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Kaman Reports 2012 Fourth Quarter And Full Year Results

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 the Company's 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, 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 under the Budget Control Act of 2011, as modified by the enactment of the Taxpayer Relief Act of 2012); (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 satisfactory conclusion to government inquiries or investigations regarding government programs, including the satisfactory 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 successful resale of the SH-2G(I) aircraft, equipment and spare parts; (x) 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; (xi) the continued support of the existing K-MAX® helicopter fleet, including sale of existing K-MAX® spare parts inventory; (xii) 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; (xiii) the profitable integration of acquired businesses into the Company's operations; (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 future availability of credit, the ability of the Company to maintain its current credit rating and the impact on the Company's funding costs and competitive position if it is unable to do so; (xix) the continued availability of raw materials and other commodities in adequate supplies and the effect of increased costs for such items; (xx) the effects of currency exchange rates and foreign competition on future operations; (xxi) changes in laws and regulations, taxes, interest rates, inflation rates and general business conditions; (xxii) future repurchases and/or issuances of common stock and (xxiii) other risks and uncertainties set forth in the Company's annual, quarterly and current reports, proxy statements and other filings with the SEC. Any forward-looking information provided in this release should be considered with these factors in mind. The Company assumes no obligation to update any forward-looking statements contained in this release.

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, 2012
 

December 31, 2011

December 31, 2012
 

December 31, 2011
Net sales $ 399,316 $ 373,835 $ 1,592,828 $ 1,477,534
Cost of sales 289,844   269,749   1,150,855   1,064,962  
Gross profit 109,472 104,086 441,973 412,572
Selling, general and administrative expenses 86,147 85,214 349,030 324,722
Net (gain)/loss on sale of assets 84   220   105   269  
Operating income from continuing operations 23,241 18,652 92,838 87,581
Interest expense, net 3,563 3,060 12,185 11,646
Other (income) expense, net 326   249   (175 ) (339 )
Earnings from continuing operations before income taxes 19,352 15,343 80,828 76,274
Income tax expense 5,418   5,607   26,900   26,346  
Net earnings from continuing operations $ 13,934   $ 9,736   $ 53,928   $ 49,928  
Earnings from discontinued operations, net of taxes (1,096 ) 222 (226 ) 1,214
Gain on disposal of discontinued operations, net of taxes 1,323     1,323    
Total earnings from discontinued operations 227   222   1,097   1,214  
Net earnings 14,161   9,958   55,025   51,142  
Net earnings per share:
Basic net earnings per share from continuing operations $ 0.52 $ 0.37 $ 2.04 $ 1.90
Basic net earnings per share from discontinued operations $ (0.04 ) $ 0.01 $ (0.01 ) $ 0.05
Basic net earnings per share from disposal of discontinued operations $ 0.05   $   $ 0.05   $  
Basic net earnings per share $ 0.53   $ 0.38   $ 2.08   $ 1.95  
Diluted net earnings per share from continuing operations $ 0.52 $ 0.37 $ 2.03 $ 1.88

Diluted net earnings per share from discontinued operations

$

(0.04

)

$

0.01

$

(0.01

)

$

0.05

Diluted net earnings per share from disposal of discontinued operations

$

0.05
 

$

 

$

0.05
 

$

 
Diluted net earnings per share $ 0.53   $ 0.38   $ 2.07   $ 1.93  
Average shares outstanding:
Basic 26,559 26,232 26,425 26,246
Diluted 26,867   26,412   26,622   26,500  
Dividends declared per share $ 0.16   $ 0.16   $ 0.64   $ 0.60  

KAMAN CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

( In thousands)
 

