Kaman Reports 2020 Fourth Quarter and Full Year Results

February 25, 2021

 

Fourth Quarter Highlights from Continuing Operations:

  • Net sales down 22.1% versus prior year to $185.3 million
  • Net loss from continuing operations of $31.4 million, or $1.13 per diluted share
  • Adjusted diluted earnings per share from continuing operations* of $0.41
  • Net cash provided by operating activities of $68.8 million, leading to Free Cash Flow* of $65.3 million in the quarter

Full Year Highlights from Continuing Operations:

  • Net sales up 3.0% versus prior year to $784.5 million; Organic sales down 7.1%
  • Positive operating results offset by a $86.6 million in impairment charges
  • Net loss from continuing operations of $70.4 million, or $2.54 per diluted share
  • Adjusted diluted earnings per share from continuing operations* of $2.11 adjusted*, a 29.4% increase over 2019

BLOOMFIELD, Conn.--(BUSINESS WIRE)--Feb. 25, 2021-- Kaman Corp. (NYSE:KAMN) today reported financial results for the fourth fiscal quarter and full year ended December 31, 2020.

 

 

 

 

 

 

 

 

 

Table 1. Summary of Financial Results (unaudited)

 

 

 

 

 

 

In thousands except per share amounts

For the Three Months Ended

 

 

 

December 31,
2020

 

December 31,
2019

 

Change

 

 

 

 

 

 

 

 

 

 

Net sales from continuing operations

$

185,288

 

 

$

237,792

 

 

$

(52,504

)

 

 

 

 

 

 

 

 

 

 

Operating income from continuing operations:

 

 

 

 

 

 

 

Operating (loss) income from continuing operations

$

(38,192

)

 

$

14,840

 

 

$

(53,032

)

 

 

% of sales

(20.6

)%

 

6.2

%

 

(26.8

)%

 

 

Adjustments

43,763

 

 

15,360

 

 

$

28,403

 

 

 

Adjusted operating income from continuing operations

$

5,571

 

 

$

30,200

 

 

$

(24,629

)

 

 

% of sales

3.0

%

 

12.7

%

 

(9.7

)%

 

 

Adjusted EBITDA* from continuing operations:

 

 

 

 

 

 

 

(Loss) earnings from continuing operations

$

(31,420

)

 

$

34,105

 

 

$

(65,525

)

 

 

Adjustments

48,686

 

 

2,641

 

 

46,045

 

 

 

Adjusted EBITDA from continuing operations*

$

17,266

 

 

$

36,746

 

 

$

(19,480

)

 

 

% of sales

9.3

%

 

15.5

%

 

(6.2

)%

 

 

Earnings per share:

 

 

 

 

 

 

 

Diluted (loss) earnings per share from continuing operations

$

(1.13

)

 

$

1.22

 

 

$

(2.35

)

 

 

Adjustments

1.54

 

 

(0.42

)

 

1.96

 

 

 

Adjusted diluted earnings per share from continuing operations*

$

0.41

 

 

$

0.80

 

 

$

(0.39

)

 

 

 

 

 

 

 

 

 

Ian K. Walsh, President and Chief Executive Officer, commented, “Over the course of the year we saw declines in our commercial aviation and medical end markets brought on by the unprecedented challenges of the global pandemic. Throughout the year we acted decisively to mitigate the impact on our operations, relying on the strength of our team and the diversity of our products to deliver solid performance in 2020. Looking at our fourth quarter 2020 results compared to 2019 we had lower JPF shipments and, as expected, saw a significant decline in our commercial aviation bearings products due to the impact of the pandemic. Sequentially, we saw a decline in sales due to lower JPF deliveries and a delay in shipments over the last two weeks of the year at Bal Seal due to the impact of a cyber incident in December. However, this was offset by a sequential sales increase for our bearings products with a modest uptick in sales to our commercial aviation customers."

Mr. Walsh continued, "For the full year, operating margins were lower than 2019 due to a number of non-recurring items. However, the underlying strength of our product portfolio, the diversity of our end market exposures, and our focus on cost control allowed us to deliver Adjusted EBITDA margin* above 2019 levels. As we look to 2021 we continue to expect our commercial aerospace business to remain challenged during the first half of the year. We expect improved performance in the second half as vaccines become more widely available, demand for business and leisure travel picks up and utilization of narrow body aircraft increases. For our defense products, sales volume is expected to be lower, largely due to the delay of an order for our joint programmable fuze program to the Middle East as a result of the new Presidential administration and their request that the U.S. State Department review Foreign Military Sales and Direct Commercial Sales to certain allied militaries. Due to the potential delay we felt it was appropriate to remove this order from our outlook for 2021. The absence of this order from our outlook is one of the primary drivers for 2021 expected performance below 2020. Finally, we took significant steps in 2020 at improving our cost structure, reducing expenses by approximately $50 million on a run rate basis, a significant portion of which is structural. We will remain focused on cost control in 2021 in order to hold profitability despite the lower volumes we expect for the year and we are optimistic that as commercial aviation begins to recover we will be well positioned to meet demand and benefit from increased volumes in our most profitable product lines."

Management Discussion of Results

Sales in the fourth quarter decreased when compared to 2019 due to lower JPF deliveries and the impact of the pandemic on sales for our commercial aviation products. Organic sales* declines for both the quarter and year-to-date periods were offset by the addition of
Bal Seal. Gross margin for the quarter of 29.3% remained strong despite the lower sales volume as we continued to benefit from the cost reduction efforts we implemented over the course of the year. A GAAP loss of $31.4 million, or $1.13 per diluted share, was driven by a non-cash impairment charge of $36.3 million related to the assets of our UK Composites operations which were held for sale as of December 31, 2020. Adjusted diluted earnings per share* was $0.41, and helped contribute to our full year adjusted diluted earnings per share of $2.11, a 29.4% increase over our full year adjusted diluted earnings per share of $1.63 achieved in 2019.

Sales of our defense products, including Safe and Arm Devices, were down 23.6% over the fourth quarter of 2019 and down 25.3% over the third quarter of 2020. During the quarter we delivered more than 12,000 JPF's, bringing our total year-to-date deliveries to a record of nearly 48,750 units. In 2021 we expect to deliver between 30,000 and 35,000 fuzes, below 2020, due in part to the removal of a previously anticipated JPF DCS order which would have added approximately 7,000 fuzes to our 2021 expectations.

