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Kaman (NYSE:KAMN)
Q4 2019 Earnings Call
Feb 25, 2020, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Kaman Corporation fourth-quarter 2019 conference call. [Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I would now like to hand the conference to your speaker today, Jamie Coogan, vice president, investor relations, and business development. Please go ahead, sir.

Jamie Coogan -- Vice President, Investor Relations, and Business development

Good morning. I'd like to welcome everyone to Kaman's fourth-quarter 2019 earnings call. Conducting the call today are Neal Keating, chairman, president, and chief executive officer; and Rob Starr, executive vice president and chief financial officer. Before we begin, I'd like to note that some of the information discussed during today's call will consist of forward-looking statements setting forth our current expectations with respect to the future of our business, the economy and other future events.

These include projections of revenue, earnings, and other financial items, statements on plans, and objectives of the company or its management, statements of future economic performance and assumptions underlying these statements regarding the company and its business. The company's actual results could differ materially from those indicated in any forward-looking statements due to many factors. The most important of which are described in the company's latest filings with the Securities and Exchange Commission, including the company's 2019 results on Form 10-K and the current report on Form 8-K filed yesterday evening together with our earnings release. We also expect to discuss certain financial measures and information that are non-GAAP measures as defined in applicable SEC rules and regulations.

Reconciliations to the company's GAAP measures are included in the earnings release filed with yesterday's 8-K. Finally, please note that in light of the sale of our former distribution business, the focus of today's earnings discussion will be on the results of continuing operations of the company. With that, I'll turn the call over to Neal Keating.

Neal Keating -- Chairman, President, and Chief Executive Officer

Thank you, Jamie. Good morning, everyone, and thank you for joining our fourth-quarter 2019 earnings call. I'll start this morning by providing some highlights on the quarter and full year, followed by operational and business updates before passing the call over to Rob for a more detailed discussion of our financial results for the quarter and expectations for 2020. Overall, I'm pleased with our results for the fourth quarter as revenue grew 7.7% to $237.8 million, driven by strong demand for our JPF and specialty bearings products, which contributed to the fourth-quarter operating margin at aerospace of 18.9% or 19% adjusted.

Touching on our full-year results, sales and operating margin at aerospace were at the high end of our outlook for the year. Sales from continuing operations increased 3.5% over 2018 to $761.6 million. This growth was impacted by an unfavorable foreign currency headwind of $6.5 million and the absence of $8.3 million in sales from our former U.K. Tooling and engineering services businesses, which were divested in 2018.

Excluding these items, the underlying business had top-line growth of 5.5%. The operating margin at aerospace for the year was 17.1% or 17.2% adjusted and contributed to the 62% increase in operating income from continuing operations over the prior year. 2019 was a transformational year at Kaman, as we laid the foundation for our future, driven by our strategic repositioning of the company into a leading provider of highly engineered products, which began with the divestiture of our distribution business in August of 2019 for approximately $700 million. Shortly thereafter, we announced the acquisition of Bal Seal Engineering, the largest acquisition in our history.

Bal Seal is an industry-leading provider of highly engineered seals, springs and contacts. We successfully closed the acquisition on January 3, and we welcome their management team and 600 employees around the globe to the Kaman organization. The addition of Bal Seal enhances our position as a leading provider of highly engineered products, broadens our access to high growth markets, such as medical technologies and industrial applications, and delivers both margin expansion and cash accretion in year one. The integration of Bal Seal is tracking to our internal expectations, and the teams are working closely to identify synergy opportunities throughout the organization.

Additionally, in the fourth quarter, we continued to make progress on reducing our general and administrative expenses and are focused on achieving our previously stated cost-reduction goals. Although we made significant progress in 2019, our transformation is still in the early stages. We continue to pursue additional acquisition opportunities that fit well with our strategy. We have significant financial capacity with approximately $700 million in cash and debt available to deploy and are seeking companies that will strengthen our current competitive position and provide improved long-term growth opportunities.

To that end, we will remain disciplined in our approach and patient in identifying opportunities that fit our strategy, culture and internal return metrics. We've also been investing in our operations across the globe. These investments are designed to help us meet future demand, to reduce lead times, and as importantly, to improve overall efficiency. In addition, we have increased our investments in new products to position us for future growth.

