INVESTOR PRESENTATION
Kaman Corporation
(NASDAQ-GM: KAMN)
2Q/2007
Slide 1
Forward-looking Statements
Forward-Looking Statements
This presentation may contain forward-looking information relating to the company's business and prospects,
including the Aerospace, Industrial Distribution and Music businesses, operating cash flow, and other matters
that involve a number of uncertainties that may cause actual results to differ materially from expectations. Those
uncertainties include, but are not limited to: 1) the successful conclusion of competitions for government
programs and thereafter contract negotiations with government authorities, both foreign and domestic;
2) political conditions in countries where the company does or intends to do business; 3) standard government
contract provisions permitting renegotiation of terms and termination for the convenience of the government;
4) domestic and foreign economic and competitive conditions in markets served by the company, particularly
defense, commercial aviation, industrial production and the consumer market for music products; 5) risks
associated with successful implementation and ramp up of significant new programs; 6) satisfactory completion
of the Australian SH-2G(A) program, including negotiation of payment and performance terms for the balance
of the program as well as the additional work scope that would assist the Commonwealth in achieving
certification of the aircraft in Australia; 7) receipt and successful execution of production orders for the JPF U.S.
government contract including the exercise of all contract options and receipt of orders from allied militaries,
as both have been assumed in connection with goodwill impairment evaluations; 8) in the EODC/University
of Arizona litigation, successful defeat of the University’s appeal of the jury verdict in the company’s favor;
9) satisfactory resolution of (i) the company’s dispute with the U.S. Army procurement agency relating to
warranty work for the FMU-143 program and (ii) the 2005 DCIS investigation of that program; 10) satisfactory
results of negotiations with NAVAIR concerning purchase of the company's leased facility in Bloomfield,
Conn.; 11) continued support of the existing K-MAX helicopter fleet, including sale of existing K-MAX spare
parts inventory and in 2007, availability of a redesigned clutch assembly system; 12) cost growth in connection
with environmental remediation activities at the Moosup facility and such potential activities at the Bloomfield
facility; 13) profitable integration of acquired businesses into the company's operations; 14) changes in supplier
sales or vendor incentive policies; 15) the effect of price increases or decreases; 16) pension plan assumptions
and future contributions; 17) future levels of indebtedness and capital expenditures; 18) continued availability
of raw materials in adequate supplies; 19) the effects of currency exchange rates and foreign competition on future
operations; 20) changes in laws and regulations, taxes, interest rates, inflation rates, general business conditions
and other factors; and 21) other risks and uncertainties set forth in the company's annual, quarterly and current
reports, and proxy statements. Any forward-looking information provided in this report should be considered with
these factors in mind. The company assumes no obligation to update any forward-looking statements contained in
this presentation.
Contact:
Russell H. Jones, SVP, Chief Investment Officer & Treasurer
(860) 243-6307
Russell.Jones@kaman.com
Russell H. Jones, SVP, Chief Investment Officer & Treasurer
(860) 243-6307
Russell.Jones@kaman.com
Slide 2
Percent Distribution of Segment Sales: Full-year 2006
55%
9%
18%
6%
6%
6%
Kaman Corporation Segment Reporting Structure
•Kaman reports information in six
business segments: This
includes four segments within the
aerospace industry: Specialty
Bearings, Aerostructures,
Helicopters, and Fuzing; as well
as the Industrial Distribution and
Music segments.
•All segments have been part of
the company’s diversified
business mix since at least the
1980s.
EXHIBIT 2
Key Messages: Second Quarter Ended June 29, 2007
Slide 3
Four aerospace industry segments:
üSpecialty Bearings segment: Sales up 14.4%; Operating income up 22.3% in quarter. Demand for
segment’s proprietary product continues to grow.
üAerostructures segment: Sales up 36.8%; Operating income up 84.3% for quarter driven by
Sikorsky BLACK HAWK and Boeing 777 work at Jacksonville.
üHelicopters segment: Sales up 25.1%; Operating loss (due to Australia program charge) is lower in
quarter and close to break even. Quarter driven by ongoing Egypt SH-2G depot level maintenance and
upgrade programs-and by subcontract work on BLACK HAWK for Sikorsky.
