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Form 8-K KAMAN Corp For: Feb 23

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February 23, 2015 4:16 PM EST


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 23, 2015



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 23, 2015, the Company issued a press release summarizing the Company's financial results for the fiscal quarter and year ended December 31, 2014. 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 24, 2015, at 8:30 AM ET. Listeners may access the call live by telephone at (877) 280-4958 and from outside the U.S. at (857) 244-7315; (passcode: 62668708); or, via the Internet at www.kaman.com. A replay will also be available two hours after the call and can be accessed at (888) 286-8010 or (617) 801-6888 using the passcode: 49474372.

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 23, 2015, regarding financial performance for the quarter and year ended December 31, 2014.




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 23, 2015




KAMAN CORPORATION AND SUBSIDIARIES

Index to Exhibits

Exhibit
Description
 
 
 
 
99.1
Press release dated February 23, 2015
Attached





Exhibit 99.1
 
 
NEWS RELEASE
 
Kaman Corporation
 
1332 Blue Hills Avenue
Bloomfield, CT USA
 
P 860.243.7100
www.kaman.com

KAMAN REPORTS 2014 FOURTH QUARTER RESULTS

Fourth Quarter and Full Year 2014 Highlights from Continuing Operations:
•
Diluted earnings per share of $0.77 (adjusted $0.76)* for the fourth quarter, an increase of 57% over the prior year
•
Diluted earnings per share of $2.37 (adjusted $2.43)* for the full year
•Organic sales per sales day* growth of 4.8% at Distribution for the fourth quarter
•Aerospace operating profit margin of 18.9% for the fourth quarter
•Free cash flow* generation of $81 million for the full year
•Quarterly dividend increased 12.5% to $0.18

BLOOMFIELD, Connecticut (February 23, 2015) - Kaman Corp. (NYSE: KAMN) today reported financial results for the fourth quarter ended December 31, 2014.
 
 
 
 
 
 
 
 
 
Table 1. Summary of Financial Results
 
 
 
 
 
 
In thousands except per share amounts
For the Three Months Ended
 
 
 
December 31, 2014
 
December 31, 2013
 
Change
 
 
Net sales from continuing operations:
 
 
 
 
 
 
 
Distribution
$
302,687

 
$
260,184

 
$
42,503

 
 
Aerospace
175,244

 
170,856

 
4,388

 
 
Net sales
$
477,931

 
$
431,040

 
$
46,891

 
 
 
 

 
 

 
 
 
 
Operating income from continuing operations:
 

 
 

 
 
 
 
Distribution
$
14,295

 
$
11,452

 
$
2,843

 
 
Aerospace
33,182

 
25,346

 
7,836

 
 
Net loss on sale of assets
(5
)
 
(38
)
 
33

 
 
Corporate expense
(14,228
)
 
(11,395
)
 
(2,833
)
 
 
Operating income
$
33,244

 
$
25,365

 
$
7,879

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA*:
 
 
 
 
 
 
 
Distribution
$
18,453

 
$
14,236

 
$
4,217

 
 
Aerospace
37,553

 
29,224

 
8,329

 
 
Net loss on sale of assets
(5
)
 
(38
)
 
33

 
 
Corporate expense
(12,855
)
 
(9,984
)
 
(2,871
)
 
 
Adjusted EBITDA*
$
43,146

 
$
33,438

 
$
9,708

 
 
 
 
 
 
 
 
 
 
Adjusted diluted earnings per share from continuing operations*
$
0.76

 
$
0.57

 
$
0.19

 
 
 
 
 
 
 
 
 





Neal J. Keating, Chairman, President and Chief Executive Officer, stated, "We finished 2014 with very strong results, achieving earnings per share from continuing operations of $0.77 for the quarter and $2.37 for the full year, or $2.43 when adjusted*. Our free cash flow* for the full year was $80.8 million, an increase of $56.8 million over 2013. In addition, we are pleased that, based on our strong results, our Board of Directors has approved an increase in our quarterly dividend by 12.5% to $0.18 per share.
Distribution had strong organic sales growth* of 4.8% during the fourth quarter, our fifth consecutive quarter of organic sales growth and our highest rate of growth since the third quarter of 2011. Our investment in our sales force expansion was accretive in the quarter and the results for the quarter speak to the importance of this initiative towards achieving growth rates in line with our long-term goals. During the quarter we divested Distribution's Mexico operations, increasing the focus on our core strategy of building out product platforms in the U.S. and delivering improved operating performance.
Aerospace had a strong fourth quarter with operating margin of 18.9% and top line sales growth of 2.6%. Aerospace enters 2015 in the midst of a transition, as certain legacy defense programs continue to ramp down. However, our Aerospace Group is managing this transition period effectively as evidenced by the top line growth in 2014, which we believe will continue into 2015."

