Kaman Reports 2016 Third Quarter Results
Third Quarter 2016 Highlights:
- GAAP Diluted Earnings per Share of
$0.62 ; Adjusted Diluted Earnings per Share* of$0.64 - Net Earnings of
$17.5 million ; Adjusted EBITDA* of$42.3 million - Aerospace Sales growth of 30%; 16.5% Operating Profit Margin
- Distribution Operating Profit Margin of 4.3%; Adjusted Operating Margin* of 4.5%
- Year-to-Date Cash Flows from Operations of
$70.0 million ; Free Cash Flow* of$46.1 million
Table 1. Summary of Financial Results | ||||||||||||
In thousands except per share amounts | For the Three Months Ended | |||||||||||
September 30, |
October 2, |
|||||||||||
2016 |
2015 |
Change | ||||||||||
Net sales: | ||||||||||||
Distribution | $ | 274,388 | $ | 296,312 | $ | (21,924 | ) | |||||
Aerospace | 179,086 | 137,430 | 41,656 | |||||||||
Net sales | $ | 453,474 | $ | 433,742 | $ | 19,732 | ||||||
Operating income: | ||||||||||||
Distribution | $ | 11,872 | $ | 14,422 | $ | (2,550 | ) | |||||
% of sales | 4.3 | % | 4.9 | % | (0.6 | )% | ||||||
Aerospace | 29,616 | 27,801 | 1,815 | |||||||||
% of sales | 16.5 | % | 20.2 | % | (3.7 | )% | ||||||
Net gain (loss) on sale of assets | (24 | ) | 10 | (34 | ) | |||||||
Corporate expense | (10,402 | ) | (12,450 | ) | 2,048 | |||||||
Operating income | $ | 31,062 | $ | 29,783 | $ | 1,279 | ||||||
Adjusted EBITDA*: | ||||||||||||
Net earnings | $ | 17,455 | $ | 17,224 | $ | 231 | ||||||
Adjustments | 24,825 | 21,785 | 3,040 | |||||||||
Adjusted EBITDA* | $ | 42,280 | $ | 39,009 | $ | 3,271 | ||||||
% of sales | 9.3 | % | 9.0 | % | 0.3 | % | ||||||
Earnings per share: | ||||||||||||
Diluted earnings per share | $ | 0.62 | $ | 0.62 | $ | — | ||||||
Adjustments | 0.02 | 0.01 | 0.01 | |||||||||
Adjusted Diluted Earnings per Share* | $ | 0.64 | $ | 0.63 | $ | 0.01 | ||||||
“At Distribution, sales decreased 7.4% when compared to the prior period. Organic Sales per Sales Day* declined 6.3% when compared to the prior year and declined 2.7% sequentially, which reflects weaker than expected market conditions. Operating margin was 4.3% in the third quarter, a 60 bps decrease from the 4.9% achieved in the third quarter of last year largely due to the deleveraging impact of the lower sales volume.
“While disappointed in the overall market environment, we continue to invest in our productivity initiative at Distribution which includes operational process improvements and data analytics, primarily focused on expanding operating margins. Although this initiative has been successful in those locations where it has been deployed, the benefits we have seen to date have been largely offset by ongoing implementation costs.
“At Aerospace, sales increased approximately 30% with Organic Sales* increasing 17.2%. The increase in Organic Sales* for the third quarter is primarily due to increased deliveries of the JPF to the
Chief Financial Officer
“We are revising our outlook for 2016, to reflect our performance through the first nine-months of the year, specifically, the reduced sales volumes we have experienced at Distribution and the shift in the product mix and timing of deliveries at Aerospace.
