
$ |
9,375 |
|
Long-term debt, excluding current portion |
|
180,653 |
|
|
284,256 |
|
||
Debt |
|
$ |
180,653 |
|
|
$ |
293,631 |
|
Total shareholders' equity |
|
788,944 |
|
|
633,157 |
|
||
Capitalization |
|
$ |
969,597 |
|
|
$ |
926,788 |
|
Debt to Capitalization Ratio |
|
18.6 |
% |
|
31.7 |
% |
Adjusted Earnings from Continuing Operations and Adjusted Diluted Earnings Per Share from Continuing Operations - Adjusted Earnings from Continuing Operations and Adjusted Diluted Earnings per Share from Continuing Operations are defined as GAAP "Earnings from Continuing Operations" and "Diluted earnings per share from continuing operations", less items that are not indicative of the operating performance of the business for the periods presented. These items are included in the reconciliation below. Management uses Adjusted Earnings from Continuing Operations and Adjusted Diluted Earnings per Share from Continuing Operations to evaluate performance period over period, to analyze the underlying trends in our business and to assess its performance relative to its competitors. We believe that this information is useful for investors and financial institutions seeking to analyze and compare companies on the basis of operating performance.
The following table illustrates the calculation of Adjusted Earnings from Continuing Operations and Adjusted Diluted Earnings per Share from Continuing Operations using “Earnings from Continuing Operations” and “Diluted earnings per share from continuing operations” from the “Consolidated Statements of Operations” included in the Company's Form 10-Q filed with the
Table 8. Adjusted Earnings from continuing operations and Adjusted Diluted Earnings
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||||||||||||
(In thousands except per share amounts) (unaudited) |
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|
||||||||||||
|
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For the Three Months Ended |
|
For the Nine Months Ended |
||||||||||||
|
|
September 27,
|
|
September 28,
|
|
September 27,
|
|
September 28,
|
||||||||
Adjustments to Earnings from Continuing Operations, pre tax |
|
|
|
|
|
|
|
|
||||||||
Restructuring and severance costs at Aerospace |
|
$ |
81 |
|
|
$ |
1,214 |
|
|
$ |
553 |
|
|
$ |
4,711 |
|
Costs associated with corporate development activities |
|
2,993 |
|
|
1,051 |
|
|
2,993 |
|
|
1,051 |
|
||||
Costs from transition services agreement |
|
1,154 |
|
|
— |
|
|
1,154 |
|
|
— |
|
||||
Income from transition services agreement |
|
(944 |
) |
|
— |
|
|
(944 |
) |
|
— |
|
||||
Benefit from change in state tax laws |
|
— |
|
|
— |
|
|
(2,137 |
) |
|
— |
|
||||
Non-cash non-taxable intangible assets impairment charge |
|
— |
|
|
10,039 |
|
|
— |
|
|
10,039 |
|
||||
Non-cash non-taxable write-off of inventory |
|
— |
|
|
709 |
|
|
— |
|
|
709 |
|
||||
Employee tax-related matters in foreign operations |
|
— |
|
|
1,279 |
|
|
— |
|
|
1,279 |
|
||||
Gain on the sale of land |
|
— |
|
|
— |
|
|
— |
|
|
(1,520 |
) |
||||
Adjustments, pre tax |
|
$ |
3,284 |
|
|
$ |
14,292 |
|
|
$ |
1,619 |
|
|
$ |
16,269 |
|
|
|
|
|
|
|
|
|
|
||||||||
Tax Effect of Adjustments to Earnings from Continuing Operations |
|
|
|
|
|
|
|
|
||||||||
Restructuring and severance costs at Aerospace |
|
$ |
15 |
|
|
$ |
304 |
|
|
$ |
70 |
|
|
$ |
1,178 |
|
Costs associated with corporate development activities |
|
554 |
|
|
