0000054381-14-000008.txt : 20140227 0000054381-14-000008.hdr.sgml : 20140227 20140227160651 ACCESSION NUMBER: 0000054381-14-000008 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20140227 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20140227 DATE AS OF CHANGE: 20140227 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KAMAN Corp CENTRAL INDEX KEY: 0000054381 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MACHINERY, EQUIPMENT & SUPPLIES [5080] IRS NUMBER: 060613548 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-35419 FILM NUMBER: 14648989 BUSINESS ADDRESS: STREET 1: 1332 BLUE HILLS AVE STREET 2: PO BOX 1 CITY: BLOOMFIELD STATE: CT ZIP: 06002 BUSINESS PHONE: 8602436321 MAIL ADDRESS: STREET 1: 1332 BLUE HILLS AVE STREET 2: PO BOX 1 CITY: BLOOMFIELD STATE: CT ZIP: 06002 FORMER COMPANY: FORMER CONFORMED NAME: KAMAN CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: KAMAN AIRCRAFT CORP DATE OF NAME CHANGE: 19680403 8-K 1 form8-kq42013earningsrelea.htm 8-K Form 8-K Q4 2013 Earnings Release


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 8-K

CURRENT REPORT Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of report (Date of earliest event reported): February 27, 2014



Kaman Corporation
(Exact Name of Registrant as Specified in Its Charter)


Connecticut
(State or Other Jurisdiction of Incorporation)

001-35419
 
06-0613548
(Commission File Number)
 
(IRS Employer Identification No.)
 
 
 
1332 Blue Hills Avenue, Bloomfield, Connecticut
 
06002
(Address of Principal Executive Offices)
 
(Zip Code)

(860) 243-7100
(Registrant's Telephone Number, Including Area Code)

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.02.    Results of Operations and Financial Condition

On February 27, 2014, the Company issued a press release summarizing the Company's financial results for the fiscal quarter and year ended December 31, 2013. A copy of this press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.

A conference call has been scheduled for tomorrow, February 28, 2014, at 8:00 AM ET. Listeners may access the call live by telephone at (877) 546-5019 and from outside the U.S. at (857) 244-7551 (passcode: 45219647); or, via the Internet at www.kaman.com. A replay will also be available two hours after the call that can be accessed at (888) 286-8010 or (617) 801-6888 using the passcode: 84624979.


Item 9.01.    Financial Statements and Exhibits

(c)    Exhibits

The following document is furnished as an Exhibit pursuant to Item 2.02 hereof:

Exhibit 99.1 - Press Release of the Company, dated February 27, 2014, regarding financial performance for the quarter and year ended December 31, 2013.




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


 
KAMAN CORPORATION
 
 
 
 
By:
/s/ Shawn G. Lisle
 
 
Shawn G. Lisle
 
 
Senior Vice President and
 
 
General Counsel

Date: February 27, 2014




KAMAN CORPORATION AND SUBSIDIARIES

Index to Exhibits

Exhibit
Description
 
 
 
 
99.1
Press release dated February 27, 2014
Attached




 EX-99.1 2 exhibit991-q42013earningsr.htm EXHIBIT 99.1 Exhibit 99.1 - Q4 2013 Earnings Release


Exhibit 99.1


 
 
NEWS RELEASE
 
Kaman Corporation
 
1332 Blue Hills Avenue
Bloomfield, CT USA
 
P 860.243.7100
www.kaman.com

KAMAN REPORTS 2013 FOURTH QUARTER AND FULL YEAR RESULTS

Fourth Quarter 2013 Highlights From Continuing Operations:
•Diluted earnings per share of $0.48 ($0.55 Adjusted*)
•Net sales $438.3 million
•Aerospace operating margin: 14.8% (16.0% Adjusted*)
•Distribution organic sales growth of 5.2%

Full Year 2013 Highlights From Continuing Operations:
•
Diluted earnings per share of $2.09 ($2.16 Adjusted*)
•
Distribution sales increase 5.5% to record $1.1 billion
•
Record Aerospace operating income, with operating margin of 16.7% (17.0% Adjusted*)

BLOOMFIELD, Connecticut (February 27, 2014) - Kaman Corp. (NYSE:KAMN) today reported financial results for the fourth quarter and full year ended December 31, 2013.
 
