Kaman Reports Second Quarter 2022 Results

Kaman Reports Second Quarter 2022 Results

04 August 2022

Second Quarter 2022 Highlights:

  • Continued confidence in full year outlook for earnings, EBITDA and free cash flow while reducing 2022 outlook for sales
  • Consolidated backlog growth year to date of 11% to $775 million driven by Engineered Products
  • Executing on our growth strategy with agreement to acquire Parker-Hannifin Aircraft Wheel & Brake
  • Net sales: $161 million
  • Gross Margin: 32.4%
  • Net earnings: $4.1 million
  • Adjusted EBITDA*: $16.4 million; Adjusted EBITDA margin*: 10.2%
  • Diluted earnings per share: $0.14 per share, $0.31 per share adjusted*

BLOOMFIELD, Conn.–(BUSINESS WIRE)–Aug. 4, 2022–
Kaman Corp. (NYSE:KAMN) today reported financial results for the second fiscal quarter ended July 1, 2022.

Table 1. Summary of Financial Results (unaudited)

Thousands of U.S. dollars

(except share data)

 

Three Months Ended

 

Six Months Ended

 

 

July 1,

2022

 

April 1,

2022

 

July 2,

2021

 

July 1,

2022

 

July 2,

2021

Net sales

 

$

160,766

 

 

$

158,048

 

 

$

182,394

 

 

$

318,814

 

 

$

354,010

 

Net earnings

 

 

4,064

 

 

 

4,028

 

 

 

11,856

 

 

 

8,092

 

 

 

19,840

 

Adjusted EBITDA*

 

 

16,429

 

 

 

12,186

 

 

 

26,944

 

 

 

28,615

 

 

 

44,057

 

Adjusted EBITDA margin*

 

 

10.2

%

 

 

7.7

%

 

 

14.8

%

 

 

9.0

%

 

 

12.4

%

Diluted earnings per share

 

$

0.14

 

 

$

0.14

 

 

$

0.42

 

 

$

0.29

 

 

$

0.71

 

Adjusted diluted earnings per share*

 

 

0.31

 

 

 

0.15

 

 

 

0.56

 

 

 

0.46

 

 

 

0.85

 

*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 6-13 for reconciliations to the most comparable GAAP measure.

“Overall performance was in line with our expectations with sales and margin improvement anticipated in the second half of the year. Order rates continue to be strong for our most profitable products and we continue to benefit from the recovery of the commercial aerospace market with Kaman sales increasing to Boeing and Airbus, for the fourth quarter in a row. In May, we executed on our growth strategy with a definitive agreement to acquire Parker-Hannifin’s Aircraft Wheel & Brake business. This acquisition, which is expected to close in the second half of the year, will expand the breadth of our product offerings, increase our exposure to attractive markets and drive meaningful margin and cash flow accretion,” said Ian K. Walsh, Chairman, President and Chief Executive Officer.

“In the second quarter, our largest and most profitable segment, Engineered Products, benefited from growing demand for bearings in the commercial, business and general aviation markets and for seals, springs and contacts in medical applications. We continued to demonstrate growth with an increase of more than 10 percent in sales, 25 percent in Adjusted EBITDA and approximately 300 basis points in EBITDA margin compared to both last quarter and the second quarter of 2021. Persistent demand is supporting robust order rates with backlog growing broadly across these businesses, increasing 33 percent since the beginning of the year to $225 million.”

“In Precision Products, sales and margin declined during the quarter mostly in our fuze programs; however, we are on target to meet our fuze delivery plan for the year. We continue to focus on the transformation of this segment, increasing investment in our air vehicles program. In June, we announced a $10 million equity investment in Near Earth Autonomy which will accelerate the development of autonomous technology in our unmanned aerial systems. We have been working with Near Earth for several years and are excited about this opportunity in a growing autonomy market. Additionally, we are still on target for a full scale model demonstration of our new KARGO UAV unmanned aerial system later this year.”

“In our Structures segment, quarterly results were impacted by a disruption of incoming materials due to a fire at one of our suppliers. We expect a partial recovery and improved performance over the course of the year. The facilities consolidation to optimize our cost structure is progressing and we are focusing on winning new business opportunities in complex structural programs,” said Walsh.