Distribution Segment
Table 2. Summary of Distribution Segment Information (in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
For the Twelve Months Ended
 
December 31,
2014
 
December 31,
2013
 
Change
 
December 31,
2014
 
December 31,
2013
 
Change
Net sales
$
302,687

 
$
260,184

 
$
42,503

 
$
1,161,992

 
$
1,039,954

 
$
122,038

Operating income
$
14,295

 
$
11,452

 
$
2,843

 
$
56,765

 
$
46,206

 
$
10,559

% of sales
4.7
%
 
4.4
%
 
0.3
%
 
4.9
%
 
4.4
%
 
0.5
%

The increase in sales in the fourth quarter resulted from $25.8 million in sales from acquisitions and an increase of $16.7 million in organic sales. Sales from acquisitions are classified as organic beginning with the thirteenth month following the acquisition. (See Table 6 for additional details regarding the Segment's sales per sales day* performance.) The increase in operating income in the fourth quarter was driven by higher rebate income and contributions from our 2014 acquisitions.

The increase in sales for the full year resulted from $89.4 million in sales from acquisitions and an increase of $32.7 million in organic sales. The increase in operating income for the full year was driven by the contribution of operating income from 2014 and 2013 acquisitions, the absence of $2.8 million of restructuring costs, lower pension expense and higher rebate income. These increases were partially offset by higher operating expenses, primarily related to higher employee related incentive costs and an increase in salary and wage expense associated with the expansion of our sales force.





Aerospace Segment
Table 3. Summary of Aerospace Segment Information (in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
For the Twelve Months Ended
 
December 31,
2014
 
December 31,
2013
 
Change
 
December 31,
2014
 
December 31,
2013
 
Change
Net sales
$
175,244

 
$
170,856

 
$
4,388

 
$
632,970

 
$
613,967

 
$
19,003

Operating income
$
33,182

 
$
25,346

 
$
7,836

 
$
108,697

 
$
102,573

 
$
6,124

% of sales
18.9
%
 
14.8
%
 
4.1
%
 
17.2
%
 
16.7
%
 
0.5
%

Sales for the fourth quarter increased due to our SH-2G(I) contract with New Zealand and higher commercial bearing product sales. These increases were partially offset by lower volume of JPF deliveries, a reduction in shipments on our Sikorsky BLACK HAWK helicopter program, and decreased year over year revenue under our AH-1Z program. Operating margin in the fourth quarter was higher than the prior year primarily due to our SH-2G(I) contract with New Zealand and stronger contribution from bearing product lines. These increases were partially offset by the lower volume and a less favorable mix of JPF deliveries.

Sales for the full year increased due to increased deliveries on commercial composite structures products/programs, higher commercial bearing product sales, our SH-2G(I) contract with New Zealand, increased sales to the U.S. Government under the JPF program and higher sales volume on the A-10 program. These increases were partially offset by lower sales of engineering design services, composite imaging products and Boeing CH-47 inlet screens, reduced deliveries of the JPF to foreign militaries, a reduction in shipments on our Sikorsky BLACK HAWK helicopter program and lower military bearing product sales. Operating margin for the full year increased primarily due to gross profit from the SH-2G(I) program and commercial bearing product sales and the absence of the $2.1 million goodwill impairment charge recorded in 2013. These increases were partially offset by lower gross margin on military bearing products and tooling sales and lower commercial sales of the JPF to foreign militaries.

Chief Financial Officer, Robert D. Starr, commented, "Our strong 2014 performance reflects the continued execution of our long-term strategies. Full year operating margin performance at Aerospace improved 50 bps to 17.2%, driven by a favorable sales mix and a focus on operating expenses. Distribution's operating margin increased 50 bps from the prior year to 4.9%, benefiting from solid organic sales growth of 3.2%.

Free cash flow generation for the full year was $80.8 million or 123% of net earnings from continuing operations, which we used to pay down outstanding borrowings bringing our year end debt to capitalization ratio to 35.2%, consistent with the prior year-end level. We are very encouraged with this level of free cash flow. With our continued focus on working capital management we believe we can consistently achieve our goal of 80% to 100% free cash flow as a percentage of net earnings.