 
 
 
 
 
 
 
 
Table 1. Summary of Financial Results
 
 
 
 
 
 
 
In thousands, except per share amounts
For the Three Months Ended
 
 
 
December 31,
2013
 
December 31,
2012
 
$ Change
 
 
Net sales from continuing operations:
 
 
 
 
 
 
 
Distribution
$
267,487

 
$
248,280

 
$
19,207

 
 
Aerospace
170,856

 
151,036

 
19,820

 
 
Net sales
$
438,343

 
$
399,316

 
$
39,027

 
 
 
 

 
 

 
 
 
 
Operating income from continuing operations:
 

 
 

 
 
 
 
Distribution
$
10,352

 
$
11,155

 
$
(803
)
 
 
Aerospace
25,346

 
22,673

 
2,673

 
 
Net gain (loss) on sale of assets
(28
)
 
(84
)
 
56

 
 
Corporate expense
(11,395
)
 
(10,503
)
 
(892
)
 
 
Operating income
$
24,275

 
$
23,241

 
$
1,034

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted net earnings per share from continuing operations
$
0.48

 
$
0.52

 
$
(0.04
)
 
 
Adjustments*
0.07

 
0.09

 
(0.02
)
 
 
Adjusted diluted net earnings per share*
$
0.55

 
$
0.61

 
$
(0.06
)
 
 
 
 
 
 
 
 
 

Neal J. Keating, Chairman, President and Chief Executive Officer, stated, “2013 was a successful year for Kaman as strong performance across a number of our Aerospace programs enabled us to deliver solid operating results. Despite the challenges encountered at Distribution, the segment achieved organic sales growth of 5.2% for the fourth quarter, our first quarter of year-over-year organic sales growth in Distribution since the second quarter of 2012.

The strong performance at Aerospace was attributable to increased deliveries of bearing products, JPF direct commercial sales and initial milestone achievements under our SH-2G(I) Helicopter program with New Zealand. We continued to make progress on our new program start-ups and initial deliveries on the AH-1Z program to Bell during the fourth quarter, which contributed to a 13.1% sales increase over the prior year. Our “One Kaman” strategy achieved its first significant program win with the recently announced 747-8 wing-to-body fairing contract with Boeing and we are confident this strategy will continue to resonate in the market providing us with additional opportunities on similar programs.






At Distribution we are focusing on making the necessary investments in this business in order to improve its long-term profitability, including the roll-out of our new ERP system. Additionally, we are reviewing the supply base with the intent of consolidating these relationships in order to improve our volume incentives. We are also increasing our sales force, a process which began in the first quarter of 2014, to further capitalize on expected improvements in the markets we serve."

Distribution Segment
Table 2. Summary of Distribution Segment Information (in thousands)
 
 
 
 
 
 
 
 
For the three months ended
 
For the twelve months ended
 
December 31,
2013
 
December 31,
2012
 
December 31,
2013
 
December 31,
2012
Net sales from continuing operations
$
267,487

 
$
248,280

 
$
1,067,839

 
$
1,012,059

Operating income
$
10,352

 
$
11,155

 
$
43,326

 
$
50,560

% of sales
3.9
%
 
4.5
%
 
4.1
%
 
5.0
%

The increase in sales for the fourth quarter is due to the contribution of $6.4 million in sales from our acquisitions (sales from acquisitions are classified as organic beginning with the thirteenth month following the acquisition) and a 3.5% increase in organic sales per sales day*. (See Table 3 for additional details regarding the Segment's sales per sales day performance.) Operating profit margin in the fourth quarter decreased due to lower purchase volume incentives and the recognition of $1.1 million in losses on mining contracts at our Mexico operations. These decreases were partially offset by the contribution from the acquisitions we completed in 2012 and 2013 and cost savings from our first quarter restructuring.

The increase in sales for the full year was due to the contribution of sales from our acquisitions partially offset by a decrease in organic sales of 1.7% when measured on a sales per sales day* basis. Operating income decreased during 2013 as compared to 2012 primarily due to negative operating leverage combined with lower volume incentives due to lower year-over-year organic sales volume, $2.4 million of losses on mining contracts at our Mexico operations and $2.8 million of expense associated with the restructuring in the first quarter of 2013. The first quarter restructuring resulted in cost savings of approximately $6.4 million for the full year.

Aerospace Segment
Table 3. Summary of Aerospace Segment Information (in thousands)
 
 
 
 
 
 
 
 
For the three months ended
 
For the twelve months ended
 
December 31,
2013
 
December 31,
2012
 
December 31,
2013
 
December 31,
2012
Net sales
$
170,856

 
$
151,036

 
$
613,967

 
$
580,769

Operating income
$
25,346

 
$
22,673

 
$
102,573

 
$
89,142

% of sales
14.8
%
 
15.0
%
 
16.7
%
 
15.3
%

Fourth quarter sales increased as a result of higher shipments of our Joint Programmable Fuze ("JPF") to foreign customers, revenues associated with the SH-2G(I) contract with New Zealand and delivery of our first AH-1Z fuselage. Partially offsetting these increases were reductions of JPF shipments to the United States Government ("USG"), lower sales of engineering services and the absence of $2.5 million in sales related to the settlement of a program related matter in the fourth quarter of 2012.

