Attached files
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| 8-K - 8-K - KAMAN Corp | a3132018form8k.htm |
Investor Presentation
2
Forward Looking Statements
FORWARD-LOOKING STATEMENTS
This presentation 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 (including new, follow-on and successor programs) and thereafter successful contract negotiations
with government authorities (both foreign and domestic) for the terms and conditions of the programs; (v) the timely receipt of any necessary export approvals and/or
other licenses or authorizations from the U.S. Government; (vi) timely satisfaction or fulfillment of material contractual conditions precedents in customer purchase orders,
contracts, or similar arrangements; (vii) the existence of standard government contract provisions permitting renegotiation of terms and termination for the convenience of
the government; (viii) the successful resolution of government inquiries or investigations relating to our businesses and programs; (ix) risks and uncertainties associated
with the successful implementation and ramp up of significant new programs, including the ability to manufacture the products to the detailed specifications required and
recover start-up costs and other investments in the programs; (x) potential difficulties associated with variable acceptance test results, given sensitive production materials
and extreme test parameters; (xi) the receipt and successful execution of production orders under the Company's existing U.S. government JPF contract, including the
exercise of all contract options and receipt of orders from allied militaries, but excluding any next generation programmable fuze programs, as all have been assumed in
connection with goodwill impairment evaluations; (xii) the continued support of the existing K-MAX® helicopter fleet, including sale of existing K-MAX® spare parts
inventory and the receipt of orders for new aircraft sufficient to recover our investment in the restart of the K-MAX® production line; (xiii) the accuracy of current cost
estimates associated with environmental remediation activities; (xiv) the profitable integration of acquired businesses into the Company's operations; (xv) the ability to
implement our ERP systems in a cost-effective and efficient manner, limiting disruption to our business, and allowing us to capture their planned benefits while
maintaining an adequate internal control environment; (xvi) changes in supplier sales or vendor incentive policies; (xvii) the effects of price increases or decreases; (xviii)
the effects of pension regulations, pension plan assumptions, pension plan asset performance, future contributions and the pension freeze, including the ultimate
determination of the U.S. Government's share of any pension curtailment adjustment calculated in accordance with CAS 413; (xix) future levels of indebtedness and
capital expenditures; (xx) the continued availability of raw materials and other commodities in adequate supplies and the effect of increased costs for such items; (xxi) the
effects of currency exchange rates and foreign competition on future operations; (xxii) changes in laws and regulations, taxes, interest rates, inflation rates and general
business conditions; (xxiii) the effects, if any, of the UK's exit from the EU; (xxiv) future repurchases and/or issuances of common stock; (xxv) the occurrence of
unanticipated restructuring costs or the failure to realize anticipated savings or benefits from past or future expense reduction actions; and (xxvi) other risks and
uncertainties set forth herein and in our Form 10-K for the year ended December 31, 2017.
Any forward-looking information provided in this presentation should be considered with these factors in mind. We assume no obligation to update any forward-looking
statements contained in this presentation.
3
What is Kaman?
Solving Our Customers’ Critical Problems with Technically
Differentiated Products & Services
Leading Provider of Highly Engineered Aerospace &
Industrial Solutions Serving a Broad Range of End Markets
4
Kaman Corporation Overview
28%
25%
47%
Aerospace
Defense
Fuzing
Commercial
50%
30%
20%
Distribution
Bearings & Mechanical
Power Transmission
Automation
Fluid Power
Full year 2017 actual results
40%
60%
Revenues: $1.8 billion