Sales for our commercial, business and general aviation products decreased 40.0% over the fourth quarter of 2019, but increased 6.4% when compared to the third quarter of 2020, our second straight quarter of sequential growth. This sequential improvement was due to a 13.7% increase in sales of commercial aviation products to Boeing and Airbus and a 3.7% increase in business and general aviation products, which includes the sale of one K-MAX® aircraft in the fourth quarter. Exiting 2020 we note that first half performance was relatively strong compared to the back half of year. Moving into 2021 we expect lower performance in the first half, specifically related to our commercial aviation products, and improved performance in the second half of the year. The cadence of earnings in the year is due to an expected increase in air traffic and commercial and business travel in the second half of the year as the impact from the pandemic begins to ease.

Sales for our medical products decreased 4.2% from the third quarter as shipments out of
Bal Seal were disrupted by the cyber incident we experienced in December of 2020. We worked quickly to assess and control the situation, restoring
Bal Seal to normal operations by mid-January without the need to pay ransom. While we incurred costs related to this incident, they were not overly material and should be largely covered by insurance. Looking to 2021, we expect to see a significant increase in sales for these products partially offsetting lower defense volumes. Finally, our industrial markets were up modestly in the fourth quarter when compared to the third quarter of 2020, and we anticipate this trend will continue into 2021.

Chief Financial Officer,
Robert D. Starr, commented, "During the fourth quarter we had strong cash flow performance generating Operating Cash Flows from Continuing Operations of $68.8 million, leading to Adjusted Free Cash Flow from Continuing Operations*of $65.3 million for the period. For the full year we delivered operating cash flows from continuing operations of $16.5 million, or Free Cash Flow usage from Continuing Operations* for the year of $1.3 million. Cash flow performance for 2020 was impacted by a delay in the collection of a significant JPF DCS receivable."

Mr. Starr further commented, "The diluted loss per share from continuing operations for the quarter of $1.13 was impacted by a number of non-recurring items, including an impairment loss associated with the assets of our UK Composites operations which were held for sale at year end. When adjusted we delivered $0.41* of diluted earnings per share from continuing operations for the quarter compared to $0.70 in the third quarter of 2020 and $0.80 in the fourth quarter of 2019. Subsequent to year end we successfully closed on a transaction to sell our UK Composites operations. This transaction will not qualify for discontinued operations reporting in 2021. In order to provide a more direct comparison to our 2021 performance we will disclose the 2020 results of this business throughout the course of the year. Sales for this business were $21.5 million in 2020, with an operating loss of approximately $6.9 million."

2021 Outlook

(in millions)

2020

 

2021 Outlook

 

Actual

 

Low End

High End

Sales

 

 

 

 

Sales from continuing operations

$

784.5

 

 

$

725.0

 

$

745.0

 

 

 

 

 

 

Adjusted EBITDA*

 

 

 

 

Earnings from continuing operations

$

(70.4

)

 

$

43.5

 

$

52.5

 

Adjustments

173.3

 

 

41.5

 

44.0

 

Adjusted EBITDA* from continuing operations

$

102.9

 

 

$

85.0

 

$

96.5

 

Adjusted EBITDA margin* from continuing operations

13.1

%

 

11.7

%

13.0

%

 

 

 

 

 

Adjusted Diluted Earnings Per Share*

 

 

 

 

Diluted Earnings Per Share

$

(2.54

)

 

$

1.55

 

$

1.87

 

Adjustments

4.65

 

 

 

 

Adjusted Diluted Earnings Per Share

$

2.11

 

 

$

1.55

 

$

1.87

 

 

 

 

 

 

Cash Flow

 

 

 

 

Operating cash flow from continuing operations

$

16.5

 

 

$

25.0

 

$

35.0

 

Bal Seal Acquisition Retention Payment

 

 

25.1

 

25.1

 

Cash used for the purchase of property, plant and equipment

(17.8

)

 

(20.0

)

(20.0

)

Adjusted Free Cash Flow*

$

(1.3

)

 

$

30.1

 

$

40.1

 

 

 

 

 

 

Discretionary Pension Contribution

$

10.0

 

 

$

10.0

 

$

10.0

 

Additional Financial Information

  • Earnings for the year are back half weighted with approximately 30% expected in the first half and less than 10% expected in the first quarter
  • Expected recovery in second half of the year as the impact of the pandemic on commercial aviation begins to ease
  • Excludes JPF DCS order previously contemplated in 2021 due to uncertainty resulting from the change in Presidential administration
  • Operating cash flow from continuing operations will include the $25.1 million payment to
    Bal Seal employees which represents purchase price paid to the former
    Bal Seal owners accounted for as compensation under ASC 805
  • Operating cash flow from continuing operations include a discretionary pension contribution of $10 million
  • Net periodic pension benefit of approximately $26.3 million
  • Interest expense of approximately $16.4 million
  • Estimated annualized tax rate of 24.0%

Please see the MD&A section of the Company's Form 10-K filed with the Securities and Exchange Commission concurrently with the issuance of this release for greater detail on our results and various company programs.

A conference call has been scheduled for tomorrow, February 26, 2021, at 8:30 AM ET. Listeners may access the call live by telephone at (844) 473-0975 and from outside theU.S.at (562) 350-0826 using the Conference ID: 6195753; or, via the Internet atwww.kaman.com. A replay will also be available two hours after the call and can be accessed at (855) 859-2056 or (404) 537-3406 using the Conference ID: 6195753. 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 fourth quarter and full year 2020 results will be posted to the Company’s website prior to the earnings call athttp://www.kaman.com/investors/presentations.

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 K-MAX® manned and unmanned medium-to-heavy lift helicopters.

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:

Organic Sales - Organic Sales is defined as "
Net Sales" less sales derived from acquisitions completed during the preceding twelve months. We believe that this measure provides management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, which can obscure underlying trends. We also believe that presenting Organic Sales 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 twelve-month fiscal periods ended December 31, 2020 and December 31, 2019, respectively. The following table illustrates the calculation of Organic Sales using the GAAP measure, "
Net Sales".

