Kaman Reports 2019 4Q and Full Year Results

ROCHESTER, N.Y. — Kaman Corp. reported financial results for the fourth fiscal quarter ended December 31, 2019.

Neal J. Keating, Chairman, President and Chief Executive Officer, commented, “We ended 2019 with strong fourth quarter results. Sales for the quarter increased 7.7% to $237.8 million and the mix was weighted toward our higher margin products resulting in Aerospace operating margin of 18.9%, or 19.0% adjusted*. These results helped us to achieve the high end of our outlook for the year, with full year Aerospace operating margin of 17.1%, or 17.2% adjusted*. The planning and execution of our team allowed us to deliver a record 41,429 joint programmable fuzes in the year, and with JPF backlog of $356.8 million at year end, we expect record delivery levels again in 2020. We also saw record sales and orders for our specialty bearings products in 2019, led by our self-lubricating bearings. While we anticipate the grounding of Boeing’s 737MAX to impact our results in 2020, we expect to more than offset this impact with growth across our other specialty bearing and engineered products based on the increased order rates, which continued into 2020, and current backlog.”

Keating continued: “During the fourth quarter, we took initial steps towards reducing our general and administrative expenses and we remain focused on achieving our previously stated goal of reducing G&A expense across the organization near the high end of our estimated $15 million to $20 million range exiting 2020.

“On January 3rd we closed the acquisition of Bal Seal Engineering. We welcome the Bal Seal employees to the Kaman family and look forward to the continued success of this business under our ownership. With the completion of this transaction and the integration of the operations underway, we are focused on continuing to deploy the capital we received from the sale of our distribution business. We end the year with more than $700 million of available cash and debt capacity and we are well positioned to execute on our long-term growth strategy of expanding our highly engineered product offerings. As we look to 2020, we expect top line organic growth, complemented by the addition of Bal Seal. Additionally, we will build off of our efforts in 2019 and continue the transformation of Kaman into a manufacturer of highly engineered products and components serving aerospace and defense, medical, and industrial markets.”

Chief Financial Officer, Robert D. Starr, commented, “Cash flows provided by continuing operations of $42.5 million led to Free Cash Flow from continuing operations* for the year of $20.0 million. Impacting cash flow for the period was the significant sales ramp in the fourth quarter and the shift in timing of cash receipt for JPF DCS sales into 2020. Diluted earnings per share from continuing operations for the quarter was $1.22, or $0.80* when adjusted for the expense associated with our acquisition of Bal Seal, certain restructuring and corporate development expenses, and several other tax related items.”

2020 Outlook

Commenting on the 2020 outlook, Starr stated, “We expect sales in the range of $860.0 to $880.0 million. We anticipate organic sales growth of 1.0% to 3.0%, despite the headwinds from 737MAX, and we expect Bal Seal to contribute approximately $95.0 million to our top line performance for the year. Consolidated operating margins of 5.0% to 6.7% will include costs related to the purchase accounting for Bal Seal of $32.0 million and costs related to our expense reduction efforts, corporate development activities, and transition services agreement totaling $10.3 million. Adjusted for these items, we expect consolidated operating margins in the range of 10.0% to 11.5%*. With depreciation and amortization expense of approximately $35 million, we expect to deliver Adjusted EBITDA margin* at the consolidated level in the range of 14.0% to 15.5%, a 175 basis point increase at the mid-point over our Adjusted EBITDA margin* for 2019. This anticipated improvement in Adjusted EBITDA margin* is due to the expected sales mix in the year, the addition of higher margin sales from Bal Seal, improved performance from our structures programs, and the partial benefit from our cost reduction efforts.

“Finally, we expect earnings for 2020 to be weighted toward the second half of the year. Approximately 65% of our earnings will occur in the second half of the year, consistent with our earnings pattern in recent years.”