263 |
|
|
380 |
|
|
263 |
|
||||
Costs from transition services agreement |
|
213 |
|
|
— |
|
|
147 |
|
|
— |
|
||||
Income from transition services agreement |
|
(175 |
) |
|
— |
|
|
(120 |
) |
|
— |
|
||||
Benefit from change in state tax laws |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
||||
Non-cash non-taxable intangible assets impairment charge |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
||||
Non-cash non-taxable write-off of inventory |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
||||
Employee tax-related matters in foreign operations |
|
— |
|
|
320 |
|
|
— |
|
|
320 |
|
||||
Gain on the sale of land |
|
— |
|
|
— |
|
|
— |
|
|
(380 |
) |
||||
Tax effect of Adjustments |
|
$ |
607 |
|
|
$ |
887 |
|
|
$ |
477 |
|
|
$ |
1,381 |
|
|
|
|
|
|
|
|
|
|
||||||||
Adjustments to Earnings from Continuing Operations, net of tax |
|
|
|
|
|
|
|
|
||||||||
GAAP Earnings from continuing operations, as reported |
|
$ |
10,130 |
|
|
$ |
(9,503 |
) |
|
$ |
22,341 |
|
|
$ |
245 |
|
Restructuring and severance costs at Aerospace |
|
66 |
|
|
910 |
|
|
483 |
|
|
3,533 |
|
||||
Costs associated with corporate development activities |
|
2,439 |
|
|
788 |
|
|
2,613 |
|
|
788 |
|
||||
Costs from transition services agreement |
|
941 |
|
|
— |
|
|
1,007 |
|
|
— |
|
||||
Income from transition services agreement |
|
(769 |
) |
|
— |
|
|
(824 |
) |
|
— |
|
||||
Benefit from change in state tax laws |
|
— |
|
|
— |
|
|
(2,137 |
) |
|
— |
|
||||
Non-cash non-taxable intangible assets impairment charge |
|
— |
|
|
10,039 |
|
|
— |
|
|
10,039 |
|
||||
Non-cash non-taxable write-off of inventory |
|
— |
|
|
709 |
|
|
— |
|
|
709 |
|
||||
Employee tax-related matters in foreign operations |
|
— |
|
|
959 |
|
|
— |
|
|
959 |
|
||||
Gain on the sale of land |
|
— |
|
|
— |
|
|
— |
|
|
(1,140 |
) |
||||
Adjusted Earnings from continuing operations |
|
$ |
12,807 |
|
|
$ |
3,902 |
|
|
$ |
23,483 |
|
|
$ |
15,133 |
|
|
|
|
|
|
|
|
|
|
||||||||
Calculation of Adjusted Diluted Earnings per Share from Continuing Operations |
|
|
|
|
|
|
|
|
||||||||
GAAP diluted earnings per share from continuing operations |
|
$ |
0.36 |
|
|
$ |
(0.34 |
) |
|
$ |
0.79 |
|
|
$ |
0.01 |
|
Restructuring and severance costs at Aerospace |
|
— |
|
|
0.03 |
|
|
0.02 |
|
|
0.13 |
|
||||
Costs associated with corporate development activities |
|
0.09 |
|
|
0.03 |
|
|
0.09 |
|
|
0.03 |
|
||||
Costs from transition services agreement |
|
0.04 |
|
|
— |
|
|
0.04 |
|
|
— |
|
||||
Income from transition services agreement |
|
(0.03 |
) |
|
— |
|
|
(0.03 |
) |
|
— |
|
||||
Benefit from change in state tax laws |
|
— |
|
|
— |
|
|
(0.07 |
) |
|
— |
|
||||
Non-cash non-taxable intangible assets impairment charge |
|
— |
|
|
0.36 |
|
|
— |
|
|
0.35 |
|
||||
Non-cash non-taxable write-off of inventory |
|
— |
|
|
0.03 |
|
|
— |
|
|
0.03 |
|
||||
Employee tax-related matters in foreign operations |
|
— |
|
|
0.03 |
|
|
— |
|
|
0.03 |
|
||||
Gain on the sale of land |
|
— |
|
|
— |
|
|
— |
|
|
(0.04 |
) |
||||
Adjusted Diluted Earnings per Share from continuing operations |
|
$ |
0.46 |
|
|
$ |
0.14 |
|
|
$ |
0.84 |
|
|
$ |
0.54 |
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted weighted average shares outstanding |
|
28,117 |
|
|
28,258 |
|
|
28,104 |
|
|
28,258 |
|