üFuzing segment: Sales up 63.7%; Operating income up 170.6% for quarter. Sales increase driven
by Joint Programmable Fuze shipments. Still subject to quarter-by-quarter fluctuations.
Industrial Distribution segment: Sales up 2.4%, operating income down 10.4% for the quarter
üEconomic conditions mixed for quarter, but appear moderately favorable for second half
üInvesting in ramp-up of large new national account contracts
üSales increase not sufficient to cover incremental increases in operating expense
Music segment: Sales down 1.1%, operating income essentially flat for the quarter
üSoft market conditions for musical instrument sales
üCost control across the segment helped earnings
Four aerospace industry
segments
BUSINESS OVERVIEW
Slide 4
2006 sales for the four segments: $326.0 million
27%
Specialty Bearings $106.3 20% $31.5 $ 27.5
Aerostructures 78.7 69% 23.3 17.1
Helicopters 69.9 83% 19.0 15.2
Fuzing 71.1 89% 24.0 14.6Total these segments $326.0 60% $97.8 $ 74.4
Aerospace
Slide 5
Aerospace industry segments:
Percent share of Kaman’s 2006 aerospace
industry sales represented by each of the
four aerospace industry segments.
Year ended Quarter ended
Millions $ Sales Millions $ Sales
12/31/06 2006 6/29/07 6/30/06
Percent
Military
Sales by aerospace industry segment
Aerospace
Slide 6
Kamatics and RWG aerospace bearings
Specialty Bearings Segment:
4Designs and manufactures proprietary self-lubricating
bearings for OEM and MRO use in nearly all military
and commercial aircraft produced in North and
South America and Europe
4Strategy: Maintain leadership in product technical
performance and application engineering support
while staying ahead of the curve in product
technology enhancement:
4Target the most demanding applications early in the aircraft
design process as part of prime-contractors’ problem-
solving teams - and effectively address customers’ needs
by providing the highest performance available
4Market size: $0.5 billion high-end portion of the $ 1.2 billion
aerospace bearing market
4Key customers include: Military (U.S. and allied)
(20% of 2006 sales), and Commercial
(Boeing, Airbus, Embraer, Bombardier and others)
Aerospace
Slide 7
Top and Middle: Metals-oriented at Jacksonville
Bottom: Composites-oriented at Wichita
Aerostructures Segment:
4Produces parts and subassemblies for
Tier 1 Prime Manufacturers:
4Military programs including Boeing C-17
internal wing structures, Sikorsky BLACK HAWK
helicopter cockpits, and Sikorsky MH-92
helicopter composite tail rotor pylons
4Commercial programs including Boeing 777
subassemblies and 787 composite structures
4Strategy: Take advantage of substantial
opportunities arising from the larger
producers’(Airbus, Bell, Boeing, Sikorsky,
Vought, etc.) offloading of manufacturing
4Seeing opportunity for new
programs: Available capacity, well-located,
non-union, flexible, competitive
Aerospace
Slide 8
Top: Kaman SH-2G Super Seasprites
Middle: Kaman K-MAX BURRO
Bottom: Joining BLACK HAWK
helicopter sections at Bloomfield facility
Helicopters Segment:
4Markets and supports Kaman-made SH-2G Super
Seasprite maritime helicopter and K-MAX
“Aerial Truck” helicopter - and performs
subcontract helicopter programs
4Strategy: Take advantage of increasing
opportunities in subcontracting as the Tier 1
Prime producers shift from manufacturing to
final assembly and systems integration
4Principal customers include: The governments
of Australia, Egypt, New Zealand and Poland;
and The Sikorsky Aircraft Corporation
4Current principal programs include: SH-2G(A)
program for Australia (in a loss position), depot
level maintenance and upgrades to SH-2G(E)
helicopters for Egypt, K-MAX BURRO UAV program
and BLACK HAWK subcontract work for Sikorsky.
