Third Quarter 2023 Highlights:
- Revising full year outlook after another strong quarter; Expect
higher sales, operating income and adjusted EBITDA led by sustained
growth in Engineered Products
- Net sales: $183.0 million
- Operating income: $11.9 million
- Net earnings: $1.5 million
- Adjusted EBITDA*: $25.2 million; Adjusted EBITDA margin*:
13.8%
- Diluted earnings per share: $0.05 per share, $0.10 per share
adjusted*
Kaman Corp. (NYSE:KAMN) today reported financial results for the
third fiscal quarter ended September 29, 2023.
Table 1. Summary of Financial Results
(unaudited)
Thousands of U.S. dollars
(except share data)
Three Months Ended
For the Nine Months
Ended
September 29,
2023
June 30, 2023
September 30,
2022
September 29,
2023
September 30,
2022
Net sales
$
183,031
$
195,158
$
172,004
$
572,731
$
490,818
Net earnings (loss)
1,466
5,255
(280)
5,952
7,369
Adjusted EBITDA*
25,232
32,008
19,467
81,058
47,520
Adjusted EBITDA margin*
13.8 %
16.4 %
11.3 %
14.2 %
9.7 %
Diluted earnings (loss) per share
$
0.05
$
0.19
$
(0.01)
$
0.21
$
0.26
Adjusted diluted earnings per share*.
$
0.10
$
0.22
$
0.29
$
0.37
$
0.72
*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 5-11 for
reconciliations to the most comparable GAAP measure.
(1)Information for the period September 30, 2022 has been
revised from amounts reported in the prior year to correct errors
related to the accounting for certain labor costs at one business
in the Precision Products segment and the net realizable value on
certain portions of the Company's inventory at another business in
the Structures segment. These errors resulted in an understatement
of cost of sales, net of tax, of $0.9 million and $1.3 million, in
the three-month and nine-month fiscal periods ended September 30,
2022, respectively. Refer to the Company's Form 10-Q for the
quarter ended September 29, 2023 for further information.
"Our Engineered Products segment continues to demonstrate
sustained strong performance with year over year growth in both
sales and operating income. This strength provides confidence to
raise our sales, operating income and adjusted EBITDA expectations
for 2023. In the nine-month period, operating income was $37.1
million, net earnings was $6.0 million and Adjusted EBITDA was
$81.1 million. In the quarter, net sales for the Company increased
by 6.4% compared to the prior year led by organic growth of 20.9%
in our Engineered Products segment. Positive order intake continues
to support near-record backlog at this segment, particularly in our
PMA aftermarket and bearings businesses," said Ian K. Walsh,
Chairman, President and Chief Executive Officer.
"This quarter we celebrate the one-year anniversary of our
Aircraft Wheel and Brake acquisition and are pleased with the
meaningful margin expansion that it provides to our Engineered
Products segment. As we continue to reshape our portfolio,
optimizing our cost structure and eliminating the major sources of
variation in performance, we also remain disciplined in our
approach to capital allocation, realizing additional opportunities
to reduce expense across the organization. We are focused on paying
down debt through the remainder of the year and will continue to
invest in the Company's highest-margin assets and opportunities. We
are confident in our transformational strategy as we enhance our
profitability and position Kaman to deliver sustainable shareholder
value," said Walsh.
OUTLOOK DISCUSSION
Given the strength in our performance at our Engineered Products
segment, we are raising our expectations for sales, operating
income, Adjusted EBITDA and diluted EPS. Operating Cash Flow and
Free Cash Flow expectations remain consistent with our prior
outlook as we continue to invest in the future growth of our
Engineered Products segment and improvements in our Structures
segment.