Some examples include the next generation of unmanned capabilities and the development of a composite rotor blade for the K-MAX. New munition sensor technology, such as the height of burst and advanced materials for our specialty bearings, which will enable us to expand into new applications. In our JPF program, we shipped over 15,000 fuses in the fourth quarter and a record 41,429 fuses for the full year. During 2019, we secured two additional JPF DCS contracts, which added more than $90 million to the backlog, and we continue to see strong demand for this product.

Our JPF backlog at the end of the year is over $350 million, and we expect unit deliveries in 2020 to increase to between 45,000 and 50,000, even above the record levels in 2019. Our specialty bearing and engineered product sales growth was led by our self-lubricating products and engine aftermarket components, and these products contributed nicely to our operating profit performance for the year. We saw strong order rates for these products throughout 2019 and ended the year with record order intake. And we were pleased to see that this momentum is carried forward into 2020, with order rates up significantly over the same period in 2019.

Currently, we project the grounding of Boeing 737MAX will have an approximately $12 million impact on our top-line results in 2020. However, growth in the underlying business remains strong due to the increased order rates across our diverse range of products and platforms and the strong backlog in the remainder of the business. Moving to our K-MAX program, we continue to see good traction as we work to expand both our capabilities and customer base. We've made great inroads with operators in North America, Europe, and Asia and are continuing to look for ways to expand the reach of our sales efforts to new operators and geographies.

Just recently, we announced a strategic distribution agreement focused on K-MAX opportunities in the United Arab Emirates and across the Middle East, another step in our market expansion efforts. During 2019, we also saw a significant improvement in our structures programs. Not only did we recognize this improvement in our financial results but we were honored by a number of customers with supplier recognition awards during the year. I'm pleased with the progress we've made and want to thank our team for their continued efforts in driving improved performance across our structures programs.

As you would expect, we are closely monitoring the situation in China and elsewhere regarding the coronavirus. At this stage, we are not seeing any significant impact on our business or associated supply chain, but remain diligent in assessing any potential impacts to command. In closing, I'm very proud of the work we completed in 2019. The progress we have made positions Kaman for future growth will enable us to better serve our customers' needs and drive long-term shareholder value.

It's been a very demanding time at Kaman, and I would like to thank all of our employees for their continued efforts as we work together through this transformation. Now I'll turn the call over to Rob for a closer look at the numbers. Rob?

Rob Starr -- Executive Vice President and Chief Financial Officer

Thank you, Neal, and good morning, everyone. Net sales for the fourth quarter increased to $237.8 million or 7.7% when compared to the prior year, driven by our deliveries of JPF DCS, revenue recognized on our JPF USG program and higher volume for our specialty bearing products. We delivered strong gross margin performance of 30.5% for the fourth quarter. However, the margin was modestly lower than the comparable period in the prior year, due in part to the mix of JPF sales in the quarter.

Operating income at Aerospace was $45 million, a 7.9% increase over the $41.7 million earned in the fourth quarter of 2018. Operating income from continuing operations decreased to $14.8 million from $24.1 million in the prior period due to $7.1 million in corporate development and transaction costs, $3.5 million in costs associated with the transition services agreement with our former distribution business and the mix of JPF sales in the period relative to the fourth quarter of 2018. On an adjusted basis, operating profit was $30.2 million or 12.7% of sales when compared to the prior-year period of $34.9 million or 15.8% of sales. Diluted earnings per share from continuing operations of $1.22 increased significantly over the prior year of $0.56, primarily due to the benefit we received from an election to change the treatment of our U.K.

entity for U.S. tax purposes. Adjusting for this and a number of other items, diluted earnings per share were $0.80 in the period, representing a strong finish to 2019. Corporate expenses increased due to activities associated with the acquisition of Bal Seal and costs related to our G&A reduction initiatives.

We have made good progress on these initiatives and exit 2019 with approximately $5 million of realized savings and a clear line of sight to the high end of our previously stated range. As a reminder, pursuant to the terms of the distribution sale, we have agreed to provide certain services, such as tax, treasury, human resources and IT, as they transition away from Kaman's shared services. While most of these activities have been transitioned, we are continuing to transition the IT services and expect to fully separate by the third quarter of 2020. We will continue to report both the associated cost and income on a quarterly basis.