Aerospace: $725 million
Distribution: $1.1 billion
5
Diverse End Markets
Selected Platforms
Boeing Airbus Fuzing
• 787/777
• 737
• A-10
• A350
• A330
• A320
• JPF
• AMRAAM
• Tomahawk
Bell Helicopter Sikorsky Kaman
• AH-1Z
• Rotor Blades
• UH-60
• CH-53
• SH-2G
• K-MAX®
83%
17%
Aerospace
OEM
Aftermarket 33%
60%
7%
Distribution
OEM
MRO
Other
Selected Industries & Products
Industries Products
• Food and beverage
• Machinery Manufacturing
• Paper manufacturing
• Nonmetallic minerals
• Durable goods
• Primary metal
• Bearings
• Mechanical power
transmission
• Material handling
• Fluid power
• Electric power
• Automation
Full Year 2017 Results
6
Growth Opportunities
Secular trends helping to drive significant long-term growth
opportunities in both Aerospace and Distribution segments
AEROSPACE
• OEM/Tier 1 outsourcing and supplier
consolidation
• Higher bearing content on new platforms
driving bearing sales
• Balance of commercial and defense
programs provides diversity across end
markets
• Expanded geographic footprint
DISTRIBUTION
• Supplier consolidation favors larger national
service providers
• Increased need for value added services
• Large fragmented market provides
consolidation opportunities
• Factory automation trends driving fluid
power and high speed automation solutions
• National accounts
7
Capital Deployment Framework
Capital deployment is focused on growth investments
and return of capital to shareholders
• Strategic acquisitions to create
shareholder value
• High return capital expenditures
including facility expansions, machinery
and equipment, and IT infrastructure
• Quarterly dividend raised 11% in 2017,
or a 43% increase since 2010
• Dividends paid without interruption for
48 years
• $100 million share repurchase
authorization in place to offset dilution
from employee stock plans
Total $960 Million
Period: 2010 to 2017
Acquisitions
56%
Capital
Expenditures
25%
Dividends &
Share
Repurchases
19%
8
40%Aerospace
9
Aerospace Overview
AEROSYSTEMS
SPECIALTY BEARINGS &
ENGINEERED PRODUCTS
FUZING & PRECISION
PRODUCTS
Products • Engineering design and testing
• Tooling design & manufacture
• Advanced machining and composite
aerostructure manufacturing
• Complex assembly
• Helicopter MRO and support
• Self-lube airframe bearings
• Traditional airframe bearings
• Miniature ball bearings
• Flexible drive systems
• Aftermarket engineered
components
• Bomb and missile safe and
arm fuzing devices
• Precision measuring
systems
• Memory products
Customers • Global commercial and defense OEMs
• Supplier Tier I’s to subcontract manufacturers
• Aircraft operators and MRO
• Specialized aerospace distributors
• Industrial and medical manufacturers of high precision equipment
• U.S. and allied militaries
• Weapon system OEMs
Platforms K-MAX® 787 Medical Devices Bearings
777 737 Marine/Hydro
SLAM-ER
AMRAAM
TOMAHAWK
STANDARD MISSILE
AGM-65M
Aftermarket
10
Specialty Bearings and Engineered Products
Positioned for growth
• Differentiated product offerings with best in class application engineers and
material scientists
• Well positioned on a broad range of fixed wing and rotary wing aircraft
• Increased exposure to healthcare and industrial applications
• Strong order rates and solid backlog
Products Markets
11
STANDARD MISSILE
Fuzing and Precision Products
• New orders of $426 million; DCS of $324 million; USG of $102 million
• Sole source provider to the US Air Force and 28 foreign governments
• Advanced capabilities and operational field reliability above 99%
• Increased production capacity to meet growing demand
• Record program backlog
JPF Program
SLAM-ER
HARPOON
MAVERICK
TOMAHAWK
JPF
STANDARD MISSILE
SLAM-ER
SLAM-ERAMRAAM
TOMAHAWK
AGM-65M
AMRAAM
On Expansive array of U.S. Weapon Systems
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2012 2013 2014 2015 2016 2017 2018
JPF Deliveries
MEMS
• SH-2G
− In service with Egypt, New Zealand, Poland, and Peru
− Fleet will grow 50% since 2014 upon completion of Peru program
− Opportunity to expand and upgrade the capability of Egyptian fleet
• K-MAX®
− Delivered first new production aircraft in 2017
− Unmanned aircraft currently stationed at Marine Operational Test and
Evaluation Squadron One (VMX-1)
• Aftermarket support including spares, repairs and MRO
Air Vehicles and MRO
Unmanned K-MAX®SH-2G Super Seasprite Commercial K-MAX®