“At Distribution we have lowered our sales outlook for the year due to our expectations for continued weakness in the industrial markets. We now expect sales in the range of
“Looking forward to the remainder of the year at Aerospace, a number of programs scheduled for delivery in 2016 have shifted to 2017. Most notably, a significant JPF direct commercial sale previously anticipated in 2016 has shifted into 2017 due to the timing of required governmental approvals, reducing our operating margin expectation for the year. We have lowered our outlook for sales to
“As noted earlier, our corporate expense was lower than our expectations for the third quarter. As a result we are reducing our outlook for corporate expense to
“Finally, we are raising the low end of our outlook for cash flows from operations to
2016 Outlook
Our revised 2016 outlook is as follows:
- Distribution:
- Sales of
$1,110.0 million to $1,120.0 million - Operating margins of 4.3% to 4.4%
- Depreciation and amortization expense of
$16.5 million
- Sales of
- Aerospace:
- Sales of
$700.0 million to $710.0 million - Operating margins of 16.4% to 16.6%, or Adjusted operating margin* of 17.2% to 17.4%, when adjusted for
$5.5 million of transaction and integration costs in 2016 associated with the 2015 acquisitions - Depreciation and amortization expense of
$24.5 million
- Sales of
- Interest expense of approximately
$16.0 million - Corporate expenses of approximately
$52.0 million - Estimated annualized tax rate of approximately 34.5%
- Consolidated depreciation and amortization expense of approximately
$45.0 million - Capital expenditures of
$30.0 million to $35.0 million - Cash flows from operations in the range of
$85.0 million to $100.0 million ; Free Cash Flow* in the range of$55.0 million to $65.0 million
Please see the MD&A section of the Company's SEC Form 10-Q filed concurrent with the issuance of this release for greater detail on our results and various company programs.
A conference call has been scheduled for tomorrow,
Table 2. Summary of Segment Information (in thousands) | ||||||||||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, |
October 2, |
September 30, |
October 2, |
|||||||||||||
2016 |
2015 |
2016 |
2015 |
|||||||||||||
Net sales: | ||||||||||||||||
Distribution | $ | 274,388 | $ | 296,312 | $ | 849,104 | $ | 911,832 | ||||||||
Aerospace | 179,086 | 137,430 | 526,210 | 411,016 | ||||||||||||
Net sales | $ | 453,474 | $ | 433,742 | $ | 1,375,314 | $ | 1,322,848 | ||||||||
Operating income: | ||||||||||||||||
Distribution | $ | 11,872 | $ | 14,422 | $ | 36,148 | $ | 42,789 | ||||||||
Aerospace | 29,616 | 27,801 | 81,374 | 78,775 | ||||||||||||
Net gain (loss) on sale of assets | (24 | ) | 10 | (10 | ) | 415 | ||||||||||
Corporate expense | (10,402 | ) | (12,450 | ) | (38,253 | ) | (39,435 | ) | ||||||||
Operating income | $ | 31,062 | $ | 29,783 | $ | 79,259 | $ | 82,544 | ||||||||
Table 3. Depreciation and Amortization by Segment (in thousands) | ||||||||||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, |
October 2, |
September 30, |
October 2, |
|||||||||||||
2016 |
2015 |
2016 |
2015 |
|||||||||||||
Depreciation and Amortization: | ||||||||||||||||
Distribution | ||||||||||||||||
Depreciation | $ | 2,046 | $ | 2,074 | $ | 6,259 | $ |
6,233 |
|
|||||||
Amortization | 1,940 | 2,007 | 5,868 | 6,108 | ||||||||||||
Total | $ | 3,986 | $ | 4,081 | $ | 12,127 | $ | 12,341 | ||||||||
Aerospace | ||||||||||||||||
Depreciation | $ | 3,909 | $ | 3,074 | $ | 11,561 | $ | 9,085 | ||||||||
Amortization | 2,038 | 873 | 6,135 | 2,582 | ||||||||||||
Total | $ | 5,947 | $ | 3,947 | $ | 17,696 | $ | 11,667 | ||||||||
Corporate | ||||||||||||||||
Depreciation | $ | 901 | $ | 874 | $ | 2,761 | $ | 2,633 | ||||||||
Amortization | 384 | 324 | 1,148 | 1,168 | ||||||||||||
Total | $ | 1,285 | $ | 1,198 | $ | 3,909 | $ | 3,801 | ||||||||
Consolidated Total | $ | 11,218 | $ | 9,226 | $ | 33,732 |
$ |
27,809 |
||||||||
Non-GAAP Measures Disclosure
Management believes that the Non-GAAP (Generally Accepted Accounting Principles) financial measures indicated 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 report and other disclosures as follows:
Organic Sales - Organic Sales is defined as "Net Sales" less sales derived from acquisitions completed during the preceding twelve months. We believe that this measure provides management and investors with a more complete understanding of underlying operating results of established, ongoing operations by excluding the effect of acquisitions, which can obscure underlying trends. We also believe that presenting Organic Sales separately for our segments provides management and investors with useful information about the trends impacting our segments and enables a more direct comparison to other businesses and companies in similar industries. Management recognizes that the term "Organic Sales" may be interpreted differently by other companies and under different circumstances. No other adjustments were made during the three-month and nine-month fiscal periods ended
Table 4. Organic Sales (in thousands) | ||||||||||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, |
October 2, |
September 30, |
October 2, |
|||||||||||||
2016 |
2015 |
2016 |
2015 |
|||||||||||||
Distribution | ||||||||||||||||
Net sales | $ | 274,388 | $ | 296,312 | $ | 849,104 | $ |
911,832 |
|
|||||||
Less: Acquisition Sales | 1,128 | 5,098 | 4,681 | 47,893 | ||||||||||||
Organic Sales | $ | 273,260 | $ | 291,214 | $ | 844,423 | $ | 863,939 | ||||||||
Aerospace | ||||||||||||||||
Net sales | $ | 179,086 | $ | 137,430 | $ | 526,210 | $ | 411,016 | ||||||||
Less: Acquisition Sales | 18,037 | — | 53,418 | — | ||||||||||||
Organic Sales | $ | 161,049 | $ | 137,430 | $ | 472,792 | $ | 411,016 | ||||||||
Consolidated | ||||||||||||||||
Net sales | $ | 453,474 | $ | 433,742 | $ | 1,375,314 | $ | 1,322,848 | ||||||||
Less: Acquisition Sales | 19,165 | 5,098 | 58,099 | 47,893 | ||||||||||||
Organic Sales | $ | 434,309 | $ | 428,644 | $ | 1,317,215 | $ | 1,274,955 | ||||||||
Organic Sales per Sales Day - Organic Sales per Sales Day is defined as GAAP "Net sales of the Distribution segment" less sales derived from acquisitions completed during the preceding twelve months divided by the number of Sales Days in a given period. Sales days ("Sales Days") are the days that the Distribution segment's branch locations were open for business and exclude weekends and holidays. Management believes Organic Sales per Sales Day provides an important perspective on how net sales may be impacted by the number of days the segment is open for business and provides a basis for comparing periods in which the number of sales days differs.
The following table illustrates the calculation of Organic Sales per Sales Day using “Net sales: Distribution” from the “Segment and Geographic Information” footnote in the “Notes to Condensed Consolidated Financial Statements” included in the Company's Form 10-Q filed with the
Table 5. Distribution - Organic Sales Per Sales Day (in thousands, except days) | ||||||||||||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||
September 30, |
October 2, |
September 30, |
October 2, |
|||||||||||||||
2016 |
2015 |
2016 |
2015 |
|||||||||||||||
Current period | ||||||||||||||||||
Net sales | $ | 274,388 | $ | 296,312 | $ | 849,104 | $ | 911,832 | ||||||||||
Acquisition sales (1) | 1,128 | 5,098 | 4,681 | 47,893 | ||||||||||||||
Organic sales | 273,260 | 291,214 | 844,423 | 863,939 | ||||||||||||||
Sales days | 63 | 64 | 192 | 193 | ||||||||||||||
Organic Sales per Sales Day for the current period | a | $ | 4,337 | $ | 4,550 | $ | 4,398 | $ | 4,476 | |||||||||
Prior period | ||||||||||||||||||
Net sales from the prior year | $ | 296,312 | $ | 302,294 | $ | 911,832 | $ | 859,305 | ||||||||||
Sales days from the prior year | 64 | 63 | 193 | 189 | ||||||||||||||
Sales per sales day from the prior year | b | $ | 4,630 | $ | 4,798 | $ | 4,725 | $ | 4,547 | |||||||||
% change | (a-b)÷b | (6.3 | )% | (5.2 | )% | (6.9 | )% | (1.6 | )% | |||||||||
Table 6. Distribution - Sales Days | ||||||||||||
First |
Second |
Third |
Fourth |
|||||||||
Quarter |
Quarter |
Quarter |
Quarter |
|||||||||
Distribution Sales Days | ||||||||||||
2016 sales days by quarter |
65 |
|
64 |
|
63 |
|
61 |
|
||||
2015 sales days by quarter | 66 | 63 | 64 | 60 | ||||||||