                 

Table 2. Organic Sales from continuing operations
(in thousands)

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Twelve Months Ended

 

 

December 31,
2020

 

December 31,
2019

 

December 31,
2020

 

December 31,
2019

Net sales from continuing operations

 

$

185,288

 

 

$

237,792

 

 

$

784,459

 

 

$

761,608

 

Acquisition sales

 

16,516

 

 

 

 

76,965

 

 

 

Organic Sales

 

168,772

 

 

237,792

 

 

707,494

 

 

761,608

 

$ Change

 

$

(69,020

)

 

$

16,933

 

 

$

(54,114

)

 

$

25,614

 

% Change

 

(29.0

)%

 

7.7

%

 

(7.1

)%

 

3.5

%

Adjusted
Net Sales from continuing operations and Adjusted Operating Income from continuing operations
- Adjusted
Net Sales from continuing operations is defined as net sales from continuing operations, less items not indicative of normal sales, such as revenue recorded related to the settlement of claims. Adjusted Operating Income from continuing operations is defined as operating income from continuing operations, less items that are not indicative of the operating performance of the Company for the period presented. These items are included in the reconciliation below. Management uses Adjusted
Net Sales from continuing operations and Adjusted Operating Income from continuing operations to evaluate performance period over period, to analyze underlying trends and to assess our performance relative to our competitors. We believe that this information is useful for investors and financial institutions seeking to analyze and compare companies on the basis of operating performance. The following table illustrates the calculation of Adjusted Operating Income from continuing operations to the Consolidated Financial Statements included in the Company's Form 10-K filed with the Securities and Exchange Commission on February 25, 2021.

         

Table 3. Adjusted
Net Sales and Adjusted Operating Income from Continuing Operations

 

 

 

 

(In thousands) (unaudited)

 

 

 

 

 

 

For the Three Months Ended

 

For the Twelve Months Ended

 

 

December 31,
2020

 

December 31,
2019

 

December 31,
2020

 

December 31,
2019

CONSOLIDATED OPERATING INCOME:

 

 

 

 

 

 

 

 

Net Sales from continuing operations

 

$

185,288

 

 

$

237,792

 

 

$

784,459

 

 

$

761,608

 

GAAP - Operating (loss) income from continuing operations

 

$

(38,192

)

 

$

14,840

 

 

$

(84,311

)

 

$

53,411

 

% of GAAP net sales

 

(20.6

)%

 

6.2

%

 

(10.7

)%

 

7.0

%

 

 

 

 

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

 

Non-cash, non tax goodwill impairment charge

 

$

 

 

$

 

 

$

50,307

 

 

$

 

Impairment on assets held for sale

 

36,285

 

 

 

 

36,285

 

 

 

Restructuring and severance costs

 

539

 

 

1,005

 

 

8,359

 

 

1,558

 

Costs associated with corporate development activities

 

207

 

 

7,097

 

 

4,539

 

 

10,090

 

Bal Seal acquisition costs

 

45

 

 

 

 

8,506

 

 

 

Cost of acquired
Bal Seal retention plans

 

5,704

 

 

 

 

22,814

 

 

 

Inventory step-up associated with
Bal Seal acquisition

 

 

 

 

 

2,355

 

 

 

Costs from transition services agreement

 

983

 

 

3,519

 

 

12,515

 

 

4,673

 

Senior leadership transition

 

 

 

 

 

280

 

 

 

Reversal of employee tax-related matters in foreign operations

 

 

 

 

 

(1,859

)

 

 

Reversal of environmental accrual at GRW

 

 

 

 

 

(264

)

 

 

(Gain) loss on sale of U.K. Tooling business

 

 

 

3,739

 

 

(493

)

 

3,739

 

Total adjustments

 

$

43,763

 

 

$

15,360

 

 

$

143,344

 

 

$

20,060

 

 

 

 

 

 

 

 

 

 

Adjusted Operating Income

 

$

5,571

 

 

$

30,200

 

 

$

59,033

 

 

$

73,471

 

% of GAAP net sales

 

3.0

%

 

12.7

%

 

7.5

%

 

9.6

%

Adjusted EBITDA from continuing operations - Adjusted EBITDA from continuing operations is defined as earnings from continuing operations before interest, taxes, other expense (income), net, depreciation and amortization and certain items that are not indicative of the operating performance of the Company's for the period presented. Adjusted EBITDA from continuing operations differs from earnings from continuing operations, as calculated in accordance with GAAP, in that it excludes interest expense, net, income tax expense, depreciation and amortization, other expense (income), net, non-service pension and post retirement benefit expense (income), and certain items that are not indicative of the operating performance of the Company for the period presented. We have made numerous investments in our business, such as acquisitions and capital expenditures, including facility improvements, new machinery and equipment, improvements to our information technology infrastructure and ERP systems, which we have adjusted for in Adjusted EBITDA from continuing operations. Adjusted EBITDA from continuing operations also does not give effect to cash used for debt service requirements and thus does not reflect funds available for distributions, reinvestments or other discretionary uses. Management believes Adjusted EBITDA from continuing operations provides an additional perspective on the operating results of the organization and its earnings capacity and helps improve the comparability of our results between periods because it provides a view of our operations that excludes items that management believes are not reflective of operating performance, such as items traditionally removed from net earnings in the calculation of EBITDA as well as Other expense (income), net and certain items that are not indicative of the operating performance of the Company for the period presented. Adjusted EBITDA from continuing operations is not presented as an alternative measure of operating performance, as determined in accordance with GAAP. No other adjustments were made during the three-month and twelve-month fiscal periods ended December 31, 2020 and December 31, 2019. The following table illustrates the calculation of Adjusted EBITDA from continuing operations using GAAP measures:

             

Adjusted EBITDA from continuing operations (in thousands)

 

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Twelve Months Ended

 

 

December 31,
2020

 

December 31,
2019

 

December 31,
2020

 

December 31,
2019

Adjusted EBITDA from continuing operations

 

 

 

 

 

 

 

 

Consolidated Results

 

 

 

 

 

 

 

 

Sales from continuing operations

 

$

185,288

 

 

$

237,792

 

 

$

784,459

 

 

$

761,608

 

 

 

 

 

 

 

 

 

 

Earnings from continuing operations, net of tax

 

$

(31,420

)

 

$

34,105

 

 

$

(70,434

)

 

$

56,446

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

4,888

 

 

2,607

 

 

19,270

 

 

17,202

 

Income tax (benefit) expense

 

(6,708

)

 

(19,103

)

 

(7,730

)

