UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
| FORM | |||||
CURRENT REPORT
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Item 2.02. Results of Operations and Financial Condition
On May 2, 2023, the Company issued a press release summarizing the Company's financial results for the fiscal quarter ended March 31, 2023. A copy of this press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.
A conference call has been scheduled for tomorrow, May 3, 2023, at 8:30 AM ET. Participants must register for the teleconference. Once registration is complete, participants will be provided with a dial-in number containing a personalized PIN to access the call. While not required, it is recommended that participants join 10 minutes prior to the event start. A live webcast will be available during the call and a replay will be available two hours after the call. Registration and webcast can be accessed at http://www.kaman.com/investors/quarterly-earnings-calls. In its discussion, management may reference certain non-GAAP financial measures related to company performance. A reconciliation of that information to the most directly comparable GAAP measures is provided in the press release, furnished herewith, a copy of which can be accessed in the investor relations section of the Company's website.
Item 9.01. Financial Statements and Exhibits
(c) Exhibits
The following document is furnished as an Exhibit pursuant to Item 2.02 hereof:
Exhibit 99.1 - Press Release of the Company, dated May 2, 2023, regarding financial performance for the fiscal quarter ended March 31, 2023.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| KAMAN CORPORATION | ||||||||
| By: | /s/ James G. Coogan | |||||||
| James G. Coogan | ||||||||
| Senior Vice President, | ||||||||
| Chief Financial Officer and Treasurer | ||||||||
Date: May 2, 2023
KAMAN CORPORATION AND SUBSIDIARIES
Index to Exhibits
| Exhibit | Description | |||||||
| 99.1 | Attached | |||||||
| 104 | Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101 | |||||||
NEWS RELEASE
May 2, 2023
KAMAN REPORTS FIRST QUARTER 2023 RESULTS
First Quarter 2023 Highlights:
•Net sales: $194.5 million
•Operating income: $8.6 million
•Net loss: $19 thousand
•Adjusted EBITDA*: $24.8 million; Adjusted EBITDA margin*: 12.7%
•Diluted (loss) earnings per share: $(0.00) per share, $0.08 per share adjusted*
| Table 1. Summary of Financial Results (unaudited) | ||||||||||||||||||||
| Thousands of U.S. dollars (except share data) | Three Months Ended | |||||||||||||||||||
| March 31, 2023 | December 31, 2022 | April 1, 2022 | ||||||||||||||||||
| Net sales | $ | 194,542 | $ | 197,143 | $ | 158,048 | ||||||||||||||
| Net (loss) earnings | (19) | (54,943) | 4,028 | |||||||||||||||||
| Adjusted EBITDA* | 24,769 | 30,987 | 12,186 | |||||||||||||||||
| Adjusted EBITDA margin* | 12.7 | % | 15.7 | % | 7.7 | % | ||||||||||||||
| Diluted (loss) earnings per share | $ | (0.00) | $ | (1.96) | $ | 0.14 | ||||||||||||||
| Adjusted diluted earnings per share* | $ | 0.08 | $ | 0.42 | $ | 0.15 | ||||||||||||||
*See the end of this release for an explanation of the Company's use of Adjusted EBITDA, Adjusted EBITDA margin, Free cash flow and Adjusted diluted earnings per share. See tables 5-9 for reconciliations to the most comparable GAAP measure.
BLOOMFIELD, Conn. (May 2, 2023) - Kaman Corp. (NYSE:KAMN) today reported financial results for the first fiscal quarter ended March 31, 2023.
"We begin the year with solid results, demonstrating the strength of the Engineered Products segment and the benefit this provides as we continue our transformation. Highlighting this performance is the end-market recovery we anticipated in our commercial aerospace and medical end markets. For the three-month period, net sales increased 23% and operating income more than doubled, when compared to the same three-month period in 2022. At the Engineered Products segment, net sales grew by 51% over the first quarter of 2022. Excluding the contribution from Aircraft Wheel and Brake, this segment was up approximately 29%. The results are reflective of the team's execution against its robust backlog and we continue to see strong order rates across this segment. With efforts focused on our highest growth opportunities, we are on the path to enhance earnings power and deliver improved financial performance." said Ian K. Walsh, Chairman, President and Chief Executive Officer.
"Our cost control efforts remain on track as we execute on the Precision Product segment facility consolidation between the Orlando, FL and Middletown, CT sites. We continue to identify additional opportunities to reduce expense across the organization and enhance our profitability. We remain focused on finding incremental cash
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opportunities as part of our net working capital management and will steadily pay down debt through the remainder of the year. We are maintaining our full year outlook for 2023." said Walsh.