During 2019, we incurred a net expense of $1 million and expect to incur approximately $2.2 million in net expense for these services in 2020. Moving to our outlook for 2020, we expect sales in the range of $860 million to $880 million. We anticipate organic sales growth of 1% to 3%, with Bal Seal contributing approximately $95 million to our top-line performance for the year. Our organic growth expectations are slightly muted by the impact of an approximate $12 million headwind from 737MAX and a $13.5 million headwind from the completion of our SH-2 program with Peru and lower volume on our AH-1Z program.

This implies that the remaining business expects organic growth of approximately 5% in 2020. Operating margins of 5% to 6.7% include costs related to our G&A initiatives, corporate development activities, and transition services for our former distribution business of $10.3 million, as well as $32 million of purchase accounting expenses related to Bal Seal. Adjusted for these items, we expect consolidated operating margins for 2020 in the range of 10% to 11.5%. We expect to deliver adjusted EBITDA margin at the consolidated level in the range of 14% to 15.5%, a 175-basis-point increase over the midpoint over our adjusted EBITDA for 2019 and a 650-basis-point improvement over our 2018 results inclusive of distribution.

This anticipated improvement and adjusted EBITDA of our 2019 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 a partial benefit from our cost-reduction efforts. We expect cash flow from operating activities from continuing operations in 2020 to be in the range of $85 million to $95 million leading to a free cash flow of $60 million to $70 million. Additionally, we will see a net periodic pension benefit of approximately $16.5 million. Expect interest expense for the year of approximately $15 million and estimate our annualized tax rate at approximately 23%.

Finally consistent with prior years, we expect the cadence of earnings to be weighed toward the second half of 2020, with approximately 35% of earnings in the first half and approximately 65% of our earnings in the second half of 2020. With that, I will turn the call back over to Neal.

Neal Keating -- Chairman, President, and Chief Executive Officer

Thanks, Rob. We are well-positioned as we enter 2020 to drive value through strong execution across our businesses and corporate initiatives. Finally, I would like to thank our employees for their hard work during the year. All of us are excited about the opportunities ahead in 2020 and look forward to updating everyone on our continued progress.

With that, I'll now turn the call back over to Jamie. Jamie?

Jamie Coogan -- Vice President, Investor Relations, and Business development

Operator, may we have the first question, please?

Questions & Answers:


Operator

Thank you. [Operator instructions] Our first question comes from Steve Barger with KeyBanc Capital Markets. Your line is now open.

Steve Barger -- KeyBanc Capital Markets -- Analyst

Hey, good morning, guys.

Neal Keating -- Chairman, President, and Chief Executive Officer

Good morning, Steve.

Rob Starr -- Executive Vice President and Chief Financial Officer

Good morning, Steve.

Steve Barger -- KeyBanc Capital Markets -- Analyst

Rob, just thinking about the organic growth guidance and I heard you go through the puts and takes there. Do you expect positive organic growth in all four quarters?

Rob Starr -- Executive Vice President and Chief Financial Officer

Yes. No. That's an excellent question, Steve. And I think the answer is most likely yes.

There may be, as you can appreciate, in particular with our JPF, a small change in shipment timing can move sales meaningfully between quarters, but the expectation would be yes.

Steve Barger -- KeyBanc Capital Markets -- Analyst

OK. And the midpoint of the guidance range suggests incremental operating contribution margin of about 19%, plus or minus, on what will be low double-digit growth. And a lot of that growth, I know, is coming from Bal Seal, which I think is higher margin. Can you talk through what's kind of keeping a lid on incremental if you see it that way or what the longer-term expectation is for incremental margin on the portfolio you envision?

Rob Starr -- Executive Vice President and Chief Financial Officer

Yes, Steve. You are correct. I mean, we're certainly seeing a benefit at 18.5% in the mid-range. And I think what's important to recognize is that as we continue to make improvements in our cost structure, as we kind of exit out of 2020, we're certainly depending on the growth of Bal Seal and some of our higher-margin businesses.

We could certainly see some upside to that. We don't provide guidance on 2021, but we certainly view there is an opportunity, and that's why we're very focused on G&A reductions and efficiencies.

Steve Barger -- KeyBanc Capital Markets -- Analyst

But I guess as you think about the portfolio and how you think about M&A going forward, would you think that this kind of 18.5% is more of a floor to be beaten in the future or is this how you think about the incremental of the portfolio?

