Item 2.05. Costs Associated with Exit or Disposal Activities.
On January 18, 2023, Kaman Corporation (the "Company") announced the next phase
in its portfolio reshaping and cost reduction efforts designed to focus
resources on the highest growth opportunities, improve financial performance and
position the Company to deliver sustainable shareholder value creation.
The most recent actions, pursuant to a plan of restructuring approved by
management on January 17, 2023, include the following: (i) discontinuing the
manufacture and production of the K-MAX® and the K-MAX TITAN; (ii) streamlining
the Company's facilities and functions by reducing headcount, eliminating
non-value added activities and waste in its processes; and (iii) right-sizing
the Company's total cost structure to better align with the size of the Company.
These actions, in combination with the previously announced JPF program
consolidation and related closure of the Company's Orlando facility, are
expected to generate approximately $25 million of annualized run-rate cost
savings and are intended to allow the Company to focus on driving meaningful
growth in its core businesses and improve earnings over time.
In connection with these and the previously announced restructuring actions, the
Company currently expects to incur approximately $10 to $12 million in total
pre-tax restructuring charges, consisting of approximately $9 to $10 million of
future cash expenditures relating to various headcount reduction and personnel
initiatives, approximately $1 to $2 million of future cash expenditures relating
to facility closing costs, and approximately $54 million of noncash charges
relating to the write down of existing aircraft, contract costs, excess spare
parts and equipment inventories. Of these amounts, approximately $61 million is
expected to be recorded in the fourth quarter of 2022, with the remainder
expected throughout 2023 and 2024.
The charges the Company currently expects to incur in connection with these
restructuring activities are subject to a number of assumptions and risks, and
actual results may differ materially. The Company may also incur other material
charges not currently contemplated due to events that may occur as a result of,
or in connection with, these restructuring activities.
Cautionary Statement Regarding Forward Looking Statements
This report includes "forward looking statements" within the meaning of the
federal securities laws relating to the restructurings described above, which
can be identified by the use of words such as "will," "expect," "believe,"
"plans," "strategy," "prospects," "estimate," "seek," "target," "anticipate,"
"intend," "future," "likely," "may," "should," "would," "could," "project,"
"opportunity," "will be," "will continue," "will likely result," and other words
of similar meaning. These forward-looking statements include statements relating
to the estimated charges and future savings likely to result from the
restructurings, the expected timing of the implementation and completion of the
restructurings and the costs and charges likely to result therefrom. These
statements are based on assumptions currently believed to be valid but involve
significant risks and uncertainties, many of which are beyond our control, which
could cause our actual results to differ materially from those expressed in the
forward-looking statements. Such risks and uncertainties include, among others,
(i) the effect the restructurings may have on the business relationships and
operating results of the Company; (ii) the extent to which the restructurings
may disrupt the current plans and operations of the Company; (iii) the inability
of the Company to successfully consolidate JPF production in its Middletown,
Connecticut, facility and realize the anticipated benefits of that aspect of the
restructurings; (iv) the inability of the Company to profitably attract new
customers and retain existing customers; (v) the ability to implement the
restructurings as planned and achieve the anticipated benefits and savings
resulting therefrom; and (vi) future and estimated revenues, earnings, cash
flow, charges and expenditures. The foregoing list of factors is not exhaustive.
Additional risks and uncertainties that could cause our actual results to differ
materially from those expressed in the forward-looking statements are identified
in our reports filed with the Securities and Exchange Commission, including our
Annual Reports on Form10-K, our Quarterly Reports on Form 10-Q and our Current
Reports on Form 8-K. The forward-looking statements included in this release are
made only as of the date of this release. Readers are cautioned not to put undue
reliance on forward-looking statements, and the Company does not undertake any
obligation to update the forward-looking statements to reflect subsequent events
or circumstances.
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Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
In connection with the cost-reduction and restructuring initiatives described
above, the following executive officers will leave the employ of the Company,
effective as of January 27, 2023:
•Russell J. Bartlett, Senior Vice President and Chief Operating Officer;
•Shawn G. Lisle, Senior Vice President, General Counsel, Chief Ethics and
Compliance Officer and Assistant Secretary; and
•Rafael Z. Cohen, Vice President and Chief Information Officer.
The Company has entered into a separation and release agreement with each of the
foregoing executives. These agreements generally provide for (i) a severance
payment equal to 12 months base salary ($1,000,000 for Mr. Lisle), (ii) 18
months of benefit continuation for Messrs. Bartlett and Cohen, (iii) full
vesting of outstanding restricted stock awards, (iv) eligibility to vest in a
pro-rata portion of outstanding performance stock units, subject to the
attainment of the financial targets set forth therein based on the actual
financial performance of the Company and the portion of the performance period
elapsed as of the executive's departure date and (v) for Mr. Lisle, payment of
his cash-based long-term incentive payment for the period from January 1, 2020
through December 31, 2022. In exchange for the termination payments and benefits
described above, each executive has agreed to a number of restrictive covenants
and is required to execute a release of claims in favor of the Company.
Copies of the foregoing separation and release agreements are filed as Exhibits
10.1, 10.2 and 10.3 to this Current Report on Form 8-K. The foregoing
description of the separation agreements does not purport to be complete and is
qualified in its entirety by reference to the full text of the agreements, which
are hereby incorporated herein by reference.
In connection with the departures discussed above, (i) Ian K. Walsh, Chairman,
President and Chief Executive Officer of the Company, will temporarily assume
managerial responsibility for the Structures Segment; (ii) Carroll K. Lane,
Senior Vice President and Segment Lead for the Precision Products Segment, will
assume the additional managerial responsibility for the Engineered Products
Segment; (iii) Richard S. Smith, Jr., Vice President, Deputy General Counsel and
Secretary, will become Senior Vice President and General Counsel of the Company;
and (iv) Roy Dilig, Director of Information Technology for the Company's Bal
Seal Engineering subsidiary, will become Vice President - Information Technology
of the Company.
Item 7.01. Regulation FD Disclosure.
On January 18, 2023, the Company issued a press release discussing the
restructurings described in Item 2.05 above. A copy of the press release is
furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information furnished in this Item 7.01 shall not be deemed to be "filed"
for purposes of Section 18 of the Securities Exchange Act of1934, as amended
(the "Exchange Act"), or otherwise subject to the liabilities of that section,
unless the Company specifically states that the information is to be considered
"filed" under the Exchange Act or incorporates it by reference into a filing
under the Exchange Act or the Securities Act of 1933, as amended.
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Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are filed with this report:
Exhibit Description
10.1 Separation and Release Agreement, dated January 1 7 , 2023, by and
between the Company and Russell J. Bartlett.
10.2 Separation and Release Agreement, dated January 17, 2023, by and between
the Company and Shawn G. Lisle.
10.3 Separation and Release Agreement, dated January 1 7 , 2023, by and
between the Company and Rafael Z. Cohen.
99.1 Press Release, dated January 18, 2023
104 Cover Page Interactive Data File - the cover page XBRL tags are embedded
within the Inline XBRL document
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