Outlook

“Persistently high demand is driving steady growth in our revenue, margins and backlog for bearings, seals, springs and contacts products in Engineered Products. A significant portion of our sales expectations for the remainder of the year is already in backlog, which gives us confidence in the expected performance for this segment in the third and fourth quarter. Based upon lower than expected order rates in our Structures segment and current pressure from foreign exchange rates, we are revising our sales outlook downward slightly for the full year. The strength in order activity, diversity of our end markets and focus on operations excellence give us confidence in meeting our earnings, EBITDA and free cash flow for the full year 2022, excluding the benefit of the Aircraft Wheel & Brake acquisition.”

“Over the long term, Kaman is in a great position to provide meaningful shareholder returns through M&A and organic growth. In addition to the Aircraft Wheel & Brake acquisition, we continue to invest in our products and will consider smaller M&A opportunities that are tightly aligned with our long term strategy. We will remain disciplined in our approach to capital allocation and thoughtful in our strategy to achieve top quartile EBITDA margin, free cash flow and return on invested capital,” Walsh said.

See Table 5 of this release for an updated outlook summary for 2022.

KAMAN BUSINESS RESULTS DISCUSSION

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; and proprietary spring energized seals, springs and contacts.

Table 2. Engineered Products Results

Thousands of U.S. dollars

 

Three Months Ended

 

Six Months Ended

 

 

July 1,

2022

 

April 1,

2022

 

July 2,

2021

 

July 1,

2022

 

July 2,

2021

Net sales

 

$

89,765

 

 

$

81,452

 

 

$

78,956

 

 

$

171,217

 

 

$

150,735

 

Operating income

 

 

15,467

 

 

 

11,042

 

 

 

9,758

 

 

 

26,509

 

 

 

14,664

 

Adjusted EBITDA

 

 

21,614

 

 

 

17,269

 

 

 

16,337

 

 

 

38,883

 

 

 

27,833

 

Adjusted EBITDA margin

 

 

24.1

%

 

 

21.2

%

 

 

20.7

%

 

 

22.7

%

 

 

18.5

%

Three months ended July 1, 2022 versus three months ended April 1, 2022 – Operating income increased $4.4 million, Adjusted EBITDA increased $4.3 million and margin increased 290 basis points versus the first quarter of 2022. Compared to the prior period, results improved primarily due to increased sales of bearings and both increased sales and margins of products used in medical end markets and engine aftermarket products.

Three months ended July 1, 2022 versus three months ended July 2, 2021 – Operating income increased $5.7 million, Adjusted EBITDA increased $5.3 million and margin increased 340 basis points versus the second quarter of 2021. Results improved compared to the same period last year driven by increased sales of commercial aerospace bearings. Both sales and margins increased for seals, springs and contacts used in products for medical and industrial applications as well as for engine aftermarket products.

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; manufacture and support of our heavy lift K-MAX® manned helicopter, the K-MAX TITAN unmanned aerial system and 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

 

Six Months Ended

 

 

July 1,

2022

 

April 1,

2022

 

July 2,

2021

 

July 1,

2022

 

July 2,

2021

Net sales

 

$

41,267

 

 

$

47,549

 

 

$

71,539

 

 

$

88,816

 

 

$

132,072

 

Operating income

 

 

2,550

 

 

 

3,409

 

 

 

19,429

 

 

 

5,959

 

 

 

32,482

 

Adjusted EBITDA

 

 

3,593

 

 

 

4,440

 

 

 

20,483

 

 

 

8,033

 

 

 

34,567

 

Adjusted EBITDA margin

 

 

8.7

%

 

 

9.3

%

 

 

28.6

%

 

 

9.0

%

 

 

26.2

%

Three months ended July 1, 2022 versus three months ended April 1, 2022 – Operating income decreased $0.9 million, Adjusted EBITDA decreased $0.8 million and margin decreased 60 basis points versus the first quarter of 2022. Compared to the prior period, results declined primarily due to lower sales and associated gross profit for our fuze programs partially offset by increased sales and margins for K-MAX® spares and support as well as for our SH-2 program.

Three months ended July 1, 2022 versus three months ended July 2, 2021 – Operating income decreased $16.9 million, Adjusted EBITDA decreased $16.9 million and margin decreased significantly versus the second quarter of 2021. Results declined compared to the same period last year, primarily due to lower sales and associated gross profit for our JPF program as the second quarter 2021 had a much larger volume.