Adjusted Net Sales from continuing operations and Adjusted Operating Income from continuing operations - Adjusted Net Sales from continuing operations is defined as net sales from continuing operations, less items not indicative of normal sales, such as revenue recorded related to the settlement of claims. Adjusted Operating Income from continuing operations is defined as operating income from continuing operations, less items that are not indicative of the operating performance of the Company's segments or corporate function for the period presented. These items are included in the reconciliation below. Management uses Adjusted Net Sales from continuing operations and Adjusted Operating Income from continuing operations to evaluate performance period over period, to analyze underlying trends in our segments and corporate function and to assess their performance relative to their competitors. We believe that this information is useful for investors and financial institutions seeking to analyze and compare companies on the basis of operating performance. The following table illustrates the calculation of Adjusted Operating Income from continuing operations to the Consolidated Financial Statements included in the Company's Form 10-Q filed with the
Table 9. Adjusted Net Sales and Adjusted Operating Income from Continuing Operations |
|
|
|
|
||||||||||||
(In thousands) (unaudited) |
|
|
|
|
||||||||||||
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
||||||||||||
|
|
September 27,
|
|
September 28,
|
|
September 27,
|
|
September 28,
|
||||||||
AEROSPACE SEGMENT OPERATING INCOME: |
|
|
|
|
|
|
|
|
||||||||
Net Sales |
|
$ |
182,670 |
|
|
$ |
157,134 |
|
|
$ |
523,816 |
|
|
$ |
515,135 |
|
GAAP Operating income - Aerospace segment |
|
$ |
34,142 |
|
|
$ |
7,206 |
|
|
$ |
85,352 |
|
|
$ |
52,609 |
|
% of GAAP net sales |
|
18.7 |
% |
|
4.6 |
% |
|
16.3 |
% |
|
10.2 |
% |
||||
Restructuring and severance costs |
|
$ |
81 |
|
|
$ |
1,214 |
|
|
$ |
553 |
|
|
$ |
4,711 |
|
Non-cash non-taxable intangible assets impairment charge |
|
— |
|
|
10,039 |
|
|
— |
|
|
10,039 |
|
||||
Non-cash non-taxable write-off of inventory |
|
— |
|
|
709 |
|
|
— |
|
|
709 |
|
||||
Employee tax-related matters in foreign operations |
|
— |
|
|
1,279 |
|
|
— |
|
|
1,279 |
|
||||
Adjusted Operating Income - Aerospace segment |
|
$ |
34,223 |
|
|
$ |
20,447 |
|
|
$ |
85,905 |
|
|
$ |
69,347 |
|
% of GAAP net sales |
|
18.7 |
% |
|
13.0 |
% |
|
16.4 |
% |
|
13.5 |
% |
||||
CORPORATE EXPENSE: |
|
|
|
|
|
|
|
|
||||||||
GAAP Corporate Expense |
|
(18,099 |
) |
|
(14,174 |
) |
|
(46,430 |
) |
|
(45,324 |
) |
||||
Costs associated with corporate development activities |
|
2,993 |
|
|
1,051 |
|
|
2,993 |
|
|
1,051 |
|
||||
Costs from transition services agreement |
|
1,154 |
|
|
— |
|
|
1,154 |
|
|
— |
|
||||
Adjusted Corporate Expense |
|
$ |
(13,952 |
) |
|
$ |
(13,123 |
) |
|
$ |
(42,283 |
) |
|
$ |
(44,273 |
) |
CONSOLIDATED OPERATING INCOME: |
|
|
|
|
|
|
|
|
||||||||
Net Sales from continuing operations |
|
$ |
182,670 |
|
|
$ |
157,134 |
|
|
$ |
523,816 |
|
|
$ |
515,135 |
|
GAAP - Operating income from continuing operations |
|
$ |
15,627 |
|
|
$ |
(6,998 |
) |
|
$ |
38,571 |
|
|
$ |
8,844 |
|
% of GAAP net sales |
|
8.6 |
% |
|
(4.5 |
)% |
|
7.4 |
% |
|
1.7 |
% |
||||
Restructuring and severance costs |
|
81 |
|
|
1,214 |
|
|
553 |
|
|
4,711 |
|
||||
Costs associated with corporate development activities |
|
2,993 |
|
|
1,051 |
|
|
2,993 |
|
|
1,051 |
|
||||
Costs from transition services agreement |