OUTLOOK DISCUSSION
Management reaffirms its guidance for 2023. Revenue and earnings will benefit from the addition of Aircraft Wheel and Brake to the portfolio. Organically, Adjusted EBITDA is expected to improve due to margin expansion from the Engineered Products segment.
•Net sales: $730.0 million to $750.0 million
•Net earnings: $4.0 million to $11.6 million
•Adjusted EBITDA: $95.0 million to $105.0 million
•Adjusted EBITDA margin: 13.0% to 14.0%
•Diluted EPS: $0.14 per share to $0.41 per share; adjusted $0.30 per share to $0.57 per share
•Cash from operating activities: $60.0 million to $70.0 million
•Free cash flow: $35.0 million to $45.0 million
For further information, the Company's supplemental presentation relating to the first quarter 2023 results and 2023 outlook will be posted to the Company's website, as detailed below.
KAMAN BUSINESS RESULTS DISCUSSION BY REPORTING SEGMENT
Kaman manages its portfolio through three segments: (1) Engineered Products; (2) Precision Products; and (3) Structures.
Engineered Products - Our Engineered Products segment serves the aerospace and defense, industrial and medical markets providing sophisticated, proprietary aircraft bearings and components; super precision, miniature ball bearings; proprietary spring energized seals, springs and contacts; and wheels, brakes and related hydraulic
components for helicopters, fixed-wing and UAV aircraft.
Table 2. Engineered Products Results | ||||||||||||||||||||
| Thousands of U.S. dollars | Three Months Ended | |||||||||||||||||||
| March 31, 2023 | December 31, 2022 | April 1, 2022 | ||||||||||||||||||
| Net sales | $ | 123,326 | $ | 113,972 | $ | 81,452 | ||||||||||||||
| Operating income | 19,356 | 17,168 | 11,042 | |||||||||||||||||
| Adjusted EBITDA | 30,119 | 30,698 | 17,269 | |||||||||||||||||
| Adjusted EBITDA margin | 24.4 | % | 26.9 | % | 21.2 | % | ||||||||||||||
Three months ended March 31, 2023 versus three months ended December 31, 2022 - Operating income increased $2.2 million, Adjusted EBITDA decreased $0.6 million and margin decreased 2.5 percentage points versus the fourth quarter of 2022. Lower EBITDA and margin compared to the prior period was driven by lower sales and gross margin on our commercial and defense bearings, partially offset by higher volume on our springs, seals and contacts used in medical and aerospace applications and our aftermarket parts and improved margins on our wheels and brakes.
Three months ended March 31, 2023 versus three months ended April 1, 2022 - Operating income increased $8.3 million, despite $4.8 million of intangible asset amortization associated with the acquisition of Aircraft Wheel and Brake. Adjusted EBITDA increased $12.9 million and margin increased 3.2 percentage points versus the first quarter of 2022. Results improved compared to the prior period driven by the contribution of sales and gross margin from our Aircraft Wheel and Brake acquisition and higher sales and gross margin on our commercial bearings and aftermarket parts.
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Precision Products - Our Precision Products segment serves the aerospace and defense markets providing precision safe and arming solutions for missile and bomb systems for the U.S. and allied militaries; subcontract helicopter work; restoration, modification and support of our SH-2G Super Seasprite maritime helicopters; support of our heavy lift K-MAX® manned helicopter, and development of the KARGO UAV unmanned aerial system, a purpose built autonomous medium lift logistics vehicle.
Table 3. Precision Products Results | ||||||||||||||||||||
| Thousands of U.S. dollars | Three Months Ended | |||||||||||||||||||
| March 31, 2023 | December 31, 2022 | April 1, 2022 | ||||||||||||||||||
| Net sales | $ | 37,971 | $ | 49,925 | $ | 47,549 | ||||||||||||||
| Operating income | 1,674 | 6,016 | 3,409 | |||||||||||||||||
| Adjusted EBITDA | 2,486 | 6,801 | 4,440 | |||||||||||||||||
| Adjusted EBITDA margin | 6.5 | % | 13.6 | % | 9.3 | % | ||||||||||||||
Three months ended March 31, 2023 versus three months ended December 31, 2022 - Operating income and Adjusted EBITDA decreased $4.3 million and margin decreased 7.1 percentage points versus the fourth quarter of 2022. Results declined compared to the prior quarter, driven by lower sales and gross margin on K-MAX® spares and support, cost growth on the Fireburst program and higher R&D spend associated with the KARGO UAV unmanned aerial system.