Operating income for the fourth quarter increased due to gross profit from the SH-2G(I) program, higher commercial and military bearing product sales and the absence of $3.3 million in expense associated with the settlement of a program related matter in the fourth quarter of 2012. These increases were partially offset by a $2.1 million non-cash non-tax deductible goodwill impairment charge, higher sales of lower margin programs and decreased gross profit on certain metallic and composite aerostructures programs.

Sales for the full year increased primarily due to an increase in sales attributable to revenue from the SH-2G(I) contract with New Zealand, increased sales on our JPF program, revenue recognized on the AH-1Z program and higher military bearing product sales.

Operating income for the full year increased due to gross profit from the SH-2G(I) program, higher commercial and military bearing product sales and higher gross profit on our JPF program. The higher profit contributions were partially offset by lower gross profit due to cost growth on various programs




across the segment, a $2.1 million non-cash non-tax deductible goodwill impairment charge and higher SG&A expense.

Outlook

The Company's expectations for 2014 are as follows:

•
Distribution:
◦
Sales of $1,115 million to $1,150 million
◦
Operating margins of 4.7% to 5.2%
•
Aerospace:
◦
Sales of $640 million to $660 million
◦
Operating margins of 16.5% to 17.0%
•
Interest expense of approximately $13 million
•
Corporate expenses of approximately $52 million
•
Estimated annualized tax rate of approximately 35%
•
Capital expenditures of $35 million to $40 million
•
Free cash flow* in the range of $40 million to $45 million



Senior Vice President and Chief Financial Officer, Robert D. Starr commented, "Full year earnings per share from continuing operations were $2.09, a 3% increase over the prior year, reflecting our ability to adjust and manage through difficult market conditions. Our continued focus on working capital allowed us to generate free cash flow* of $26.8 million during the quarter and $22.0 million for the full year, in line with expectations.

For 2014 we expect sequential earnings improvement throughout the year, with approximately 60% of the cumulative earnings coming in the second half. For Aerospace, we expect 2014 sales to increase more than 5%, with margins consistent with the high level achieved in 2013.

At Distribution, we anticipate improved operating performance as our initiatives deliver results in conjunction with improvements in underlying market conditions. Our 2014 operating margin outlook includes expenses related to our ERP roll-out, as well as the investment in approximately 50 to 60 account managers. Our phased ERP roll-out process, while reducing operational risk, will add operating expense burden ahead of the efficiencies the systems will ultimately deliver. Distribution operating margins are projected to improve as the year progresses and we expect to end the year at a strong run rate."






Please see the MD&A section of the Company's SEC Form 10-K 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, February 28, 2014, at 8:00 AM ET. Listeners may access the call live by telephone at (877) 546-5019 and from outside the U.S. at (857) 244-7551 (passcode: 45219647); or, via the Internet at www.kaman.com. A replay will also be available two hours after the call that can be accessed at (888) 286-8010 or (617) 801-6888 using the passcode: 84624979. In its discussion, management may include certain non-GAAP measures related to company performance. If so, a reconciliation of that information to GAAP, if not provided in this release, will be provided in the exhibits to the conference call and will be available through the Internet link provided above.


Table 4. Summary of Segment Information (in thousands)
 
 
 
 
 
 
 
 
For the three months ended
 
For the twelve months ended
 
December 31,
2013
 
December 31,
2012
 
December 31,
2013
 
December 31,
2012
Net sales:
 
 
 
 
 
 
 
   Distribution
$
267,487

 
$
248,280

 
$
1,067,839

 
$
1,012,059

   Aerospace
170,856

 
151,036

 
613,967

 
580,769

     Net sales
$
438,343

 
$
399,316

 
$
1,681,806

 
$
1,592,828

 
 

 
 

 
 

 
 

Operating income:
 

 
 

 
 
 
 
   Distribution
$
10,352

 
$
11,155

 
$
43,326

 
$
50,560

   Aerospace
25,346

 
22,673

 
102,573

 
89,142

   Net gain (loss) on sale of assets
(28
)
 
(84
)
 
(128
)
 
(105
)
   Corporate expense
(11,395
)
 
(10,503
)
 
(45,291
)
 
(46,759
)
     Operating income
$
24,275

 
$
23,241

 
$
100,480

 
$
92,838

 
 
 
 
 
 
 
 
Depreciation and Amortization:
 
 
 
 
 
 
 