Previous Outlook
Current Outlook
Net sales
$730.0 - $750.0 million
$765.0 - $775.0 million
Net earnings
$3.7 - $11.3 million
$6.5 - $12.2 million
Adjusted EBITDA
$97.5 - $107.5 million
$102.5 - $110.0 million
Adjusted EBITDA margin
13.4% - 14.3%
13.4% - 14.2%
Diluted EPS
$0.13 - $0.40 per share
$0.23 - $0.43 per share
Adjusted diluted EPS
$0.29 - $0.56 per share
$0.40 - $0.60 per share
Cash from operating activities
$60.0 - $70.0 million
$60.0 - $70.0 million
Free cash flow
$35.0 - $45.0 million
$35.0 - $45.0 million
For further information, the Company's supplemental presentation
relating to the third 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
Nine Months Ended
September 29,
2023
June 30, 2023
September 30,
2022
September 29,
2023
September 30,
2022
Net sales
$ 123,598
$ 133,513
$ 92,052
$ 380,437
$ 263,269
Operating income
29,026
30,542
14,156
78,924
40,665
Adjusted EBITDA
38,428
40,659
21,772
109,206
60,655
Adjusted EBITDA margin
31.1 %
30.5 %
23.7 %
28.7 %
23.0 %
Three months ended September 29, 2023 versus three months
ended June 30, 2023 - Operating income decreased $1.5 million
and Adjusted EBITDA decreased $2.2 million, primarily driven by
lower sales and associated gross profit on PMA Aftermarket parts
and the timing of sales at Aircraft Wheel and Brake resulting from
our preparation for its ERP implementation.
Three months ended September 29, 2023 versus three months
ended September 30, 2022 - Operating income increased $14.9
million, Adjusted EBITDA increased $16.7 million and margin
increased 7.4 percentage points compared to the corresponding
period in 2022, primarily due to the contribution from our Aircraft
Wheel and Brake acquisition, higher sales and associated gross
profit on our commercial and defense bearings products and PMA
aftermarket parts and higher gross profit on our seals, springs and
contacts.
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
Nine Months Ended
September 29,
2023
June 30, 2023
September 30,
2022
September 29,
2023
September 30,
2022
Net sales
$ 27,098
$ 28,059
$ 46,282
$ 93,128
$ 135,098
Operating (loss) income
(3,241)
(1,884)
5,296
(3,996)
10,725
Adjusted EBITDA
(2,458)
(1,078)
6,100
(1,595)
13,603
Adjusted EBITDA margin
(9.1) %
(3.8) %
13.2 %
(1.7) %
10.1 %
(1)Information for the period ended September 30, 2022 has been
revised from amounts reported in the prior year to correct errors
related to the accounting for certain labor costs at one business
in the Precision Products segment. Refer to the Company's Form 10-Q
for the quarter ended September 29, 2023 for further
information.
Three months ended September 29, 2023 versus three months
ended June 30, 2023 - Operating income and Adjusted EBITDA
decreased $1.4 million and margin decreased 5.3 percentage points
versus the second quarter of 2023. Results declined compared to the
prior quarter, driven by lower sales and gross profit on the JPF
program and cost growth on legacy fuzing and measuring programs,
partially offset by higher sales and associated gross profit from
the K-MAX® aftermarket.
Three months ended September 29, 2023 versus three months
ended September 30, 2022 - Operating income decreased $8.5
million, Adjusted EBITDA decreased $8.6 million and margin
decreased 22.3 percentage points compared to the corresponding
period in 2022, primarily attributable to lower sales and gross
profit on the JPF program and cost growth on measuring programs,
partially offset by higher sales and associated gross profit from
the K-MAX® aftermarket and lower operating expenses at our Orlando
facility as we begin to realize the benefits of the cost reduction
initiatives announced earlier in the year.
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
Nine Months Ended
September 29,
2023
June 30, 2023
September 30,
2022
September 29,
2023
September 30,
2022
Net sales
$ 32,335
$ 33,586
$ 33,670
$ 99,166
$ 92,451
Operating loss
(3,020)
(106)
(642)
(3,769)
(2,121)
Adjusted EBITDA
(2,222)
675
228
(1,396)
542
Adjusted EBITDA margin
(6.9) %
2.0 %
0.7 %
(1.4) %
0.6 %
(1)Information for the period ended September 30, 2022 has been
revised from amounts reported in the prior year to correct errors
related to the net realizable value on certain portions of the
Company's inventory at a business in the Structures segment. Refer
to the Company's Form 10-Q for the quarter ended September 29, 2023
for further information.