StructuresOur 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

 

Six Months Ended

 

 

July 1,

2022

 

April 1,

2022

 

July 2,

2021

 

July 1,

2022

 

July 2,

2021

Net sales

 

$

29,734

 

 

$

29,047

 

 

$

31,899

 

 

$

58,781

 

 

$

71,203

 

Operating income (loss)

 

 

(830

)

 

 

(617

)

 

 

(1,521

)

 

 

(1,447

)

 

 

(1,201

)

Adjusted EBITDA

 

 

57

 

 

 

289

 

 

 

(666

)

 

 

346

 

 

 

515

 

Adjusted EBITDA margin

 

 

0.2

%

 

 

1.0

%

 

 

(2.1

) %

 

 

0.6

%

 

 

0.7

%

Three months ended July 1, 2022 versus three months ended April 1, 2022 – Operating loss, Adjusted EBITDA and margin were relatively unchanged compared to the first quarter of 2022. Results were partially impacted by a disruption of incoming material due to a fire at one of our suppliers in the second quarter 2022 and the wind down of the AH-1Z program. This was mostly offset by higher medical imaging sales and margins.

Three months ended July 1, 2022 versus three months ended July 2, 2021 – Operating loss decreased $0.7 million, Adjusted EBITDA increased $0.7 million and margin increased 230 basis points versus the second quarter of 2021. Compared to the prior period, sales and margins were higher on our Rolls Royce and imaging programs, partially offset by a disruption of incoming material in the second quarter of 2022 due to a fire at one of our suppliers.

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.

OUTLOOK

Table 5. Outlook

Millions of U.S. dollars (except share data)

2022 Outlook

 

Low End

 

High End

Net Sales

$

700

 

 

$

715

 

Earnings from continuing operations

$

49

 

 

$

53

 

Adjusted EBITDA

$

94

 

 

$

99

 

Adjusted EBITDA margin

 

13.4

%

 

 

13.8

%

Adjusted diluted earnings per share

$

1.75

 

 

$

1.90

 

Cash flow from operating activities

$

65

 

 

$

75

 

Adjusted free cash flow

$

40

 

 

$

50

 

Please see the supplemental presentation relating to the second quarter 2022 on our Company’s website for a full outlook summary.

CONFERENCE CALL

A webcast and conference call has been scheduled for tomorrow, August 5, 2022, 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 second quarter 2022 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; 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; manufacture and support of our heavy lift K-MAX® manned helicopter, the K-MAX TITAN unmanned helicopter and 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) 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 and Adjusted EBITDA margin – 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 6. Adjusted EBITDA and Adjusted EBITDA Margin (unaudited)

 

 

Three Months Ended

Thousands of U.S. dollars

 

July 1, 2022

 

 

Consolidated

 

Engineered Products

 

Precision Products

 

Structures

 

Corp/Elims**

Net sales

 

$

160,766

 

 

$

89,765

 

 

$

41,267

 

 

$

29,734

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

4,064

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

1,993

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

 

557

 

 

 

 

 

 

 

 

 

Non-service pension and post retirement benefit income

 

 

(5,024

)

 

 

 

 

 

 

 

 

Other expense (income), net

 

 

690

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

$

2,280

 

 

$

15,467

 

 

$

2,550

 

 

$

(830

)

 

$

(14,907

)

Depreciation and amortization

 

 

8,822

 

 

 

6,147

 

 

 

1,043

 

 

 

887

 

 

 

745

 

Restructuring and severance costs

 

 

2,927

 

 

 

 

 

 

 

 

 

 

 

 

2,927

 

Cost associated with corporate development activities

 

 

2,400

 

 

 

 

 

 

 

 

 

 

 

 

2,400

 

Other Adjustments

 

$

14,149

 

 

$

6,147

 

 

$

1,043

 

 

$

887

 

 

$

6,072

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

16,429

 

 

$

21,614

 

 

$

3,593

 

 

$

57

 

 

$

(8,835

)

Adjusted EBITDA margin

 

 

10.2

%

 

 

24.1

%

 

 

8.7

%

 

 

0.2

%

 

 

**Corp/Elims Operating income (loss) represents the Corporate office expenses and $2.9 million of unallocated expenses that are shown on the Consolidated Statement of Earnings as their own line items.

