1. No category

Investor Presentation
January 14, 2015
1
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 and thereafter contract negotiations with government authorities, both foreign and domestic; (v) the existence of standard
government contract provisions permitting renegotiation of terms and termination for the convenience of the government; (vi) the conclusion to
government inquiries or investigations; (vii) risks and uncertainties associated with the successful implementation and ramp up of significant new
programs; (viii) potential difficulties associated with variable acceptance test results, given sensitive production materials and extreme test parameters;
(ix) the receipt and successful execution of production orders for the U.S. government JPF contract, including the exercise of all contract options and
receipt of orders from allied militaries, as all have been assumed in connection with goodwill impairment evaluations; (x) the continued support of the
existing K-MAX® helicopter fleet, including sale of existing K-MAX® spare parts inventory; (xi) the accuracy of current cost estimates associated with
environmental remediation activities; (xii) the profitable integration of acquired businesses into the Company's operations; (xiii) the ability to implement
our ERP systems in a cost-effective and efficient manner, limiting disruption to our business, and to capture their planned benefits while maintaining an
adequate internal control environment; (xiv) changes in supplier sales or vendor incentive policies; (xv) the effects of price increases or decreases; (xvi)
the effects of pension regulations, pension plan assumptions, pension plan asset performance and future contributions; (xvii) future levels of
indebtedness and capital expenditures; (xviii) the continued availability of raw materials and other commodities in adequate supplies and the effect of
increased costs for such items; (xix) the effects of currency exchange rates and foreign competition on future operations; (xx) changes in laws and
regulations, taxes, interest rates, inflation rates and general business conditions; (xxi) future repurchases and/or issuances of common stock; and (xxii)
other risks and uncertainties set forth herein and in our 2013 Form 10-K.
2
What is Kaman?
Leading Provider of Highly Engineered Aerospace &
Industrial Products Serving a Broad Range of End Markets
Solving Our Customers’ Critical Problems with Technically
Differentiated Products & Services
3
Kaman Corporation Overview
Aerospace
$1.8B Revenues
42%
37%
Fuzing
Commercial
21%
35%
Defense
65%
Distribution
Bearings and Mechanical
Power Transmission
18%
Aerospace
Distribution
26%
56%
Automation, Control and
Energy
Fluid Power
Based on LTM Actual Results as of Q314
4
Kaman Investment Highlights
Strategically
Positioned
Improving
Financials
 Outstanding portfolio of
intellectual property
across Aerospace
 Focused on driving
strong top-line growth
 Distribution aligned with
best-in-class, vendors
 Diverse end market
exposure provides
consistent performance to
fund growth
Reliable Business
Strategies
 Disciplined acquisition growth
to achieve scale and margin
enhancements
 Deliver earnings
growth through scale
and operational
execution
 Continuing focus on
innovation to maintain
differentiation
 Generate strong
consistent cash flow to
fund long-term growth
 Relentless effort to drive
operational excellence and
lean
 ERP investments will
yield improved
efficiencies & financial
performance over
medium-term
 Shared services allow for
efficient allocation of
resources
5
Aerospace Overview
AEROSYSTEMS
SPECIALTY BEARINGS &
ENGINEERED PRODUCTS
FUZING & PRECISION
PRODUCTS
v
Product
• Engineering design and testing
• Self-lube airframe bearings
• Tooling design & manufacture
• Traditional airframe bearings
• Advanced machining and composite
aerostructure manufacturing
• Flexible drive systems
• Bomb and missile safe and
arm fuzing devices
• Precision measuring systems
• Memory products
• Complex assembly
• Helicopter MRO and support
Customer
•
•
•
•
Global commercial and defense OEM’s
Super Tier I’s to subcontract manufacturers
Aircraft operators and MRO
Specialized aerospace distributors
Business
Dynamic
• “One Kaman” combines design and build capabilities to provide
customers with a global integrated solution
• Bearing product lines strong commercial customer base expected to
provide growth from new program wins and higher build rates
• U.S. and allied militaries
• Weapon system OEMs
• Exclusivity and significant
backlog provide a stable
revenue base
6
Distribution Overview
PRODUCT
PLATFORM
% of Sales
(LTM Q3 2014)
Market Size
Acquisitions
since 2008
BEARINGS &
MECHANICAL POWER
TRANSMISSION (BPT)
FLUID POWER
AUTOMATION, CONTROL &
ENERGY (ACE)
56%
18%
26%
$13 Billion
$7 Billion
$15 Billion
• Industrial Supply Corp
• INRUMEC
• Zeller
• Allied Bearings Supply
• Catching
• Minarik
• Plains Bearing
• Northwest Hose & Fittings
• Target Electronic Supply
• Florida Bearings Inc.