Aerospace
Slide 9
Fuzes for high profile missiles such as the
Hawk; and bomb programs including the Joint
Programmable Fuze (JPF)
Fuzing Segment:
4Manufactures safe, arm and fuzing devices
for a number of major missile and bomb programs
4Missile programs: AMRAAM, ATACMS, Brimstone,
M-100 Hawk, Harpoon, JASSM, Maverick,
SLAM-ER, Standard and Tactical Tomahawk
4Bomb programs: Joint Programmable Fuze,
FMU-143, FMU-139, 40mm
4Strategy: Become the leading producer of
fuzing systems for the U.S. and allied militaries
Market size estimate: $650 million
4Principal customers: U.S. and allied militaries,
Boeing, General Dynamics, Lockheed and
Raytheon
4Division includes Measuring & Memory
Systems products
Industrial Distribution
segment
BUSINESS OVERVIEW
Slide 10
2006 sales: $665.4 million
55%
Industrial Dist
Industrial Distribution
Slide 11
Industrial Distribution Segment
Extensive product catalogue
Value-added service
4Third largest player in $12 billion power transmission
market. Provides nearly two million products to more
than 50,000 MRO and OEM customers
4Strategy:
4Expand the geographic footprint in major industrial markets
to enhance competition for national and regional accounts.
4Broaden the product line and further enhance operating and
asset utilization efficiencies throughout the enterprise
4 Serves a broad cross section of North American
industry with local branches in 70 of the top 100 U.S. Industrial
markets. Growing national account base
4Now nearly 200 locations in the U.S., Canada
and Mexico
4The business tends to track the U.S. Industrial
production and capacity utilization indices
Industrial Distribution
Source: Federal Reserve Board
Slide 12
FRB Indices Of Industrial Production and Capacity Utilization:
Predictability: Segment tends to track national indices
Industrial Distribution
Slide 13
Portfolio Of Recognized Brands:
More than 1.7 million products sold to more than 50,000 MRO and OEM customers
Industrial Distribution
Slide 14
Geographical Coverage: Nearly 200 locations in U.S. Canada and Mexico
Music segment
BUSINESS OVERVIEW
Slide 15
2006 sales: $214.8 million
18%
Music
Music
Slide 16
Music Segment
Largest independent distributor of percussion and
fretted musical instruments and accessories;
Industry-leading information technology systems
4Largest independent distributor of musical
instruments and accessories in a $2.5 billion slice
of the $7.0 billion U.S. musical instruments market:
More than 20,000 products
4Strategy: Build on Kaman’s strong brand identity
while adding new market-leading names to the
company’s offering of proprietary products
4Leads the market in use of technology, providing
systems to service customers at all levels
4U.S. and Asian manufacturing supports Kaman’s
proprietary and licensed brands of
premium products
4Market is driven by consumer sentiment with
the Holiday selling season a key driver
Music
Slide 17
Source: The Conference Board
Consumer Confidence Index:
Music Sales are Highly Influenced by Consumer Sentiment/Holiday spending
Music
Slide 18
Largest Independent Distributor: Over 20,000 Products in Total
Premier Branded Products: 51% of Segment Sales
Financial Review
Slide 19
Sales:
2Q 2007: up 9.2% over 2Q 2006
Earnings before Income Tax:
See GAAP reconciliation (Slide 22)
for effect of one-time charges and gains in
second quarter 2007 and 2006
Net Earnings:
2Q 2007: up 34.4% over 2Q 2006
EPS - diluted:
Average diluted shares outstanding
2Q 2006: 24,880; 2Q 2007: 25,210
Income Statement Highlights for the Second-Quarter Periods
For the three-month periods ended
$293.0
$320.0
$12.1
$15.6
$7.5
$10.1
$0.31
$0.40
Slide 20
6/30/06 6/29/07
Sales:
1H 2007: up 8.1% over 1H 2006
Earnings before Income Tax:
See GAAP reconciliation (Slide 23)
for effect of one-time charges and gains in
first half 2007 and 2006
Net Earnings:
1H 2007: up 50.2% over 1H 2006
EPS - diluted:
Average diluted shares outstanding
1H 2006: 24,883; 1H 2007: 25,157
Income Statement Highlights for the First-Half Periods
For the six-month periods ended
$589.6
$637.3
$22.2
$31.6
$13.4
$20.1
$0.55
$0.81
Slide 21
6/30/06 6/29/07
These adjustments represent certain discrete items. The Company uses certain financial measures internally to focus management on
period-to-period changes in our business. Therefore, we believe that this supplemental information is meaningful to investors when considered in
connection with the information contained in the GAAP presentation of financial information. The presentation of these items is not meant to
represent results as defined by GAAP, nor as an alternative for financial performance as determined under GAAP.