Three months ended March 31, 2023 versus three months ended April 1, 2022 - Operating income decreased $1.7 million, Adjusted EBITDA decreased $2.0 million and margin decreased 2.8 percentage points versus the first quarter of 2022. Results declined compared to the prior period, driven by expected lower JPF sales, planned higher R&D spend associated with the KARGO UAV unmanned aerial system and cost growth on certain fuzing and measuring programs, partially offset by higher sales and margin on our K-MAX® spares and support.
Structures - Our Structures segment serves the aerospace and defense and medical end markets providing sophisticated complex metallic and composite aerostructures for commercial, military and general aviation fixed and rotary wing aircraft, and medical imaging solutions.
Table 4. Structures Results | ||||||||||||||||||||
| Thousands of U.S. dollars | Three Months Ended | |||||||||||||||||||
| March 31, 2023 | December 31, 2022 | April 1, 2022 | ||||||||||||||||||
| Net sales | $ | 33,245 | $ | 33,246 | $ | 29,047 | ||||||||||||||
| Operating loss | (237) | (1,624) | (617) | |||||||||||||||||
| Adjusted EBITDA | 557 | (768) | 289 | |||||||||||||||||
| Adjusted EBITDA margin | 1.7 | % | (2.3) | % | 1.0 | % | ||||||||||||||
Three months ended March 31, 2023 versus three months ended December 31, 2022 - Operating loss decreased $1.4 million, Adjusted EBITDA increased $1.3 million, and margin increased 4.0 percentage points versus the fourth quarter of 2022. Results improved compared to the prior quarter, driven by higher sales and gross profit on certain composite programs, partially offset by changes in profit estimates for long term contracts.
Three months ended March 31, 2023 versus three months ended April 1, 2022 - Operating loss decreased $0.4 million, Adjusted EBITDA increased $0.3 million, and margin increased 0.7 percentage points versus the first quarter of 2022. Results improved compared to the prior quarter, driven by higher sales and gross profit on certain composite programs, partially offset by changes in profit estimates for long term contracts.
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Please see the MD&A section of the Company's Form 10-Q filed with the Securities and Exchange Commission concurrently with the issuance of this release for greater detail on our results and various company programs.
CONFERENCE CALL
A webcast and conference call has been scheduled for Wednesday, May 3, 2023, at 8:30 AM ET. Participants
must register for the teleconference. Once registration is complete, participants will be provided with a dial-in
number containing a personalized PIN to access the call. While not required, it is recommended that participants
join 10 minutes prior to the event start. A live webcast will be available during the call and a replay will be
available two hours after the call. Registration and webcast can be accessed at www.kaman.com/investors/
quarterly-earnings-calls. In its discussion, management may reference certain non-GAAP financial measures related
to company performance. A reconciliation of that information to the most directly comparable GAAP measures is
provided in this release. In addition, a supplemental presentation relating to the first quarter 2023 results will be
posted to the Company’s website prior to the earnings call at www.kaman.com/investors/quarterly-earnings-calls.
ABOUT KAMAN CORPORATION
Kaman Corporation, founded in 1945 by aviation pioneer Charles H. Kaman, and headquartered in Bloomfield, Connecticut, conducts business in the aerospace & defense, industrial and medical markets. Kaman produces and markets proprietary aircraft bearings and components; super precision, miniature ball bearings; proprietary spring energized seals, springs and contacts; wheels, brakes and related hydraulic components for helicopters, fixed-wing and UAV aircraft; complex metallic and composite aerostructures for commercial, military and general aviation fixed and rotary wing aircraft; safe and arming solutions for missile and bomb systems for the U.S. and allied militaries; subcontract helicopter work; restoration, modification and support of our SH-2G Super Seasprite maritime helicopters; support of our heavy lift K-MAX® manned helicopter, and development of the KARGO UAV unmanned aerial system, a purpose built autonomous medium lift logistics vehicle. More information is available at www.kaman.com.