December 31, 2012
 

December 31, 2011
Assets
Current assets:
Cash and cash equivalents $ 16,593 $ 14,985
Accounts receivable, net 180,798 190,081
Inventories 367,385 339,846
Deferred income taxes 25,835 25,018
Income taxes receivable 527
Other current assets 27,434   29,645  
Total current assets 618,045   600,102  
Property, plant and equipment, net of accumulated depreciation of $149,696 and $142,657, respectively 128,669 111,895
Goodwill 192,046 153,267
Other intangible assets, net 92,913 73,816
Deferred income taxes 42,905 38,434
Other assets 22,415   18,884  
Total assets $ 1,096,993   $ 996,398  
Liabilities and Shareholders’ Equity
Current liabilities:
Notes payable $ 21 $ 1,685
Current portion of long-term debt 10,000 5,000
Accounts payable – trade 113,143 106,025
Accrued salaries and wages 35,869 35,766
Current portion of amount due to Commonwealth of Australia 6,659 6,487
Other accruals and payables 55,368 62,748
Income taxes payable 2,892   987  
Total current liabilities 223,952   218,698  
Long-term debt, excluding current portion 249,585 198,522
Deferred income taxes 5,150 6,827
Underfunded pension 148,703 135,829
Due to Commonwealth of Australia, excluding current portion 6,566
Other long-term liabilities 49,410 56,885
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; 26,881,257 and 26,495,828 shares issued, respectively 26,881 26,496
Additional paid-in capital 122,522 109,584
Retained earnings 399,473 361,389
Accumulated other comprehensive income (loss) (121,590 ) (117,946 )
Less 277,473 and 258,424 shares of common stock, respectively, held in treasury, at cost (7,093 ) (6,452 )
Total shareholders’ equity 420,193   373,071  
Total liabilities and shareholders’ equity $ 1,096,993   $ 996,398  

KAMAN CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

( In thousands)
 
    For the year ended
 

December 31, 2012
 

December 31, 2011
Cash flows from operating activities:
Earnings from continuing operations $ 53,928 $ 49,928
Adjustments to reconcile earnings from continuing operations to net cash provided by (used in) operating activities of continuing operations:
Depreciation and amortization 28,383 23,168
Accretion of convertible notes discount 1,738 1,679
Change in allowance for doubtful accounts (382 ) (495 )
Net (gain) loss on sale of assets 105 269
Change in amount Due to Commonwealth of Australia, net of gain (loss) on derivative instruments (427 ) 279
Stock compensation expense 5,865 6,806
Excess tax (expense) benefit from share-based compensation arrangements (883 ) (779 )
Deferred income taxes (1,210 ) 5,472
Changes in assets and liabilities, excluding effects of acquisitions/divestitures:
Accounts receivable 27,105 (2,970 )
Inventories (21,289 ) (12,502 )
Income tax receivable 527 1,893
Other current assets 4,619 6,861
Accounts payable-trade 1,688 1,358
Other accrued expenses and payables (16,114 ) (19,798 )
Income taxes payable (576 ) 42
Pension liabilities 56 (14,150 )
Other long-term liabilities 1,447   (3,200 )
Net cash provided by (used in) operating activities of continuing operations 84,580 43,861
Net cash provided by (used in) operating activities of discontinued operations (3,610 ) 982  
Net cash provided by (used in) operating activities $ 80,970   $ 44,843  
Cash flows from investing activities:
Proceeds from sale of assets 348 355
Proceeds from sale of discontinued operations 8,743
Expenditures for property, plant & equipment (32,569 ) (28,816 )
Acquisition of businesses including earn out adjustments, net of cash received (87,977 ) (77,672 )
Other, net (6,401 ) 17  
Cash provided by (used in) investing activities of continuing operations (117,856 ) (106,116 )
Cash provided by (used in) investing activities of discontinued operations (8 ) (16 )
Cash provided by (used in) investing activities $ (117,864 ) $ (106,132 )
Cash flows from financing activities:
Net borrowings (repayments) under revolving credit agreements (11,348 ) 62,021
Borrowings under Term Loan Facility 100,000
Debt repayment (35,000 ) (5,000 )
Net change in book overdraft (2,698 ) 4,372
Proceeds from exercise of employee stock awards 7,550 5,458
Purchase of treasury shares (733 ) (5,583 )
Dividends paid (16,882 ) (15,199 )
Debt issuance costs (2,132 ) (715 )
Windfall tax (expense) benefit 883 779
Other   (660 )
Cash provided by (used in) financing activities of continuing operations 39,640 45,473
Cash provided by (used in) financing activities of discontinued operations (1,067 ) (1,094 )
Cash provided by (used in) financing activities $ 38,573   $ 44,379  
Net increase (decrease) in cash and cash equivalents 1,679 (16,910 )
Effect of exchange rate changes on cash and cash equivalents (71 ) (337 )
Cash and cash equivalents at beginning of period 14,985   32,232  
Cash and cash equivalents at end of period $ 16,593   $ 14,985  

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