 

(15,859

)

Non-service pension and post retirement benefit income, net

 

(4,062

)

 

(98

)

 

(16,250

)

 

(396

)

Other expense (income), net

 

(304

)

 

58

 

 

(728

)

 

(309

)

Depreciation and amortization

 

11,695

 

 

6,546

 

 

43,899

 

 

25,854

 

Other Adjustments:

 

 

 

 

 

 

 

 

Non-cash, non tax goodwill impairment charge

 

$

 

 

$

 

 

$

50,307

 

 

$

 

Impairment on assets held for sale

 

36,285

 

 

 

 

36,285

 

 

 

Restructuring and severance costs

 

539

 

 

1,005

 

 

8,359

 

 

1,558

 

Cost associated with corporate development activities

 

207

 

 

7,097

 

 

4,539

 

 

10,090

 

Bal Seal acquisition costs

 

45

 

 

 

 

8,506

 

 

 

Cost of acquired
Bal Seal retention plans

 

5,704

 

 

 

 

22,814

 

 

 

Inventory step-up associated with
Bal Seal acquisition

 

 

 

 

 

2,355

 

 

 

Costs from transition services agreement

 

983

 

 

3,519

 

 

12,515

 

 

4,673

 

Income from transition services agreement

 

(586

)

 

(2,729

)

 

(8,439

)

 

(3,673

)

Senior leadership transition

 

 

 

 

 

280

 

 

 

Reversal of employee-tax related matters in foreign operations

 

 

 

 

 

(1,859

)

 

 

Reversal of environmental accrual at GRW

 

 

 

 

 

(264

)

 

 

(Gain) loss on sale of U.K. Tooling business

 

 

 

3,739

 

 

(493

)

 

3,739

 

Adjustments

 

$

48,686

 

 

$

2,641

 

 

$

173,366

 

 

$

42,879

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA from continuing operations

 

$

17,266

 

 

$

36,746

 

 

$

102,932

 

 

$

99,325

 

Adjusted EBITDA margin

 

9.3

%

 

15.5

%

 

13.1

%

 

13.0

%

 

Outlook - Adjusted EBITDA from continuing operations (in millions)

 

 

 

 

 

2021 Outlook

 

 

Low

 

High

Adjusted EBITDA from continuing operations

 

 

 

 

2021 Outlook

 

 

 

 

Sales from continuing operations

 

$

725.0

 

 

$

745.0

 

 

 

 

 

 

Earnings from continuing operations, net of tax

 

$

43.5

 

 

$

52.5

 

 

 

 

 

 

Interest expense, net

 

16.4

 

 

16.4

 

Income tax (benefit) expense

 

14.0

 

 

16.5

 

Net Periodic Pension Benefit

 

(26.3

)

 

(26.3

)

Other expense (income), net

 

(1.3

)

 

(1.3

)

Depreciation and amortization

 

38.7

 

 

38.7

 

Total Adjustments

 

$

41.5

 

 

$

44.0

 

 

 

 

 

 

Adjusted EBITDA from continuing operations

 

$

85.0

 

 

$

96.5

 

Adjusted EBITDA margin

 

11.7

%

 

13.0

%

Adjusted Earnings from Continuing Operations and Adjusted Diluted Earnings Per Share from Continuing Operations - Adjusted Earnings from Continuing Operations and Adjusted Diluted Earnings per Share from Continuing Operations are defined as GAAP "Earnings from Continuing Operations" and "Diluted earnings per share from continuing operations", less items that are not indicative of the operating performance of the business for the periods presented. These items are included in the reconciliation below. Management uses Adjusted Earnings from Continuing Operations and Adjusted Diluted Earnings per Share from Continuing Operations to evaluate performance period over period, to analyze the underlying trends in our business and to assess its performance relative to its competitors. We believe that this information is useful for investors and financial institutions seeking to analyze and compare companies on the basis of operating performance.

The following table illustrates the calculation of Adjusted Earnings from Continuing Operations and Adjusted Diluted Earnings per Share from Continuing Operations using “Earnings from Continuing Operations” and “Diluted earnings per share from continuing operations” from the “Consolidated Statements of Operations” included in the Company's Form 10-K filed with the Securities and Exchange Commission on February 25, 2021.

     

Adjusted Earnings from continuing operations and Adjusted Diluted Earnings per Share from continuing operations

(In thousands except per share amounts) (unaudited)

 

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Twelve Months Ended

 

 

December 31,
2020

 

December 31,
2019

 

December 31,
2020

 

December 31,
2019

Adjustments to Earnings from Continuing Operations

 

 

 

 

 

 

 

 

 

 

Non-cash, non tax goodwill impairment charge

 

$

 

 

 

$

 

 

 

$

50,307

 

 

 

$

 

 

Impairment on assets held for sale

 

36,285

 

 

 

 

 

 

36,285

 

 

 

 

 

Restructuring and severance costs

 

539

 

 

 

1,005

 

 

 

8,359

 

 

 

1,558

 

 

Costs associated with corporate development activities

 

207

 

 

 

7,097

 

 

 

4,539

 

 

 

10,090

 

 

Bal Seal acquisition costs

 

45

 

 

 

 

 

 

8,506

 

 

 

 

 

Cost of acquired
Bal Seal retention plans

 

5,704

 

 

 

 

 

 

22,814

 

 

 

 

 

Inventory step-up associated with
Bal Seal acquisition

 

 

 

 

 

 

 

2,355

 

 

 

 

 

Costs from transition services agreement

 

983

 

 

 

3,519

 

 

 

12,515

 

 

 

4,673

 

 

Income from transition services agreement

 

(586

)

 

 

(2,729

)

 

 

(8,439

)

 

 

(3,673

)

 

Senior leadership transition

 

 

 

 

 

 

 

280

 

 

 

 

 

Reversal of employee tax-related matters in foreign operations

 

 

 

 

 

 

 

(1,859

)

 

 

 

 

Reversal of environmental accrual at GRW

 

 

 

 

 

 

 

(264

)

 

 

 

 

(Gain) loss on sale of U.K. Tooling business

 

 

 

 

3,739

 

 

 

(493

)

 

 

3,739

 

 

Tax benefit from change in state tax laws

 

 

 

 

 

 

 

 

 

 

(2,137

)

 

Tax benefit of foreign derived income included in discontinued operations

 