Slide 22
GAAP reconciliations applicable to the Second-Quarter Periods
Three Months ended
June 29, 2007 Three Months ended
June 30, 2006 (In millions)As Reported Earnings
Before
Income
Taxes$15.6 Net
Earnings$10.1 Net
Earnings
Per Share
Diluted$0.40 Earnings
Before
Income
Taxes$12.1 $7.5Net
Earnings Net
Earnings Per
Share
Diluted$0.31 Add: Addition to Loss Reserve: Australia 2.4 1.4 0.06 2.8 1.7 0.07 Deductible and Non-Ded. Stock Appreciation Rgts. 0.8 0.6 0.03 Subtract: Deductible and Non-Ded.Stock Appreciation Rgts. (0.8) (0.6) (0.03) Recovery of Recapitalization Legal Fees (0.5) (0.5) (0.02) As Adjusted $18.8 $12.1 $0.49 $13.6 $ 8.1 $0.33
Six Months ended June 29, 2007 | Six Months ended June 30, 2006 | |||||
(In millions) | Earnings Before Income Taxes | Net Earnings | Net Earnings Per Share Diluted | Earnings Before Income Taxes | Net Earnings | Net Earnings Per Share Diluted |
As Reported | $31.6 | $20.1 | $0.81 | $22.2 | $13.4 | $0.55 |
Add: | ||||||
Addition to Loss Reserve: Australia | 4.9 | 2.9 | 0.12 | 5.3 | 3.2 | 0.13 |
Deductible and Non-Ded. Stock Appreciation Rgts. | 1.0 | 0.8 | 0.03 | 0.5 | 0.4 | 0.02 |
Subtract: | ||||||
Gain from Capitalized Freight-Adjustment (KIT) | (1.6) | (0.9) | (0.04) | |||
Recovery of Recapitalization Legal Fees | (0.5) | (0.5) | (0.02) | |||
As Adjusted | $37.5 | $23.8 | $0.96 | $25.9 | $15.6 | $0.64 |
These adjustments represent certain discrete items. The Company uses certain financial measures internally to focus management on
period-to-period changes in our business. Therefore, we believe that this supplemental information is meaningful to investors when considered in
connection with the information contained in the GAAP presentation of financial information. The presentation of these items is not meant to
represent results as defined by GAAP, nor as an alternative for financial performance as determined under GAAP.
Slide 23
GAAP reconciliations applicable to the First-Half Periods
Three Months Ended | ||
6/29/2007 | 6/30/2006 | |
Corporate expense before breakout items | $(7.0) | $(6.4) |
Breakout items: | ||
Stock appreciation rights expense | (0.8) | 0.8 |
Pension expense | (0.1) | (1.0) |
Supplemental employees’ retirement plan | (1.5) | (1.4) |
Group Insurance | (0.7) | (0.1) |
Legal - Recapitalization | -- | 0.5 |
Corporate expense - total | $(10.1) | $(7.6) |
Corporate Expense Highlights for the Second-Quarter Periods
Slide 24
Six Months Ended | ||
6/29/2007 | 6/30/2006 | |
Corporate expense before breakout items | $(13.3) | $(13.8) |
Breakout items: | ||
Stock appreciation rights expense | (1.0) | (0.5) |
Pension expense | (0.2) | (1.7) |
Supplemental employees’ retirement plan | (3.0) | (2.7) |
Group Insurance | (2.0) | 0.1 |
Legal - Recapitalization | -- | 0.5 |
Corporate expense - total | $(19.5) | $(18.1) |
Corporate Expense Highlights for the First-Half Periods
Slide 25
(In millions) | Sales | Operating Income | Operating Margin | |||
2Q/07 | 2Q/06 | 2Q/07 | 2Q/06 | 2Q/07 | 2Q/06 | |
Aerostructures | $23.3 | $17.1 | $3.7 | $2.0 | 15.8% | 11.7% |