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:
Adjusted EBITDA - Adjusted EBITDA for the consolidated company results is defined as net earnings before interest, taxes, other expense (income), net, depreciation and amortization and certain items that are not indicative of the operating performance of the Company for the periods presented. Adjusted EBITDA for the segments is defined as operating income before depreciation and amortization. Adjusted EBITDA margin is defined as Adjusted EBITDA as a percent of Net sales. Management believes Adjusted EBITDA and Adjusted EBITDA margin provide 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 they provide 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 for the period presented. Adjusted EBITDA and Adjusted EBITDA margin are not presented as an alternative measure of operating performance, as determined in accordance with GAAP. The following tables illustrate the calculation of Adjusted EBITDA:
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Table 5. Adjusted EBITDA (unaudited) | ||||||||||||||||||||||||||||||||
| Thousands of U.S. dollars | Three Months Ended March 31, 2023 | |||||||||||||||||||||||||||||||
| Consolidated | Engineered Products | Precision Products | Structures | Corp/Elims** | ||||||||||||||||||||||||||||
| Adjusted EBITDA | ||||||||||||||||||||||||||||||||
| Consolidated Results | ||||||||||||||||||||||||||||||||
| Net sales | $ | 194,542 | $ | 123,326 | $ | 37,971 | $ | 33,245 | $ | — | ||||||||||||||||||||||
| Net (loss) earnings | $ | (19) | ||||||||||||||||||||||||||||||
| Interest expense, net | 9,604 | |||||||||||||||||||||||||||||||
| Income tax (benefit) expense | (5) | |||||||||||||||||||||||||||||||
| Non-service pension and post retirement benefit income | (381) | |||||||||||||||||||||||||||||||
| Other income, net | (571) | |||||||||||||||||||||||||||||||
| Operating income (loss) | $ | 8,628 | $ | 19,356 | $ | 1,674 | $ | (237) | $ | (12,165) | ||||||||||||||||||||||
| Depreciation and amortization | 13,154 | 10,763 | 812 | 794 | 785 | |||||||||||||||||||||||||||
Restructuring and severance costs(1) | 2,190 | — | — | — | 2,190 | |||||||||||||||||||||||||||
Integration and implementation costs(2) | 797 | — | — | — | 797 | |||||||||||||||||||||||||||
| Other Adjustments | $ | 16,141 | $ | 10,763 | $ | 812 | $ | 794 | $ | 3,772 | ||||||||||||||||||||||
| Adjusted EBITDA | $ | 24,769 | $ | 30,119 | $ | 2,486 | $ | 557 | $ | (8,393) | ||||||||||||||||||||||
| Adjusted EBITDA margin | 12.7 | % | 24.4 | % | 6.5 | % | 1.7 | % | ||||||||||||||||||||||||
(1) Restructuring and severance costs include actions associated with the previously announced cost reduction efforts that include the consolidation of our JPF production facilities, discontinuation of the K-MAX® aircraft production line and Corporate headcount reductions.
(2) Integration and implementation costs include one-time costs associated with the integration of Aircraft Wheel and Brake and costs associated with the set-up of a new joint venture to satisfy existing offset requirements the Company has with a foreign customer.
**Corp/Elims Operating income (loss) represents the Corporate office expenses and $2.2 million of unallocated expenses that are shown on the Consolidated Statement of Earnings as their own line items.
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Table 6. Adjusted EBITDA (unaudited) | ||||||||||||||||||||||||||||||||
| Thousands of U.S. dollars | Three Months Ended December 31, 2022 | |||||||||||||||||||||||||||||||
| Consolidated | Engineered Products | Precision Products | Structures | Corp/Elims** | ||||||||||||||||||||||||||||
| Adjusted EBITDA | ||||||||||||||||||||||||||||||||
| Consolidated Results | ||||||||||||||||||||||||||||||||
| Net sales | $ | 197,143 | $ | 113,972 | $ | 49,925 | $ | 33,246 | $ | — | ||||||||||||||||||||||
| Net (loss) earnings | $ | (54,943) | ||||||||||||||||||||||||||||||
| Interest expense, net | 8,786 | |||||||||||||||||||||||||||||||
| Income tax (benefit) expense | (18,724) | |||||||||||||||||||||||||||||||
| Non-service pension and post retirement benefit income | (5,145) | |||||||||||||||||||||||||||||||
| Other income, net | (2,100) | |||||||||||||||||||||||||||||||
| Operating income (loss) | $ | (72,126) | $ | 17,168 | $ | 6,016 | $ | (1,624) | $ | (93,686) | ||||||||||||||||||||||
| Depreciation and amortization | 13,675 | 11,231 | 785 | 856 | 803 | |||||||||||||||||||||||||||
| Goodwill impairment | 25,306 | — | — | — | 25,306 | |||||||||||||||||||||||||||
| Program assets impairment | 53,677 | — | — | — | 53,677 | |||||||||||||||||||||||||||
| Restructuring and severance costs | 6,989 | — | — | — | 6,989 | |||||||||||||||||||||||||||
| Cost associated with corporate development activities | 1,167 | — | — | — | 1,167 | |||||||||||||||||||||||||||
| Inventory step-up associated with acquisition | 2,299 | 2,299 | — | — | — | |||||||||||||||||||||||||||
| Other Adjustments | $ | 103,113 | $ | 13,530 | $ | 785 | $ | 856 | $ | 87,942 | ||||||||||||||||||||||
| Adjusted EBITDA | $ | 30,987 | $ | 30,698 | $ | 6,801 | $ | (768) | $ | (5,744) | ||||||||||||||||||||||
| Adjusted EBITDA margin | 15.7 | % | 26.9 | % | 13.6 | % | (2.3) | % | ||||||||||||||||||||||||
**Corp/Elims Operating income (loss) represents the Corporate office expenses and $86.0 million of unallocated expenses that are shown on the Consolidated Statement of Earnings as their own line items.