Three months ended September 29, 2023 versus three months
ended June 30, 2023 - Operating loss increased $2.9 million,
Adjusted EBITDA decreased $2.9 million and margin decreased 8.9
percentage points versus the second quarter of 2023, primarily
attributable to lower sales and gross profit on the Sikorsky UH-60
BLACK HAWK program and the receipt of an insurance claim settlement
in the prior quarter that related to a fire at one of our suppliers
in the prior year.
Three months ended September 29, 2023 versus three months
ended September 30, 2022 - Operating loss increased $2.4
million, Adjusted EBITDA decreased $2.5 million and margin
decreased 7.6 percentage points compared to the third quarter of
2022, primarily attributable to lower sales and associated gross
profit on the A-10 program and the Sikorsky UH-60 BLACK HAWK
program.
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 Thursday,
November 2, 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 third 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:
Table 5. Adjusted EBITDA
(unaudited)
Thousands of U.S. dollars
Three Months Ended
September 29, 2023
Consolidated
Engineered Products
Precision Products
Structures
Corp/Elims**
Adjusted EBITDA
Consolidated Results
Net sales
$
183,031
$
123,598
$
27,098
$
32,335
$
—
Net earnings
$
1,466
Interest expense, net
9,405
Income tax expense
462
Non-service pension and post retirement
benefit income
(310)
Other expense, net
849
Operating income (loss)
$
11,872
$
29,026
$
(3,241)
$
(3,020)
$
(10,893)
Depreciation and amortization
11,800
9,402
783
798
817
Restructuring and severance
costs(1)
571
—
—
—
571
Integration and implementation
costs(2)
572
—
—
—
572
Program inventory impairment(3)
417
—
—
—
417
Other Adjustments
$
13,360
$
9,402
$
783
$
798
$
2,377
Adjusted EBITDA
$
25,232
$
38,428
$
(2,458)
$
(2,222)
$
(8,516)
Adjusted EBITDA margin
13.8 %
31.1 %
(9.1) %
(6.9) %
(1) Restructuring and severance costs include actions
associated with the previously announced cost reduction efforts
that include the consolidation of our JPF production facilities and
discontinuation of the K-MAX® aircraft production line.
(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.
(3) Program inventory impairment includes the write-off
of long lead parts received in the current period associated with
K-MAX® program which were determined to have no alternative
use.
**Corp/Elims Operating income (loss) represents the Corporate
office expenses and $1.1 million of unallocated expenses that are
shown on the Consolidated Statement of Operations as their own line
items.
Table 6. Adjusted EBITDA
(unaudited)
Thousands of U.S. dollars
Three Months Ended
June 30, 2023
Consolidated
Engineered Products
Precision Products
Structures
Corp/Elims**
Adjusted EBITDA
Consolidated Results
Net sales
$
195,158
$
133,513
$
28,059
$
33,586
$
—
Net earnings
$
5,255
Interest expense, net
10,340
Income tax expense
2,115
Non-service pension and post retirement
benefit income
(239)
Other expense, net
99
Operating income (loss)
$
17,570
$
30,542
$
(1,884)
$
(106)
$
(10,982)
Depreciation and amortization
13,290
10,874
806
781
829
Restructuring and severance
costs(1)
272
—
—
—
272
Integration and implementation
costs(2)
1,037
—
—
—
1,037
Program inventory impairment(3)
596
—
—
—
596
Tax contingency reversal(4)
(757)
(757)
—
—
—
Other Adjustments
$
14,438
$
10,117
$
806
$
781
$
2,734
Adjusted EBITDA
$
32,008
$
40,659
$
(1,078)
$
675
$
(8,248)
Adjusted EBITDA margin
16.4 %
30.5 %
(3.8) %
2.0 %
(1) Restructuring and severance costs include actions
associated with the previously announced cost reduction efforts
that include the consolidation of our JPF production facilities and
discontinuation of the K-MAX® aircraft production line.
(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.