Fuzing | 24.0 | 14.6 | 4.0 | 1.5 | 16.8% | 10.1% |
Helicopters | 19.0 | 15.2 | (0.2) | (1.1) | (1.3%) | (7.7%) |
Specialty Bearings | 31.5 | 27.5 | 10.2 | 8.3 | 32.4% | 30.3% |
Subtotal Aerospace | $97.8 | $74.4 | $17.7 | $10.7 | 18.1% | 14.3% |
Industrial Distribution | 174.6 | 170.5 | 8.3 | 9.3 | 4.8% | 5.4% |
Music | 47.6 | 48.1 | 1.6 | 1.6 | 3.4% | 3.4% |
Corporate Expense/Other Total | $320.0 | $293.0 | (10.1) $17.5 | (7.6) $14.0 | 1(3.2%) 5.5% | 1(2.6%) 4.8% |
1 Corporate expense percentage is to Total Sales
Three-Month Periods Ended June 29, 2007 and June 30, 2006
Slide 26
Income Statement Highlights for the Second-Quarter Periods
(In millions) | Sales | Operating Income | Operating Margin | |||
1H/07 | 1H/06 | 1H/07 | 1H/06 | 1H/07 | 1H/06 | |
Aerostructures | $48.5 | $34.0 | $8.2 | $4.4 | 17.0% | 12.8% |
Fuzing | 42.5 | 33.7 | 6.6 | 4.4 | 15.4% | 13.1% |
Helicopters | 36.5 | 26.7 | (1.3) | (3.2) | (3.5%) | (12.1%) |
Specialty Bearings | 63.4 | 53.6 | 20.8 | 15.1 | 32.7% | 28.1% |
Subtotal Aerospace | $190.9 | $148.0 | $34.3 | $20.7 | 18.0% | 14.0% |
Industrial Distribution | 348.0 | 341.1 | 17.0 | 1 20.1 | 4.9% | 5.9% |
Music | 98.4 | 100.5 | 3.2 | 2.9 | 3.3% | 2.9% |
Corporate Expense/Other | (19.5) | (18.0) | 2 (3.1%) | 2 (3.1%) | ||
Total | $637.3 | $589.6 | $35.0 | $25.7 | 5.5% | 4.3% |
1 Includes one-time $1.6 million gain
2 Corporate expense percentage is to Total Sales
Six-Month Periods Ended June 29, 2007 and June 30, 2006
Slide 27
Income Statement Highlights for the First-Half Periods
(In millions) | Sales | Operating Income | Operating Margin | |||
3Q/06 | 4Q/06 | 3Q/06 | 4Q/06 | 3Q/06 | 4Q/06 | |
Aerostructures | $21.4 | $23.3 | $3.5 | $3.7 | 16.1% | 15.9% |
Fuzing | 22.3 | 15.1 | 2.4 | 0.9 | 11.0% | 5.8% |
Helicopters | 15.4 | 27.8 | (1.1) | 4.5 | (7.0%) | 16.3% |
Specialty Bearings | 26.2 | 26.4 | 7.0 | 6.6 | 26.7% | 24.8% |
Subtotal Aerospace | $85.3 | $92.6 | $11.8 | $15.7 | 13.8% | 16.9% |
Industrial Distribution | $166.8 | $157.6 | $8.5 | 6.5 | 5.2% | 4.1% |
Music | 55.5 | 58.7 | 3.8 | 4.9 | 6.8% | 8.3% |
Corporate Expense/Other | (7.9) | (9.6) | 2(2.6%) | 2(3.1%) | ||
Total | $307.6 | $308.9 | 1$16.2 | $17.5 | 5.3% | 5.7% |
1 Includes $0.1 in net loss on sales or disposal of assets in 3Q/06
2 Corporate expense percentage is to Total Sales
Three-Month Periods Ended September 29, 2006 and December 31, 2006
Slide 28
This slide is included to provide third and fourth quarter 2006 augmented segment detail for the four recently disaggregated aerospace industry segments
Income Statement Highlights for the Third & Fourth Quarters of 2006
As of 6/29/07 | As of 12/31/06 | As of 6/30/06 | |
Notes Payable and Long-term Debt | $108.1 | $74.4 | $101.4 |
Shareholders’ Equity | $318.5 | $296.6 | $281.1 |
Debt as % of Total Capitalization | 25.3% | 20.1% | 26.5% |
Capital Expenditures | $6.8 | $13.2 | $5.0 |
Depreciation & Amortization | $5.7 | $10.5 | $5.2 |
Slide 29
Balance Sheet and Capital Factors
Public information is available on the Kaman website: www.kaman.com
KAMN
KAMAN CORPORATION
Traded on NASDAQ Global Market