• Western Fluid Components
• B. W. Rogers
• Ohio Gear and Transmission
• B. W. Rogers
• G.C. Fabrication@
Major
Suppliers
@
Expected to close late January 2015
7
Market Opportunities
Secular trends helping to drive significant long-term growth
opportunities in both Aerospace and Distribution segments
DISTRIBUTION
AEROSPACE
•
•
•
•
OEM/Tier 1 outsourcing and supplier
consolidation
Higher bearing content on new platforms
Increasing commercial build rates driving
bearing and aerostructure sales
New programs provide offset to lower
defense spending
•
•
•
•
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
8
Organic Growth Drivers
Aerospace
Distribution
• “One Kaman Approach”
• Supplier consolidation
• New product development
efforts at Specialty Bearings
and Precision Products
• Factory automation trends
• Continued commercial
aerospace cycle growth
• JPF Navy Opportunity
• Expanded geographic
footprint
• Differentiated product and
services
• Product platform crossselling
• National account
opportunities
• Sales force expansion
9
Operational Excellence
KEY INITIATIVES
• Significant ERP investments
at both Segments
• New state-of-the-art facilities
in the UK and Germany
• Low Cost Country
operations provide margin
expansion opportunities
• Increasing use of automation
and robotics are favorably
impacting quality, throughput
and labor costs
10
Acquisition Strategy Framework
11
Aerospace
35%
12
Aerospace Profile
Sales by Product Line
LTM Q314
Defense
42%
Technology Profile
Commercial
37%
Build to
Print 60%
Design
& Build / IP 40%
Fuzing
21%
Financial Summary
LTM Net Sales Q314
$629M
LTM OI% Q314
16.4%(1)
(1) Adjusted, excludes goodwill impairment charge of $2.1 million
13
Aerospace Strategy
DEPTH
DIVERSITY
DIFFERENTIATION
DEVELOPMENT
• Size/financial strength to address larger,
integrated work packages from primes/OEMs
and Tier 1s
• Balance portfolio through increased commercial
content and select acquisitions
• Selective increase in engineering content for
higher margins and more defensible positions
• Increased, focused investments in our people and
infrastructure to increase capabilities and drive
continuous improvement
14
Aircraft Programs/Capabilities
7
9
10
1
2
3
Bearing Products
11
6
12
15
4
13
5
8
14
16
Other Products
1. Doors
9. Door assemblies
2. Nose landing gear
10. Top covers
3. Engine/thrust reverser
11. Fixed leading edge
4. Flight controls
12. Fixed trailing edge
5. Flaps
13. Winglets
6. Main landing gear
14. Wing structures, flaps, slats
7. Rudder
15. Access doors
8. Horizontal stabilizer
16. Nacelle components
15
Aircraft Programs/Capabilities
1
5
2
1
7
6
6
6
4
3
Bearing Products
1. Flexible drive systems
2. Flight control bearings
3. Landing gear bearings
Other Products
4. Manufacture and assembly of tail
rotor pylon
5. Blade manufacture, repair and
overhaul
6. Manufacture and subassembly
of cabins and structures
7. Manufacture of cockpit
16
Market Leading Self-Lube Airframe Bearing Product Lines
KAron®
• KAflex® • Tufflex®
Proprietary
Technology
•
•
•
Material
Science
Capability
Work Force
Lean
Automation
Operational
Excellence
•
•
•
•
New Technologies
New Products
Customization
Customer Intimacy
Application
Engineering
Expertise
World Class Performance
17
Fuzing Products
STANDARD
SLAM-ER
MISSILE
TOMAHAWK
AMRAAM
JPF
SLAM-ER
FMU-139
AGM-65M
STANDARD
MISSILE
SLAM-ER
HARPOON
TOMAHAWK
MAVERICK
On a Majority of U.S. Weapon Systems
AMRAAM
AMRAAM
18
JPF Program
• U.S. Air Force (USAF) bomb fuze of choice
• USAF inventory levels well below desired
quantity, foreign orders and U.S. Navy
provide additional opportunities
• USAF contract extends sole source position
into 2017
• Backlog of over $100 million
Bomb Compatibility
- JDAM
• 27 foreign customers