(3) Program inventory impairment includes the write-off
of long lead parts received in the current period associated with
K-MAX® program which were determined to have no alternative
use.
(4) Following an evaluation of a wide range of factors,
including legislative activity and administrative practices, the
Company deemed a reserve was no longer needed for a certain tax
contingency.
**Corp/Elims Operating income (loss) represents the Corporate
office expenses and $1.3 million of unallocated expenses that are
shown on the Consolidated Statement of Operations as their own line
items.
Table 7. Adjusted EBITDA
(unaudited)
Thousands of U.S. dollars
Three Months Ended
September 30, 2022
Consolidated
Engineered Products
Precision Products
Structures
Corp/Elims**
Adjusted EBITDA
Consolidated Results
Net sales
$
172,004
$
92,052
$
46,282
$
33,670
$
—
Net loss
$
(280)
Interest expense, net
3,614
Income tax benefit
(114)
Non-service pension and post retirement
benefit income
(5,142)
Other expense, net
1,221
Operating (loss) income
$
(701)
$
14,156
$
5,296
$
(642)
$
(19,511)
Depreciation and amortization
9,383
6,856
804
870
853
Restructuring and severance costs
(243)
—
—
—
(243)
Cost associated with corporate development
activities
10,725
—
—
—
10,725
Inventory step-up associated with
acquisition
760
760
—
—
—
(Gain) loss on sale of business
(457)
—
—
—
(457)
Other Adjustments
$
20,168
$
7,616
$
804
$
870
$
10,878
Adjusted EBITDA
$
19,467
$
21,772
$
6,100
$
228
$
(8,633)
Adjusted EBITDA margin
11.3 %
23.7 %
13.2 %
0.7 %
(1)Information for the period ended September 30, 2022 has been
revised from amounts reported in prior periods to correct errors
related to the accounting for certain labor costs at one business
in the Precision Products segment and the net realizable value on
certain portions of the Company's inventory at another business in
the Structures segment. Refer to the Company's Form 10-Q for the
quarter ended September 29, 2023 for further information.
**Corp/Elims Operating income (loss) represents the Corporate
office expenses and $0.7 million of unallocated income that are
shown on the Consolidated Statement of Operations as their own line
items.
Table 8. Adjusted EBITDA
(unaudited)
Thousands of U.S. dollars
Nine Months Ended
September 29, 2023
Consolidated
Engineered Products
Precision Products
Structures
Corp/Elims**
Adjusted EBITDA
Consolidated Results
Net sales
$
572,731
$
380,437
$
93,128
$
99,166
$
—
Net earnings
$
5,952
Interest expense, net
29,349
Income tax expense
2,371
Non-service pension and post retirement
benefit income
(930)
Other income, net
377
Operating income (loss)
$
37,119
$
78,924
$
(3,996)
$
(3,769)
$
(34,040)
Depreciation and amortization
38,244
31,039
2,401
2,373
2,431
Restructuring and severance costs(1)
3,033
—
—
—
3,033
Integration and implementation
costs(2)
2,406
—
—
—
2,406
Program inventory impairment(3)
1,013
—
—
—
1,013
Tax contingency reversal(4)
(757)
(757)
—
—
—
Other Adjustments
$
43,939
$
30,282
$
2,401
$
2,373
$
8,883
Adjusted EBITDA
$
81,058
$
109,206
$
(1,595)
$
(1,396)
$
(25,157)
Adjusted EBITDA margin
14.2 %
28.7 %
(1.7) %
(1.4) %
(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.
(3) Program inventory impairment includes the write-off
of long lead parts received in the current period associated with
K-MAX® program which were determined to have no alternative
use.
(4) Following an evaluation of a wide range of factors,
including legislative activity and administrative practices, the
Company deemed a reserve was no longer needed for a certain tax
contingency.
**Corp/Elims Operating income (loss) represents the Corporate
office expenses and $4.5 million of unallocated expenses that are
shown on the Consolidated Statement of Operations as their own line
items.