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Table 7. Adjusted EBITDA (unaudited) | ||||||||||||||||||||||||||||||||
| Thousands of U.S. dollars | Three Months Ended April 1, 2022 | |||||||||||||||||||||||||||||||
| Consolidated | Engineered Products | Precision Products | Structures | Corp/Elims** | ||||||||||||||||||||||||||||
| Adjusted EBITDA | ||||||||||||||||||||||||||||||||
| Consolidated Results | ||||||||||||||||||||||||||||||||
| Net sales | $ | 158,048 | $ | 81,452 | $ | 47,549 | $ | 29,047 | $ | — | ||||||||||||||||||||||
| Net earnings | $ | 4,028 | ||||||||||||||||||||||||||||||
| Interest expense, net | 2,481 | |||||||||||||||||||||||||||||||
| Income tax expense (benefit) | 1,307 | |||||||||||||||||||||||||||||||
| Non-service pension and post retirement benefit income | (5,263) | |||||||||||||||||||||||||||||||
| Other expense (income), net | 504 | |||||||||||||||||||||||||||||||
| Operating income (loss) | $ | 3,057 | $ | 11,042 | $ | 3,409 | $ | (617) | $ | (10,777) | ||||||||||||||||||||||
| Depreciation and amortization | 8,832 | 6,227 | 1,031 | 906 | 668 | |||||||||||||||||||||||||||
| Restructuring and severance costs | 169 | — | — | — | 169 | |||||||||||||||||||||||||||
| Cost associated with corporate development activities | 128 | — | — | — | 128 | |||||||||||||||||||||||||||
| Other Adjustments | $ | 9,129 | $ | 6,227 | $ | 1,031 | $ | 906 | $ | 965 | ||||||||||||||||||||||
| Adjusted EBITDA | $ | 12,186 | $ | 17,269 | $ | 4,440 | $ | 289 | $ | (9,812) | ||||||||||||||||||||||
| Adjusted EBITDA margin | 7.7 | % | 21.2 | % | 9.3 | % | 1.0 | % | ||||||||||||||||||||||||
**Corp/Elims Operating income (loss) represents the Corporate office expenses and $0.2 million of unallocated expenses that are shown on the Consolidated Statement of Earnings as their own line items.
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Adjusted Net Earnings and Adjusted Diluted Earnings Per Share - Adjusted net earnings and adjusted diluted earnings per share are defined as GAAP "Net earnings" and "Diluted earnings per share", 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 net earnings and adjusted diluted earnings per share 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 net earnings and adjusted diluted earnings per share:
| Table 8. Adjusted Net Earnings and Adjusted Diluted Earnings per Share (unaudited) | ||||||||||||||||||||||||||||||||||||||
| Thousands of U.S. dollars (except share data) | ||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||||||||
| March 31, 2023 | April 1, 2022 | |||||||||||||||||||||||||||||||||||||
| Pre-Tax | Tax-Effected | Diluted EPS | Pre-Tax | Tax-Effected | Diluted EPS | |||||||||||||||||||||||||||||||||
| Net (loss) earnings | $ | (24) | $ | (19) | $ | (0.00) | $ | 5,335 | $ | 4,028 | $ | 0.14 | ||||||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||||
| Restructuring and severance costs | 2,190 | 1,730 | 0.06 | 169 | 128 | 0.01 | ||||||||||||||||||||||||||||||||
| Integration and implementation costs | 797 | 630 | 0.02 | — | — | — | ||||||||||||||||||||||||||||||||
| Costs associated with corporate development activities | — | — | — | 128 | $ | 97 | — | |||||||||||||||||||||||||||||||
| Adjustments | $ | 2,987 | $ | 2,360 | $ | 0.08 | $ | 297 | $ | 225 | $ | 0.01 | ||||||||||||||||||||||||||
| Adjusted net earnings | $ | 2,963 | $ | 2,341 | $ | 0.08 | $ | 5,632 | $ | 4,253 | $ | 0.15 | ||||||||||||||||||||||||||
| Diluted weighted average shares outstanding | 28,117 | 28,082 | ||||||||||||||||||||||||||||||||||||
| Three Months Ended December 31, 2022 | ||||||||||||||||||||||||||||||||||||||
| Pre-Tax | Tax-Effected | Diluted EPS | ||||||||||||||||||||||||||||||||||||
| Net (loss) earnings | $ | (73,667) | $ | (54,943) | $ | (1.96) | ||||||||||||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||||
| Goodwill impairment | 25,306 | 18,874 | 0.67 | |||||||||||||||||||||||||||||||||||
| Program assets impairment | 53,677 | 40,034 | 1.43 | |||||||||||||||||||||||||||||||||||
| Restructuring and severance costs | 6,989 | 5,213 | 0.19 | |||||||||||||||||||||||||||||||||||
| Costs associated with corporate development activities | 1,167 | 870 | 0.03 | |||||||||||||||||||||||||||||||||||
| Inventory step-up associated with acquisition | 2,299 | 1,715 | 0.06 | |||||||||||||||||||||||||||||||||||
| Adjustments | $ | 89,438 | $ | 66,706 | $ | 2.38 | ||||||||||||||||||||||||||||||||
| Adjusted net earnings | $ | 15,771 | $ | 11,763 | $ | 0.42 | ||||||||||||||||||||||||||||||||
| Diluted weighted average shares outstanding | 28,051 | |||||||||||||||||||||||||||||||||||||
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Free Cash Flow - Free cash flow 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 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 should not be viewed as representing the residual cash flow available for discretionary expenditures such as dividends to shareholders or acquisitions. Management uses free cash flow internally to assess overall liquidity. The following table illustrates the calculation of free cash flow.