   Distribution
 
 
 
 
 
 
 
       Depreciation
$
1,283

 
$
1,405

 
$
5,468

 
$
5,161

       Amortization
1,584

 
1,481

 
6,088

 
4,404

     Total
$
2,867

 
$
2,886

 
$
11,556

 
$
9,565

   Aerospace
 
 
 
 
 
 
 
       Depreciation
$
3,048

 
$
2,895

 
$
11,777

 
$
10,829

       Amortization
830

 
802

 
3,264

 
3,118

     Total
$
3,878

 
$
3,697

 
$
15,041

 
$
13,947

   Corporate
 
 
 
 
 
 
 
       Depreciation
$
1,014

 
$
736

 
$
3,723

 
$
2,885

       Amortization
397

 
623

 
1,555

 
1,986

     Total
$
1,411

 
$
1,359

 
$
5,278

 
$
4,871


Non-GAAP Measure Disclosure

Management believes the non-GAAP (Generally Accepted Accounting Principles) 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 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 are essentially days that the Company's branch locations are open for business and exclude weekends and holidays. Sales days are provided as part of this release. 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 differ.  

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 Consolidated Financial Statements” from the Company's Form 10-K filed with the Securities and Exchange Commission on February 27, 2014. Sales from acquisitions are classified as organic beginning with the thirteenth month following the acquisition. Prior period




information is adjusted to reflect acquisition sales for that period as organic sales when calculating organic sales per sales day.
Table 5. Distribution - Organic Sales Per Sales Day (in thousands, except days)
 
 
 
 
 
 
 
 
For the three months ended
 
For the twelve months ended
 
December 31,
2013
 
December 31,
2012
 
December 31,
2013
 
December 31,
2012
Net sales: Distribution
$
267,487

 
$
248,280

 
$
1,067,839

 
$
1,012,059

Acquisition related sales
6,420

 
—

 
72,578

 
—

Organic sales
$
261,067

 
$
248,280

 
$
995,261

 
$
1,012,059

Sales days
63

 
62

 
253

 
253

Organic sales per sales day
$
4,144

 
$
4,005

 
$
3,934

 
$
4,000

% change
3.5
%
 


 
(1.7
)%
 
 


Free Cash Flow - Free cash flow is defined as GAAP “Net cash provided by (used in) operating activities” less “Expenditures for property, plant & equipment.” Management believes free cash flow provides an important perspective on the cash available for dividends to shareholders, debt repayment, and acquisitions after making capital investments required to support ongoing business operations and long-term value creation. Free cash flow does not represent the residual cash flow available for discretionary expenditures as it excludes certain mandatory expenditures such as repayment of maturing debt. Management uses free cash flow internally to assess both business performance and overall liquidity. The following table illustrates the calculation of free cash flow using “Net cash provided by (used in) operating activities” and “Expenditures for property, plant & equipment”, GAAP measures from the Consolidated Statements of Cash Flows.

Table 6. Free Cash Flow (in thousands)
 
 
 
 
 
 
 
 
For the Twelve Months Ended
 
For the Nine Months Ended
 
For the Three Months Ended
 
 
December 31,
2013
 
September 27,
2013
 
December 31,
2013
Net cash provided by (used in) operating activities
 
$
62,948

 
$
25,308

 
$
37,640

Expenditures for property, plant & equipment
 
(40,928
)
 
(30,118
)
 
(10,810
)
Free Cash Flow
 
$
22,020

 
$
(4,810
)
 
$
26,830

Table 7. Free Cash Flow - 2014 Outlook (in millions)
 
 
2014 Outlook
Cash flows from operations
$
75

to
$
85

Expenditures for property, plant and equipment
(35
)
to
(40
)
Free Cash Flow
$
40

to
$
45



Debt to Capitalization Ratio - Debt to capitalization ratio is calculated by dividing debt by capitalization. Debt is defined as GAAP “Notes payable” plus “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 debt to capitalization 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 using GAAP measures from the consolidated balance sheets included in this release.