13
Significant Programs
HH-60W CRH
787
K-MAX®
A350
AH-1Z
UH-60SH-2JPF
737
A330
Trent 7000 P-8
14
Aircraft Programs/Capabilities
1. Doors
2. Nose landing gear
3. Engine/thrust reverser
4. Flight controls
5. Flaps
6. Main landing gear
7. Rudder
8. Horizontal stabilizer
9. Flexible drive systems
10. Flight control bearings
11. Landing gear bearings
Bearing Products Structural Components
12. Door assemblies
13. Top covers
14. Fixed leading edge
15. Fixed trailing edge
16. Winglets
17. Wing structures, flaps, slats
18. Composite structures (e.g. access
doors, radomes, consoles)
19. Nacelle components
20. Manufacture and subassembly of
major structure
21. Blade manufacture, repair and
overhaul
22.Manufacture of composite structures
1
2 3
4 5
6
7
812 13 14 15
16
1718
19
18
18
9
20
9
10
11
21
20
20 20
20
22
15
Primary Aerospace Locations
1
2
3
4
5
6
7
8
9
10
11
12
14
15
13
16
1. Everett, WA
Engineering
2. Mesa, AZ
Aftermarket Components
3. Wichita, KS
Composites
4. Charleston, SC
Engineering
5. Jacksonville, FL
Assembly & Metallics
6. Orlando, FL
Fuzing
7. Middletown, CT
Fuzing
8. Bloomfield, CT
o Air Vehicles & MRO
o Specialty Bearings
9. Bennington, VT
Composites
10. Chihuahua, Mexico
Metallics
11. Hochstadt, Germany
Specialty Bearings
12. Rimpar, Germany
Specialty Bearings
13. Prachatice, Czech Republic
Specialty Bearings
14. Darwen, UK
Composites
15. Burnley, UK
Tooling
16. Goa, India
Composites (Joint Venture)
= Low cost facility
Diverse locations focused on core competencies
16
Distribution
60%
17
Distribution Overview
PRODUCT
PLATFORM
BEARINGS &
MECHANICAL POWER
TRANSMISSION (BPT)
FLUID POWER AUTOMATION
2017
% of Sales
50% 20% 30%
Estimated
Market Size(1)
$16 Billion $7 Billion $22 Billion
Product
Offerings
• Bearings
• Gearing
• Hose & Fittings
• Hydraulics & Pneumatics
• Linear Motion
• Material Handling
• Power Transmission
• Process Control &
Instrumentation
• Cylinders
• Filters, Regulators, Lubricators
• Hydraulic Motors
• Hydraulic Power Units
• Hoses and Connections
• Pumps & Vacuums
• Valves
• Automation
• Electrical
• Gearing
• Linear Motion
• Motion Control
• OEM Control Panels &
Custom Enclosures
Major Suppliers
(1) Source: Modern Distribution Management
18
Growth in Product Platforms
74%
14%
12%
2009 Salesa of approx. $600M
Through acquisitions and organic growth, Kaman has significantly grown its
Distribution business while greatly expanding its product offering
Bearings & Power Transmission up approximately 20%
Automation up approximately 300%
Fluid Power up approximately 300%
50%30%
20%
2017 Salesa of approx. $1.1B
b
b
b
Sales from continuing operations
Growth in sales from 2009 thru 2017
a
b
19
Adding Leading Brands in Multiple Technologies
PLCs, HMIs
Sensors & Signaling
Machine Safety
Hydraulics
Pneumatics
Fluid Connectors
Motion Control
Servos & Steppers
Linear Motion
Bearings
Power Transmission
Industrial Supplies
V
a
lu
e
-
A
d
d
e
d
T
e
ch
n
o
lo
g
ie
s
2009 2017
20
Distribution Expanded Product Portfolio
System Design &
Build
Fluid Power
Systems
Hose & Coupling
Assemblies
Application
Engineering Belt Fabrication
Maintenance &
Reliability
Value Added Offerings
21
Strong Nationwide Footprint
22
Summary
23
Kaman Investment Highlights
Strategically Positioned
Highly Engineered Products Outstanding portfolio of highly engineered products and proprietary technologies
Best-in-class Vendors Continue to partner with leading brands and enhance product portfolio
Diverse End Markets Broad exposure to diverse products, platforms and customers
Strong Financial Performance
Top Line Growth Shown consistent, reliable performance with ~8% revenue CAGR over the past 10 years
Profitability Gains Focus on scale, product mix, and operational efficiency to enhance profitability
Strong Free Cash Flow Average Free Cash Flow Conversion from 2014 to 2017 well in excess of Net Earnings
Strong Capital Structure Maintain conservative leverage of 2.0x–3.0x net debt / Adjusted EBITDA over the long term
Reliable Business Strategies
Efficient Capital Allocation Deploy capital to drive future growth while returning capital to shareholders
Focus on Innovation Commitment to internal investment to maintain differentiation and drive productivity
Operational Excellence Strategic investments designed to optimize operational efficiency and returns