 

 

 

3,360

 

 

 

 

 

 

3,360

 

 

Tax benefit from change in U.K. entity tax classification

 

 

 

 

(25,710

)

 

 

 

 

 

(25,710

)

 

Adjustments, pre tax

 

$

43,177

 

 

 

$

(9,719

)

 

 

$

134,905

 

 

 

$

(8,100

)

 

 

 

 

 

 

 

 

 

 

 

 

Tax Effect of Adjustments to Earnings from Continuing Operations

 

 

 

 

 

 

 

 

 

 

Non-cash, non tax goodwill impairment charge

 

$

 

 

 

$

 

 

 

$

 

 

 

$

 

 

Impairment on assets held for sale

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring and severance costs

 

123

 

 

 

212

 

 

 

1,911

 

 

 

328

 

 

Costs associated with corporate development activities

 

47

 

 

 

1,496

 

 

 

1,038

 

 

 

2,124

 

 

Bal Seal acquisition costs

 

10

 

 

 

 

 

 

1,904

 

 

 

 

 

Cost of acquired
Bal Seal retention plans

 

 

 

 

 

 

 

 

 

 

 

 

Inventory step-up associated with
Bal Seal acquisition

 

 

 

 

 

 

 

527

 

 

 

 

 

Costs from transition services agreement

 

225

 

 

 

742

 

 

 

2,861

 

 

 

984

 

 

Income from transition services agreement

 

(134

)

 

 

(575

)

 

 

(1,929

)

 

 

(773

)

 

Senior leadership transition

 

 

 

 

 

 

 

64

 

 

 

 

 

Reversal of employee tax-related matters in foreign operations

 

 

 

 

 

 

 

(167

)

 

 

 

 

Reversal of environmental accrual at GRW

 

 

 

 

 

 

 

(77

)

 

 

 

 

(Gain) loss on sale of U.K. Tooling business

 

 

 

 

 

 

 

(123

)

 

 

 

 

Tax benefit from change in state tax laws

 

 

 

 

 

 

 

 

 

 

 

 

Tax benefit of foreign derived income included in discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

Tax benefit from change in U.K. entity tax classification

 

 

 

 

 

 

 

 

 

 —

 

Tax effect of Adjustments

 

$

271

 

 

 

$

1,875

 

 

 

$

6,009

 

 

 

$

2,663

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to Earnings from Continuing Operations, net of tax

 

 

 

 

 

 

 

 

 

 

GAAP Earnings from continuing operations, as reported

 

$

(31,420

)

 

 

$

34,105

 

 

 

$

(70,434

)

 

 

$

56,446

 

 

Non-cash, non tax goodwill impairment charge

 

 

 

 

 

 

 

50,307

 

 

 

 

 

Impairment on assets held for sale

 

36,285

 

 

 

 

 

 

36,285

 

 

 

 

 

Restructuring and severance costs

 

416

 

 

 

793

 

 

 

6,448

 

 

 

1,230

 

 

Costs associated with corporate development activities

 

160

 

 

 

5,601

 

 

 

3,501

 

 

 

7,966

 

 

Bal Seal acquisition costs

 

35

 

 

 

 

 

 

6,602

 

 

 

 

 

Cost of acquired
Bal Seal retention plans

 

5,704

 

 

 

 

 

 

22,814

 

 

 

 

 

Inventory step-up associated with
Bal Seal acquisition

 

 

 

 

 

 

 

1,828

 

 

 

 

 

Costs from transition services agreement

 

758

 

 

 

2,777

 

 

 

9,654

 

 

 

3,689

 

 

Income from transition services agreement

 

(452

)

 

 

(2,154

)

 

 

(6,510

)

 

 

(2,900

)

 

Senior leadership transition

 

 

 

 

 

 

 

216

 

 

 

 

 

Reversal of employee tax-related matters in foreign operations

 

 

 

 

 

 

 

(1,692

)

 

 

 

 

Reversal of environmental accrual at GRW

 

 

 

 

 

 

 

(187

)

 

 

 

 

(Gain) loss on sale of U.K. Tooling business

 

 

 

 

3,739

 

 

 

(370

)

 

 

3,739

 

 

Tax benefit from change in state tax laws

 

 

 

 

 

 

 

 

 

 

(2,137

)

 

Tax benefit of foreign derived income included in discontinued operations

 

 

 

 

3,360

 

 

 

 

 

 

3,360

 

 

Tax benefit from change in U.K. entity tax classification

 

 

 

 

(25,710

)

 

 

 

 

 

(25,710

)

 

Adjusted Earnings from continuing operations

 

$

11,486

 

 

 

$

22,511

 

 

 

$

58,462

 

 

 

$

45,683

 

 

 

 

 

 

 

 

 

 

 

 

 

Calculation of Adjusted Diluted Earnings per Share from Continuing Operations

 

 

 

 

 

 

 

 

 

 

GAAP diluted earnings per share from continuing operations

 

$

(1.13

)

 

 

$

1.22

 

 

 

$

(2.54

)

 

 

$

2.01

 

 

Non-cash, non tax goodwill impairment charge

 

 

 

 

 

 

 

1.82

 

 

 

 

 

Impairment on assets held for sale

 

1.31

 

 

 

 

 

 

1.31

 

 

 

 

 

Restructuring and severance costs

 

0.01

 

 

 

0.03

 

 

 

0.23

 

 

 

0.04

 

 

Costs associated with corporate development activities

 

0.01

 

 

 

0.20

 

 

 

0.13

 

 

 

0.29

 

 

Bal Seal acquisition costs

 

 

 

 

 

 

 

0.24

 

 

 

 

 

Cost of acquired
Bal Seal retention plans

 

0.21

 

 

 

 

 

 

0.82

 

 

 

 

 

Inventory step-up associated with
Bal Seal acquisition

 

 

 

 

 

 

 

0.06

 

 

 

 

 

Costs from transition services agreement

 

0.02

 

 

 

0.10

 

 

 

0.34

 

 

 

0.13

 

 

Income from transition services agreement

 

(0.02

)

 

 

(0.08

)

 

 

(0.23

)

 

 

(0.10

)

 

Senior leadership transition

 

 

 

 

 

 

 

0.01

 

 

 

 

 

Reversal of employee tax-related matters in foreign operations

 

 

 

 

 

 

 

(0.06

)

