Kaman Reports 2012 Fourth Quarter And Full Year Results

Organic Sales per Sales Day - Organic sales per sales day is defined as GAAP “Net sales from the Distribution segment” less sales derived from acquisitions, divided by the number of sales days in a given period. Sales days are essentially business days that the Company's branch locations are open for business and exclude weekends and holidays. Sales days are provided as part of this release. Management believes sales per sales day provides investors with an important perspective on how net sales may be impacted by the number of days the segment is open for business.

Management uses organic sales per sales day as a measurement to compare periods in which the number of sales days differ. The following table illustrates the calculation of organic sales per sales day using “Net sales: Distribution” from the “Segment Information” footnote in the “Notes to Consolidated Financial Statements” from the Company's Form 10-K filed with the Securities and Exchange Commission on February 25, 2013. Sales from acquisitions are classified as organic beginning with the thirteenth month following the acquisition.

Table 2. Distribution - Organic Sales Per Sales Day (in thousands, except days)
	For the three months ended
	December 31, 2012				December 31, 2011
Net sales: Distribution	$	248,280			$	228,552
Acquisition related sales	32,552				1,626
Organic sales	$	215,728			$	226,926
Sales days	62				61
Organic sales per sales day	$	3,479			$	3,720
% change	(6.5		%)		(2.3		%)

Free Cash Flow - Free cash flow is defined as GAAP “Net cash provided by (used in) operating activities” less “Expenditures for property, plant & equipment.” Management believes free cash flow provides investors with an important perspective on the cash available for dividends to shareholders, debt repayment, and acquisitions after making capital investments required to support ongoing business operations and long-term value creation. Free cash flow does not represent the residual cash flow available for discretionary expenditures as it excludes certain mandatory expenditures such as repayment of maturing debt. Management uses free cash flow internally to assess both business performance and overall liquidity. The following table illustrates the calculation of free cash flow using “Net cash provided by (used in) operating activities” and “Expenditures for property, plant & equipment”, GAAP measures from the consolidated statements of cash flows.

Table 3. Free Cash Flow (in thousands)
		For the Twelve Months Ended				For the Nine Months Ended				For the Three Months Ended
		December 31, 2012				September 28, 2012				December 31, 2012
Net cash provided by (used in) operating activities from continuing operations		$	84,580			$	37,246			$	47,334
Expenditures for property, plant & equipment		(32,569		)		(19,559		)		(13,010		)
Free Cash Flow from continuing operations		$	52,011			$	17,687			$	34,324

Debt to Capitalization Ratio - Debt to capitalization ratio is calculated by dividing debt by capitalization. Debt is defined as GAAP “Notes payable” plus “Current portion of long-term debt” plus “Long-term debt, excluding current portion.” Capitalization is defined as Debt plus GAAP “Total shareholders' equity.” Management believes that debt to capitalization is a measurement of financial leverage and provides investors with an insight into the financial structure of the Company and its financial strength. The following table illustrates the calculation of debt to capitalization using GAAP measures from the consolidated balance sheets included in this release.

Table 4. Debt to Capitalization (in thousands)
		December 31, 2012				December 31, 2011
Notes payable		$	21			$	1,685
Current portion of long-term debt		10,000				5,000
Long-term debt, excluding current portion		249,585				198,522
Debt		259,606				205,207
Total shareholders' equity		420,193				373,071
Capitalization		$	679,799			$	578,278
Debt to capitalization		38.2		%		35.5		%

Table 5. Summary of Segment Information (in thousands)
		For the three months ended								For the twelve months ended
		December 31, 2012				December 31, 2011				December 31, 2012				December 31, 2011
Net sales from continuing operations:
Distribution		$	248,280			$	228,552			$	1,012,059			$	930,131
Aerospace		151,036				145,283				580,769				547,403
Net sales		$	399,316			$	373,835			$	1,592,828			$	1,477,534
Operating income from continuing operations:
Distribution		$	11,155			$	10,920			$	50,560			$	46,894
Aerospace		22,673				17,472				89,142				80,424
Net gain (loss) on sale of assets		(84		)		(220		)		(105		)		(269		)
Corporate expense		(10,503		)		(9,520		)		(46,759		)		(39,468		)
Operating income		$	23,241			$	18,652			$	92,838			$	87,581