Table 7. Adjusted EBITDA and Adjusted EBITDA margin (unaudited)

 

 

Three Months Ended

Thousands of U.S. dollars

 

April 1, 2022

 

 

Consolidated

 

Engineered Products

 

Precision Products

 

Structures

 

Corp/Elims**

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.

Table 8. Adjusted EBITDA and Adjusted EBITDA margin (unaudited)

 

 

Three Months Ended

Thousands of U.S. dollars

 

July 2, 2021

 

 

Consolidated

 

Engineered Products

 

Precision Products

 

Structures

 

Corp/Elims**

Net sales

 

$

182,394

 

 

$

78,956

 

 

$

71,539

 

 

$

31,899

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

11,856

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

4,335

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

 

5,502

 

 

 

 

 

 

 

 

 

Non-service pension and post retirement benefit income

 

 

(6,577

)

 

 

 

 

 

 

 

 

Income from TSA

 

 

(442

)

 

 

 

 

 

 

 

 

Other expense (income), net

 

 

158

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

$

14,832

 

 

$

9,758

 

 

$

19,429

 

 

$

(1,521

)

 

$

(12,834

)

Depreciation and amortization

 

 

9,182

 

 

 

6,579

 

 

 

1,054

 

 

 

855

 

 

 

694

 

Restructuring and severance costs

 

 

1,516

 

 

 

 

 

 

 

 

 

 

 

 

1,516

 

Costs associated with corporate development activities

 

 

415

 

 

 

 

 

 

 

 

 

 

 

 

415

 

Costs from transition service agreement

 

 

999

 

 

 

 

 

 

 

 

 

 

 

 

999

 

Other Adjustments

 

$

12,112

 

 

$

6,579

 

 

$

1,054

 

 

$

855

 

 

$

3,624

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

26,944

 

 

$

16,337

 

 

$

20,483

 

 

$

(666

)

 

$

(9,210

)

Adjusted EBITDA margin

 

 

14.8

%

 

 

20.7

%

 

 

28.6

%

 

 

(2.1

) %

 

 

**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 Earnings as their own line items.

Table 9. Adjusted EBITDA and Adjusted EBITDA margin (unaudited)

 

 

Six Months Ended

Thousands of U.S. dollars

 

July 1, 2022

 

 

Consolidated

 

Engineered Products

 

Precision Products

 

Structures

 

Corp/Elims**

Net sales

 

$

318,814

 

 

$

171,217

 

 

$

88,816

 

 

$

58,781

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

8,092

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

4,474

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

 

1,864

 

 

 

 

 

 

 

 

 

Non-service pension and post retirement benefit income

 

 

(10,287

)

 

 

 

 

 

 

 

 

Other expense (income), net

 

 

1,194

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

$

5,337

 

 

$

26,509

 

 

$

5,959

 

 

$

(1,447

)

 

$

(25,684

)

Depreciation and amortization

 

 

17,654

 

 

 

12,374

 

 

 

2,074

 

 

 

1,793

 

 

 

1,413

 

Restructuring and severance costs

 

 

3,096

 

 

 

 

 

 

 

 

 

 

 

 

3,096

 

Cost associated with corporate development activities

 

 

2,528

 

 

 

 

 

 

 

 

 

 

 

 

2,528

 

Other Adjustments

 

$

23,278

 

 

 

12,374

 

 

 

2,074

 

 

 

1,793

 

 

 

7,037

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

28,615

 

 

 

38,883

 

 

 

8,033

 

 

 

346

 

 

 

(18,647

)

Adjusted EBITDA margin

 

 

9.0

%

 

 

22.7

%

 

 

9.0

%

 

 

0.6

%

 

 

**Corp/Elims Operating income (loss) represents the Corporate office expenses and $3.2 million of unallocated expenses that are shown on the Consolidated Statement of Earnings as their own line items.