Adjusted EBITDA - Adjusted EBITDA is defined as net earnings before interest, taxes, other expense (income), net, and depreciation and amortization. Adjusted EBITDA differs from net earnings, as calculated in accordance with GAAP, in that it excludes interest expense, net, income tax expense, depreciation and amortization and other expense, net. We have made numerous investments in our business, such as acquisitions and capital expenditures, including facility improvements, new machinery and equipment, improvements to our information technology infrastructure and new ERP systems, which we believe we have adjusted for in Adjusted EBITDA. Adjusted EBITDA also does not give effect to cash used for debt service requirements and thus does not reflect funds available for distributions, reinvestments or other discretionary uses. Management believes Adjusted EBITDA provides an additional perspective on the operating results of the organization and its earnings capacity and helps improve the comparability of our results between periods because it provides a view of our operations that excludes items that management believes are not reflective of operating performance, such as items traditionally removed from net earnings in the calculation of EBITDA as well as Other Expense, net. Adjusted EBITDA is not presented as an alternative measure of operating performance, as determined in accordance with GAAP. No other adjustments were made during the three-month and nine-month fiscal periods ended
Table 7. Adjusted EBITDA (in thousands) | ||||||||||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, |
October 2, |
September 30, |
October 2, |
|||||||||||||
2016 |
2015 |
2016 |
2015 |
|||||||||||||
Adjusted EBITDA | ||||||||||||||||
Consolidated Results | ||||||||||||||||
Sales | $ | 453,474 | $ | 433,742 | $ | 1,375,314 | $ | 1,322,848 | ||||||||
Net earnings | $ | 17,455 | $ | 17,224 | $ | 43,727 | $ | 51,664 | ||||||||
Interest expense, net | $ | 4,165 | $ | 3,208 | $ | 11,960 | $ | 9,757 | ||||||||
Income tax expense | 9,774 | 9,166 | 23,329 | 21,003 | ||||||||||||
Other expense (income), net | (332 | ) | 185 | 243 | 120 | |||||||||||
Depreciation and amortization | 11,218 | 9,226 | 33,732 |
|
27,809 | |||||||||||
Adjustments | $ | 24,825 | $ | 21,785 | $ | 69,264 | $ | 58,689 | ||||||||
Adjusted EBITDA | $ | 42,280 | $ | 39,009 | $ | 112,991 | $ | 110,353 | ||||||||
Adjusted EBITDA margin | 9.3 | % | 9.0 | % | 8.2 | % | 8.3 | % | ||||||||
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 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, as it may exclude certain mandatory expenditures such as repayment of maturing debt and other contractual obligations. Management uses Free Cash Flow internally to assess overall liquidity. The following table illustrates the calculation of Free Cash Flow using “Net cash provided by operating activities” and “Expenditures for property, plant & equipment”, GAAP measures from the Condensed Consolidated Statements of Cash Flows included in this release.
Table 8. Free Cash Flow (in thousands) | ||||||||||||
For the Nine |
For the Six |
For the Three |
||||||||||
Months Ended |
Months Ended |
Months Ended |
||||||||||
September 30, |
July 1, |
September 30, |
||||||||||
2016 |
2016 |
2016 |
||||||||||
Net cash provided by operating activities | $ | 70,016 | $ | 25,352 | $ | 44,664 | ||||||
Expenditures for property, plant & equipment | (23,926 | ) | (15,348 | ) | (8,578 | ) | ||||||
Free Cash Flow | $ | 46,090 | $ | 10,004 | $ | 36,086 | ||||||
Table 9. Free Cash Flow - 2016 Outlook (in millions) | 2016 Outlook | |||||||||||||
Free Cash Flow: | ||||||||||||||
Net cash provided by operating activities | $ | 85.0 | to | $ | 100.0 | |||||||||
Less: Expenditures for property, plant and equipment | (30.0 | ) | to | (35.0 | ) | |||||||||
Free Cash Flow | $ | 55.0 | to | $ | 65.0 | |||||||||
Debt to Capitalization Ratio - Debt to Capitalization Ratio is calculated by dividing debt by capitalization. Debt is defined as GAAP “Current portion of long-term debt” plus “Long-term debt, excluding current portion”. Capitalization is defined as Debt plus GAAP “Total shareholders' equity”. Management believes that Debt to Capitalization Ratio is a measurement of financial leverage and provides an insight into the financial structure of the Company and its financial strength. The following table illustrates the calculation of Debt to Capitalization Ratio using GAAP measures from the condensed consolidated balance sheets included in this release.