For 2015 we expect strong sales growth at Distribution and low single digit growth at Aerospace. The operating profit outlook reflects strong underlying core performance, offset by a number of significant headwinds, most notably pension, ERP and group health expense. Similar to 2014, we anticipate quarterly earnings to increase sequentially throughout the year, with approximately 60% to 65% of our full year earnings in the second half. Finally, we anticipate another outstanding year of free cash flow generation in 2015."





2015 Outlook

Our 2015 outlook is as follows:

•
Distribution:
◦
Sales of $1,250 million to $1,280 million
◦
Operating margins of 4.9% to 5.2%
•
Aerospace:
◦
Sales of $635 million to $655 million
◦
Operating margins of 16.8% to 17.2%
•
Interest expense of approximately $13 million
•
Corporate expenses of $52 million to $53 million
•
Estimated annualized tax rate of approximately 34%
•
Depreciation and amortization expense of approximately $40 million
•
Capital expenditures of $30 million to $40 million
•
Free cash flow* in the range of $75 million to $90 million

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 24, 2015, at 8:30 AM ET. Listeners may access the call live by telephone at (877) 280-4958 and from outside the U.S. at (857) 244-7315; (passcode: 62668708); or, via the Internet at www.kaman.com. A replay will also be available two hours after the call and can be accessed at (888) 286-8010 or (617) 801-6888 using the passcode: 49474372. 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,
2014
 
December 31,
2013
 
December 31,
2014
 
December 31,
2013
Net sales:
 
 
 
 
 
 
 
   Distribution
$
302,687

 
$
260,184

 
$
1,161,992

 
$
1,039,954

   Aerospace
175,244

 
170,856

 
632,970

 
613,967

     Net sales
$
477,931

 
$
431,040

 
$
1,794,962

 
$
1,653,921

 
 

 
 

 
 
 
 
Operating income:
 

 
 

 
 
 
 
   Distribution
$
14,295

 
$
11,452

 
$
56,765

 
$
46,206

   Aerospace
33,182

 
25,346

 
108,697

 
102,573

   Net gain (loss) on sale of assets
(5
)
 
(38
)
 
(233
)
 
(142
)
   Corporate expense
(14,228
)
 
(11,395
)
 
(54,722
)
 
(45,291
)
     Operating income
$
33,244

 
$
25,365

 
$
110,507

 
$
103,346

 
 
 
 
 
 
 
 
Depreciation and Amortization:
 
 
 
 
 
 
 
   Distribution
 
 
 
 
 
 
 
       Depreciation
$
2,141

 
$
1,247

 
$
7,017

 
$
5,338

       Amortization
2,017

 
1,537

 
7,444

 
5,898

     Total
$
4,158

 
$
2,784

 
$
14,461

 
$
11,236

   Aerospace
 
 
 
 
 
 
 
       Depreciation
$
3,520

 
$
3,048

 
$
12,639

 
$
11,777

       Amortization
851

 
830

 
3,400

 
3,264

     Total
$
4,371

 
$
3,878

 
$
16,039

 
$
15,041

   Corporate
 
 
 
 
 
 
 
       Depreciation
$
975

 
$
1,014

 
$
4,129

 
$
3,723

       Amortization
398

 
397

 
1,580

 
1,555

     Total
$
1,373

 
$
1,411

 
$
5,709

 
$
5,278


Non-GAAP Measures Disclosure

Management believes that 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:

Adjusted EBITDA - Adjusted EBITDA is defined as operating income before depreciation and amortization. Adjusted EBITDA is calculated on our consolidated results as well as the results of our reportable segments. Adjusted EBITDA differs from Segment Operating Income, as calculated in accordance with GAAP, in that it excludes depreciation and amortization. We have made numerous investments in our business, such as acquisitions and increased capital expenditures, including facility improvements, new machinery and equipment, improvements to our information technology infrastructure and new ERP systems. Management believes Adjusted EBITDA provides an additional perspective on the operating results of the organization and its earnings capacity and helps improve the comparability of our results between periods by eliminating the impact of non-cash depreciation and amortization expense. Adjusted EBITDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. Adjusted EBITDA is not




presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with GAAP. No other adjustments were made during the three-month and twelve-month periods ended December 31, 2014 and 2013.