Table 10. Adjusted EBITDA and Adjusted EBITDA margin (unaudited)

 

 

Six Months Ended

Thousands of U.S. dollars

 

July 2, 2021

 

 

Consolidated

 

Engineered Products

 

Precision Products

 

Structures

 

Corp/Elims**

Net sales

 

$

354,010

 

 

$

150,735

 

 

$

132,072

 

 

$

71,203

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

19,840

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

8,586

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

 

5,709

 

 

 

 

 

 

 

 

 

Non-service pension and post retirement benefit income

 

 

(13,220

)

 

 

 

 

 

 

 

 

Income from TSA

 

 

(917

)

 

 

 

 

 

 

 

 

Other expense (income), net

 

 

447

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

$

20,445

 

 

$

14,664

 

 

$

32,482

 

 

$

(1,201

)

 

$

(25,500

)

Depreciation and amortization

 

 

18,391

 

 

 

13,169

 

 

 

2,085

 

 

 

1,716

 

 

 

1,421

 

Restructuring and severance costs

 

 

2,868

 

 

 

 

 

 

 

 

 

 

 

 

2,868

 

Costs from transition service agreement

 

 

1,704

 

 

 

 

 

 

 

 

 

 

 

 

1,704

 

Cost associated with corporate development activities

 

 

415

 

 

 

 

 

 

 

 

 

 

 

 

415

 

Loss on sale of business

 

 

234

 

 

 

 

 

 

 

 

 

 

 

 

234

 

Other Adjustments

 

$

23,612

 

 

$

13,169

 

 

$

2,085

 

 

$

1,716

 

 

$

6,642

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

44,057

 

 

$

27,833

 

 

$

34,567

 

 

$

515

 

 

$

(18,858

)

Adjusted EBITDA margin

 

 

12.4

%

 

 

18.5

%

 

 

26.2

%

 

 

0.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

**Corp/Elims Operating income (loss) represents the Corporate office expenses and $4.8 million of unallocated expenses that are shown on the Consolidated Statement of Earnings 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. 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 11. Adjusted Net Earnings and Adjusted Diluted Earnings per Share (unaudited)

Thousands of U.S. dollars (except share data)

 

 

 

 

 

 

 

 

Three Months Ended

 

Three Months Ended

 

 

July 1, 2022

 

July 2, 2021

 

 

Pre-Tax

 

Tax-Effected

 

Diluted EPS

 

Pre-Tax

 

Tax-Effected

 

Diluted EPS

Net earnings

 

$

4,621

 

$

4,064

 

$

0.14

 

$

17,358

 

 

$

11,856

 

 

$

0.42

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring and severance costs

 

 

2,927

 

 

2,574

 

 

0.09

 

 

1,516

 

 

 

1,194

 

 

 

0.04

 

Costs associated with corporate development activities

 

 

2,400

 

 

2,111

 

 

0.08

 

 

415

 

 

 

327

 

 

 

0.01

 

Costs from transition services agreement

 

 

 

 

 

 

 

 

999

 

 

 

787

 

 

 

0.03

 

Income from transition services agreement

 

 

 

 

 

 

 

 

(442

)

 

 

(348

)

 

 

(0.01

)

Tax benefit on sale of UK operations

 

 

 

 

 

 

 

 

1,799

 

 

 

1,799

 

 

 

0.07

 

Adjustments

 

$

5,327

 

$

4,685

 

$

0.17

 

$

4,287

 

 

$

3,759

 

 

$

0.14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net earnings

 

$

9,948

 

$

8,749

 

$

0.31

 

$

21,645

 

 

$

15,615

 

 

$

0.56

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

 

 

 

 

 

28,059

 

 

 

 

 

 

27,913

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

 

 

 

April 1, 2022

 

 

 

 

 

 

 

 

Pre-Tax

 

Tax-Effected

 

Diluted EPS

Net earnings

 

$

5,335

 

 

$

4,028

 

 

$

0.14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring and severance costs

 

 

169

 

 

 

128

 

 

 

0.01

 

Costs associated with corporate development activities

 

 

128

 

 

 

97

 

 

 

 

Adjustments

 

$

297

 

 

$

225

 

 

$

0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net earnings

 

$

5,632

 

 

$

4,253

 

 

$

0.15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

 

 

 

 

 

28,082

 

Table 12. Adjusted Net Earnings and Adjusted Diluted Earnings per Share (unaudited)

Thousands of U.S. dollars (except share data)

 

 

 

 

 

 

 

 

Six Months Ended

 

Six Months Ended

 

 

July 1, 2022

 

July 2, 2021

 

 