Table 10. Debt to Capitalization Ratio (in thousands) | ||||||||
September 30, |
December 31, |
|||||||
2016 |
2015 |
|||||||
Current portion of long-term debt | $ | 118,906 | $ | 5,000 | ||||
Long-term debt, excluding current portion | 301,566 | 434,227 | ||||||
Debt | 420,472 | 439,227 | ||||||
Temporary equity, convertible notes | 2,344 | — | ||||||
Total shareholders' equity | 579,362 | 543,077 | ||||||
Capitalization | $ | 1,002,178 | $ | 982,304 | ||||
Debt to Capitalization Ratio | 42.0 | % | 44.7 | % | ||||
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 using “Net earnings” and “Diluted earnings per share” from the “Condensed Consolidated Statements of Operations” included in the Company's Form 10-Q filed with the
Table 11. Adjusted Net Earnings and Adjusted Diluted Earnings per Share | ||||||||||||||||
(In thousands except per share amounts) | ||||||||||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, |
October 2, |
September 30, |
October 2, |
|||||||||||||
2016 |
2015 |
2016 |
2015 |
|||||||||||||
Adjustments to Net Earnings, pre tax | ||||||||||||||||
Acquisition transaction and integration costs | $ | 546 | $ | 437 | $ | 4,850 | $ | 437 | ||||||||
Recognition of tax benefit from tax law changes | — | — | — | (4,402 | ) | |||||||||||
Restructuring and severance costs at Distribution |
344 | — | 691 | 848 | ||||||||||||
Adjustments, pre tax | $ | 890 | $ | 437 | $ | 5,541 | $ | (3,117 | ) | |||||||
Tax Effect of Adjustments to Net Earnings | ||||||||||||||||
Acquisition transaction and integration costs | $ | 191 | $ | 153 | $ | 1,697 | $ | 153 | ||||||||
Recognition of tax benefit from tax law changes | — | — | — | — | ||||||||||||
Restructuring and severance costs at Distribution |
120 | — | 242 | 255 | ||||||||||||
Tax effect of Adjustments | $ | 311 | $ | 153 | $ | 1,939 | $ | 408 | ||||||||
Adjustments to Net Earnings, net of tax | ||||||||||||||||
GAAP Net earnings, as reported | $ | 17,455 | $ | 17,224 | $ | 43,727 | $ | 51,664 | ||||||||
Acquisition transaction and integration costs | 355 | 284 | 3,153 | 284 | ||||||||||||
Recognition of tax benefit from tax law changes | — | — | — | (4,402 | ) | |||||||||||
Restructuring and severance costs at Distribution |
224 | — | 449 | 593 | ||||||||||||
Adjusted Net Earnings | $ | 18,034 | $ | 17,508 | $ | 47,329 | $ | 48,139 | ||||||||
Calculation of Adjusted Diluted Earnings per Share | ||||||||||||||||
GAAP diluted earnings per share | $ | 0.62 | $ | 0.62 | $ | 1.56 | $ | 1.85 | ||||||||
Acquisition transaction and integration costs | 0.01 | 0.01 | 0.11 | 0.01 | ||||||||||||
Recognition of tax benefit from tax law changes | — | — | — | (0.16 | ) | |||||||||||
Restructuring and severance costs at Distribution |
0.01 | — | 0.02 | 0.02 | ||||||||||||
Adjusted Diluted Earnings per Share | $ | 0.64 | $ | 0.63 | $ | 1.69 | $ | 1.72 | ||||||||
Diluted weighted average shares outstanding | 28,080 | 27,770 | 27,943 | 27,915 | ||||||||||||
Adjusted Net Sales and Adjusted Operating Income - Adjusted Net Sales is defined as net sales, less items not indicative of normal sales, such as revenue recorded related to the settlement of claims. Adjusted Operating Income is defined as operating income, less items that are not indicative of the operating performance of the Company's segments or corporate function for the period presented. These items are included in the reconciliation below. Management uses Adjusted Net Sales and Adjusted Operating Income to evaluate performance period over period, to analyze underlying trends in our segments and corporate function and to assess their performance relative to their competitors. We believe that this information is useful for investors and financial institutions seeking to analyze and compare companies on the basis of operating performance.