Table 5. Adjusted EBITDA (in thousands)
 
 
 
 
 
 
For the Three Months Ended
 
For the Twelve Months Ended
 
December 31,
2014
 
December 31,
2013
 
December 31,
2014
 
December 31,
2013
Adjusted EBITDA
 
 
 
 
 
 
 
Distribution
 
 
 
 
 
 
 
   Operating Income
$
14,295

 
$
11,452

 
$
56,765

 
$
46,206

   Depreciation and Amortization
4,158

 
2,784

 
14,461

 
11,236

   Adjusted EBITDA
$
18,453

 
$
14,236

 
$
71,226

 
$
57,442

 


 


 
 
 
 
Aerospace
 
 
 
 
 
 
 
   Operating Income
$
33,182

 
$
25,346

 
$
108,697

 
$
102,573

   Depreciation and Amortization
4,371

 
3,878

 
16,039

 
15,041

    Adjusted EBITDA
$
37,553

 
$
29,224

 
$
124,736

 
$
117,614

 
 
 
 
 
 
 
 
Corporate expense
 
 
 
 
 
 
 
   Operating expense
$
(14,228
)
 
$
(11,395
)
 
$
(54,722
)
 
$
(45,291
)
   Depreciation and Amortization
1,373

 
1,411

 
5,709

 
5,278

   Adjusted EBITDA
$
(12,855
)
 
$
(9,984
)
 
$
(49,013
)
 
$
(40,013
)
 
 
 
 
 
 
 
 
Net loss on sale of assets
(5
)
 
(38
)
 
(233
)
 
(142
)
Total Adjusted EBITDA
$
43,146

 
$
33,438

 
$
146,716

 
$
134,901


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, 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. 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 Condensed Consolidated Financial Statements” from the Company's Form 10-K filed with the Securities and Exchange Commission on February 23, 2015. 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 6. Distribution - Organic Sales Per Sales Day (in thousands, except days)
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
For the Twelve Months Ended
 
 
December 31,
2014
 
December 31,
2013
 
December 31,
2014
 
December 31,
2013
Current period
 
 
 
 
 
 
 
 
Net sales: Distribution
 
$
302,687

 
$
260,184

 
$
1,161,992

 
$
1,039,954

Acquisition sales
 
25,783

 
6,420

 
89,388

 
72,578

Organic sales
 
$
276,904

 
$
253,764

 
$
1,072,604

 
$
967,376

Sales days
 
64

 
63

 
253

 
253

Organic sales per sales day for the current period
a
$
4,327

 
$
4,028

 
$
4,240

 
$
3,824

 
 
 
 
 
 
 
 
 
Prior period
 
 
 
 
 
 
 
 
Net sales from the prior year
 
$
260,184

 
$
240,474

 
$
1,039,954

 
$
982,573

Sales days from the prior year
 
63

 
62

 
253

 
253

Organic sales per sales day from the prior year
b
$
4,130

 
$
3,879

 
$
4,110

 
$
3,884

 
 
 
 
 
 
 
 
 
% change in organic sales per sales day
(a-b)÷b
4.8
%
 
3.8
%
 
3.2
%
 
(1.5
)%

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 included in this release.
Table 7. 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, 2014
 
September 26,
2014
 
December 31,
2014
Net cash provided by operating activities
 
$
109,089

 
$
45,132

 
$
63,957

Expenditures for property, plant & equipment
 
(28,283
)
 
(22,177
)
 
(6,106
)
Free Cash Flow
 
$
80,806

 
$
22,955

 
$
57,851


Table 8. Free Cash Flow - 2015 Outlook (in millions)
2015 Outlook
 
 
 
 
Free Cash Flow:
 
 
 
     Net cash provided by operating activities
$
105.0

to
$
130.0

     Expenditures for property, plant and equipment
(30.0
)
to
(40.0
)
          Free Cash Flow
$
75.0

to
$
90.0






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 that 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 condensed consolidated balance sheets included in this release.