Pre-Tax

 

Tax-Effected

 

Diluted EPS

 

Pre-Tax

 

Tax-Effected

 

Diluted EPS

Net earnings

 

$

9,956

 

$

8,092

 

$

0.29

 

$

25,549

 

 

$

19,840

 

 

$

0.71

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring and severance costs

 

 

3,096

 

 

2,702

 

 

0.09

 

 

2,868

 

 

 

2,272

 

 

 

0.08

 

Costs associated with corporate development activities

 

 

2,528

 

 

2,208

 

 

0.08

 

 

415

 

 

 

329

 

 

 

0.01

 

Costs from transition services agreement

 

 

 

 

 

 

 

 

1,704

 

 

 

1,350

 

 

 

0.05

 

Income from transition services agreement

 

 

 

 

 

 

 

 

(917

)

 

 

(726

)

 

 

(0.02

)

Tax expense on sale of UK operations

 

 

 

 

 

 

 

 

287

 

 

 

287

 

 

 

0.01

 

Loss on sale of business

 

 

.

 

 

 

 

 

234

 

 

 

234

 

 

 

0.01

 

Adjustments

 

$

5,624

 

$

4,910

 

$

0.17

 

$

4,591

 

 

$

3,746

 

 

$

0.14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net earnings

 

$

15,580

 

$

13,002

 

$

0.46

 

$

30,140

 

 

$

23,586

 

 

$

0.85

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

 

 

 

 

 

28,071

 

 

 

 

 

 

27,890

 

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 13. Free Cash Flow (unaudited)

Thousands of U.S. dollars

 

Three Months Ended

 

Last Twelve Months

 

 

October 1,

2021

 

December 31,

2021

 

April 1,

2022

 

July 1,

2022

 

July 1,

2022

Net cash provided by (used in) operating activities

 

$

28,846

 

 

$

34,575

 

 

$

(1,017

)

 

$

(25,937

)

 

$

36,467

 

Expenditures for property, plant & equipment

 

 

(3,262

)

 

 

(6,166

)

 

 

(6,877

)

 

 

(3,643

)

 

 

(19,948

)

Free cash flow

 

$

25,584

 

 

$

28,409

 

 

$

(7,894

)

 

$

(29,580

)

 

$

16,519

 

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) 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) 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, including the ultimate determination of the USG’s share of any pension curtailment adjustment calculated in accordance with CAS 413; (xxi) future levels of indebtedness and capital expenditures; (xxii) the continued availability of raw materials and other commodities in adequate supplies and the effect of increased costs for such items; (xxiii) the effects of currency exchange rates and foreign competition on future operations; (xxiv) changes in laws and regulations, taxes, interest rates, inflation rates and general business conditions; (xxv) future repurchases and/or issuances of common stock;(xxvi) the occurrence of unanticipated restructuring costs or the failure to realize anticipated savings or benefits from past or future expense reduction actions; (xxvii) the ability to recruit and retain skilled employees; and (xxviii) other risks and uncertainties set forth herein and in our 2021 Form 10-K and our second quarter 2022 Form 10-Q filed August 4, 2022.

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

 

Six Months Ended

 

 

July 1, 2022

 

July 2, 2021

 

July 1, 2022

 

July 2, 2021

Net sales

 

$

160,766

 

 

$

182,394

 

 

$

318,814

 

 

$

354,010

 

Cost of sales

 

 

108,659

 

 

 

120,448

 

 

 

216,120

 

 

 

239,159

 

Gross profit

 

 

52,107

 

 

 

61,946

 

 

 

102,694

 

 

 

114,851

 

Selling, general and administrative expenses

 

 

39,250

 

 

 

38,719

 

 

 

78,971

 

 

 

76,847

 

Research and development costs

 

 

5,215

 

 

 

3,238

 

 

 

10,328

 

 

 

7,464

 

Intangible asset amortization expense

 

 

2,439

 

 

 

2,637

 

 

 

4,906

 

 

 

5,274

 

Costs from transition services agreement

 

 

 

 

 

999

 

 

 

 

 

 

1,704

 

Restructuring and severance costs

 

 

2,927

 

 

 

1,516

 

 

 

3,096

 

 

 

2,868

 

Loss on sale of business

 

 

 

 

 

 

 

 

 

 