Rob Starr -- Executive Vice President and Chief Financial Officer

Yes. I think there is opportunity, Steve, based on M&A to certainly do better when we think about the focus of our M&A efforts on highly engineered products relative to the balance of the portfolio. So certainly, depending on M&A activity, which is hard to predict. We could see upside to that, and we're certainly focused on improving our cost structure to really improve incremental margin up in north.

Steve Barger -- KeyBanc Capital Markets -- Analyst

Yes. And so last one for me, I know it's not built into the guide, and I heard you just say it's hard to predict, but do you think we should reasonably expect incremental revenue and EPS contribution from new M&A, based on what you can see in the pipeline right now for 2020?

Rob Starr -- Executive Vice President and Chief Financial Officer

Yes, Steve. I really can't comment on that. As you can appreciate, we do have an active effort to identify M&A targets, but those transactions are very difficult to predict. So we are diligently working.

And as Neal alluded to, we do have significant capital. Our balance sheet is in terrific shape. So we're certainly pushing to find the right target, something similar to Bal Seal would be terrific.

Steve Barger -- KeyBanc Capital Markets -- Analyst

Yes. I'll jump back in line. Thanks.

Rob Starr -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

Thank you. Our next question comes from Edward Marshall with Sidoti & Company. Your line is now open.

Edward Marshall -- Sidoti and Company -- Analyst

Good morning, guys. How are you? I wanted to ask on Bal Seal. It looks like in the initial press release, you talked about 2019 revenue of around $95 million. There's no growth expected in the guidance for Bal Seal for 2020.

Is that kind of what you anticipated when you purchased this or is there something unusual going on? Have you divested a piece of that business? Just trying to understand why the flat revenue growth year to year.

Rob Starr -- Executive Vice President and Chief Financial Officer

No. Ed, a really good observation. A couple of things. When we acquired them, we knew that they were experiencing some potential weakness in some of their industrial markets.

What I can tell you is that their 2019 sales that have come in marginally below our expectations. We do have expectations for growth in 2020 for the business. And there are a couple of pressure points with a couple of accounts, which if you kind of carve those out. The balance of the business is growing in the high single digits, which is what we would have expected.

So we have a couple of account matters to kind of work through, but we remain very positive on the business, very strong cash flow generation. So overall, we're very pleased with the outlook for 2020 with Bal Seal and are working very closely with their team to identify both sales and other types of opportunities to drive growth.

Edward Marshall -- Sidoti and Company -- Analyst

Got it. And the roughly $23 million in EBITDA that they produce in, how does the deal accounting shake-up? Could you sum that maybe DNA component of that $23 million?

Rob Starr -- Executive Vice President and Chief Financial Officer

Yes. So we're expecting Bal Seal DNA to be roughly in the neighborhood of about $10 million in 2020. As you can appreciate with some of the purchase accounting, we're going to see somewhere in the range of about $5 million to $6 million DNA drag relating to intangibles. And we're still working through the purchase accounting.

Those numbers aren't yet final. But as you can appreciate, it's complex.

Edward Marshall -- Sidoti and Company -- Analyst

Right. On the 737MAX, you talked about $12 million in revenue drag for 2020. Does that assume production restarts? The reason I ask is there's a restart? The reason I ask is there's a structures competitor, I guess, as well as a customer on the structure side indicated the restarting production in the 737MAX in March. Is that consistent with your expectations?

Neal Keating -- Chairman, President, and Chief Executive Officer

Ed, good morning. It's Neal. I think that we're probably looking at it in that time frame to perhaps a little bit later. The way we've worked through, it is a combination of what GE and Safran are working on with Spirit, who you may have been referring to, is looking at for deliveries to the year and what Boeing is publicly stated their target may be.

So as we look at those three figures, we come down to a delivery of between 210 and 220 ship sets for the year, our deliveries, not necessarily Boeings' but our deliveries. And that's about for us, taking about $10 million to $12 million out of our year-to-year growth. And as you can imagine as well that, that is very heavily weighted toward our specialty bearings business, so higher margin. So we're considering losing about half a year.

Edward Marshall -- Sidoti and Company -- Analyst

OK. About six months, and is that big in original 624 shipsets a year on the 52 a month, roughly?