Table 8. Debt to Capitalization (in thousands)
 
 
 
 
 
 
December 31,
2013
 
December 31,
2012
Notes payable
 
$
559

 
$
21

Current portion of long-term debt
 
10,000

 
10,000

Long-term debt, excluding current portion
 
264,655

 
249,585

Debt
 
275,214

 
259,606

Total shareholders' equity
 
511,292

 
420,193

Capitalization
 
$
786,506

 
$
679,799

Debt to capitalization
 
35.0
%
 
38.2
%

Non-GAAP adjusted net earnings and Non-GAAP adjusted diluted net earnings per share - Non-GAAP adjusted net earnings and Non-GAAP adjusted diluted net earnings per share are defined as net earnings and diluted earnings per share, less items that are not indicative of the operating performance of the business for the period presented. These items are included in the reconciliation below. Management uses Non-GAAP adjusted net earnings and Non-GAAP adjusted diluted net earnings per share to evaluate performance period over period, to analyze the underlying trends in our business and to assess the Company's performance relative to its competitors. We believe




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 Non-GAAP adjusted net earnings and Non-GAAP adjusted diluted net earnings per share using “Net earnings” and “Diluted earnings per share” from the “Consolidated Statement of Operations” included in the Company's Form 10-K filed with the Securities and Exchange Commission on February 27, 2014.

Table 9. Reconciliation of Non-GAAP Financial Information - Net Earnings
(In thousands except per share amounts)
 
 
 
 
 
For the three months ended
 
For the twelve months ended
 
December 31, 2013
 
December 31, 2012
 
December 31, 2013
 
December 31, 2012
NET EARNINGS:
 
 
 
 
 
 
 
GAAP Net earnings from continuing operations, as reported
$
12,958

 
$
13,934

 
$
56,699

 
$
53,928

GAAP Earnings from discontinued operations, net of taxes
(83
)
 
(1,096
)
 
(19
)
 
(226
)
Goodwill impairment charge
2,071

 
—

 
2,071

 
—

Resolution of Aerospace contract claim, net of tax
—

 
2,524

 
—

 
2,524

Costs associated with Disposal of Canadian operations, net of tax
—

 
1,103

 
—

 
1,103

Severance related to Aerospace realignment, net of tax
—

 
(79
)
 
—

 
282

Aerospace contract claim settlement, net of tax
—

 
—

 
—

 
381

Non-GAAP adjusted net earnings
$
14,946

 
$
16,386

 
$
58,751

 
$
57,992

 
 
 
 
 
 
 
 
GAAP Diluted net earnings per share from continuing operations
$
0.48

 
$
0.52

 
$
2.09

 
$
2.03

GAAP Diluted net earnings per share from discontinued operations
(0.01
)
 
(0.04
)
 
(0.01
)
 
(0.01
)
Goodwill impairment charge
0.08

 
—

 
0.08

 
—

Resolution of Aerospace contract claim, net of tax
—

 
0.09

 
—

 
0.09

Costs associated with Disposal of Canadian operations, net of tax
—

 
0.04

 
—

 
0.04

Severance related to Aerospace realignment, net of tax
—

 
—

 
—

 
0.01

Aerospace contract claim settlement, net of tax
—

 
—

 
—

 
0.02

Non-GAAP adjusted diluted net earnings per share
$
0.55

 
$
0.61

 
$
2.16

 
$
2.18

 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
27,375

 
26,867

 
27,143

 
26,622

 
 
 
 
 
 
 
 

Non-GAAP adjusted net sales for Aerospace and Distribution and Non-GAAP adjusted operating income for Aerospace and Distribution - Non-GAAP adjusted sales for Aerospace and Distribution and Non-GAAP adjusted operating income for Aerospace and Distribution are defined as net sales for Aerospace and Distribution and operating income for Aerospace and Distribution, less items that are not indicative of the operating performance of Aerospace and Distribution for the period presented. These items are included in the reconciliation below. Management uses Non-GAAP adjusted net sales and Non-GAAP adjusted operating income to evaluate performance period over period, to analyze the underlying trends in our segments and to assess their performance relative to their competitors. We believe 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 Non-GAAP adjusted net sales per reportable segment and Non-GAAP adjusted operating profit per reportable segment using “Net Sales - Aerospace”, "Net Sales - Distribution", "Operating Profit - Aerospace" and “Operating Profit - Distribution” from Footnote 20, Segment and Geographic Information, to the consolidated financial statements included in the Company's Form 10-K filed with the Securities and Exchange Commission on February 27, 2014.





Table 10. Reconciliation of Non-GAAP Financial Information - Operating Segments
(In thousands)
 
For the three months ended
 
For the twelve months ended
 
December 31, 2013
 
December 31, 2012
 
December 31, 2013
 
December 31, 2012
AEROSPACE SEGMENT OPERATING INCOME:
GAAP net sales - Aerospace segment
$
170,856

 
$
151,036

 
$
613,967

 
$
580,769

Sales adjustment due to resolution of contract claim
—

 
(2,500
)
 
—

 
(2,500
)
Adjusted net sales - Aerospace segment
$
170,856

 
$
148,536

 
$
613,967

 
$
578,269

 
 
 
 
 
 
 
 