|
1,154 |
|
|
— |
|
|
1,154 |
|
|
— |
|
||||
Non-cash non-taxable intangible assets impairment charge |
|
— |
|
|
10,039 |
|
|
— |
|
|
10,039 |
|
||||
Non-cash non-taxable write-off of inventory |
|
— |
|
|
709 |
|
|
— |
|
|
709 |
|
||||
Employee tax-related matters in foreign operations |
|
— |
|
|
1,279 |
|
|
— |
|
|
1,279 |
|
||||
Gain on sale of land |
|
— |
|
|
— |
|
|
— |
|
|
(1,520 |
) |
||||
Adjusted Operating Income |
|
$ |
19,855 |
|
|
$ |
7,294 |
|
|
$ |
43,271 |
|
|
$ |
25,113 |
|
% of GAAP net sales |
|
10.9 |
% |
|
4.6 |
% |
|
8.3 |
% |
|
4.9 |
% |
FORWARD-LOOKING STATEMENTS
This release contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements also may be included in other publicly available documents issued by the Company and in oral statements made by our officers and representatives from time to time. These forward-looking statements are intended to provide management's current expectations or plans for our future operating and financial performance, based on assumptions currently believed to be valid. They can be identified by the use of words such as "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "would," "could," "will" and other words of similar meaning in connection with a discussion of future operating or financial performance. Examples of forward looking statements include, among others, statements relating to future sales, earnings, cash flows, results of operations, uses of cash and other measures of financial performance.
Because forward-looking statements relate to the future, they are subject to inherent risks, uncertainties and other factors that may cause the Company's actual results and financial condition to differ materially from those expressed or implied in the forward-looking statements. Such risks, uncertainties and other factors include, among others: (i) the possibility that we may be unable to find appropriate reinvestment opportunities for the proceeds from the sale of the Distribution segment; (ii) risks related to Kaman's performance of its obligations under the transition services agreement entered into in connection with the sale of the Distribution segment and disruption of management time from ongoing business operations relating thereto; (iii) changes in domestic and foreign economic and competitive conditions in markets served by the Company, particularly the defense, commercial aviation and industrial production markets; (iv) changes in government and customer priorities and requirements (including cost-cutting initiatives, government and customer shut-downs, the potential deferral of awards, terminations or reductions of expenditures to respond to the priorities of
Any forward-looking information provided in this release should be considered with these factors in mind. We assume no obligation to update any forward-looking statements contained in this report.
KAMAN CORPORATION AND SUBSIDIARIES |
||||||||||||||||
Condensed Consolidated Statements of Operations |
||||||||||||||||
(In thousands, except per share amounts) (unaudited) |
||||||||||||||||
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
||||||||||||
|
|
September 27,
|
|
September 28,
|
|
September 27,
|
|
September 28,
|
||||||||
Net sales |
|
$ |
182,670 |
|
|
$ |
157,134 |
|
|
$ |
523,816 |
|
|
$ |
515,135 |
|
Cost of sales |
|
121,537 |
|
|
109,446 |
|
|
355,573 |
|
|
360,826 |
|
||||
Gross profit |
|
61,133 |