 

 

 

 

Reversal of environmental accrual at GRW

 

 

 

 

 

 

 

(0.01

)

 

 

 

 

(Gain) loss on sale of U.K. Tooling business

 

 

 

 

0.13

 

 

 

(0.01

)

 

 

0.13

 

 

Tax benefit from change in state tax laws

 

 

 

 

 

 

 

 

 

 

(0.07

)

 

Tax benefit of foreign derived income included in discontinued operations

 

 

 

 

0.12

 

 

 

 

 

 

0.12

 

 

Tax benefit from change in U.K. entity tax classification

 

 

 

 

(0.92

)

 

 

 

 

 

(0.92

)

 

Adjustments to diluted earnings per share from continuing operations

 

$

1.54

 

 

 

$

(0.42

)

 

 

$

4.65

 

 

 

$

(0.38

)

 

Adjusted Diluted Earnings per Share from continuing operations

 

$

0.41

 

 

 

$

0.80

 

 

 

$

2.11

 

 

 

$

1.63

 

 

Diluted weighted average shares outstanding

 

27,735

 

 

 

28,056

 

 

 

27,723

 

 

 

28,092

 

 

Adjusted Free Cash Flow from continuing operations - Adjusted Free Cash Flow from continuing operations is defined as GAAP “Net cash provided by (used in) operating activities from continuing operations” in a period less “Expenditures for property, plant & equipment” in the same period and any adjustments that are representative of the Company's cash generation or usage in the period. For 2021 we will adjusted free cash flow to remove the cash payment made to
Bal Seal employees under the retention plan established by the former owners of
Bal Seal. Management believes Free Cash Flow from continuing operations and Adjusted 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 from continuing operations and Adjusted 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 from continuing operations and Adjusted Free Cash Flow internally to assess overall liquidity. The following table illustrates the calculation of Free Cash Flow from continuing operations using “Net cash provided by (used in) operating activities from continuing operations” and “Expenditures for property, plant & equipment”, GAAP measures from the Condensed Consolidated Statements of Cash Flows included in this release.

             

Adjusted Free Cash Flow from continuing operations

(in thousands)

 

 

 

 

 

 

 

 

For the Twelve
Months Ended

 

For the Nine
Months Ended

 

For the Three
Months Ended

 

 

December 31,
2020

 

October 2,
2020

 

December 31,
2020

Net cash provided by operating activities from continuing operations

 

$

16,469

 

 

 

$

(52,379

)

 

 

$

68,848

 

 

Expenditures for property, plant & equipment

 

(17,783

)

 

 

(14,232

)

 

 

(3,551

)

 

Adjusted Free Cash Flow from continuing operations

 

$

(1,314

)

 

 

$

(66,611

)

 

 

$

65,297

 

 

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.

Debt to Capitalization Ratio (in thousands) (unaudited)

 

 

 

 

 

 

December 31, 2020

 

December 31, 2019

Current portion of long-term debt

 

$

 

 

$

 

Long-term debt, excluding current portion

 

185,401

 

 

181,622

 

Debt

 

$

185,401

 

 

$

181,622

 

Total shareholders' equity

 

746,438

 

 

823,202

 

Capitalization

 

$

931,839

 

 

$

1,004,824

 

Debt to Capitalization Ratio

 

19.9

%

 

18.1

%

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) risks related to Kaman's performance of its obligations under the transition services agreement entered into in connection with the sale of our former Distribution business and disruption of management time from ongoing business operations relating thereto; (ii) changes in domestic and foreign economic and competitive conditions in markets served by the Company, particularly the defense, commercial aviation and industrial production markets; (iii) 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); (iv) the global economic impact of the COVID-19 pandemic; (v) changes in geopolitical conditions in countries where the Company does or intends to do business; (vi) the successful conclusion of competitions for government programs (including new, follow-on and successor programs) and thereafter successful contract negotiations with government authorities (both foreign and domestic) for the terms and conditions of the programs; (vii) the timely receipt of any necessary export approvals and/or other licenses or authorizations from the USG; (viii) timely satisfaction or fulfillment of material contractual conditions precedents in customer purchase orders, contracts, or similar arrangements; (ix) the existence of standard government contract provisions permitting renegotiation of terms and termination for the convenience of the government; (x) the successful resolution of government inquiries or investigations relating to our businesses and programs; (xi) risks and uncertainties associated with the successful implementation and ramp up of significant new programs, including the ability to manufacture the products to the detailed specifications required and recover start-up costs and other investments in the programs; (xii) potential difficulties associated with variable acceptance test results, given sensitive production materials and extreme test parameters; (xiii) the receipt and successful execution of production orders under the Company's existing USG JPF contract, including the exercise of all contract options and receipt of orders from allied militaries, but excluding any next generation programmable fuze programs, as all have been assumed in connection with goodwill impairment evaluations; (xiv) the continued support of the existing K-MAX® helicopter fleet, including sale of existing K-MAX® spare parts inventory and the receipt of orders for new aircraft sufficient to recover our investments in the K-MAX® production line; (xv) the accuracy of current cost estimates associated with environmental remediation activities; (xvi) the profitable integration of acquired businesses into the Company's operations; (xvii) the ability to recover from cyber-based or other security attacks, information technology failures or other disruptions; (xviii) changes in supplier sales or vendor incentive policies; (xix) the ability of our suppliers to satisfy their performance obligations; (xx) the effects of price increases or decreases; (xxi) the effects of pension regulations, pension plan assumptions, pension plan asset performance, future contributions and the pension freeze, including the ultimate determination of the USG's share of any pension curtailment adjustment calculated in accordance with CAS 413; (xxii) future levels of indebtedness and capital expenditures; (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; and (xxix) other risks and uncertainties set forth herein and in our 2020 Form 10-K.

Any forward-looking information provided in this release should be considered with these factors in mind. We assume no obligation to update any forward-looking statements contained in this report. 