GAAP operating income - Aerospace segment
$
25,346

 
$
22,673

 
$
102,573

 
$
89,142

% of GAAP net sales
14.8
%

15.0
%

16.7
%

15.3
%
Goodwill impairment charge
2,071

 
—

 
2,071

 
—

Resolution of Aerospace contract claim
—

 
3,297

 
—

 
3,297

Severance related to Aerospace realignment
—

 
455

 
—

 
455

Aerospace contract claim settlement
—

 
—

 
—

 
586

Non-GAAP adjusted operating income - Aerospace segment
$
27,417

 
$
26,425

 
$
104,644

 
$
93,480

% of adjusted net sales
16.0
%
 
17.8
%
 
17.0
%
 
16.2
%
 
 
 
 
 
 
 
 
DISTRIBUTION SEGMENT OPERATING INCOME:
GAAP net sales from continuing operations - Distribution segment
$
267,487

 
$
248,280

 
$
1,067,839

 
$
1,012,059

Net sales from discontinued operations
—

 
4,814

 
—

 
20,117

Adjusted net sales - Distribution segment
$
267,487

 
$
253,094

 
$
1,067,839

 
$
1,032,176

 
 
 
 
 
 
 
 
GAAP operating income from continuing operations - Distribution segment
$
10,352

 
$
11,155

 
$
43,326

 
$
50,560

% of GAAP net sales from continuing operations
3.9
%
 
4.5
%
 
4.1
%
 
5.0
%
Operating (loss) income from discontinued operations
—

 
(1,099
)
 
—

 
92

Costs associated with disposal of Canadian operations
—

 
1,490

 
—

 
1,490

Non-GAAP adjusted operating income - Distribution segment
$
10,352

 
$
11,546

 
$
43,326

 
$
52,142

% of adjusted net sales
3.9
%
 
4.6
%
 
4.1
%
 
5.1
%

About Kaman Corporation
Kaman Corporation, founded in 1945 by aviation pioneer Charles H. Kaman, and headquartered in Bloomfield, Connecticut conducts business in the aerospace and industrial distribution markets. The company produces and/or markets widely used proprietary aircraft bearings and components; complex metallic and composite aerostructures for commercial, military and general aviation fixed and rotary wing aircraft; aerostructure engineering design analysis and FAA certification services; safe and arm solutions for missile and bomb systems for the U.S. and allied militaries; subcontract helicopter work; and support for the company's SH-2G Super Seasprite maritime helicopters and K-MAX medium-to-heavy lift helicopters. The company is a leading distributor of industrial parts, and operates more than 200 customer service locations and five distribution centers across North America. Kaman offers more than four million items including bearings, mechanical power transmission, electrical, material handling, motion control, fluid power, automation and MRO supplies to customers in virtually every industry. Additionally, Kaman provides engineering, design and support for automation, electrical, linear, hydraulic and pneumatic systems as well as belting and rubber fabrication, customized mechanical services, hose assemblies, repair, fluid analysis and motor management. 
 

FORWARD-LOOKING STATEMENTS

This report contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements also may be included in other publicly available documents issued by the Company and in oral statements made by our officers and representatives from time to time. These forward-looking statements are intended to provide management's current expectations or plans for our future operating and financial performance, based on assumptions currently believed to be valid. They can be identified by the use of words such as "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "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) changes in geopolitical conditions in countries where the company does or intends to do business; (iv) the successful conclusion of competitions for government programs and thereafter contract negotiations with government authorities, both foreign and domestic; (v) the existence of standard government contract provisions permitting




renegotiation of terms and termination for the convenience of the government; (vi) the conclusion to government inquiries or investigations regarding government programs, including the resolution of the Wichita subpoena matter; (vii) risks and uncertainties associated with the successful implementation and ramp up of significant new programs; (viii) potential difficulties associated with variable acceptance test results, given sensitive production materials and extreme test parameters; (ix) the receipt and successful execution of production orders for the JPF U.S. government contract, including the exercise of all contract options and receipt of orders from allied militaries, as all have been assumed in connection with goodwill impairment evaluations; (x) the continued support of the existing K-MAX® helicopter fleet, including sale of existing K-MAX® spare parts inventory; (xi) the accuracy of current cost estimates associated with environmental remediation activities at the Bloomfield, Moosup and New Hartford, CT facilities and our U.K. facilities; (xii) the profitable integration of acquired businesses into the company's operations; (xiii) the ability to implement our ERP systems in a cost-effective and efficient manner, limiting disruption to our business, and to capture their planned benefits while maintaining an adequate internal control environment; (xiv) changes in supplier sales or vendor incentive policies; (xv) the effects of price increases or decreases; (xvi) the effects of pension regulations, pension plan assumptions, pension plan asset performance and future contributions; (xvii) future levels of indebtedness and capital expenditures; (xviii) the continued availability of raw materials and other commodities in adequate supplies and the effect of increased costs for such items; (xix) the effects of currency exchange rates and foreign competition on future operations; (xx) changes in laws and regulations, taxes, interest rates, inflation rates and general business conditions; (xxi) future repurchases and/or issuances of common stock and (xxii) other risks and uncertainties set forth in our Annual Report on Form 10-K for the year ended December 31, 2013.