Neal Keating -- Chairman, President, and Chief Executive Officer

Yes. Actually, we were -- since they had been working at 42 a month for most of 18 that was the baseline we're looking at. So we know that we're going to have higher content of about $45,000 on the new aircraft going out since we've been able to add some product to that aircraft, as we had talked about before. So we're looking in the range of about $45,000 per aircraft for the balance.

Edward Marshall -- Sidoti and Company -- Analyst

Got it. OK. That's what I was trying to back into. And then finally, I just wanted to get an update on the 139 D/B and the next-generation rollout? And how you see that kind of shaping up over the next, say, few years?

Neal Keating -- Chairman, President, and Chief Executive Officer

Ed, we continue to be very comfortable with our JPF product. Obviously, when we're looking at $350 million of backlog today, working with the U.S. Air Force on both options, 15 and 16, which we expect to get into backlog in the first half of this year, that takes us out to 2023. So, we feel very good about that and that is before we consider additional foreign demand, which, as you know, has been pretty consistent for us in recent years.

The other thing is when we look at the reliability of the product in use, we feel very comfortable with where we are, but we also know that we have to continue to work to reduce the cost and that's what we're doing. So we feel pretty good about where we're at right now.

Edward Marshall -- Sidoti and Company -- Analyst

Great. It sounds like it's in good shape. I appreciate it, guys. Thanks very much.

Rob Starr -- Executive Vice President and Chief Financial Officer

OK. Thank you, Ed.

Neal Keating -- Chairman, President, and Chief Executive Officer

Thank you, Ed.

Operator

[Operator instructions] Our next question comes from Seth Seifman with JP Morgan. Your line is now open.

Seth Seifman -- J.P. Morgan -- Analyst

Thanks very much, and good morning.

Rob Starr -- Executive Vice President and Chief Financial Officer

Good morning.

Neal Keating -- Chairman, President, and Chief Executive Officer

Good morning, Seth.

Seth Seifman -- J.P. Morgan -- Analyst

So just wondering about the progression of kind of bringing down the SG&A. And I guess if we look at the guidance and what seems to be implied for the legacy business, this may be about $80 million of EBIT. And if you're kind of into 2017, like you were last year in aerospace, that's about $16 million of corporate. And as you go down toward that target of $15 million to $20 million, it seems like you want to be exiting around that level of $20 million.

So, it implies kind of a very low amount in the fourth quarter. Should we think about kind of significant reductions in that corporate expense as we move through the year?

Rob Starr -- Executive Vice President and Chief Financial Officer

Yes. Seth, this is Rob. A couple of things. Going forward, in 2020, we will not be providing any separate guidance as it relates to the corporate expenses.

We're just doing a full operating income guide, so just want to clarify that. As it relates to where we are, we've already realized about $5 million on a run-rate basis on the savings. So we're very well on our way toward achieving the range that we had guided previously. As you can imagine, that is a major focus for us.

We recognize the importance of achieving that. Part of the reason you also are seeing some of the earnings cadence, the way that you are is that we do expect as we run through 2020, you will see those savings accumulating, which will have a positive impact on our results. So, we've talked about reaching a rate toward the high end of the range as we exit 2020 and remain on track to do so.

Seth Seifman -- J.P. Morgan -- Analyst

All right. OK. Great. And then just following up on the last question on JPF.

You talked about the higher deliveries. I mean, can you give us a sense of how much higher the JPF revenues will be in 2020 versus 2019? And then when you think about moving beyond, do we think about that 2020 level as kind of a sustainable level or a level off which you see potential for incremental growth?

Neal Keating -- Chairman, President, and Chief Executive Officer

Seth, it's Neal. I think that given the range of 45,000 to 50,000 units for 2020. We think that as you look at the backlog of $350 million before options 15 and 16 going into backlog that we see that as sustainable for the next few years. That's a rate that we feel very comfortable with.

We've worked to be able to consistently meet that kind of output and the team under Jerry Rickets' leadership has done a great job.

Seth Seifman -- J.P. Morgan -- Analyst

Great. OK. Yes. That takes care of my questions for now.

Thanks very much.

Neal Keating -- Chairman, President, and Chief Executive Officer

Thank you, Seth.

Rob Starr -- Executive Vice President and Chief Financial Officer

Thank you, Seth.

