1
INVESTOR PRESENTATION
Kaman Corporation
(NASDAQ-GM: KAMN)
3Q/2007
Slide 1
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 any additional work scope requested by the Commonwealth; 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) the University of Arizona’s continued failure to succeed
in its appeals efforts to overturn the jury verdict that rejected the University's breach of contract claim against the company; 9) satisfactory resolution
of (i) the company’s contract dispute with the U.S. Army procurement agency relating to 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; 12) cost growth in connection with
environmental remediation activities at the Moosup facility and such potential activities at the Bloomfield facility; 13) whether and when Kaman's music
business is sold on the terms set forth in an agreement entered into as of October 27, 2007; 14) profitable integration of acquired businesses into the
company's operations; 15) changes in supplier sales or vendor incentive policies; 16) the effect of price increases or decreases; 17) pension plan
assumptions and future contributions; 18) future levels of indebtedness and capital expenditures; 19) continued availability of raw materials in
adequate supplies; 20) the effects of currency exchange rates and foreign competition on future operations; 21) changes in laws and regulations,
taxes, interest rates, inflation rates, general business conditions and other factors; and 22) 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.
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 any additional work scope requested by the Commonwealth; 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) the University of Arizona’s continued failure to succeed
in its appeals efforts to overturn the jury verdict that rejected the University's breach of contract claim against the company; 9) satisfactory resolution
of (i) the company’s contract dispute with the U.S. Army procurement agency relating to 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; 12) cost growth in connection with
environmental remediation activities at the Moosup facility and such potential activities at the Bloomfield facility; 13) whether and when Kaman's music
business is sold on the terms set forth in an agreement entered into as of October 27, 2007; 14) profitable integration of acquired businesses into the
company's operations; 15) changes in supplier sales or vendor incentive policies; 16) the effect of price increases or decreases; 17) pension plan
assumptions and future contributions; 18) future levels of indebtedness and capital expenditures; 19) continued availability of raw materials in
adequate supplies; 20) the effects of currency exchange rates and foreign competition on future operations; 21) changes in laws and regulations,
taxes, interest rates, inflation rates, general business conditions and other factors; and 22) 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
Slide 2
Percent Distribution of Segment Sales: Full-year 2006
55%
9%
18%
6%
6%
6%
Discontinued Operations
Kaman Corporation Segment Reporting Structure
•Kaman reports information in six
business segments: Five of these
comprise continuing operations,
including
–Four aerospace industry
segments:
•Specialty Bearings
•Aerostructures
•Helicopters, and
•Fuzing
–As well as the Industrial
Distribution segment.
•In addition there is one segment,
Music, comprising discontinued
operations.
EXHIBIT 2
Highlights: Third Quarter Ended September 28, 2007
Slide 3
Four Aerospace industry segments:
üAerostructures segment: Sales up 19.9% driven by Sikorsky BLACK HAWK and other Jacksonville programs;
Operating income down 52.8% for quarter due to adjustments related to the simultaneous ramp-up of several new
programs at Wichita
üFuzing segment: Sales flat; Operating income up 9.7% for quarter. Segment remains subject to
quarter-by-quarter fluctuation.
üHelicopters segment: Sales up 18.1% driven by Egypt SH-2G depot level maintenance program and upgrades -
and by subcontract work on BLACK HAWK for Sikorsky. Operating income of $2.3 million compared to a loss of
$1.1 million in last-year third quarter. Australia Program charge is lower.
üSpecialty Bearings segment: Sales up 17.5%; Operating income up 55.7% in quarter. Strong demand in a good
market. Record backlogs.
Industrial Distribution segment: Sales up 6.8%; Operating income up 5.3% 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
Four aerospace industry
segments
BUSINESS OVERVIEW
Slide 4
2006 sales for the four segments: $326.0 million
27%
Millions $ Sale Year ended 12/31/06 | Percent Military 2006 |
$106.3 | 20% |
78.7 | 69% |
69.9 | 83% |
71.1 | 89% |
$326.0 | 60% |
Millions $ Sales | |
Quarter ended | |
9/28/07 | 9/29/06 |
$30.7 | $ 26.2 |
25.7 | 21.5 |
18.2 | 15.4 |
22.1 | 22.3 |
$96.7 | $ 85.4 |
Specialty Bearings
Aerostructures
Helicopters
Fuzing
Aerospace
Slide 5
Aerospace industry segments:
Percent share of Kaman’s 2006 aerospace
industry sales represented by each of the
four aerospace industry segments.