Table 9. Adjusted EBITDA
(unaudited)
Thousands of U.S. dollars
Nine Months Ended
September 30, 2022
Consolidated
Engineered Products
Precision Products
Structures
Corp/Elims**
Adjusted EBITDA
Consolidated Results
Net sales
$
490,818
$
263,269
$
135,098
$
92,451
$
—
Net earnings
$
7,369
Interest expense, net
8,088
Income tax expense (benefit)
1,631
Non-service pension and post retirement
benefit income
(15,429)
Other expense (income), net
2,415
Operating income (loss)
$
4,074
$
40,665
$
10,725
$
(2,121)
$
(45,195)
Depreciation and amortization
27,037
19,230
2,878
2,663
2,266
Restructuring and severance costs
2,853
—
—
—
2,853
Cost associated with corporate development
activities
13,253
—
—
—
13,253
Inventory step-up associated with
acquisition
760
760
—
—
—
(Gain) loss on sale of business
(457)
—
—
—
(457)
Other Adjustments
$
43,446
$
19,990
$
2,878
$
2,663
$
17,915
Adjusted EBITDA
$
47,520
$
60,655
$
13,603
$
542
$
(27,280)
Adjusted EBITDA margin
9.7 %
23.0 %
10.1 %
0.6 %
(1)Information for the period September 30, 2022 has been
revised from amounts reported in prior periods to correct errors
related to the accounting for certain labor costs at one business
in the Precision Products segment and the net realizable value on
certain portions of the Company's inventory at another business in
the Structures segment. Refer to the Company's Form 10-Q for the
quarter ended September 29, 2023 for further information.
**Corp/Elims Operating income (loss) represents the Corporate
office expenses and $2.5 million of unallocated expenses that are
shown on the Consolidated Statement of Operations as their own line
items.
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 10. Adjusted Net Earnings and
Adjusted Diluted Earnings per Share (unaudited)
Thousands of U.S. dollars (except share
data)
Three Months Ended
Three Months Ended
September 29, 2023
September 30, 2022
Pre-Tax
Tax-Effected
Diluted EPS
Pre-Tax
Tax-Effected
Diluted EPS
Net earnings (loss)
$
1,928
$
1,466
$
0.05
$
(394)
$
(280)
$
(0.01)
Adjustments:
Restructuring and severance costs
571
451
0.02
(243)
(189)
(0.01)
Integration and implementation costs
572
452
0.02
—
—
—
Costs associated with corporate
development activities
—
—
—
10,725
8,363
0.30
Inventory step-up associated with
acquisition
—
—
—
760
593
0.02
Program inventory impairment
417
329
0.01
—
—
—
(Gain) loss on sale of business
—
—
—
(457)
(356)
(0.01)
Adjustments
$
1,560
$
1,232
$
0.05
$
10,785
$
8,411
$
0.30
Adjusted net earnings
$
3,488
$
2,698
$
0.10
$
10,391
$
8,131
$
0.29
Diluted weighted average shares
outstanding
28,350
28,037
Three Months Ended
June 30, 2023
Pre-Tax
Tax-Effected
Diluted EPS
Net earnings
$
7,370
$
5,255
$
0.19
Adjustments:
Restructuring and severance costs
272
215
—
Integration and implementation costs
1,037
819
0.03
Program inventory impairment
596
471
0.02
Tax contingency reversal
(757)
(598)
(0.02)
Adjustments
$
1,148
$
907
$
0.03
Adjusted net earnings
$
8,518
$
6,162
$
0.22
Diluted weighted average shares
outstanding
28,355
(1))Information for the period ended September 30, 2022 has been
revised from amounts reported in prior periods to correct errors
related to the accounting for certain labor costs at one business
in the Precision Products segment and the net realizable value on
certain portions of the Company's inventory at another business in
the Structures segment. Refer to the Company's Form 10-Q for the
quarter ended September 29, 2023 for further information
Table 10. Adjusted Net Earnings and
Adjusted Diluted Earnings per Share (unaudited) - continued
Thousands of U.S. dollars (except share
data)
For the Nine Months
Ended
For the Nine Months
Ended
September 29, 2023
September 30, 2022
Pre-Tax
Tax-Effected
Diluted EPS
Pre-Tax
Tax-Effected
Diluted EPS
Net earnings
$
8,323
$
5,952
0.21
$
9,000
$
7,369
0.26
Adjustments:
Restructuring and severance costs
3,033
2,396
0.08
2,853
2,225
0.08
Integration and implementation costs
2,406
1,901
0.07
—
—
—
Costs associated with corporate
development activities
—
—
—
13,253
10,334
0.37
Inventory step-up associated with
acquisition
—
—
—
760
593
0.02
Program inventory impairment
1,013
800
0.03
—
—
—
Foreign wage tax provision reversal
(757)
(598)
(0.02)
—
—
—
(Gain) loss on sale of business
—
—
—
(457)
(356)
(0.01)
