Kaman

AR 13

Financials

Part II

Financials/Financial Statements and Supplementary Data/Notes to Consolidated Financial Statements – Note 20

For the Years Ended December 31, 2013, 2012 and 2011



20. SEGMENT AND GEOGRAPHIC INFORMATION

The Company is organized based upon the nature of its products and services, and is composed of two operating segments each overseen by a segment manager. These segments are reflective of how the Company's Chief Executive Officer, who is its Chief Operating Decision Maker ("CODM"), reviews operating results for the purposes of allocating resources and assessing performance. The Company has not aggregated operating segments for purposes of identifying reportable segments.

The Distribution segment is the third largest power transmission/motion control industrial distributor in North America. The segment provides products including bearings, mechanical and electrical power transmission, fluid power, motion control, automation, material handling components, electrical control and power distribution, and MRO supplies to a broad spectrum of industrial markets throughout North America.

The Aerospace segment produces and/or markets widely used proprietary aircraft bearings and components; complex metallic and composite aerostructures for commercial, military and general aviation fixed and rotary wing aircraft; safe and arm solutions for missile and bomb systems for the U.S. and allied militaries; subcontract helicopter work; support for the Company's SH-2G Super Seasprite maritime helicopters and K-MAX® medium-to-heavy lift helicopters; and engineering services.

Summarized financial information by business segment is as follows:

For the year ended December 31,
In thousands 2013 2012 2011
Net sales:
Distribution $ 1,067,839 $ 1,012,059 $ 930,131
Aerospace (a) 613,967 580,769 547,403
Net sales $ 1,681,806 $ 1,592,828 $ 1,477,534
Operating income:
Distribution $ 43,326 $ 50,560 $ 46,894
Aerospace (b) 102,573 89,142 80,424
Net gain (loss) on sale of assets (128) (105) (269)
Corporate expense (45,291) (46,759) (39,468)
Operating income from continuing operations 100,480 92,838 87,581
Interest expense, net (c) 12,559 12,185 11,646
Other expense (income), net 425 (175) (339)
Earnings before income taxes from continuing operations 80,828 76,274
Income tax expense 30,797 26,900 26,346
Earnings from continuing operations $ 56,699 $ 53,928 $ 49,928
  1. Net sales by the Aerospace segment under contracts with U.S. Government agencies (including sales to foreign governments through foreign military sales contracts with U.S. Government agencies) totaled $262.9 million, $303.5 million and $268.1 million in 2013, 2012 and 2011, respectively.
  2. Operating income for 2013 includes a $2.1 million non-cash non-tax deductible goodwill impairment charge. Operating income for 2012 includes $3.3 million of net loss associated with the resolution of a program related matter. Operating income for 2011 includes $6.2 million in expense associated with the settlement of the FMU-143 matter.
At December 31,
In thousands 2013 2012 2011
Identifiable assets (a):
Distribution $ 480,117 $ 449,552 $ 374,144
Aerospace 557,831 521,080 513,556
Corporate (b) 102,683 126,361 108,698
Total assets $ 1,140,631 $ 1,096,993 $ 996,398
Capital expenditures:
Distribution $ 12,110 $ 10,867 $ 8,044
Aerospace 21,193 15,293 11,958
Corporate 7,625 6,409 8,814
Total capital expenditures $ 40,928 $ 32,569 $ 28,816
Depreciation and amortization:
Distribution $ 11,556 $ 9,565 $ 7,059
Aerospace 15,041 13,947 12,540
Corporate 5,278 4,871 3,569
Total depreciation and amortization $ 31,875 $ 28,383 $ 23,168
  1. Identifiable assets are year-end assets at their respective net carrying values segregated as to segment and corporate use.
  2. For the periods presented, the corporate identifiable assets are principally comprised of cash, short-term and long-term deferred income tax assets, capitalized debt issuance costs, cash surrender value of life insurance policies and fixed assets.

The following table summarizes total sales of the Company, which are principally derived from the sale of products:

For the year ended December 31,
2013 2012 2011
In thousands
Bearings and Power Transmission (a) $ 649,926 $ 651,635 $ 641,532
Automation, Control and Energy 271,465 220,999 193,130
Fluid Power 146,448 139,425 95,469
Military and Defense 384,088 346,290 352,735
Commercial Aerospace 229,879 234,479 194,668
Total sales (b) $ 1,681,806 $ 1,592,828 $ 1,477,534
  1. Aerospace bearings are not included in this caption, as they are broken out by Military and Defense and Commercial Aerospace.
  2. Service revenue was not material for the years ended December 31, 2013, 2012 and 2011.

Sales are attributed to geographic regions based on the location to which the product is shipped. Geographic distribution of sales recorded by continuing operations is as follows:

For the year ended December 31,
2013 2012 2011
In thousands
North America $ 1,470,360 $ 1,444,856 $ 1,351,766
Europe 107,297 99,187 84,542
Middle East 39,357 4,023 6,078
Asia 32,414 29,196 22,336
Oceania 28,892 10,249 9,163
Other 3,486 5,317 3,649
Total $ 1,681,806 $ 1,592,828 $ 1,477,534

Geographic distribution of long-lived assets is as follows:

At December 31,
2013 2012
In thousands
United States $ 373,268 $ 354,627
United Kingdom 64,585 61,562
Germany 20,260 12,718
Mexico 2,978 3,261
Total $ 461,091 $ 432,168