 

KAMAN CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts) (unaudited)

 

 

For the Three Months Ended

 

For the Twelve Months Ended

 

 

December 31,
2020

 

December 31,
2019

 

December 31,
2020

 

December 31,
2019

Net sales

 

$

185,288

 

 

 

$

237,792

 

 

 

$

784,459

 

 

 

$

761,608

 

 

Cost of sales

 

130,951

 

 

 

165,230

 

 

 

538,877

 

 

 

520,803

 

 

Gross profit

 

54,337

 

 

 

72,562

 

 

 

245,582

 

 

 

240,805

 

 

Selling, general and administrative expenses

 

48,813

 

 

 

49,573

 

 

 

199,906

 

 

 

177,187

 

 

Goodwill and other intangibles impairment

 

 

 

 

 

 

 

50,307

 

 

 

 

 

Impairment on assets held for sale

 

36,285

 

 

 

 

 

 

36,285

 

 

 

 

 

Costs from transition services agreement

 

983

 

 

 

3,519

 

 

 

12,515

 

 

 

4,673

 

 

Cost of acquired retention plans

 

5,704

 

 

 

 

 

 

22,814

 

 

 

 

 

Restructuring costs

 

539

 

 

 

1,005

 

 

 

8,359

 

 

 

1,558

 

 

(Gain) loss on sale of business

 

 

 

 

3,739

 

 

 

(493

)

 

 

3,739

 

 

Net loss (gain) on sale of assets

 

205

 

 

 

(114

)

 

 

200

 

 

 

237

 

 

Operating (loss) income

 

(38,192

)

 

 

14,840

 

 

 

(84,311

)

 

 

53,411

 

 

Interest expense, net

 

4,888

 

 

 

2,607

 

 

 

19,270

 

 

 

17,202

 

 

Non-service pension and post retirement benefit income, net

 

(4,062

)

 

 

(98

)

 

 

(16,250

)

 

 

(396

)

 

Income from transition services agreement

 

(586

)

 

 

(2,729

)

 

 

(8,439

)

 

 

(3,673

)

 

Other expense (income), net

 

(304

)

 

 

58

 

 

 

(728

)

 

 

(309

)

 

(Loss) earnings from continuing operations before income taxes

 

(38,128

)

 

 

15,002

 

 

 

(78,164

)

 

 

40,587

 

 

Income tax (benefit) expense

 

(6,708

)

 

 

(19,103

)

 

 

(7,730

)

 

 

(15,859

)

 

(Loss) earnings from continuing operations, net of tax

 

(31,420

)

 

 

34,105

 

 

 

(70,434

)

 

 

56,446

 

 

Earnings from discontinued operations before gain on disposal, net of tax

 

 

 

 

3,787

 

 

 

 

 

 

29,027

 

 

Gain on disposal of discontinued operations, net of tax

 

 

 

 

1,570

 

 

 

692

 

 

 

124,356

 

 

Total earnings from discontinued operations, net of tax

 

 

 

 

5,357

 

 

 

692

 

 

 

153,383

 

 

Net (loss) earnings

 

$

(31,420

)

 

 

$

39,462

 

 

 

$

(69,742

)

 

 

$

209,829

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

Basic (loss) earnings per share from continuing operations

 

$

(1.13

)

 

 

$

1.22

 

 

 

$

(2.54

)

 

 

$

2.02

 

 

Basic earnings per share from discontinued operations

 

 

 

 

0.19

 

 

 

0.02

 

 

 

5.49

 

 

Basic (loss) earnings per share

 

$

(1.13

)

 

 

$

1.41

 

 

 

$

(2.52

)

 

 

$

7.51

 

 

Diluted (loss) earnings per share from continuing operations

 

$

(1.13

)

 

 

$

1.22

 

 

 

$

(2.54

)

 

 

$

2.01

 

 

Diluted earnings per share from discontinued operations

 

 

 

0.19

 

 

0.02

 

 

 

5.46

 

 

Diluted (loss) earnings per share

 

$

(1.13

)

 

 

$

1.41

 

 

 

$

(2.52

)

 

 

$

7.47

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

27,735

 

 

 

27,922

 

 

 

27,723

 

 

 

27,936

 

 

Diluted

 

27,735

 

 

 

28,056

 

 

 

27,723

 

 

 

28,092

 

 

 

KAMAN CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts) (unaudited)

 

 

December 31, 2020

 

December 31, 2019

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

104,377

 

 

 

$

471,540

 

 

Restricted cash

 

25,121

 

 

 

 

 

Accounts receivable, net

 

153,806

 

 

 

156,492

 

 

Contract assets

 

108,645

 

 

 

121,614

 

 

Contract costs, current portion

 

3,511

 

 

 

6,052

 

 

Inventories

 

185,072

 

 

 

156,353

 

 

Income tax refunds receivable

 

5,269

 

 

 

8,069

 

 

Other current assets

 

12,173

 

 

 

16,368

 

 

Total current assets

 

597,974

 

 

 

936,488

 

 

Property, plant and equipment, net of accumulated depreciation of $228,984 and $210,549, respectively

 

210,852

 

 

 

140,450

 

 

Operating right-of-use asset, net

 

12,880

 

 

 

15,159

 

 

Goodwill

 

247,244

 

 

 

195,314

 

 

Other intangible assets, net

 

150,198

 

 

 

53,439

 

 

Deferred income taxes

 

39,809

 

 

 

35,240

 

 

Contract costs, noncurrent portion

 

8,311

 

 

 

6,099

 

 

Other assets

 

39,125

 

 

 

36,754

 

 

Total assets

 

$

1,306,393

 

 

 

$

1,418,943

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable – trade

 

60,200

 

 

 

70,884

 

 

Accrued salaries and wages

 

70,552

 

 

 

43,220

 

 

Contract liabilities, current portion

 

39,073

 

 

 

42,942

 

 

Operating lease liabilities, current portion

 

4,305

 

 

 

4,306

 

 

Income taxes payable

 

19

 

 

 

4,722

 

 

Liabilities held for sale, current portion

 

18,086

 

 

 

 

 

Other current liabilities

 

36,177

 

 

 

37,918

 

 

Total current liabilities

 

228,412

 

 

 

203,992

 

 

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

 

185,401

 

 

 

181,622

 

 

Deferred income taxes

 

7,381

 

 

 

6,994

 

 

Underfunded pension

 

69,610

 

 

 

97,246

 

 

Contract liabilities, noncurrent portion

 

11,019

 

 

 

37,855

 

 

Operating lease liabilities, noncurrent portion

 

9,325

 

 

 

11,617

 

 

Liabilities held for sale, noncurrent portion

 

1,171

 

 

 

 

 

Other long-term liabilities

 

47,636

 

 

 

56,415

 