 

234

 

Net loss on sale of assets

 

 

(4

)

 

 

5

 

 

 

56

 

 

 

15

 

Operating income

 

 

2,280

 

 

 

14,832

 

 

 

5,337

 

 

 

20,445

 

Interest expense, net

 

 

1,993

 

 

 

4,335

 

 

 

4,474

 

 

 

8,586

 

Non-service pension and post retirement benefit income

 

 

(5,024

)

 

 

(6,577

)

 

 

(10,287

)

 

 

(13,220

)

Income from transition services agreement

 

 

 

 

 

(442

)

 

 

 

 

 

(917

)

Other income, net

 

 

690

 

 

 

158

 

 

 

1,194

 

 

 

447

 

Net earnings before income taxes

 

 

4,621

 

 

 

17,358

 

 

 

9,956

 

 

 

25,549

 

Income tax expense

 

 

557

 

 

 

5,502

 

 

 

1,864

 

 

 

5,709

 

Net earnings

 

$

4,064

 

 

$

11,856

 

 

$

8,092

 

 

$

19,840

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.15

 

 

$

0.43

 

 

$

0.29

 

 

$

0.71

 

Diluted earnings per share

 

$

0.14

 

 

$

0.42

 

 

$

0.29

 

 

$

0.71

 

Average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

28,005

 

 

 

27,867

 

 

 

27,977

 

 

 

27,841

 

Diluted

 

 

28,059

 

 

 

27,913

 

 

 

28,071

 

 

 

27,890

 

KAMAN CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Thousands of U.S. dollars, except share data) (unaudited)

 

 

 

July 1, 2022

 

December 31, 2021

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

80,244

 

 

$

140,800

 

Accounts receivable, net

 

 

77,692

 

 

 

73,524

 

Contract assets

 

 

109,290

 

 

 

112,354

 

Contract costs, current portion

 

 

909

 

 

 

850

 

Inventories

 

 

214,688

 

 

 

193,100

 

Income tax refunds receivable

 

 

16,194

 

 

 

13,832

 

Assets held for sale, current portion

 

 

363

 

 

 

 

Other current assets

 

 

15,754

 

 

 

12,083

 

Total current assets

 

 

515,134

 

 

 

546,543

 

Property, plant and equipment, net of accumulated depreciation of $256,689 and $251,888, respectively

 

 

192,769

 

 

 

197,822

 

Operating right-of-use assets, net

 

 

8,618

 

 

 

11,011

 

Goodwill

 

 

233,135

 

 

 

240,681

 

Other intangible assets, net

 

 

131,403

 

 

 

138,074

 

Deferred income taxes

 

 

15,335

 

 

 

15,717

 

Contract costs, noncurrent portion

 

 

9,865

 

 

 

10,249

 

Assets held for sale, noncurrent portion

 

 

901

 

 

 

 

Investment in Near Earth Autonomy

 

 

10,000

 

 

 

 

Other assets

 

 

40,937

 

 

 

38,385

 

Total assets

 

$

1,158,097

 

 

$

1,198,482

 

Liabilities and Shareholders’ Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable – trade

 

$

32,192

 

 

$

42,134

 

Accrued salaries and wages

 

 

29,306

 

 

 

38,892

 

Contract liabilities, current portion

 

 

2,893

 

 

 

2,945

 

Operating lease liabilities, current portion

 

 

3,896

 

 

 

4,502

 

Income taxes payable

 

 

239

 

 

 

386

 

Liabilities held for sale, current portion

 

 

340

 

 

 

 

Other current liabilities

 

 

36,275

 

 

 

32,076

 

Total current liabilities

 

 

105,141

 

 

 

120,935

 

Long-term debt, excluding current portion, net of debt issuance costs

 

 

197,542

 

 

 

189,421

 

Deferred income taxes

 

 

6,354

 

 

 

6,506

 

Underfunded pension

 

 

10,978

 

 

 

21,786

 

Contract liabilities, noncurrent portion

 

 

16,528

 

 

 

16,528

 

Operating lease liabilities, noncurrent portion

 

 

5,398

 

 

 

7,140

 

Liabilities held for sale, noncurrent portion

 

 

230

 

 

 

 

Other long-term liabilities

 

 

36,984

 

 

 

39,837

 