The following table illustrates the calculation of Adjusted Operating Income using information found in Note 14, Segment and Geographic Information, to the Condensed Consolidated Financial Statements included in the Company's Form 10-Q filed with the
Table 12. Adjusted Net Sales and Adjusted Operating Income | ||||||||||||||||
(In thousands) | ||||||||||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, |
October 2, |
September 30, |
October 2, |
|||||||||||||
2016 |
2015 |
2016 |
2015 |
|||||||||||||
DISTRIBUTION SEGMENT OPERATING INCOME: | ||||||||||||||||
Net Sales | $ | 274,388 | $ | 296,312 | $ | 849,104 | $ | 911,832 | ||||||||
GAAP Operating income - Distribution segment | $ | 11,872 | $ | 14,422 | $ | 36,148 | $ | 42,789 | ||||||||
% of GAAP net sales | 4.3 | % | 4.9 | % | 4.3 | % | 4.7 | % | ||||||||
Restructuring and severance costs at Distribution | 344 | — | 691 | 848 | ||||||||||||
Adjusted Operating Income - Distribution segment | $ | 12,216 | $ | 14,422 | $ | 36,839 | $ | 43,637 | ||||||||
% of net sales | 4.5 | % | 4.9 | % | 4.3 | % | 4.8 | % | ||||||||
AEROSPACE SEGMENT OPERATING INCOME: | ||||||||||||||||
Net Sales | $ | 179,086 | $ | 137,430 | $ | 526,210 | $ | 411,016 | ||||||||
Less: Settlement of Bell Matter | — | — | 4,300 | — | ||||||||||||
Adjusted Net Sales | $ | 179,086 | $ | 137,430 | $ | 521,910 | $ | 411,016 | ||||||||
GAAP Operating income - Aerospace segment | $ | 29,616 | $ | 27,801 | $ | 81,374 | $ | 78,775 | ||||||||
% of GAAP net sales | 16.5 | % | 20.2 | % | 15.5 | % | 19.2 | % | ||||||||
Acquisition transaction and integration costs | 546 | 437 | 4,850 | 437 | ||||||||||||
Adjusted Operating Income - Aerospace segment | $ | 30,162 | $ | 28,238 | $ | 86,224 | $ | 79,212 | ||||||||
% of net sales | 16.8 | % | 20.5 | % | 16.4 | % | 19.3 | % | ||||||||
% of adjusted net sales | 16.8 | % | 20.5 | % | 16.5 | % | 19.3 | % | ||||||||
CONSOLIDATED OPERATING INCOME: | ||||||||||||||||
Net Sales | $ | 453,474 | $ | 433,742 | $ | 1,375,314 | $ | 1,322,848 | ||||||||
Less: Settlement of Bell Matter | — | — | 4,300 | — | ||||||||||||
Adjusted Net Sales | $ | 453,474 | $ | 433,742 | $ | 1,371,014 | $ | 1,322,848 | ||||||||
GAAP - Operating income | $ | 31,062 | $ | 29,783 | $ | 79,259 | $ | 82,544 | ||||||||
% of GAAP net sales | 6.8 | % | 6.9 | % | 5.8 | % | 6.2 | % | ||||||||
Acquisition transaction and integration costs | 546 | 437 | 4,850 | 437 | ||||||||||||
Restructuring and severance costs at Distribution | 344 | — | 691 | 848 | ||||||||||||
Adjusted Operating Income | $ | 31,952 | $ | 30,220 | $ | 84,800 | $ | 83,829 | ||||||||
% of net sales | 7.0 | % | 7.0 | % | 6.2 | % | 6.3 | % | ||||||||
% of adjusted net sales | 7.0 | % | 7.0 | % | 6.2 | % | 6.3 | % | ||||||||
The following table reconciles our GAAP operating margin outlook for Aerospace for 2016 to our Adjusted Operating Margin outlook for Aerospace for 2016:
Table 13. Adjusted Operating Income - Outlook | ||||||||||
2016 Outlook | ||||||||||
Low End of |
High End of |
|||||||||
Adjusted Operating Income - Outlook |
Range |
Range |
||||||||
Aerospace | ||||||||||
Net Sales - Outlook | $ | 700.0 | to | $ | 710.0 | |||||
Operating income - Outlook | 114.9 | to | 118.0 | |||||||
GAAP operating margin - outlook | 16.4 | % | to | 16.6 | % | |||||
Transaction and integration costs | 5.5 | to | 5.5 | |||||||
Transaction and integration costs as a percentage of sales | 0.8 | % | to | 0.8 | % | |||||
Adjusted Operating Income - Outlook | $ | 120.4 | to | $ | 123.5 | |||||
Adjusted Operating Margin - Outlook | 17.2 | % | to | 17.4 | % | |||||
About
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
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 |
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Condensed Consolidated Statements of Operations |