| Table 9. Free Cash Flow (unaudited) | ||||||||||||||||||||||||||||||||
| Thousands of U.S. dollars | Three Months Ended | Last Twelve Months | ||||||||||||||||||||||||||||||
| July 1, 2022 | September 30, 2022 | December 31, 2022 | March 31, 2023 | March 31, 2023 | ||||||||||||||||||||||||||||
| Net cash provided by operating activities | $ | (25,937) | $ | (6,746) | $ | 54,669 | $ | (5,453) | $ | 16,533 | ||||||||||||||||||||||
| Expenditures for property, plant & equipment | (3,643) | (7,106) | (6,063) | (5,948) | (22,760) | |||||||||||||||||||||||||||
| Free cash flow | $ | (29,580) | $ | (13,852) | $ | 48,606 | $ | (11,401) | $ | (6,227) | ||||||||||||||||||||||
FORWARD-LOOKING STATEMENTS
This report 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) changes in domestic and foreign economic and competitive conditions in markets served by the Company, particularly the defense, commercial aviation and industrial production markets; (ii) 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 Congress and the Administration, or budgetary cuts resulting from Congressional actions or automatic sequestration); (iii) the global economic impact of the COVID-19 pandemic; (iv) risks and uncertainties associated with the successful integration of our Aircraft Wheel and Brake acquisition; (v) changes in geopolitical conditions in countries where the Company does or intends to do business; (vi) the successful conclusion of competitions for government programs (including new, follow-on and successor programs) and thereafter successful contract negotiations with government authorities (both foreign and domestic) for the terms and conditions of the programs; (vii) the timely receipt of any necessary export approvals and/or other licenses or authorizations from the USG; (viii) timely satisfaction or fulfillment of material contractual conditions precedents in customer purchase orders, contracts, or similar arrangements; (ix) the existence of standard government contract provisions permitting renegotiation of terms and termination for the convenience of the government; (x) the successful resolution of government inquiries or investigations relating to our businesses and programs; (xi) risks and uncertainties associated with the successful implementation and ramp up of significant new programs, including the ability to manufacture the products to the detailed specifications required and recover start-up costs and other investments in the programs; (xii) potential difficulties associated with variable acceptance test results, given sensitive production materials and extreme test parameters; (xiii) the receipt and successful execution of production orders under the Company's existing USG JPF contract, including the exercise of all contract options and receipt of orders from allied militaries, but excluding any
9
next generation programmable fuze programs, as all have been assumed in connection with goodwill impairment evaluations; (xiv) the continued support of the existing K-MAX® helicopter fleet, including sale of existing K-MAX® spare parts inventory; (xv) the accuracy of current cost estimates associated with environmental remediation activities; (xvi) the profitable integration of acquired businesses into the Company's operations; (xvii) the ability to recover from cyber-based or other security attacks, information technology failures or other disruptions; (xviii) changes in supplier sales or vendor incentive policies; (xix) the ability of our suppliers to satisfy their performance obligations, including any supply chain disruptions; (xx) the effects of price increases or decreases; (xxi) the effects of pension regulations, pension plan assumptions, pension plan asset performance, future contributions and the pension freeze; (xxii) future levels of indebtedness and capital expenditures; (xxiii) compliance with our debt covenants; (xxiv) the continued availability of raw materials and other commodities in adequate supplies and the effect of increased costs for such items; (xxv) the effects of currency exchange rates and foreign competition on future operations; (xxvi) changes in laws and regulations, taxes, interest rates, inflation rates and general business conditions; (xxvii) future repurchases and/or issuances of common stock;(xxviii) the occurrence of unanticipated restructuring costs or the failure to realize anticipated savings or benefits from past or future expense reduction actions; (xxix) the ability to recruit and retain skilled employees; (xxx) the successful resolution of all pending and future investigations, litigation or claims relating to the manufacture or design of our products, including, without limitation, the K-MAX® helicopter; and (xxxi) other risks and uncertainties set forth herein and in our 2022 Form 10-K and our first quarter 2023 Form 10-Q filed May 2, 2023.