Adjustments
$
5,695
$
4,499
$
0.16
$
16,409
$
12,796
$
0.46
Adjusted net earnings
$
14,018
$
10,451
$
0.37
$
25,409
$
20,165
$
0.72
Diluted weighted average shares
outstanding
28,324
28,076
(1)Information for the period ended September 30, 2022 has been
revised from amounts reported in prior periods to correct errors
related to the accounting for certain labor costs at one business
in the Precision Products segment and the net realizable value on
certain portions of the Company's inventory at another business in
the Structures segment. Refer to the Company's Form 10-Q for the
quarter ended September 29, 2023 for further information.
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 11. Free Cash Flow
(unaudited)
Thousands of U.S. dollars
Three Months Ended
Last Twelve Months
December 31, 2022
March 31, 2023
June 30, 2023
September 29,
2023
September 29,
2023
Net cash provided by (used in) operating
activities
$
54,669
$
(5,453)
$
24,259
$
10,867
$
84,342
Expenditures for property, plant &
equipment
(6,063)
(5,948)
(6,888)
(7,028)
(25,927)
Free cash flow
$
48,606
$
(11,401)
$
17,371
$
3,839
$
58,415
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) risks and uncertainties associated with the
successful integration of our Aircraft Wheel and Brake acquisition;
(iv) changes in geopolitical conditions in countries where the
Company does or intends to do business; (v) 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; (vi) the
timely receipt of any necessary export approvals and/or other
licenses or authorizations from the USG; (vii) timely satisfaction
or fulfillment of material contractual conditions precedents in
customer purchase orders, contracts, or similar arrangements;
(viii) the existence of standard government contract provisions
permitting renegotiation of terms and termination for the
convenience of the government; (ix) the successful resolution of
government inquiries or investigations relating to our businesses
and programs; (x) 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; (xi) potential difficulties associated
with variable acceptance test results, given sensitive production
materials and extreme test parameters; (xii) 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 next generation programmable fuze programs, as all have been
assumed in connection with goodwill impairment evaluations; (xiii)
the continued support of the existing K-MAX® helicopter fleet,
including sale of existing K-MAX® spare parts inventory and the
receipt of orders for new aircraft sufficient to recover our
investments in the K-MAX® production line; (xiv) the accuracy of
current cost estimates associated with environmental remediation
activities; (xv) the profitable integration of acquired businesses
into the Company's operations; (xvi) the ability to recover from
cyber-based or other security attacks, information technology
failures or other disruptions; (xvii) changes in supplier sales or
vendor incentive policies; (xviii) the ability of our suppliers to
satisfy their performance obligations, including any supply chain
disruptions; (xix) the effects of price increases or decreases;
(xx) the effects of pension regulations, pension plan assumptions,
pension plan asset performance, future contributions and the
pension freeze; (xxi) future levels of indebtedness and capital
expenditures; (xxii) compliance with our debt covenants; (xxiii)
the continued availability of raw materials and other commodities
in adequate supplies and the effect of increased costs for such
items; (xxiv) the effects of currency exchange rates and foreign
competition on future operations; (xxv) changes in laws and
regulations, taxes, interest rates, inflation rates and general
business conditions; (xxvi) future repurchases and/or issuances of
common stock;(xxvii) the occurrence of unanticipated restructuring
costs or the failure to realize anticipated savings or benefits
from past or future expense reduction actions; (xxviii) the ability
to recruit and retain skilled employees; (xxix) 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 (xxx)
other risks and uncertainties set forth herein and in our 2022 Form
10-K and our third quarter 2023 Form 10-Q filed November 1,
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.