Operator

Thank you. [Operator instructions] Our next question comes from Steve Barger with KeyBanc Capital Markets. Your line is now open.

Steve Barger -- KeyBanc Capital Markets -- Analyst

Hi. Thanks. Just going back to M&A, can you remind us how you think about necessary metrics in terms of accretion timing, margin expectations or free cash flow characteristics or just what are your deal requirements?

Rob Starr -- Executive Vice President and Chief Financial Officer

Yes. So when we think about accretion, I mean, we certainly look to reduce or eliminate the purchase accounting adjustments. I mean, Bal Seal, certainly, with $32 million of negative adjustments this year, that's a tall hill to climb. But when we do an IRR metric, as you would appreciate, well in excess of our cost of capital.

That is a very critical assumption for us as we evaluate transactions from a cash flow perspective, as you would appreciate, looking at IRR, that plays a very significant role. We are looking for strong cash flow contributors. So that is absolutely a key criteria as we look at acquisition opportunities. And really, what's really important for us as well is understanding, one, the technology, the macros that are behind those acquisitions and how well and how synergistic they fit into our portfolio.

I think, for us, and by the way, for those folks on Bal Seal are on the call, welcome to Kaman. Hopefully, a number of them are listening into the call this morning. That is really just an ideal acquisition for us, given the technology and the focus on medical instruments in that market. So we're going to continue to look for engineered products across A&D and the medical space, just as we have been.

And the strong financial performance is absolutely essential for us when we're going to pull the trigger and deploy capital.

Neal Keating -- Chairman, President, and Chief Executive Officer

And Steve, the other things that were really attractive to us was the very strong management team, engineering team, and operations team at Bal Seal. So those clearly drive the financial performance of the companies that we look at and enable us to be able to add new capability to us. So those are the other things that we look for, that really help drive those financial returns.

Steve Barger -- KeyBanc Capital Markets -- Analyst

Yes. As you think about finding companies of that size or maybe bigger that have the characteristics that you're looking for, do you feel like there's a sizable enough pool out there? Or is it really hard work trying to find things that meet those definitions?

Neal Keating -- Chairman, President, and Chief Executive Officer

Steve, we think that there's a good opportunity for us. We will say that we'll work hard at it. So we're not going to be shy of saying that we have to work hard at it, but I think that there's a good universe of targets. And also, one of the other advantages of the acquisition of Bal Seal is it opened up the aperture for us into more kinds of markets in the ceiling, where we can do smaller-to-midsized bolt-on acquisitions and use that as another platform for growth.

So it always is hard work for every company to be able to identify the right opportunity and then to be able to bring it home at the right price and also to have a good plan for integrating it into your operations and take advantage of some of the synergies that you might have across operations, sales and marketing, etc. But we feel pretty good about where we are right now and the kinds of companies that we can bring into the Kaman fold.

Steve Barger -- KeyBanc Capital Markets -- Analyst

Yes. Kaman is still a relatively small company, and you're trying to do more with less and a lot going on in terms of the integration and looking for new M&A. Can you just kind of rank order what you're most focused on right now? Or what's the most pressing conversation that you have with the team, Neal?

Neal Keating -- Chairman, President, and Chief Executive Officer

I think, first of all, it always starts with execution to make sure that we can meet our customer demands, and that's number one because that's what drives our future business. Number two, it's taking advantage of the investments that we have made in advanced automation and robotics to help drive our costs down. It is certainly for us to be able to keep our eyes open on new technologies, like the unmanned K-MAX, like our titanium diffusion heartening, to expand the markets that we serve. And then, certainly, for us to be able to identify those companies where we can really strengthen our relative competitive position and add some new capabilities is important.

And then without question, we recognize that we are a smaller company today than we were a year ago, and we need to focus on aligning our cost structure with the size of our company. And while doing that, building that strong foundation of processes and people where we can drive that growth through acquisition or organically. So it's a combination of various areas that we have to focus on, Steve. And I think it's one where we've done a really good job through 2019 and into 2020.

We're a very different company than we were a year ago. And we have a very strong outlook, we think, for 2020 and beyond.

Steve Barger -- KeyBanc Capital Markets -- Analyst

Yes. I guess -- and to that point about being a very different company than you were, any updated thoughts on the Analyst Day? I know you have a lot going on, but just what's the thought process about maybe explaining more clearly to the investment community about how you see this portfolio progressing over time?