• System reliability exceeds 98% and field
reliability is greater than 99%
- Paveway II and III
- GBU-10, 12, 16, 24, 27, 28, 31, 32,
38, 54
- BLU-109, 110, 111, 113, 117, 121,
122, 126
- MK82/BSU-49, MK83/BSU-85,
MK84/BSU-50
19
Helicopter Programs
SH-2G Super Seasprite
K-MAX®
• Service and support
• Commercial fleet service and support
• Flying fleet expected to grow in
excess of 40% in the next two years
• Research, development and testing of
unmanned technologies & capabilities
• Currently fulfilling a contract to
provide ten aircraft to the New
Zealand Ministry of Defence
• Two unmanned aircraft supported the
USMC in a cargo supply role in
Afghanistan for 33 months
• Under contract to support the
procurement of five aircraft by the
Peruvian Navy
• Partnered with Lockheed Martin to
pursue a military program of record
• Evaluating commercial sales
opportunities
20
Aerospace – Key 2015 Operational Objectives
• Complete the New Zealand SH-2(G)I contract and transition to the
Peru program
• Build on the growth and success of bearing product lines
• Continue to ramp up programs to full rate production to build on
improved cash flow generation
• Build on the “One Kaman” effort to offer customers a one stop
solution for their Aerosystem needs and close open bids
• Capitalize on market opportunities for fuze programs
• Continue improvement in operational execution across the segment
to enhance competitiveness and margins
21
Distribution
65%
22
Kaman Distribution Segment
Served Market Size = $35B
Business Overview
$16
$14
LTM Q314 Net Sales
$1,145M
•
LTM Q314 OI%
4.4%
•
# of Customers
65,000
$12
dollars in billions
•
$10
$8
$6
•
SKUs in Catalog
4+ million
$4
$2
Bearings & PT
Fluid Power
Automation & Control
Source: PTDA Market Size Report; US Census Bureau; ARC Advisory
23
Business Strategies
1
Acquisitions
•
•
•
2
Organic initiatives
•
•
•
Adding more differentiated products
Large national account opportunity pipeline
Targeting emerging industries
3
Sales force expansion
•
•
•
Focused on outside sales force
Targeting strategic geographic markets
Kaman training programs
4
Profitability
•
•
•
Strategic pricing
Supplier rebates
Purchasing leverage
ERP deployment
•
•
•
Multi-phase rollout
Includes CRM, WMS, Financials
Drives operational efficiencies
5
Pipeline for each product platform
Formal integration process
End market diversification
24
Distribution – Road to 7+% Operating Margin
CATALYSTS
Improved Operational
Efficiencies
TODAY
<5%
Scale
Product Mix
FUTURE
7+%
Strategic Pricing
25
Platform Evolution
2014 Pro Forma #
2009 Sales
12%
21%
14%
53%
74%
26%
#adjusted
for full year with B. W. Rogers
Through acquisitions and organic growth, Kaman has significantly grown its
Distribution business while greatly expanding its product offering
a
Bearings & Power Transmission
up 40%
Automation, Control & Energy
up 203%
Fluid Power
up 97%
a
a
a
For the years 2009-2013
26
Executing Strategy and Building Network
27
Acquisitions in all Product Platforms
$1,200,000,000
Distribution Group Sales
$1,100,000,000
$1,000,000,000
$900,000,000
$800,000,000
$700,000,000
$600,000,000
$500,000,000
2007
2008
2009
2010
2011
2012
2013
2014
28
GCF Acquisition
• Announced an agreement to acquire the assets of G.C. Fabrication,
Inc. (expected to close late January)
• A premier Schneider Electric distributor, ~ $20 Million in revenue
• Highly complimentary product offering & brands of electrical control,
power, process and automation
• Services include systems programming, power & energy
management, communication & networking, HVAC systems
• Will extend key brand authorizations into New York metro area for
industrial, commercial building & infrastructure markets