Table 9. Debt to Capitalization (in thousands)
 
 
 
 
 
 
December 31,
2014
 
December 31,
2013
Notes payable
 
$
—

 
$
559

Current portion of long-term debt
 
10,000

 
10,000

Long-term debt, excluding current portion
 
271,232

 
264,655

Debt
 
281,232

 
275,214

Total shareholders' equity
 
517,665

 
511,292

Capitalization
 
$
798,897

 
$
786,506

Debt to capitalization
 
35.2
%
 
35.0
%

Non-GAAP adjusted net earnings and Non-GAAP adjusted diluted earnings per share - Non-GAAP adjusted net earnings and Non-GAAP adjusted diluted 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 earnings per share to evaluate performance period over period, to analyze the underlying trends in our business and to assess its performance relative to its competitors. We believe that this information is useful for investors and financial institutions seeking to analyze and compare companies on the basis of operating performance.

The following table illustrates the calculation of Non-GAAP adjusted net earnings and Non-GAAP adjusted diluted earnings per share using “Net earnings” and “Diluted earnings per share” from the “Consolidated Statement of Operations” and the "Selected Quarterly Financial Data" from the Company's Form 10-K filed with the Securities and Exchange Commission on February 23, 2015.





Table 10. 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, 2014
 
December 31, 2013
 
December 31, 2014
 
December 31, 2013
NET EARNINGS:
 
 
 
 
 
 
 
GAAP Earnings from continuing operations, as reported
$
21,330

 
$
13,507

 
$
65,780

 
$
59,066

Costs associated with the sale of Moosup
(45
)
 
—

 
1,499

 
—

Severance costs at Distribution
—

 
—

 
367

 
—

Goodwill impairment charge
—

 
2,071

 
—

 
2,071

Non-GAAP adjusted net earnings from continuing operations
$
21,285

 
$
15,578

 
$
67,646

 
$
61,137

 
 
 
 
 
 
 
 
GAAP diluted earnings per share from continuing operations
$
0.77

 
$
0.49

 
$
2.37

 
$
2.17

Costs associated with the sale of Moosup
(0.01
)
 
—

 
0.05

 
—

Severance costs at Distribution
—

 
—

 
0.01

 
—

Goodwill impairment charge
—

 
0.08

 
—

 
0.08

Non-GAAP adjusted diluted earnings per share from continuing operations
$
0.76

 
$
0.57

 
$
2.43

 
$
2.25

 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
27,812

 
27,375

 
27,777

 
27,143

 
 
 
 
 
 
 
 

Non-GAAP adjusted operating income for Distribution - Non-GAAP adjusted operating income for Distribution is defined as operating income for Distribution, less items that are not indicative of the operating performance of Distribution for the period presented. These items are included in the reconciliation below. Management uses 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 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 Non-GAAP adjusted operating profit for Distribution using Footnote 19, Segment and Geographic Information, to the consolidated financial statements from the Company's Form 10-K filed with the Securities and Exchange Commission on February 23, 2015.

Table 11. Reconciliation of Non-GAAP Financial Information - Operating Segments
(In thousands)
 
For the Three Months Ended
 
For the Twelve Months Ended
 
December 31, 2014
 
December 31, 2013
 
December 31, 2014
 
December 31, 2013
DISTRIBUTION SEGMENT OPERATING INCOME:
 
 
 
 
 
Net Sales
$
302,687

 
$
260,184

 
$
1,161,992

 
$
1,039,954

GAAP operating income from continuing operations - Distribution segment
$
14,295

 
$
11,452

 
$
56,765

 
$
46,206

% of GAAP net sales from continuing operations
4.7
%
 
4.4
%
 
4.9
%
 
4.4
%
Severance costs at Distribution
$
—

 
$
—

 
$
550

 
$
—

Non-GAAP adjusted operating income - Distribution segment
$
14,295

 
$
11,452

 
$
57,315

 
$
46,206

% of adjusted net sales
4.7
%
 
4.4
%
 
4.9
%
 
4.4
%




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," "would," "could," "will" and other words of similar meaning in connection with a discussion of future operating or financial performance. Examples of forward looking statements include, among others, statements relating to future sales, earnings, cash flows, results of operations, uses of cash and other measures of financial performance.

Because forward-looking statements relate to the future, they are subject to inherent risks, uncertainties and other factors that may cause the company's actual results and financial condition to differ materially from those expressed or implied in the forward-looking statements. Such risks, uncertainties and other factors include, among others: (i) changes in domestic and foreign economic and competitive conditions in markets served by the Company, particularly the defense, commercial aviation and industrial production markets; (ii) changes in government and customer priorities and requirements (including cost-cutting initiatives, government and customer shut-downs, the potential deferral of awards, terminations or reductions of expenditures to respond to the priorities of Congress and the Administration, or budgetary cuts resulting from Congressional actions or automatic sequestration); (iii) 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; (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 U.S. government JPF 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; (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 herein and in our 2014 Form 10-K.