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.
Contact:
Rebecca Stath
V.P., Controller and Head of Investor Relations
(860) 286-4127
Rebecca.Stath@kaman.com or InvestorRelations@kaman.com
10
KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Thousands of U.S. dollars, except share data) (unaudited)
| Three Months Ended | ||||||||||||||
| March 31, 2023 | April 1, 2022 | |||||||||||||
| Net sales | $ | 194,542 | $ | 158,048 | ||||||||||
| Cost of sales | 126,998 | 107,461 | ||||||||||||
| Gross profit | 67,544 | 50,587 | ||||||||||||
| Selling, general and administrative expenses | 43,698 | 39,721 | ||||||||||||
| Research and development costs | 5,907 | 5,113 | ||||||||||||
| Intangible asset amortization expense | 7,152 | 2,467 | ||||||||||||
| Restructuring and severance costs | 2,190 | 169 | ||||||||||||
| Net (gain) loss on sale of assets | (31) | 60 | ||||||||||||
| Operating income | 8,628 | 3,057 | ||||||||||||
| Interest expense, net | 9,604 | 2,481 | ||||||||||||
| Non-service pension and post retirement benefit income | (381) | (5,263) | ||||||||||||
| Other (income) expense, net | (571) | 504 | ||||||||||||
| (Loss) earnings before income taxes | (24) | 5,335 | ||||||||||||
| Income tax (benefit) expense | (5) | 1,307 | ||||||||||||
| Net (loss) earnings | $ | (19) | $ | 4,028 | ||||||||||
| Earnings (loss) per share: | ||||||||||||||
| Basic (loss) earnings per share | $ | (0.00) | $ | 0.14 | ||||||||||
| Diluted (loss) earnings per share | $ | (0.00) | $ | 0.14 | ||||||||||
| Average shares outstanding: | ||||||||||||||
| Basic | 28,117 | 27,950 | ||||||||||||
| Diluted | 28,117 | 28,082 | ||||||||||||
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KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Thousands of U.S. dollars, except share data) (unaudited)
| March 31, 2023 | December 31, 2022 | |||||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 53,986 | $ | 24,154 | ||||||||||
| Accounts receivable, net | 101,292 | 87,659 | ||||||||||||
| Contract assets | 116,168 | 113,182 | ||||||||||||
| Inventories | 186,495 | 176,468 | ||||||||||||
| Income tax refunds receivable | 1,321 | 13,981 | ||||||||||||
| Other current assets | 22,975 | 16,114 | ||||||||||||
| Total current assets | 482,237 | 431,558 | ||||||||||||
Property, plant and equipment, net of accumulated depreciation of $274,458 and $268,089, respectively | 203,266 | 201,606 | ||||||||||||
| Operating right-of-use assets, net | 6,618 | 7,391 | ||||||||||||
| Goodwill | 382,504 | 379,854 | ||||||||||||
| Other intangible assets, net | 365,427 | 372,331 | ||||||||||||
| Deferred income taxes | 47,818 | 47,385 | ||||||||||||
| Other assets | 50,788 | 51,207 | ||||||||||||
| Total assets | $ | 1,538,658 | $ | 1,491,332 | ||||||||||
| Liabilities and Shareholders’ Equity | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable – trade | $ | 47,194 | $ | 48,277 | ||||||||||
| Accrued salaries and wages | 26,258 | 31,395 | ||||||||||||
| Contract liabilities, current portion | 6,044 | 4,081 | ||||||||||||
| Operating lease liabilities, current portion | 3,121 | 3,332 | ||||||||||||
| Income taxes payable | 170 | 393 | ||||||||||||
| Other current liabilities | 44,210 | 39,097 | ||||||||||||
| Total current liabilities | 126,997 | 126,575 | ||||||||||||
| Long-term debt, excluding current portion, net of debt issuance costs | 609,325 | 561,061 | ||||||||||||
| Deferred income taxes | 6,365 | 6,079 | ||||||||||||
| Underfunded pension | 51,459 | 52,309 | ||||||||||||
| Contract liabilities, noncurrent portion | 20,329 | 20,515 | ||||||||||||
| Operating lease liabilities, noncurrent portion | 3,905 | 4,534 | ||||||||||||
| Other long-term liabilities | 36,322 | 36,280 | ||||||||||||