• 5th acquisition in AC&E platform since 2010
• Expected to be accretive and integrate rapidly with Automation,
Control & Energy platform of the Distribution segment
29
Adding Leading Brands in Multiple Technologies
Value- Added Technologies
PLCs, HMIs
Sensors & Signaling
Machine Safety
Hydraulics
Pneumatics
Fluid Connectors
Motion Control
Servos & Steppers
Linear Motion
Bearings
Power Transmission
Industrial Supplies
2010
2011
2012
2013
2014
30
Extensive Solution and Service Capabilities
System Design & Build
Fluid Power Systems
Hose & Coupling
Assemblies
Application Engineering
Belt Fabrication
Maintenance & Reliability
31
Distribution – Key 2015 Operational Objectives
• Continue to drive higher margins across the segment
• Increase organic growth, capitalizing on expense leverage through
increased customer engagement, and broader product offering
across our three business platforms
• Continue to pursue accretive acquisitions and gain additional sales
and cost synergies from completed acquisitions
• Continue deployment of new ERP system to consolidate disparate
systems and drive significant productivity enhancements
• Leverage strong supplier relationships to increase sales of higher
margin product lines
32
Positioned for Future Growth
• Proven strategies have delivered strong shareholder value over time
• Aerospace
– Leveraging unique set of proprietary products and capabilities
– Strong platform positions across commercial & defense markets
– Robust pipeline of future opportunities
• Distribution
– Three product platform strategy expands growth opportunities
– Increased scale provides improved operating leverage
– ERP implementation benefits
• Successfully execute future acquisitions - maintain discipline
• Leverage experienced management and workforce across the
company
33
Financial Information
34
Financial Highlights – Full Year 2013
Kaman Corporation and Subsidiaries
P&L Highlights
($ in millions except
For the three months ended September
per share amounts)
2014
2013
Actuals
Actuals
GAAP
Adjusted*
GAAP
Adjusted*
$
$
Net sales:
Distribution
$
Aerospace
308.5
$
153.8
308.5
153.8
273.0
150.7
273.0
150.7
$
462.3
$
462.3
$
423.7
$
423.7
$
13.3
$
13.8
$
14.7
$
14.7
Operating income:
Distribution
Aerospace
26.8
$
40.1
26.8
$
40.6
27.6
$
42.3
27.6
$
42.3
Operating profit %:
Distribution
4.3%
4.5%
5.4%
5.4%
Aerospace
17.4%
17.0%
18.3%
18.3%
Net earnings
$
14.9
$
16..8
$
18.7
$
18.7
EPS diluted
$
0.53
$
0.60
$
0.68
$
0.68
35
Financial Highlights – Full Year 2013
Kaman Corporation and Subsidiaries
P&L Highlights
($ in millions except
For the twelve months ended December
per share amounts)
2013
2012
Actuals
Actuals
GAAP
Adjusted*
$
$
GAAP
Adjusted*
Net sales:
Distribution
Aerospace
1,067.8
614.0
1,067.8
$
614.0
1,012.1
$
1,032.2
580.8
578.3
$
1,681.8
$
1,681.8
$
1,592.9
$
1,610.5
$
43.3
$
43.3
$
50.6
$
52.1
Operating income:
Distribution
Aerospace
102.6
$
145.9
104.6
$
147.9
89.1
$
139.7
93.5
$
145.6
Operating profit %:
Distribution
4.1%
4.1%
5.0%
5.1%
Aerospace
16.7%
17.0%
15.3%
16.2%
Net earnings
$
56.7
$
58.8
$
53.9
$
58.0
EPS diluted
$
2.09
$
2.16
$
2.03
$
2.18
36
Balance Sheet, Capital Factors, and Cash Flow Items
(In Millions)
As of 9/26/14
As of 12/31/13
Cash and Cash Equivalents
$
$
Notes Payable and Long-term Debt
Shareholders’ Equity
10.4
$ 16.6
$ 338.0
$ 275.2
$ 259.6
$ 547.7
$ 511.3
$ 420.2
38.2%
35.0%
38.2%
Debt as % of Total Capitalization
9.8
As of 12/31/12
Capital Expendituresa
$
22.2
$
40.9
$ 32.6
Depreciation & Amortizationa
$
26.5
$
31.9
$ 28.4
Free Cash Flow*a
$
21.3
$
21.6
$ 52.0
aYTD
9/26/2014
37
Appendix I
Non-GAAP Reconciliations
38
Reconciliation of Non-GAAP Financial Information
Table 1. Aerospace Segment YTD 2014
Q1
Q2
Q3
YTD
GAAP Net Sales
$ 149,062