Non-GAAP adjusted net earnings and Non-GAAP adjusted net earnings per common share diluted - Non-GAAP adjusted net earnings and Non-GAAP adjusted net earnings per common share diluted are defined as net earnings and diluted earnings per share, less items that are not indicative of the operating performance of the business for the period presented. These items are included in the reconciliation below. Management uses Non-GAAP adjusted net earnings and Non-GAAP adjusted net earnings per common share diluted to evaluate performance period over period, to analyze the underlying trends in our business and to assess its performance relative to its competitors. We believe that this information is useful for investors and financial institutions seeking to analyze and compare companies on the basis of operating performance.

The following table illustrates the calculation of Non-GAAP adjusted net earnings and Non-GAAP adjusted net earnings per common share diluted using “Net earnings” and “Diluted earnings per share” from the “Consolidated Statement of Operations” from the Company's Form 10-K filed with the Securities and Exchange Commission on February 25, 2013.

Table 6. Reconciliation of Non-GAAP Financial Information - Net Earnings
(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 EARNINGS:
GAAP Earnings from continuing operations, as reported	$	13,934			$	9,736			$	53,928			$	49,928
GAAP Earnings from discontinued operations, net of tax, as reported	(1,096		)		222				(226		)		1,214
Non-recurring benefit associated with the death of a former executive, net of tax	—				—				—				(1,900		)
FMU-143 litigation settlement, net of tax	—				3,971				—				3,971
Resolution of Aerospace contract claim, net of tax	2,524				—				2,524				—
Costs associated with Disposal of Canadian Operations, net of tax	1,103				—				1,103				—
Severance related to Aerospace realignment, net of tax	(79		)		—				282				—
Aerospace contract claim settlement, net of tax	—				—				381				—
Non-GAAP adjusted net earnings	$	16,386			$	13,929			$	57,992			$	53,213
GAAP earnings from continuing operations per common share - diluted	$	0.52			$	0.37			$	2.03			$	1.88
GAAP earnings from discontinued operations per common share - diluted	(0.04		)		0.01				(0.01		)		0.05
Non-recurring benefit associated with the death of a former executive, net of tax	—				—				—				(0.07		)
FMU-143 litigation settlement, net of tax	—				0.15				—				0.15
Resolution of Aerospace contract claim, net of tax	0.09				—				0.09				—
Costs associated with Disposal of Canadian Operations, net of tax	0.04				—				0.04				—
Severance related to Aerospace realignment, net of tax	—				—				0.01				—
Aerospace contract claim settlement, net of tax	—				—				0.02				—
Non-GAAP adjusted net earnings per common share diluted	$	0.61			$	0.53			$	2.18			$	2.01
Diluted weighted average shares outstanding	26,867				26,412				26,622				26,500

Non-GAAP adjusted net sales for Aerospace and Distribution and Non-GAAP adjusted operating income for Aerospace and Distribution - Non-GAAP adjusted sales for Aerospace and Distribution and Non-GAAP adjusted operating income for Aerospace and Distribution are defined as net sales for Aerospace and Distribution and operating income for Aerospace and Distribution, less items that are not indicative of the operating performance of Aerospace and Distribution for the period presented. These items are included in the reconciliation below. Management uses Non-GAAP adjusted net sales and Non-GAAP adjusted operating income to evaluate performance period over period, to analyze the underlying trends in our segments and to assess their performance relative to their competitors. We believe that this information is useful for investors and financial institutions seeking to analyze and compare companies on the basis of operating performance.

The following table illustrates the calculation of Non-GAAP adjusted net sales per reportable segment and Non-GAAP adjusted operating profit per reportable segment using “Net Sales - Aerospace”, "Net Sales - Distribution", "Operating Profit - Aerospace" and “Operating Profit - Distribution” from Footnote 19, Segment and Geographic

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