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






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, 2014
 
December 31, 2013
 
December 31, 2014
 
December 31, 2013
Net sales
 
$
477,931

 
$
431,040

 
$
1,794,962

 
$
1,653,921

Cost of sales
 
341,906

 
315,217

 
1,287,023

 
1,190,610

Gross profit
 
136,025

 
115,823

 
507,939

 
463,311

Selling, general and administrative expenses
 
102,776

 
88,349

 
397,199

 
357,752

Goodwill impairment
 
—

 
2,071

 
—

 
2,071

Net loss on sale of assets
 
5

 
38

 
233

 
142

Operating income
 
33,244

 
25,365

 
110,507

 
103,346

Interest expense, net
 
3,650

 
3,113

 
13,382

 
12,294

Other expense, net
 
(127
)
 
64

 
623

 
398

Earnings from continuing operations before income taxes
 
29,721

 
22,188

 
96,502

 
90,654

Income tax expense
 
8,391

 
8,681

 
30,722

 
31,588

Earnings from continuing operations
 
21,330

 
13,507

 
65,780

 
59,066

Earnings from discontinued operations, net of taxes
 
(998)
 
(632)
 
(2,924)
 
(2,386)
Gain on disposal of discontinued operations, net of taxes
 
(5,269
)
 
—

 
(4,984
)
 
420

Total earnings from discontinued operations, net of taxes
 
(6,267
)
 
(632
)
 
(7,908
)
 
(1,966
)
Net earnings
 
$
15,063

 
$
12,875

 
$
57,872

 
$
57,100

 
 
 
 
 
 
 
 
 
Earnings per share:
 
 

 
 

 
 
 
 
Basic earnings per share from continuing operations
 
$
0.79

 
$
0.50

 
$
2.43

 
$
2.21

Basic earnings per share from discontinued operations
 
(0.04
)
 
(0.02
)
 
(0.11
)
 
(0.09
)
Basic earnings per share from disposal of discontinued operations
 
(0.19
)
 
—

 
(0.18
)
 
0.02

Basic earnings per share
 
$
0.56

 
$
0.48

 
$
2.14

 
$
2.14

 
 
 
 
 
 
 
 
 
Diluted earnings per share from continuing operations
 
$
0.77

 
$
0.49

 
$
2.37

 
$
2.17

Diluted earnings per share from discontinued operations
 
(0.04
)
 
(0.02
)
 
(0.11
)
 
(0.09
)
Diluted earnings per share from disposal of discontinued operations
 
(0.19
)
 
—

 
(0.18
)
 
0.02

Diluted earnings per share
 
$
0.54

 
$
0.47

 
$
2.08

 
$
2.10

Average shares outstanding:
 
 

 
 

 
 
 
 
Basic
 
27,137

 
26,815

 
27,053

 
26,744

Diluted
 
27,812

 
27,375

 
27,777

 
27,143

Dividends declared per share
 
$
0.16

 
$
0.16

 
$
0.64

 
$
0.64







KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts) (unaudited)
 
 
December 31,
2014
 
December 31,
2013
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
12,411

 
$
10,384

Accounts receivable, net
 
234,648

 
205,873

Inventories
 
359,741

 
390,495

Deferred income taxes
 
25,888

 
30,128

Income tax refunds receivable
 
—

 
2,297

Other current assets
 
29,568

 
26,028

Total current assets
 
662,256

 
665,205

Property, plant and equipment, net of accumulated depreciation of $183,829 and $167,282, respectively
 
147,825

 
148,508

Goodwill
 
238,581

 
203,923

Other intangible assets, net
 
94,491

 
89,449

Deferred income taxes
 
34,784

 
10,287

Other assets
 
23,268

 
23,259

Total assets
 
$
1,201,205

 
$
1,140,631

Liabilities and Shareholders’ Equity
 
 

 
 

Current liabilities:
 
 

 
 