KAMAN CORPORATION AND
SUBSIDIARIES
Condensed Consolidated
Statements of Operations
(Thousands of U.S. dollars,
except share data) (unaudited)
Three Months Ended
For the Nine Months
Ended
September 29, 2023
September 30, 2022
September 29, 2023
September 30, 2022
Net sales
$
183,031
$
172,004
$
572,731
$
490,818
Cost of sales
117,977
117,326
368,246
334,008
Program inventory impairment
417
—
1,013
—
Gross profit
64,637
54,678
203,472
156,810
Selling, general and administrative
expenses
42,501
49,009
127,765
127,980
Research and development costs
4,022
3,937
15,122
14,265
Intangible asset amortization expense
5,593
3,118
19,937
8,024
Restructuring and severance costs
571
(243)
3,033
2,853
Gain on sale of business
—
(457)
—
(457)
Net loss on disposition of assets
78
15
496
71
Operating income (loss)
11,872
(701)
37,119
4,074
Interest expense, net
9,405
3,614
29,349
8,088
Non-service pension and post retirement
benefit income
(310)
(5,142)
(930)
(15,429)
Other expense, net
849
1,221
377
2,415
Earnings (loss) before income taxes
1,928
(394)
8,323
9,000
Income tax expense (benefit)
462
(114)
2,371
1,631
Net earnings (loss)
$
1,466
$
(280)
$
5,952
$
7,369
Earnings (loss) per share:
Basic earnings (loss) per share
$
0.05
$
(0.01)
$
0.21
$
0.26
Diluted earnings (loss) per share
$
0.05
$
(0.01)
$
0.21
$
0.26
Average shares outstanding:
Basic
28,247
28,037
28,189
27,997
Diluted
28,350
28,037
28,324
28,076
(1) The condensed consolidated statement of operations for the
three-month and nine-month fiscal periods ended September 30, 2022
has been revised from amounts reported in the prior year to correct
errors related to the accounting for certain labor costs at one
business in the Precision Products segment and the net realizable
value on certain portions of the Company's inventory at another
business in the Structures segment. These errors resulted in an
understatement of cost of sales, net of tax, of $0.9 million and
$1.3 million, respectively. Refer to the Company's Form 10-Q for
the quarter ended September 29, 2023 for further information.
KAMAN CORPORATION AND
SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(Thousands of U.S. dollars,
except share data) (unaudited)
September 29, 2023
December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
30,065
$
24,154
Accounts receivable, net
106,647
87,659
Contract assets
100,709
113,182
Inventories
201,439
172,383
Income tax refunds receivable
4,680
14,843
Other current assets
21,063
16,114
Total current assets
464,603
428,335
Property, plant and equipment, net of
accumulated depreciation of $283,272 and $268,089, respectively
203,704
201,606
Operating right-of-use assets, net
6,325
7,391
Goodwill
380,243
379,854
Other intangible assets, net
352,208
372,331
Deferred income taxes
45,878
47,385
Other assets
54,831
51,207
Total assets
$
1,507,792
$
1,488,109
Liabilities and Shareholders’
Equity
Current liabilities:
Current portion of long-term debt
$
198,854
$
—
Accounts payable – trade
45,890
48,277
Accrued salaries and wages
31,027
31,395
Contract liabilities, current portion
7,884
4,081
Operating lease liabilities, current
portion
3,110
3,332
Income taxes payable
2,214
393
Other current liabilities
45,540
39,097
Total current liabilities
334,519
126,575
Long-term debt, excluding current portion,
net of debt issuance costs
382,000
561,061
Deferred income taxes
6,490
6,079
Underfunded pension
49,813
52,309
Contract liabilities, noncurrent
portion
19,653
20,515
Operating lease liabilities, noncurrent
portion
3,452
4,534
Other long-term liabilities
32,570
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; 30,910,177 and 30,640,068 shares issued,
respectively
30,910
30,640
Additional paid-in capital
251,843
245,436
Retained earnings
674,271
685,234
Accumulated other comprehensive income
(loss)
(154,794)
(158,421)
Less 2,663,437 and 2,607,841 shares of
common stock, respectively, held in treasury, at cost
(122,935)
(122,133)
Total shareholders’ equity
679,295
680,756
Total liabilities and shareholders’
equity
$
1,507,792
$
1,488,109
(1) The condensed consolidated balance sheet at December 31,
2022 has been revised from amounts reported in the prior year to
correct misstatements related to the accounting for certain labor
costs at one business in the Precision Products segment and the net
realizable value on certain portions of the Company's inventory at
another business in the Structures segment. The correction of these
errors impacted the amounts reported for inventory, income tax
refunds receivable and retained earnings. Refer to the Company's
Form 10-Q for the quarter ended September 29, 2023 for further
information.