|
|
47,688 |
|
|
168,243 |
|
|
154,309 |
|
||||
Selling, general and administrative expenses |
|
43,855 |
|
|
43,403 |
|
|
127,614 |
|
|
132,274 |
|
||||
Other intangible assets impairment |
|
— |
|
|
10,039 |
|
|
— |
|
|
10,039 |
|
||||
Costs from transition services agreement |
|
1,154 |
|
|
— |
|
|
1,154 |
|
|
— |
|
||||
Restructuring costs |
|
81 |
|
|
1,214 |
|
|
553 |
|
|
4,711 |
|
||||
Net loss (gain) on sale of assets |
|
416 |
|
|
30 |
|
|
351 |
|
|
(1,559 |
) |
||||
Operating income (loss) |
|
15,627 |
|
|
(6,998 |
) |
|
38,571 |
|
|
8,844 |
|
||||
Interest expense, net |
|
4,058 |
|
|
5,084 |
|
|
14,595 |
|
|
15,407 |
|
||||
Non-service pension and post retirement benefit income |
|
(99 |
) |
|
(2,975 |
) |
|
(298 |
) |
|
(9,043 |
) |
||||
Income from transition services agreement |
|
(944 |
) |
|
— |
|
|
(944 |
) |
|
— |
|
||||
Other expense (income), net |
|
185 |
|
|
(163 |
) |
|
(367 |
) |
|
(141 |
) |
||||
Earnings (loss) from continuing operations before income taxes |
|
12,427 |
|
|
(8,944 |
) |
|
25,585 |
|
|
2,621 |
|
||||
Income tax expense |
|
2,297 |
|
|
559 |
|
|
3,244 |
|
|
2,376 |
|
||||
Earnings (loss) from continuing operations |
|
10,130 |
|
|
(9,503 |
) |
|
22,341 |
|
|
245 |
|
||||
Earnings from discontinued operations before gain on disposal, net of tax |
|
9,860 |
|
|
10,935 |
|
|
25,240 |
|
|
30,347 |
|
||||
Gain on disposal of discontinued operations, net of tax |
|
122,786 |
|
|
— |
|
|
122,786 |
|
|
— |
|
||||
Total earnings from discontinued operations |
|
132,646 |
|
|
10,935 |
|
|
148,026 |
|
|
30,347 |
|
||||
Net earnings |
|
$ |
142,776 |
|
|
$ |
1,432 |
|
|
$ |
170,367 |
|
|
$ |
30,592 |
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings per share: |
|
|
|
|
|
|
|
|
||||||||
Basic earnings per share from continuing operations |
|
$ |
0.36 |
|
|
$ |
(0.34 |
) |
|
$ |
0.80 |
|
|
$ |
0.01 |
|
Basic earnings per share from discontinued operations |
|
4.75 |
|
|
0.39 |
|
|
5.30 |
|
|
1.08 |
|
||||
Basic earnings per share |
|
$ |
5.11 |
|
|
$ |
0.05 |
|
|
$ |
6.10 |
|
|
$ |
1.09 |
|
Diluted earnings per share from continuing operations |
|
$ |
0.36 |
|
|
$ |
(0.34 |
) |
|
$ |
0.79 |
|
|
$ |
0.01 |
|
Diluted earnings per share from discontinued operations |
|
4.72 |
|
|
0.39 |
|
|
5.27 |
|
|
1.07 |
|
||||
Diluted earnings per share |
|
$ |
5.08 |
|
|
$ |
0.05 |
|
|
$ |
6.06 |
|
|
$ |
1.08 |
|
Average shares outstanding: |
|
|
|
|
|
|
|
|
||||||||
Basic |
|
27,952 |
|
|
28,009 |
|
|
27,941 |
|
|
27,944 |
|
||||
Diluted |
|
28,117 |
|
|
28,258 |
|
|
28,104 |
|
|
28,258 |
|
KAMAN CORPORATION AND SUBSIDIARIES |
||||||||
Condensed Consolidated Balance Sheets |
||||||||
(In thousands, except share and per share amounts) (unaudited) |
||||||||
|
|
September 27, 2019 |
|
December 31, 2018 |
||||
Assets |
|
|
|
|
||||
Current assets: |
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
509,990 |
|
|
$ |
25,895 |
|
Accounts receivable, net |
|
130,246 |
|
|
149,338 |
|
||
Contract assets |
|
119,221 |
|
|
99,261 |
|
||
Contract costs, current portion |
|
5,705 |
|
|
5,993 |
|
||
Inventories |
|
173,143 |
|
|
131,569 |
|
||
Income tax refunds receivable |
|
1,585 |
|
|
1,752 |
|
||
Assets held for sale, current portion |
|
— |
|
|
351,261 |
|
||
Other current assets |
|
13,868 |
|
|
8,036 |
|
||
Total current assets |
|
953,758 |
|
|
773,105 |
|
||
Property, plant and equipment, net of accumulated depreciation of $203,787 and $192,285, respectively |