Notes payable
 
$
—

 
$
559

Current portion of long-term debt
 
10,000

 
10,000

Accounts payable – trade
 
116,787

 
119,482

Accrued salaries and wages
 
42,214

 
33,677

Advances on contracts
 
2,406

 
9,470

Other accruals and payables
 
47,583

 
54,095

Income taxes payable
 
2,734

 
673

Total current liabilities
 
221,724

 
227,956

Long-term debt, excluding current portion
 
271,232

 
264,655

Deferred income taxes
 
3,391

 
3,855

Underfunded pension
 
141,546

 
85,835

Other long-term liabilities
 
45,647

 
47,038

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; 27,518,226 and 27,189,922 shares issued, respectively
 
27,518

 
27,190

Additional paid-in capital
 
145,845

 
133,517

Retained earnings
 
479,984

 
439,441

Accumulated other comprehensive income (loss)
 
(126,261
)
 
(81,121
)
Less 385,942 and 330,487 shares of common stock, respectively, held in treasury, at cost
 
(9,421
)
 
(7,735
)
Total shareholders’ equity
 
517,665

 
511,292

Total liabilities and shareholders’ equity
 
$
1,201,205

 
$
1,140,631

 
 


 
 







KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands) (unaudited)

 
 
For the Twelve Months Ended
 
 
December 31, 2014
 
December 31, 2013
Cash flows from operating activities:
 
 
 
 
Earnings from continuing operations
 
$
65,780

 
$
59,066

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

 
 

Depreciation and amortization
 
36,209

 
31,555

Accretion of convertible notes discount
 
1,931

 
1,833

Provision for doubtful accounts
 
853

 
1,286

Net loss on sale of assets
 
233

 
142

Goodwill impairment
 
—

 
2,071

Net gain (loss) on derivative instruments
 
1,071

 
178

Stock compensation expense
 
5,411

 
4,973

Excess tax benefit from share-based compensation arrangements
 
(834
)
 
(543
)
Deferred income taxes
 
1,434

 
2,938

Changes in assets and liabilities, excluding effects of acquisitions/divestitures:
 
 
 
 
Accounts receivable
 
(23,876
)
 
(22,565
)
Inventories
 
30,181

 
(19,707
)
Income tax refunds receivable
 
2,292

 
(2,297
)
Other current assets
 
(2,560
)
 
1,299

Accounts payable - trade
 
(3,858
)
 
12,170

Accrued contract losses
 
(1,899
)
 
(969
)
Advances on contracts
 
(7,065
)
 
7,570

Other accruals and payables
 
6,746

 
(10,187
)
Income taxes payable
 
4,455

 
(2,024
)
Pension liabilities
 
(6,380
)
 
(3,118
)
Other long-term liabilities
 
(1,035
)
 
1,169

Net cash provided by (used in) operating activities of continuing operations
 
109,089

 
64,840

Net cash provided by operating activities of discontinued operations
 
(2,902
)
 
(1,892
)
Net cash provided by (used in) operating activities
 
106,187

 
62,948

Cash flows from investing activities:
 
 

 
 

Proceeds from sale of assets
 
39

 
100

Proceeds from sale of discontinued operations
 
7,863

 
—

Expenditures for property, plant & equipment
 
(28,283
)
 
(40,852
)
Acquisition of businesses
 
(77,618
)
 
(18,162
)
Other, net
 
(2,060
)
 
(2,305
)
Cash used in investing activities of continuing operations
 
(100,059
)
 
(61,219
)
Cash used in investing activities of discontinued operations
 
3

 
(56
)
Cash used in investing activities
 
(100,056
)
 
(61,275
)
Cash flows from financing activities:
 
 

 
 

Net borrowings under revolving credit agreements
 
15,788

 
22,720

Debt repayment
 
(10,000
)
 
(10,000
)
Net change in book overdraft
 
1,568

 
(9,878
)
Proceeds from exercise of employee stock awards
 
6,411

 
6,333

Purchase of treasury shares
 
(853
)
 
(644
)
Dividends paid
 
(17,286
)
 
(17,091
)
Other
 
—

 
(98
)
Windfall tax benefit
 
834

 
543

Cash provided by financing activities of continuing operations
 
(3,538
)
 
(8,115
)
Cash provided by financing activities of discontinued operations
 
—

 
—

Cash provided by financing activities
 
(3,538
)
 
(8,115
)
Net increase (decrease) in cash and cash equivalents
 
2,593

 
(6,442
)
Effect of exchange rate changes on cash and cash equivalents
 
(566
)
 
233

Cash and cash equivalents at beginning of period
 
10,384

 
16,593

Cash and cash equivalents at end of period
 
$
12,411

 
$
10,384




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