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(In thousands, except per share amounts) (unaudited) |
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For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, |
October 2, |
September 30, |
October 2, |
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2016 |
2015 |
2016 |
2015 |
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Net sales | $ | 453,474 | $ | 433,742 | $ | 1,375,314 | $ | 1,322,848 | ||||||||
Cost of sales | 317,984 | 303,816 | 961,628 | 933,059 | ||||||||||||
Gross profit | 135,490 | 129,926 | 413,686 | 389,789 | ||||||||||||
Selling, general and administrative expenses | 104,404 | 100,153 | 334,417 | 307,660 | ||||||||||||
Net (gain) loss on sale of assets | 24 | (10 | ) | 10 | (415 | ) | ||||||||||
Operating income | 31,062 | 29,783 | 79,259 | 82,544 | ||||||||||||
Interest expense, net | 4,165 | 3,208 | 11,960 | 9,757 | ||||||||||||
Other expense, net | (332 | ) | 185 | 243 | 120 | |||||||||||
Earnings before income taxes | 27,229 | 26,390 | 67,056 | 72,667 | ||||||||||||
Income tax expense | 9,774 | 9,166 | 23,329 | 21,003 | ||||||||||||
Net earnings | $ | 17,455 | $ | 17,224 | $ | 43,727 | $ | 51,664 | ||||||||
Earnings per share: | ||||||||||||||||
Basic earnings per share | $ | 0.64 | $ | 0.63 | $ | 1.61 | $ | 1.90 | ||||||||
Diluted earnings per share | $ | 0.62 | $ | 0.62 | $ | 1.56 | $ | 1.85 | ||||||||
Average shares outstanding: | ||||||||||||||||
Basic | 27,128 | 27,179 | 27,096 | 27,203 | ||||||||||||
Diluted | 28,080 | 27,770 | 27,943 | 27,915 | ||||||||||||
Dividends declared per share | $ | 0.18 | $ | 0.18 | $ | 0.54 | $ | 0.54 | ||||||||
KAMAN CORPORATION AND SUBSIDIARIES |
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Condensed Consolidated Balance Sheets |
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(In thousands, except share and per share amounts) (unaudited) |
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September 30, |
December 31, |
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2016 |
2015 |
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Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 25,551 | $ | 16,462 | ||||
Accounts receivable, net | 248,474 | 238,102 | ||||||
Inventories | 394,223 | 385,747 | ||||||
Income tax refunds receivable | 2,713 | 3,591 | ||||||
Other current assets | 30,518 | 32,133 | ||||||
Total current assets | 701,479 | 676,035 | ||||||
Property, plant and equipment, net of accumulated depreciation of $220,856 and $202,648, respectively | 178,774 | 175,586 | ||||||
Goodwill | 348,243 | 352,710 | ||||||
Other intangible assets, net | 132,928 | 144,763 | ||||||
Deferred income taxes | 57,334 | 66,815 | ||||||
Other assets | 23,319 | 23,702 | ||||||
Total assets | $ | 1,442,077 | $ | 1,439,611 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | 118,906 | $ | 5,000 | ||||
Accounts payable – trade | 124,769 | 121,044 | ||||||
Accrued salaries and wages | 42,595 | 40,284 | ||||||
Advances on contracts | 14,847 | 11,274 | ||||||
Other accruals and payables | 59,267 | 58,761 | ||||||
Income taxes payable | 982 | 326 | ||||||
Total current liabilities | 361,366 | 236,689 | ||||||
Long-term debt, excluding current portion | 301,566 | 434,227 | ||||||
Deferred income taxes | 7,067 | 15,207 | ||||||
Underfunded pension | 140,220 | 158,984 | ||||||
Other long-term liabilities | 50,152 | 51,427 | ||||||
Commitments and contingencies | ||||||||
Temporary equity, convertible notes | 2,344 | — | ||||||
Shareholders' equity: | ||||||||
Preferred stock, $1 par value, 200,000 shares authorized; none outstanding | — | — | ||||||
Common stock, $1 par value, 50,000,000 shares authorized; voting; 28,056,402 and 27,735,757 shares issued, respectively | 28,056 | 27,736 | ||||||