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; 30,584,400 and 30,434,269 shares issued, respectively

 

 

30,584

 

 

 

30,434

 

Additional paid-in capital

 

 

241,597

 

 

 

248,153

 

Retained earnings

 

 

753,985

 

 

 

750,445

 

Accumulated other comprehensive income (loss)

 

 

(125,202

)

 

 

(111,385

)

Less 2,598,056 and 2,573,896 shares of common stock, respectively, held in treasury, at cost

 

 

(122,022

)

 

 

(121,318

)

Total shareholders’ equity

 

 

778,942

 

 

 

796,329

 

Total liabilities and shareholders’ equity

 

$

1,158,097

 

 

$

1,198,482

 

KAMAN CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Thousands of U.S. dollars) (unaudited)

 

 

 

Six Months Ended

 

 

July 1, 2022

 

July 2, 2021

Cash flows from operating activities:

 

 

 

 

Net earnings

 

$

8,092

 

 

$

19,840

 

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:

 

 

 

 

Depreciation and amortization

 

 

17,654

 

 

 

18,391

 

Amortization of debt issuance costs

 

 

1,024

 

 

 

882

 

Accretion of convertible notes discount

 

 

 

 

 

1,484

 

Provision for doubtful accounts

 

 

263

 

 

 

290

 

Loss on sale of business

 

 

 

 

 

234

 

Net loss on sale of assets

 

 

56

 

 

 

15

 

Net loss on derivative instruments

 

 

1,646

 

 

 

566

 

Stock compensation expense

 

 

4,811

 

 

 

4,225

 

Non-cash consideration received for blade exchange

 

 

(827

)

 

 

 

Deferred income taxes

 

 

2,050

 

 

 

2,957

 

Changes in assets and liabilities, excluding effects of acquisitions/divestitures:

 

 

 

 

Accounts receivable

 

 

(5,430

)

 

 

53,232

 

Contract assets

 

 

2,936

 

 

 

(4,637

)

Contract costs

 

 

324

 

 

 

(349

)

Inventories

 

 

(24,411

)

 

 

(12,205

)

Income tax refunds receivable

 

 

(2,365

)

 

 

1,485

 

Operating right of use assets

 

 

1,748

 

 

 

781

 

Other assets

 

 

(2,817

)

 

 

1,319

 

Accounts payable – trade

 

 

(9,701

)

 

 

(24,068

)

Contract liabilities

 

 

(38

)

 

 

(18,588

)

Operating lease liabilities

 

 

(1,703

)

 

 

(919

)

Acquired retention plan payments

 

 

 

 

 

(25,108

)

Other current liabilities

 

 

(8,635

)

 

 

(9,470

)

Income taxes payable

 

 

(160

)

 

 

1,532

 

Pension liabilities

 

 

(8,873

)

 

 

(22,837

)

Other long-term liabilities

 

 

(2,598

)

 

 

(3,775

)

Net cash used in operating activities

 

 

(26,954

)

 

 

(14,723

)

Cash flows from investing activities:

 

 

 

 

Proceeds from sale of business, net of cash on hand

 

 

 

 

 

(3,428

)

Expenditures for property, plant & equipment

 

 

(10,520

)

 

 

(8,102

)

Investment in Near Earth Autonomy

 

 

(10,000

)

 

 

 

Other, net

 

 

1,341

 

 

 

(671

)

Net cash used in investing activities.

 

 

(19,179

)

 

 

(12,201

)

Cash flows from financing activities:

 

 

 

 

Purchase of treasury shares

 

 

(698

)

 

 

(390

)

Dividends paid

 

 

(11,163

)

 

 

(11,106

)

Debt issuance costs

 

 

(4,236

)

 

 

 

Other, net

 

 

2,319

 

 

 

876

 

Net cash used in financing activities

 

 

(13,778

)

 

 

(10,620

)

Net decrease in cash and cash equivalents

 

 

(59,911

)

 

 

(37,544

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(645

)

 

 

(183

)

Cash and cash equivalents and restricted cash at beginning of period

 

 

140,800

 

 

 

136,089

 

Cash and cash equivalents and restricted cash at end of period

 

$

80,244

 

 

$

98,362

 

 

Kary Bare

Investor Relations

(860) 243-7485

[email protected]

Source: Kaman Corp.