|
136,229 |
|
|
137,112 |
|
||
Operating right-of-use assets, net |
|
16,001 |
|
|
— |
|
||
Goodwill |
|
191,218 |
|
|
196,161 |
|
||
Other intangible assets, net |
|
53,903 |
|
|
58,567 |
|
||
Deferred income taxes |
|
39,337 |
|
|
38,040 |
|
||
Contract costs, noncurrent portion |
|
7,820 |
|
|
10,666 |
|
||
Assets held for sale, noncurrent portion |
|
— |
|
|
229,238 |
|
||
Other assets |
|
32,081 |
|
|
31,173 |
|
||
Total assets |
|
$ |
1,430,347 |
|
|
$ |
1,474,062 |
|
Liabilities and Shareholders’ Equity |
|
|
|
|
||||
Current liabilities: |
|
|
|
|
||||
Current portion of long-term debt, net of debt issuance costs |
|
$ |
— |
|
|
$ |
9,375 |
|
Accounts payable – trade |
|
57,143 |
|
|
56,826 |
|
||
Accrued salaries and wages |
|
40,461 |
|
|
32,795 |
|
||
Contract liabilities, current portion |
|
35,975 |
|
|
28,865 |
|
||
Operating lease liabilities, current portion |
|
4,642 |
|
|
— |
|
||
Income taxes payable |
|
58,493 |
|
|
139 |
|
||
Liabilities held for sale, current portion |
|
— |
|
|
131,047 |
|
||
Other current liabilities |
|
41,859 |
|
|
39,429 |
|
||
Total current liabilities |
|
238,573 |
|
|
298,476 |
|
||
Long-term debt, excluding current portion, net of debt issuance costs |
|
180,653 |
|
|
284,256 |
|
||
Deferred income taxes |
|
7,182 |
|
|
7,146 |
|
||
Underfunded pension |
|
96,710 |
|
|
104,988 |
|
||
Contract liabilities, noncurrent portion |
|
55,096 |
|
|
78,562 |
|
||
Operating lease liabilities, noncurrent portion |
|
12,295 |
|
|
— |
|
||
Liabilities held for sale, noncurrent portion |
|
— |
|
|
15,602 |
|
||
Other long-term liabilities |
|
50,894 |
|
|
51,875 |
|
||
Commitments and contingencies (Note 15) |
|
|
|
|
||||
Shareholders' equity: |
|
|
|
|
||||
Preferred stock, $1 par value, 200,000 shares authorized; none outstanding |
|
— |
|
|
— |
|
||
Common stock, $1 par value, 50,000,000 shares authorized; voting;
|
|
29,850 |
|
|
29,545 |
|
||
Additional paid-in capital |
|
216,655 |
|
|
200,474 |
|
||
Retained earnings |
|
786,798 |
|
|
610,103 |
|
||
Accumulated other comprehensive income (loss) |
|
(159,357 |
) |
|
(134,898 |
) |
||
Less 1,904,262 and 1,672,917 shares of common stock, respectively, held in treasury, at cost |
|
(85,002 |
) |
|
(72,067 |
) |
||
Total shareholders’ equity |
|
788,944 |
|
|
633,157 |
|
||
Total liabilities and shareholders’ equity |
|
$ |
1,430,347 |
|
|
$ |
1,474,062 |
|
KAMAN CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (In thousands) (unaudited) |
||||||||
|
|
For the Nine Months Ended |
||||||
|
|
September 27,
|
|
September 28,
|
||||
Cash flows from operating activities: |
|
|
|
|
||||
Net earnings |
|
$ |
170,367 |
|
|
$ |
30,592 |
|
Less: Total earnings from discontinued operations |
|
148,026 |
|
|
30,347 |
|
||
Earnings from continuing operations |
|
22,341 |
|
|
245 |
|
||
Adjustments to reconcile net earnings from continuing operations to net cash provided by
|
|
|
|
|
||||
Depreciation and amortization |
|
19,308 |
|
|
21,080 |
|
||
Amortization of debt issuance costs |
|
1,401 |
|
|
1,355 |
|
||
Accretion of convertible notes discount |
|
2,067 |
|
|
1,934 |
|
||
Provision for doubtful accounts |
|
384 |
|
|
670 |
|
||
Net loss (gain) on sale of assets |
|
351 |
|
|
(1,559 |
) |
||
Other intangible assets impairment |
|
— |
|
|
10,039 |
|
||
Net loss on derivative instruments |
|
549 |
|
|
642 |
|
||
Stock compensation expense |