Any forward-looking information provided in this report should be considered with these factors in mind. We assume no obligation to update any forward-looking statements contained in this report.
###
Contact: Eric Remington
V.P., Investor Relations
(860) 243-6334
Eric.Remington@kaman.com








KAMAN CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands except per share amounts)

 
For the Three Months Ended
 
For the Twelve months ended
 
December 31,
2013
 
December 31,
2012
 
December 31,
2013
 
December 31,
2012
Net sales
$
438,343

 
$
399,316

 
$
1,681,806

 
$
1,592,828

Cost of sales
322,099

 
289,844

 
1,215,182

 
1,150,855

Gross profit
116,244

 
109,472

 
466,624

 
441,973

Selling, general and administrative expenses
89,870

 
86,147

 
363,945

 
349,030

Goodwill impairment
2,071

 
—

 
2,071

 
—

Net (gain)/loss on sale of assets
28

 
84

 
128

 
105

Operating income from continuing operations
24,275

 
23,241

 
100,480

 
92,838

Interest expense, net
3,215

 
3,563

 
12,559

 
12,185

Other (income) expense, net
57

 
326

 
425

 
(175
)
Earnings from continuing operations before income taxes
21,003

 
19,352

 
87,496

 
80,828

Income tax expense
8,045

 
5,418

 
30,797

 
26,900

Net earnings from continuing operations
12,958

 
13,934

 
56,699

 
53,928

Earnings from discontinued operations, net of taxes
(83
)
 
(1,096
)
 
(19
)
 
(226
)
Gain on disposal of discontinued operations, net of taxes
—

 
1,323

 
420

 
1,323

Total earnings from discontinued operations
(83
)
 
227

 
401

 
1,097

Net earnings
$
12,875

 
$
14,161

 
$
57,100

 
$
55,025

Net earnings per share:
 
 
 
 
 

 
 

Basic net earnings per share from continuing operations
$
0.48

 
$
0.52

 
$
2.12

 
$
2.04

Basic net earnings per share from discontinued operations
—

 
(0.04
)
 
—

 
(0.01
)
Basic net earnings per share from disposal of discontinued operations
—

 
0.05

 
0.02

 
0.05

Basic net earnings per share
$
0.48

 
$
0.53

 
$
2.14

 
$
2.08

Diluted net earnings per share from continuing operations
$
0.48

 
$
0.52

 
$
2.09

 
$
2.03

Diluted net earnings per share from discontinued operations
(0.01
)
 
(0.04
)
 
(0.01
)
 
(0.01
)
Diluted net earnings per share from disposal of discontinued operations
—

 
0.05

 
0.02

 
0.05

Diluted net earnings per share
$
0.47

 
$
0.53

 
$
2.10

 
$
2.07

Weighted average shares outstanding:
 
 
 
 
 

 
 

Basic
26,815

 
26,559

 
26,744

 
26,425

Diluted
27,375

 
26,867

 
27,143

 
26,622

Dividends declared per share
$
0.16

 
$
0.16

 
$
0.64

 
$
0.64







KAMAN CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
 
December 31, 2013
 
December 31, 2012
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
10,384

 
$
16,593

Accounts receivable, net
205,873

 
180,798

Inventories
390,495

 
367,385

Deferred income taxes
30,128

 
25,835

Income taxes receivable
2,297

 
—

Other current assets
26,028

 
27,434

Total current assets
665,205

 
618,045

Property, plant and equipment, net of accumulated depreciation of $167,282 and $149,696, respectively
148,508

 
128,669

Goodwill
203,923

 
192,046

Other intangible assets, net
89,449

 
92,913

Deferred income taxes
10,287

 
42,905

Other assets
23,259

 
22,415

Total assets
$
1,140,631

 
$
1,096,993

Liabilities and Shareholders’ Equity
 

 
 

Current liabilities:
 

 
 