KAMAN CORPORATION AND
SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flows
(Thousands of U.S.
dollars) (unaudited)
For the Nine Months
Ended
September 29, 2023
September 30, 2022
Cash flows from operating
activities:
Net earnings
$
5,952
$
7,369
Adjustments to reconcile earnings, net of
tax to net cash provided by operating activities:
Depreciation and amortization
38,244
27,037
Amortization of debt issuance costs
2,985
1,882
Provision for doubtful accounts
1,495
619
Gain on sale of business
—
(457)
Net loss on disposition of assets
496
71
Program inventory impairment
1,013
—
Net loss on derivative instruments
620
2,670
Stock compensation expense
5,190
6,145
Non-cash consideration received for blade
exchange
(1,309)
(827)
Deferred income taxes
212
1,600
Changes in assets and liabilities,
excluding effects of acquisitions/divestitures:
Accounts receivable
(20,736)
(23,640)
Contract assets
12,467
(5,405)
Inventories
(30,952)
(19,478)
Income tax refunds receivable
10,158
(2,401)
Operating right of use assets
1,052
3,347
Other assets
(3,802)
(3,230)
Accounts payable - trade
(2,423)
(8,780)
Contract liabilities
2,951
4,246
Operating lease liabilities
(1,290)
(3,296)
Other current liabilities
5,057
(4,591)
Income taxes payable
1,867
(227)
Pension liabilities
3,005
(13,309)
Other long-term liabilities
(2,579)
(3,045)
Net cash provided by (used in) operating
activities
29,673
(33,700)
Cash flows from investing
activities:
Expenditures for property, plant &
equipment
(19,864)
(17,626)
Investment in Near Earth Autonomy
—
(10,000)
Acquisition of businesses, net of cash
acquired
(1,487)
(441,340)
Other, net
(708)
2,438
Net cash used in investing activities
(22,059)
(466,528)
Cash flows from financing
activities:
Net borrowings under revolving credit
agreement
19,000
412,000
Purchase of treasury shares
(780)
(762)
Dividends paid
(16,871)
(16,760)
Debt issuance costs
(4,833)
(4,285)
Other, net
1,903
1,725
Net cash (used in) provided financing
activities
(1,581)
391,918
Net increase (decrease) in cash and cash
equivalents
6,033
(108,310)
Effect of exchange rate changes on cash
and cash equivalents
(122)
(1,132)
Cash and cash equivalents at beginning of
period
24,154
140,800
Cash and cash equivalents at end of
period
$
30,065
$
31,358
(1) The condensed consolidated statement of cash flows for the
nine-month fiscal periods ended September 30, 2022 has been revised
from amounts reported in the prior year to correct errors related
to the accounting for certain labor costs at one business in the
Precision Products segment and the net realizable value on certain
portions of the Company's inventory at another business in the
Structures segment. The correction of these errors impacted the
amounts reported for net earnings, inventory and income tax refunds
receivable. Refer to the Company's Form 10-Q for the quarter ended
September 29, 2023 for further information.
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