|
3,969 |
|
|
4,222 |
|
||
Deferred income taxes |
|
(3,743 |
) |
|
8,094 |
|
||
Changes in assets and liabilities, excluding effects of acquisitions/divestitures: |
|
|
|
|
||||
Accounts receivable |
|
17,650 |
|
|
67,862 |
|
||
Contract assets |
|
(20,303 |
) |
|
(41,033 |
) |
||
Contract costs |
|
3,130 |
|
|
(6,576 |
) |
||
Inventories |
|
(43,139 |
) |
|
(6,698 |
) |
||
Income tax refunds receivable |
|
157 |
|
|
(1,268 |
) |
||
Operating right of use assets |
|
2,388 |
|
|
— |
|
||
Other assets |
|
(4,020 |
) |
|
(3,430 |
) |
||
Accounts payable - trade |
|
704 |
|
|
(2,720 |
) |
||
Contract liabilities |
|
(16,647 |
) |
|
95,331 |
|
||
Operating lease liabilities |
|
(2,256 |
) |
|
— |
|
||
Other current liabilities |
|
7,318 |
|
|
2,631 |
|
||
Income taxes payable |
|
15,620 |
|
|
(2,526 |
) |
||
Pension liabilities |
|
3,128 |
|
|
(36,185 |
) |
||
Other long-term liabilities |
|
979 |
|
|
992 |
|
||
Net cash provided by operating activities of continuing operations |
|
11,336 |
|
|
113,102 |
|
||
Net cash (used in) provided by operating activities of discontinued operations |
|
(7,341 |
) |
|
14,296 |
|
||
Net cash (used in) provided by operating activities |
|
3,995 |
|
|
127,398 |
|
||
Cash flows from investing activities: |
|
|
|
|
||||
Proceeds from sale of assets |
|
82 |
|
|
1,666 |
|
||
Proceeds from sale of discontinued operations |
|
656,736 |
|
|
— |
|
||
Expenditures for property, plant & equipment |
|
(17,411 |
) |
|
(16,623 |
) |
||
Other, net |
|
(3,092 |
) |
|
(2,453 |
) |
||
Net cash provided by (used in) investing activities of continuing operations |
|
636,315 |
|
|
(17,410 |
) |
||
Net cash used in investing activities of discontinued operations |
|
(9,838 |
) |
|
(6,222 |
) |
||
Net cash provided by (used in) investing activities |
|
626,477 |
|
|
(23,632 |
) |
||
Cash flows from financing activities: |
|
|
|
|
||||
Net repayments under revolving credit agreements |
|
(38,500 |
) |
|
(89,727 |
) |
||
Debt repayment |
|
(76,875 |
) |
|
(5,625 |
) |
||
Repayment of convertible notes |
|
(500 |
) |
|
— |
|
||
Net change in bank overdraft |
|
2,995 |
|
|
1,701 |
|
||
Proceeds from exercise of employee stock awards |
|
8,616 |
|
|
6,448 |
|
||
Purchase of treasury shares |
|
(12,006 |
) |
|
(11,996 |
) |
||
Dividends paid |
|
(16,756 |
) |
|
(16,751 |
) |
||
Other, net |
|
(1,092 |
) |
|
(729 |
) |
||
Net cash used in financing activities of continuing operations |
|
(134,118 |
) |
|
(116,679 |
) |
||
Net cash provided by financing activities of discontinued operations |
|
7,967 |
|
|
2,968 |
|
||
Net cash used in financing activities |
|
(126,151 |
) |
|
(113,711 |
) |
||
Net increase (decrease) in cash and cash equivalents |
|
504,321 |
|
|
(9,945 |
) |
||
Cash and cash equivalents included of discontinued operations |
|
(21,834 |
) |
|
(1,929 |
) |
||
Effect of exchange rate changes on cash and cash equivalents |
|
(208 |
) |
|
(737 |
) |
||
Cash and cash equivalents at beginning of period |
|
27,711 |
|
|
36,904 |
|
||
Cash and cash equivalents at end of period |
|
$ |
509,990 |
|
|
$ |
24,293 |
|
|
|
|
|
|
||||
Supplemental disclosure of noncash activities: |
|
|
|
|
||||
Value of common shares issued for unwind of warrant transactions |
|
$ |
— |
|
|
$ |
7,583 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20191104005964/en/
Source:
James Coogan
V.P., Investor Relations
(860) 243-6342
James.Coogan@kaman.com