Notes payable
$
559

 
$
21

Current portion of long-term debt
10,000

 
10,000

Accounts payable – trade
119,482

 
113,143

Accrued salaries and wages
33,677

 
35,869

Current portion of amount due to Commonwealth of Australia
—

 
6,659

Advances on contracts
9,470

 
1,900

Other accruals and payables
54,095

 
53,468

Income taxes payable
673

 
2,892

Total current liabilities
227,956

 
223,952

Long-term debt, excluding current portion
264,655

 
249,585

Deferred income taxes
3,855

 
5,150

Underfunded pension
85,835

 
148,703

Other long-term liabilities
47,038

 
49,410

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; 27,189,922 and 26,881,257 shares issued, respectively
27,190

 
26,881

Additional paid-in capital
133,517

 
122,522

Retained earnings
439,441

 
399,473

Accumulated other comprehensive income (loss)
(81,121
)
 
(121,590
)
Less 330,487 and 277,473 shares of common stock, respectively, held in treasury, at cost
(7,735
)
 
(7,093
)
Total shareholders’ equity
511,292

 
420,193

Total liabilities and shareholders’ equity
$
1,140,631

 
$
1,096,993








KAMAN CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
 
 
For the year ended
 
 
December 31,
2013
 
December 31,
2012
Cash flows from operating activities:
 
 
 
 
Earnings from continuing operations
 
$
56,699

 
$
53,928

Adjustments to reconcile earnings from continuing operations to net cash provided by (used in) operating activities of continuing operations:
 
 

 
 

Depreciation and amortization
 
31,875

 
28,383

Accretion of convertible notes discount
 
1,833

 
1,738

Change in allowance for doubtful accounts
 
1,635

 
537

Net (gain) loss on sale of assets
 
128

 
105

Goodwill impairment
 
2,071

 
—

Change in amount Due to Commonwealth of Australia, net of gain (loss) on derivative instruments
 
178

 
(427
)
Stock compensation expense
 
4,973

 
5,865

Excess tax (expense) benefit from share-based compensation arrangements
 
(543
)
 
(883
)
Deferred income taxes
 
1,991

 
(1,210
)
Changes in assets and liabilities, excluding effects of acquisitions/divestitures:
 
 
Accounts receivable
 
(23,016
)
 
26,186

Inventories
 
(19,131
)
 
(21,289
)
Income tax receivable
 
(2,297
)
 
527

Other current assets
 
1,110

 
4,619

Accounts payable-trade
 
13,058

 
1,688

Other accrued expenses and payables
 
(3,742
)
 
(16,114
)
Income taxes payable
 
(2,325
)
 
(576
)
Pension liabilities
 
(3,118
)
 
56

Other long-term liabilities
 
1,168

 
1,447

Net cash provided by (used in) operating activities of continuing operations
 
62,547

 
84,580

Net cash provided by (used in) operating activities of discontinued operations
 
401

 
(3,610
)
Net cash provided by (used in) operating activities
 
62,948

 
80,970

Cash flows from investing activities:
 
 
 
 
Proceeds from sale of assets
 
117

 
348

Proceeds from sale of discontinued operations
 
—

 
8,743

Expenditures for property, plant & equipment
 
(40,928
)
 
(32,569
)
Acquisition of businesses including earn out adjustments, net of cash received
 
(18,162
)
 
(87,977
)
Other, net
 
(2,302
)
 
(6,401
)
Cash provided by (used in) investing activities of continuing operations
 
(61,275
)
 
(117,856
)
Cash provided by (used in) investing activities of discontinued operations
 
—

 
(8
)
Cash provided by (used in) investing activities
 
(61,275
)
 
(117,864
)
Cash flows from financing activities:
 
 
 
 
Net borrowings (repayments) under revolving credit agreements
 
22,720

 
(11,348
)
Borrowings under Term Loan Facility
 
—

 
100,000

Debt repayment
 
(10,000
)
 
(35,000
)
Net change in book overdraft
 
(9,878
)
 
(2,698
)
Proceeds from exercise of employee stock awards
 
6,333

 
7,550

Purchase of treasury shares
 
(644
)
 
(733
)
Dividends paid
 
(17,091
)
 
(16,882
)
Debt issuance costs
 
(98
)
 
(2,132
)
Windfall tax (expense) benefit
 
543

 
883

Cash provided by (used in) financing activities of continuing operations
 
(8,115
)
 
39,640

Cash provided by (used in) financing activities of discontinued operations
 
—

 
(1,067
)
Cash provided by (used in) financing activities
 
(8,115
)
 
38,573

Net increase (decrease) in cash and cash equivalents
 
(6,442
)
 
1,679

Effect of exchange rate changes on cash and cash equivalents
 
233

 
(71
)
Cash and cash equivalents at beginning of period
 
16,593

 
14,985

Cash and cash equivalents at end of period
 
$
10,384

 
$
16,593




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