 

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; 30,278,668 and 30,058,455 shares issued, respectively

 

30,279

 

 

 

30,058

 

 

Additional paid-in capital

 

238,829

 

 

 

228,153

 

 

Retained earnings

 

728,764

 

 

 

820,666

 

 

Accumulated other comprehensive income (loss)

 

(130,821

)

 

 

(150,893

)

 

Less 2,555,785 and 2,219,332 shares of common stock, respectively, held in treasury, at cost

 

(120,613

)

 

 

(104,782

)

 

Total shareholders’ equity

 

746,438

 

 

 

823,202

 

 

Total liabilities and shareholders’ equity

 

$

1,306,393

 

 

 

$

1,418,943

 

 

KAMAN CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands) (unaudited)

 

 

For the Twelve Months Ended

 

 

December 31,
2020

 

December 31,
2019

Cash flows from operating activities:

 

 

 

 

Net (loss) earnings

 

$

(69,742

)

 

 

$

209,829

 

 

Less: Total earnings from discontinued operations, net of tax

 

692

 

 

 

153,383

 

 

(Loss) earnings from continuing operations, net of tax

 

(70,434

)

 

 

56,446

 

 

Adjustments to reconcile earnings from continuing operations, net of tax to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

43,899

 

 

 

25,854

 

 

Amortization of debt issuance costs

 

1,746

 

 

 

1,996

 

 

Accretion of convertible notes discount

 

2,860

 

 

 

2,760

 

 

Provision for doubtful accounts

 

1,381

 

 

 

788

 

 

Impairment on assets held for sale

 

36,285

 

 

 

 

 

(Gain) loss on sale of business

 

(493

)

 

 

3,971

 

 

Net loss on sale of assets

 

200

 

 

 

237

 

 

Goodwill and other intangible assets impairment

 

50,307

 

 

 

 

 

Net (gain) loss on derivative instruments

 

(466

)

 

 

302

 

 

Stock compensation expense

 

4,979

 

 

 

4,669

 

 

Non-cash consideration received for aircraft sale

 

 

 

 

(3,100

)

 

Deferred income taxes

 

(6,055

)

 

 

182

 

 

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

 

 

 

 

Accounts receivable

 

7,042

 

 

 

(8,173

)

 

Contract assets

 

12,629

 

 

 

(21,994

)

 

Contract costs

 

294

 

 

 

4,506

 

 

Inventories

 

(18,485

)

 

 

(25,129

)

 

Income tax refunds receivable

 

2,763

 

 

 

(6,296

)

 

Operating right-of-use assets

 

1,513

 

 

 

3,390

 

 

Other assets

 

2,490

 

 

 

(6,108

)

 

Accounts payable - trade

 

(9,227

)

 

 

14,034

 

 

Contract liabilities

 

(29,555

)

 

 

(26,638

)

 

Operating lease liabilities

 

(1,560

)

 

 

(3,423

)

 

Other current liabilities

 

16,955

 

 

 

6,085

 

 

Income taxes payable

 

(4,885

)

 

 

7,888

 

 

Pension liabilities

 

(21,550

)

 

 

4,170

 

 

Other long-term liabilities

 

(6,164

)

 

 

6,071

 

 

Net cash provided by operating activities from continuing operations

 

16,469

 

 

 

42,488

 

 

Net cash (used in) provided by operating activities of discontinued operations

 

 

 

 

(50,288

)

 

Net cash provided by (used in) operating activities

 

16,469

 

 

 

(7,800

)

 

Cash flows from investing activities:

 

 

 

 

Proceeds from sale of assets

 

352

 

 

 

196

 

 

Proceeds from sale of discontinued operations

 

5,223

 

 

 

655,030

 

 

Proceeds from sale of business

 

493

 

 

 

 

 

Expenditures for property, plant & equipment

 

(17,783

)

 

 

(22,447

)

 

Acquisition of businesses including earn out adjustments, net of cash acquired

 

(304,661

)

 

 

 

 

Other, net

 

(2,346

)

 

 

(4,463

)

 

Net cash (used in) provided by investing activities of continuing operations

 

(318,722

)

 

 

628,316

 

 

Net cash used in investing activities of discontinued operations

 

 

 

 

(9,838

)

 

Net cash (used in) provided by investing activities

 

(318,722

)

 

 

618,478

 

 

Cash flows from financing activities:

 

 

 

 

Net repayments under revolving credit agreements

 

 

 

 

(38,500

)

 

Debt repayment

 

 

 

 

(76,875

)

 

Repayment of convertible notes

 

 

 

 

(500

)

 

Net change in bank overdraft

 

(12

)

 

 

886

 

 

Proceeds from exercise of employee stock awards

 

4,296

 

 

 

19,676

 

 

Purchase of treasury shares

 

(14,210

)

 

 

(30,060

)

 

Dividends paid

 

(22,210

)

 

 

(22,343

)

 

Debt and equity issuance costs

 

 

 

 

(3,584

)

 

Other

 

(1,399

)

 

 

(1,413

)

 

Net cash used in financing activities of continuing operations

 

(33,535

)

 

 

(152,713

)

 

Net cash provided by (used in) financing activities of discontinued operations

 

 

 

 

7,967

 

 

Net cash used in financing activities

 

(33,535

)

 

 

(144,746

)

 

Net (decrease) increase in cash and cash equivalents

 

(335,788

)

 

 

465,932

 

 

Cash and cash equivalents of discontinued operations and liabilities held for sale

 

 

 

 

(21,834

)

 

Effect of exchange rate changes on cash and cash equivalents

 

337

 

 

 

(269

)

 

Cash and cash equivalents and restricted cash at beginning of period

 

471,540

 

 

 

27,711

 

 

Cash and cash equivalents and restricted cash at end of period(1)

 

$

136,089

 

 

 

$

471,540

 

 

(1)Cash and cash equivalents and restricted cash at the end of the period on the Company’s Consolidated Statement of Cash Flows for the year ended December 31, 2020 includes $6.6 million of cash that is included in the UK Composites business disposal group. However, given the assets of the disposal group are recognized net of the impairment charge, such amounts are not reflected on the Company’s Consolidated Balance Sheet at December 31, 2020.

James CooganV.P., Investor Relations and Business Development
(860) 243-6342
James.Coogan@kaman.com

Source: Kaman Corp.