$ 154,903
$ 153,761
$
457,726
GAAP Operating Profit
$ 22,021
$ 26,681
$ 26,813
$
75,515
14.8%
17.2%
17.4%
($000s)
% of sales
16.5%
39
Reconciliation of Non-GAAP Financial Information
Table 2. Aerospace Segment 2013
Q1
Q2
Q3
Q4
Full Year
GAAP Net Sales
$ 130,907
$ 161,492
$ 150,712
$ 170,856
$
613,967
GAAP Operating Profit
$ 20,911
$ 28,678
$ 27,638
$ 25,346
$
102,573
16.0%
17.8%
18.3%
14.8%
($000s)
% of sales
Goodwill impairment charge
Operating profit - Adjusted
% of sales
$
16.7%
2,071
$
2,071
$
104,644
$ 20,911
$ 28,678
$ 27,638
$ 27,417
16.0%
17.8%
18.3%
16.0%
17.0%
40
Reconciliation of Non-GAAP Financial Information
Table 3. Distribution Segment YTD 2014
Q1
Q2
Q3
YTD
GAAP Net Sales
$ 264,870
$ 304,186
$ 308,571
$
877,627
GAAP Operating Profit
$ 11,135
$ 15,419
$ 13,272
$
39,826
4.2%
5.1%
4.3%
($000s)
% of sales
Severance costs
Operating profit - Adjusted
% of sales
$
4.5%
550
$
550
$
40,376
$ 11,135
$ 15,419
$ 13,822
4.2%
5.1%
4.5%
4.6%
41
Reconciliation of Non-GAAP Financial Information
Table 4. Distribution Segment 2013
Q1
Q2
Q3
Q4
Full Year
GAAP Net Sales from continuing operations
$ 257,168
$ 270,233
$ 272,951
$ 267,487
$ 1,067,839
GAAP Operating Profit
$
4,630
$ 13,669
$ 14,675
$
$
1.8%
5.1%
5.4%
($000s)
% of sales
10,352
3.9%
43,326
4.1%
42
Reconciliation of Non-GAAP Financial Information
Table 5. Net Earnings 2014 YTD
Q1
Q2
Q3
YTD
$ 11,457
$ 16,194
$ 14,873
$
42,524
$
$
$
285
($000s except per share amounts)
+
GAAP Earnings from continuing operations
+
GAAP Earnings from discontinued operations
379
+
Costs associated with the sale of Moosup
+
Severance costs at Distribution
+
(94)
$
1,544
$
1,544
$
367
$
367
Non-GAAP adjusted net earnings
$ 11,457
$ 16,573
$ 16,690
$
44,720
GAAP Earnings from continuing operations per
+
common share - diluted
$
$
0.59
$
$
1.53
$
0.01
$
0.01
0.42
+
GAAP Earnings from discontinued operations
+
Costs associated with the sale of Moosup
+
Severance costs at Distribution
Non-GAAP adjusted net earnings per common
+
share - diluted
$
0.42
$
0.60
0.53
$
0.06
$
0.06
$
0.01
$
0.01
$
0.60
$
1.61
+
Net of tax
43
Reconciliation of Non-GAAP Financial Information
Table 6. Net Earnings 2013
Q1
Q2
Q3
Q4
Full Year
$ 17,892
$ 18,695
$ 12,958
$
$
$
$
($000s except per share amounts)
+
GAAP Earnings from continuing operations
$
7,154
+
GAAP Earnings from discontinued operations
64
Goodwill impairment charge
$
+
Non-GAAP adjusted net earnings
GAAP Diluted net earnings per share from
+
continuing operations
GAAP Diluted net earnings from discontinued
+
operations
Goodwill impairment charge
Non-GAAP adjusted net earnings per common
+
share - diluted
$
7,154
$
0.26
$
0.26
(83)
56,699
(19)
2,071
$
2,071
$ 17,892
$ 18,759
$ 14,946
$
58,751
$
$
$
0.48
$
2.09
$
(0.01)
$
(0.01)
$
0.08
$
0.08
$
0.55
$
2.16
$
0.67
0.67
$
0.68
0.68
+
Net of tax
44
Reconciliation of Non-GAAP Financial Information
Table 7. Free Cash Flow
($000s)
9 Months
Ended
9/26/2014
Year Ended
12/31/2013
Year Ended
12/31/2012
Net cash provided/(used in) operating activities
of continuing operations
$
43,469
$
62,547
$
84,580
Expenditures for property, plant and equipment
$
(22,188)
$
(40,928)
$
(32,569)
Free cash flow
$
21,281
$
21,619
$
52,011
45
Appendix II
Incentive Compensation
46
Performance-Driven Incentives
• Annual cash incentive driven by financial performance
– Corporate – compared against the 5-year average of Russell 2000:
• Return on Investment
• EPS growth
• EPS performance against plan
– Business Units – compared against targets
• Return on Investment
• Year over year growth in operating income
• Year over year growth in sales
• Free cash flow
• Senior Executives – Long-term Incentive
– Return on Investment
– Growth in EPS
– Total Shareholder Return
47