| Commitments and contingencies | ||||||||||||||
| Shareholders' equity: | ||||||||||||||
Preferred stock, $1 par value, 200,000 shares authorized; none outstanding | — | — | ||||||||||||
Common stock, $1 par value, 50,000,000 shares authorized; voting; 30,766,419 and 30,640,068 shares issued, respectively | 30,766 | 30,640 | ||||||||||||
| Additional paid-in capital | 247,812 | 245,436 | ||||||||||||
| Retained earnings | 682,812 | 688,457 | ||||||||||||
| Accumulated other comprehensive income (loss) | (154,793) | (158,421) | ||||||||||||
Less 2,632,334 and 2,607,841 shares of common stock, respectively, held in treasury, at cost | (122,641) | (122,133) | ||||||||||||
| Total shareholders’ equity | 683,956 | 683,979 | ||||||||||||
| Total liabilities and shareholders’ equity | $ | 1,538,658 | $ | 1,491,332 | ||||||||||
12
KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Thousands of U.S. dollars) (unaudited)
| Three Months Ended | ||||||||||||||
| March 31, 2023 | April 1, 2022 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net (loss) earnings | $ | (19) | $ | 4,028 | ||||||||||
| Adjustments to reconcile earnings, net of tax to net cash provided by operating activities: | ||||||||||||||
| Depreciation and amortization | 13,154 | 8,832 | ||||||||||||
| Amortization of debt issuance costs | 883 | 442 | ||||||||||||
| Provision for doubtful accounts | 805 | 135 | ||||||||||||
| Net (gain) loss on sale of assets | (31) | 60 | ||||||||||||
| Net (gain) loss on derivative instruments | (283) | 449 | ||||||||||||
| Stock compensation expense | 2,003 | 2,081 | ||||||||||||
| Deferred income taxes | (669) | (1,247) | ||||||||||||
| Changes in assets and liabilities, excluding effects of acquisitions/divestitures: | ||||||||||||||
| Accounts receivable | (14,177) | 4,307 | ||||||||||||
| Contract assets | (2,973) | 12,973 | ||||||||||||
| Inventories | (9,596) | (17,285) | ||||||||||||
| Income tax refunds receivable | 12,663 | (410) | ||||||||||||
| Operating right of use assets | 785 | 915 | ||||||||||||
| Other assets | (6,431) | (2,105) | ||||||||||||
| Accounts payable - trade | (1,151) | (612) | ||||||||||||
| Contract liabilities | 1,776 | (137) | ||||||||||||
| Operating lease liabilities | (852) | (899) | ||||||||||||
| Other current liabilities | (2,483) | (10,581) | ||||||||||||
| Income taxes payable | (222) | 53 | ||||||||||||
| Pension liabilities | 936 | (1,876) | ||||||||||||
| Other long-term liabilities | 429 | (140) | ||||||||||||
| Net cash used in operating activities | (5,453) | (1,017) | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Expenditures for property, plant & equipment | (5,948) | (6,877) | ||||||||||||
| Acquisition of businesses, net of cash acquired | (1,487) | — | ||||||||||||
| Other, net | (1,363) | 424 | ||||||||||||
| Net cash used in investing activities | (8,798) | (6,453) | ||||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Borrowings under revolving credit agreement | 94,000 | — | ||||||||||||
| Repayments under revolving credit agreement | (46,000) | — | ||||||||||||
| Purchase of treasury shares | (503) | (575) | ||||||||||||
| Dividends paid | (5,606) | (5,572) | ||||||||||||
| Other, net | 2,079 | 2,112 | ||||||||||||
| Net cash provided by (used in) financing activities | 43,970 | (4,035) | ||||||||||||
| Net increase (decrease) in cash and cash equivalents | 29,719 | (11,505) | ||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | 113 | (198) | ||||||||||||
| Cash and cash equivalents at beginning of period | 24,154 | 140,800 | ||||||||||||
| Cash and cash equivalents at end of period | $ | 53,986 | $ | 129,097 | ||||||||||
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