Neal Keating -- Chairman, President, and Chief Executive Officer

Steve, you're exactly right. And we've been active with discussions internally and being able to do that. And certainly, we'll probably talk more about that maybe on the next call, even. But we recognize that we are a very different company and that we have to put more focus on getting that message out, and certainly, an Investor Day would provide us the opportunity to do that.

Steve Barger -- KeyBanc Capital Markets -- Analyst

Great. Thank you.

Neal Keating -- Chairman, President, and Chief Executive Officer

OK. Thank you, Steve.

Rob Starr -- Executive Vice President and Chief Financial Officer

Thanks, Steve.

Operator

Thank you. Our next question comes from Seth Seifman with J.P. Morgan. Your line is now open.

Seth Seifman -- J.P. Morgan -- Analyst

Hey. So just a quick follow-up. I just wanted to make sure, going forward, do you still plan to report legacy segment and Bal Seal separately as we go through 2020 here?

Rob Starr -- Executive Vice President and Chief Financial Officer

Yes, Seth. The short answer is we're going to be reporting, going forward, as far as we understand, as a single segment operation. So we will not be providing Bal Seal as a separate entity. So that's where we are.

Seth Seifman -- J.P. Morgan -- Analyst

OK. But will there be then a segment or just kind of revenue and adjusted EBIT at the whole corporate level?

Rob Starr -- Executive Vice President and Chief Financial Officer

Yes. No. Just at the whole corporate level.

Seth Seifman -- J.P. Morgan -- Analyst

Right. OK. OK. Gotcha.

And then just kind of updated thoughts. I guess, as you think about the M&A opportunities out there and where things are headed and you think about your target end market structure between aero, the commercial aero and defense, non-aero items, some things where there might be, I guess, opportunities outside of aero that is attractive from a return standpoint and maybe some things that you do in aero that are less attractive from a return standpoint, how should we think about that evolving?

Neal Keating -- Chairman, President, and Chief Executive Officer

Seth, I think that we would break it down into a few different areas. Number one, we have really been emphasizing investments, both organic growth, production, efficiency, and acquisitions more in our specialty bearings and engineered products area as opposed to our lower-margin structures area. So I think that that's the first thing. We'd had very good performance improvement in our structures market, but we know that the upside opportunity, for us, relies more on aerospace and specialty and engineered products.

And then within those, we really like our specialty bearing space. It is one that we continue to leverage and grow. I think the GRW acquisition was a good example of that. That enabled us to expand more into medical and industrial, which have proven to be and in the industrial market, more so in the automation and robotics parts of the industrial market.

So we've had very good results there and that informed in part our acquisition of Bal Seal because of the mix of industrial, aerospace, and medical markets that they had. So I think that as you look at the acquisitions that we would be most interested in, it will be those where we have a unique competitive advantage or intellectual property across aerospace. We have a good mix, almost 50-50, between commercial and defense today, so we like that mix. I think as you can see that despite the headwind from several programs, including 737, we've got organic growth from year to year, so it highlights the diversity of the products and platforms that we're on.

So we like that a lot. But I think that you'll see more activity in the specialized industrial markets and medical markets going forward.

Seth Seifman -- J.P. Morgan -- Analyst

Great. Thanks. So, yes, that's all from me. Thanks very much for the additional color.

Rob Starr -- Executive Vice President and Chief Financial Officer

Thank you.

Neal Keating -- Chairman, President, and Chief Executive Officer

Thank you, Seth.

Operator

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Jamie Coogan for closing remarks.

Jamie Coogan -- Vice President, Investor Relations, and Business development

Thank you for joining us on today's conference call. We look forward to speaking with you again when we report our first-quarter results.

Operator

[Operator signoff]

Duration: 41 minutes

Call participants:

Jamie Coogan -- Vice President, Investor Relations, and Business development

Neal Keating -- Chairman, President, and Chief Executive Officer

Rob Starr -- Executive Vice President and Chief Financial Officer

Steve Barger -- KeyBanc Capital Markets -- Analyst

Edward Marshall -- Sidoti and Company -- Analyst

Seth Seifman -- J.P. Morgan -- Analyst

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