Total these segments
Sales by aerospace industry segment
Aerospace
Slide 6
Kamatics airframe bearings and
high-performance drive couplings
RWG bearings
Specialty Bearings Segment: Bloomfield, CT and Dachsbach, Germany
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, applying innovative technology, develop
and manufacture proprietary products which effectively
address customers’ needs by providing the highest
performance and service 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)
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: Jacksonville, FL and Wichita, KS
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: Joining BLACK HAWK
helicopter sections at Bloomfield facility
Bottom: Kaman K-MAX BURRO
Helicopters Segment: Bloomfield, CT
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 Sikorsky.
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, and BLACK HAWK
subcontract work for Sikorsky.
Aerospace
Slide 9
Fuzes for high profile missile and bomb programs
including the Joint Programmable Fuze (JPF); and high
performance measuring and memory devices.
Fuzing Segment: Middletown, CT and Orlando, FL
4Manufactures safe, arm and fuzing devices
for major missile and bomb programs.
4Principal Missile programs: AMRAAM, ATACMS,
Harpoon, Maverick, Standard and Tactical Tomahawk
4Principal Bomb program: Joint Programmable Fuze
4Strategy: Become a 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 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.
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.
4Serves 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
Geographical Coverage: Approximately 200 locations in U.S., Canada and Mexico
Discontinued
Operations
(Music Segment)
BUSINESS OVERVIEW
Slide 14
2006 sales: $214.8 million
18%
Discontinued Operations
Slide 15
Discontinued Operations: 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
4On October 29, 2007, Kaman announced an agreement
to sell 100% of segment to Fender Musical
Instruments Corp. for approximately $117 million.
Stock transaction.
4Closing targeted to occur prior to January 1, 2008
subject to favorable Hart-Scott-Rodino antitrust
review and customary conditions.
4When closed, transaction expected to result
in an after tax gain of approximately $14 million,
or $0.55 per share, fully diluted and generate
net proceeds of approximately $100 million.
4Proceeds to be used initially to reduce
indebtedness and thereafter to pursue strategic
objectives.
Financial Review
Slide 16
Sales:
3Q 2007: up 7.9% over 3Q 2006
Earnings before Income Tax:
See GAAP reconciliation (Slide 19)
for effect of one-time charge in
third quarter 2007 and 2006
Net Earnings:
3Q 2007: up 34.3% over 3Q 2006
Income Statement Highlights for Continuing and Discontinued Operations
For the three-month periods ended
$307.6
$331.9
$14.4
$19.0
$8.7
$11.7
$0.36
$0.47
Slide 17
9/29/069/28/07
EPS - diluted:
Average diluted shares outstanding
9/29/06: 24,794; 9/28/07: 25,336
Average diluted shares outstanding
9/29/06: 24,794; 9/28/07: 25,336
Sales:
1st 9 Mos 2007: up 8.0% over 1st 9 Mos 2006
1st 9 Mos 2007: up 8.0% over 1st 9 Mos 2006
Earnings before Income Tax:
See GAAP reconciliation (Slide 20)
for effect of one-time charge in 1st 9 Mos of 2007 and 2006
Net Earnings:
1st 9 Mos 2007: up 43.9% over 1st 9 Mos 2006
EPS - diluted:
Average diluted shares outstanding
9/29/06: 24,854; 9/28/07: 25,217
1st 9 Mos 2007: up 43.9% over 1st 9 Mos 2006
EPS - diluted:
Average diluted shares outstanding
9/29/06: 24,854; 9/28/07: 25,217
Income Statement Highlights for Continuing and Discontinued Operations
For the first nine-month periods ended
$897.2
$969.2
$36.6
$50.6
$22.1
$31.9
$0.91
$1.28
Slide 18
9/29/069/28/07
Three Months endedSeptember 28, 2007 Three Months endedSeptember 29, 2006(In thousands) EarningsBeforeIncomeTaxes NetEarnings NetEarningsPerShareDiluted EarningsBeforeIncomeTaxes NetEarnings NetEarningsPerShareDiluted As Reported $18,982 $11,737 $0.47 $14,408 $8,738 $0.36 Add: Addition to Loss Reserve:Australia 768 461 0.02 2,497 1,498 0.06 As Adjusted $19,750 $12,198 $0.49 $16,905 $10,236 $0.42
This adjustment represents a discrete item. 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 this item is not meant to represent results as
defined by GAAP, nor as an alternative for financial performance as determined under GAAP.
Slide 19
GAAP reconciliation applicable to the Third-Quarter Periods
This adjustment represents a discrete item. 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 this item is not meant to represent results as
defined by GAAP, nor as an alternative for financial performance as determined under GAAP.