Additional paid-in capital | 166,745 | 156,803 | ||||||
Retained earnings | 549,954 | 520,865 | ||||||
Accumulated other comprehensive income (loss) | (133,412 | ) | (140,138 | ) | ||||
Less 936,449 and 698,183 shares of common stock, respectively, held in treasury, at cost | (31,981 | ) | (22,189 | ) | ||||
Total shareholders’ equity | 579,362 | 543,077 | ||||||
Total liabilities and shareholders’ equity | $ | 1,442,077 | $ | 1,439,611 | ||||
KAMAN CORPORATION AND SUBSIDIARIES |
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Condensed Consolidated Statements of Cash Flows |
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(In thousands) (unaudited) |
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For the Nine Months Ended | ||||||||
September 30, |
October 2, |
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2016 |
2015 |
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Cash flows from operating activities: | ||||||||
Net earnings | $ | 43,727 | $ | 51,664 | ||||
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 33,732 | 27,809 | ||||||
Accretion of convertible notes discount | 1,598 | 1,516 | ||||||
Provision for doubtful accounts | 1,021 | 1,925 | ||||||
Net gain/(loss) on sale of assets | 10 | (415 | ) | |||||
Net loss on derivative instruments | 783 | 423 | ||||||
Stock compensation expense | 4,711 | 5,304 | ||||||
Excess tax benefit from share-based compensation arrangements | (302 | ) | (324 | ) | ||||
Deferred income taxes | 3,993 | (2,001 | ) | |||||
Changes in assets and liabilities, excluding effects of acquisitions/divestitures: | ||||||||
Accounts receivable | (12,011 | ) | 1,583 | |||||
Inventories | (10,050 | ) | (10,430 | ) | ||||
Income tax refunds receivable | 883 | (3,493 | ) | |||||
Other current assets | 1,271 | (7,421 | ) | |||||
Accounts payable - trade | 967 | 18,051 | ||||||
Accrued contract losses | 468 | 28 | ||||||
Advances on contracts | 3,573 | 11,511 | ||||||
Other accruals and payables | 6,556 | (5,807 | ) | |||||
Income taxes payable | 28 | 529 | ||||||
Pension liabilities | (9,318 | ) | (4,225 | ) | ||||
Other long-term liabilities | (1,624 | ) | (2,323 | ) | ||||
Net cash provided by operating activities | 70,016 | 83,904 | ||||||
Cash flows from investing activities: | ||||||||
Proceeds from sale of assets | 190 | 660 | ||||||
Expenditures for property, plant & equipment | (23,926 | ) | (23,130 | ) | ||||
Acquisition of businesses (net of cash acquired) | (6,631 | ) | (11,877 | ) | ||||
Other, net | (442 | ) | (696 | ) | ||||
Cash used in investing activities | (30,809 | ) | (35,043 | ) | ||||
Cash flows from financing activities: | ||||||||
Net borrowings (repayments) under revolving credit agreements | (12,959 | ) | (43,291 | ) | ||||
Proceeds from issuance of long-term debt | — | 100,000 | ||||||
Debt repayment | (3,750 | ) | (82,500 | ) | ||||
Net change in book overdraft | 3,427 | (3,537 | ) | |||||
Proceeds from exercise of employee stock awards | 7,094 | 4,024 | ||||||
Purchase of treasury shares | (8,989 | ) | (8,642 | ) | ||||
Dividends paid | (14,625 | ) | (14,140 | ) | ||||
Debt issuance costs | — | (1,348 | ) | |||||
Other | (246 | ) | (117 | ) | ||||
Windfall tax benefit | 302 | 324 | ||||||
Cash provided by (used in) financing activities | (29,746 | ) | (49,227 | ) | ||||
Net increase in cash and cash equivalents | 9,461 | (366 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | (372 | ) | (466 | ) | ||||
Cash and cash equivalents at beginning of period | 16,462 | 12,411 | ||||||
Cash and cash equivalents at end of period | $ | 25,551 | $ | 11,579 |
View source version on businesswire.com: http://www.businesswire.com/news/home/20161027006722/en/
Source:
Kaman Corporation
Eric Remington, 860-243-6334
V.P., Investor Relations
Eric.Remington@kaman.com