Slide 20
GAAP reconciliation applicable to the First Nine Month Periods
Nine Months ended September 28, 2007 | Nine Months ended September 29, 2006 | |||||
(In thousands) | Earnings Before Income Taxes | Net Earnings | Net Earnings Per Share Diluted | Earnings Before Income Taxes | Net Earnings | Net Earnings Per Share Diluted |
As Reported | $50,628 | $31,871 | $1.28 | $36,604 | $22,144 | $0.91 |
Add: | ||||||
Addition to Loss Reserve: Australia | 5,617 | 3,371 | 0.14 | 7,807 | 4,684 | 0.19 |
As Adjusted | $56,245 | $35,242 | $1.42 | $44,411 | $26,828 | $1.10 |
(In millions) | Net Sales | Operating Income/(Loss) | Operating Margin | |||
SEGMENTS | 3Q/07 | 3Q/06 | 3Q/07 | 3Q/06 | 3Q/07 | 3Q/06 |
Aerostructures | $25.7 | $21.5 | $1.6 | $3.5 | 6.3% | 16.1% |
Fuzing | 22.1 | 22.3 | 2.7 | 2.4 | 12.2% | 11.0% |
Helicopters | 18.2 | 15.4 | 2.3 | (1.1) | 12.5% | (7.0%) |
Specialty Bearings | 30.7 | 26.2 | 10.9 | 7.0 | 35.3% | 26.7% |
Subtotal Aerospace | 96.7 | 85.4 | 17.5 | 11.8 | 18.0% | 13.8% |
Industrial Distribution | 178.1 | 166.7 | 9.0 | 8.6 | 5.1% | 5.2% |
Corporate Expense/Other | (9.5) | (8.0) | 1(2.9%) | 1(2.6%) | ||
Total from Continuing perations | 274.8 | 252.1 | 17.0 | 12.4 | 6.2% | 4.9% |
Discontinued Operations | 57.1 | 55.5 | 3.7 | 3.8 | 6.5% | 6.8% |
Total | $331.9 | $307.6 | $20.7 | $16.2 | 6.2% | 5.3% |
1 Corporate expense percentage is to Total Sales
Slide 21
Income Statement Highlights for the Third-Quarter Periods
(In millions) | Net Sales | Operating Income/(Loss) | Operating Margin | |||
SEGMENTS | 9Mos/07 | 9Mos/06 | 9Mos/07 | 9Mos/06 | 9Mos/07 | 9Mos/06 |
Aerostructures | $74.2 | $55.4 | $9.9 | $7.8 | 13.3% | 14.1% |
Fuzing | 64.6 | 56.0 | 9.2 | 6.9 | 14.3% | 12.3% |
Helicopters | 54.7 | 42.1 | 1.0 | (4.3) | 1.9% | (10.2%) |
Specialty Bearings | 94.2 | 79.8 | 31.6 | 22.1 | 33.6% | 27.7% |
Subtotal Aerospace | 287.7 | 233.4 | 51.7 | 32.5 | 18.0% | 13.9% |
Industrial Distribution | 526.1 | 507.8 | 26.0 | 28.7 | 5.0% | 5.6% |
Corporate Expense/Other | (29.0) | (25.9) | 1 (3.0%) | 1 (2.9%) | ||
Total from Continuing Operations | 813.8 | 741.2 | 48.8 | 35.2 | 6.0% | 4.7% |
Discontinued Operations | 155.4 | 156.0 | 6.9 | 6.7 | 4.5% | 4.3% |
Total | $969.2 | $897.2 | $55.7 | 41.9 | 5.7% | 4.7% |
1 Corporate expense percentage is to Total Sales
Slide 22
Income Statement Highlights for the First Nine Month Periods
(In thousands) | As of 9/28/07 | As of 12/31/06 | As of 9/29/06 |
Notes Payable and Long-term Debt | $99,940 | $74,423 | $97,721 |
Shareholders’ Equity | $332,060 | $296,561 | $287,652 |
Debt as % of Total Capitalization | 23.1% | 20.1% | 25.4% |
Capital Expenditures (Continuing Operations) | $9,301 | $12,099 | $7,354 |
Depreciation & Amortization (Continuing Operations) | $7,204 | $8,754 | $6,612 |
Slide 23
Balance Sheet and Capital Factors
Public information is available on the Kaman website: www.kaman.com
KAMN
KAMAN CORPORATION
Traded on NASDAQ Global Market