Kaman Corporation (NASDAQ-GS: KAMN)
Kaman Corporation (NASDAQ-GS: KAMN)
Investor Presentation
March 2009
Distribution:
Industrial Distribution
2008 SALES AT $1.25 BILLION
2008 Sales $777 million
INDUSTRIAL DISTRIBUTION SEGMENT
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INDUSTRIAL DISTRIBUTION SEGMENT
Third largest industrial distribution firm in $20 billion power transmission
market.
market.
Strategy:
♦ Expand our geographic footprint in major industrial markets to enhance our
position in the competition for national and regional accounts
position in the competition for national and regional accounts
♦ Broaden our product offerings to gain additional business from existing
customers and new opportunities from a wider slice of the market
customers and new opportunities from a wider slice of the market
Customers:
♦ Broad cross section of industry with more than 50,000 customers served from
local branches in 72 of the top 100 U.S. Industrial markets. Growing national
account base.
local branches in 72 of the top 100 U.S. Industrial markets. Growing national
account base.
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ACQUISITIONS: Strategic Fit
§ Supports corporate strategy of accelerating growth of KIT
§ Adds additional product lines to our portfolio
§ Increases our capability to service national and regional customers
§ Adds proven management teams and dedicated employees
§ Industrial Supply Corporation, Richmond, VA, acquired March 31, 2008
• Adds $55 million in annual sales
• Increases Kaman’s presence in important Virginia (four branches) and N. Carolina
(two branches) markets
§ INRUMEC, Gurabo, Puerto Rico, Acquired October 3, 2008
• Four branches in Puerto Rico
• Adds $13 million in annual sales
• Provides a presence for Kaman in the important Puerto Rico market while avoiding the
costs and time of building a greenfield operation
costs and time of building a greenfield operation
KIT Branch Location
Distribution Center
ISC Branch Location
INRUMEC Location
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KAMAN INDUSTRIAL TECHNOLOGIES LOCATIONS
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INDUSTRIAL DISTRIBUTION SEGMENT
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KAMAN INDUSTRIAL TECHNOLOGIES - Current Market Update
§ Began experiencing negative organic sales growth during Q408
§ Planning for negative organic sales growth in 2009 of 10%-15%
§ Operating Margin in 2009 could be down as much as 150 basis points
§ Implementing contingency plans to maintain profitability, while leaving
the company positioned for the eventual economic recovery
§ Working to capitalize on acquisition opportunities created by the current
economic environment
AEROSPACE SEGMENT:
FOUR AEROSPACE BUSINESSES
2008 Sales $477 million
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SPECIALTY BEARINGS DIVISION:
Bloomfield, CT and Dachsbach, Germany
Bloomfield, CT and Dachsbach, Germany
Designs and manufactures proprietary self-lubricating
airframe bearings
airframe bearings
Programs:
♦ Kaman products are used in nearly all military and
commercial aircraft
commercial aircraft
Strategy:
♦ Maintain leadership in product technical performance and
application engineering support while staying ahead of
the curve in product technology enhancement, lean
manufacturing techniques and lead time reduction
application engineering support while staying ahead of
the curve in product technology enhancement, lean
manufacturing techniques and lead time reduction
Business Mix (approximate):
♦ Commercial 80%, Military 20%
♦ OEM 60%, After-Market 40%
Slide 11
PRECISION PRODUCTS DIVISION:
Middletown, CT & Orlando, FL
Fuzing Segment: Middletown, CT and Orlando, FL
Manufactures safe, arm and fuzing devices for major missile and
bomb programs.
bomb programs.
♦ Principal Missile programs: AMRAAM, ATACMS,
Harpoon, Maverick, Standard and Tactical Tomahawk
Harpoon, Maverick, Standard and Tactical Tomahawk
♦ Principal Bomb program: Joint Programmable Fuze
♦ Division includes Measuring & Memory systems products.
Strategy:
♦ Become the established leader in bomb and missile fuzes,
specialized memory products, precision measuring devices and
electro-optic sensor systems for military and commercial
applications
specialized memory products, precision measuring devices and
electro-optic sensor systems for military and commercial
applications
Principal customers:
♦ U.S. and allied militaries, Boeing General Dynamics, Lockheed
and Raytheon.
and Raytheon.
Business Mix:
♦ Military 97%, Commercial 3%
Slide 12
HELICOPTERS DIVISION: Bloomfield, CT
Full service helicopter subcontractor. Supports legacy SH-2G
Super Seasprite and K-MAX “Aerial Truck” helicopters.
Super Seasprite and K-MAX “Aerial Truck” helicopters.
Principal programs:
♦ Major maintenance and upgrades to Egyptian SH-2G(E)
♦ BLACK HAWK subcontract for Sikorsky
♦ Remarketing eleven SH-2G (I) helicopters
Strategy:
♦ Leverage systems knowledge and lean manufacturing to
take advantage of emerging assembly/subcontracting and
after-market/retrofit opportunities as helicopter prime
manufacturers focus on system design, integration, and
final assembly
take advantage of emerging assembly/subcontracting and
after-market/retrofit opportunities as helicopter prime
manufacturers focus on system design, integration, and
final assembly
Principal customers:
♦ The governments of Egypt, New Zealand and Poland;
Sikorsky and MDHI
Sikorsky and MDHI
Business Mix:
♦ Military 80%, Commercial 20%
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AEROSTRUCTURES DIVISION:
Jacksonville, FL; Wichita, KS; and Manchester, UK
Jacksonville, FL; Wichita, KS; and Manchester, UK
Produces parts and subassemblies for Tier 1 and Prime
Manufacturers; designs and builds mold and assembly tooling;
and provides after-market support for UK MoD platforms
Manufacturers; designs and builds mold and assembly tooling;
and provides after-market support for UK MoD platforms
♦ Military: Boeing C-17 internal wing structures, Sikorsky BLACK
HAWK helicopter cockpits, Sikorsky MH-92 helicopter
composite tail rotor pylons, JSF wing panels, A-400M FTAC, A
-10 wing components
HAWK helicopter cockpits, Sikorsky MH-92 helicopter
composite tail rotor pylons, JSF wing panels, A-400M FTAC, A
-10 wing components
♦ Commercial: Boeing 777 and 767 wing trailing edges,
A330/340 composite wing panels, new large wide-body
program
A330/340 composite wing panels, new large wide-body
program
Strategy:
♦ Expand our global market position as a supplier of complex,
composite and metallic structures and integrated subsystems
for military and commercial aircraft
composite and metallic structures and integrated subsystems
for military and commercial aircraft
Business Mix:
♦ Military 73%, Commercial 27%
Slide 14
Talented, committed employees - Proven management team
BROOKHOUSE HOLDINGS, LTD.: Strategic Fit
§ Acquired June 12, 2008, $55 million in annual sales
§ Accelerates growth and increases scale in Aerostructures market
§ Enhances our composite capabilities - RFI technology provides differentiator
§ Balanced portfolio of platforms and mix of business
• 47% Commercial, 53% Military
• 66% OEM, 34% Repair and Overhaul
§ Adds a world class tooling capability to Kaman’s portfolio
§ Provides entry into higher margin aftermarket services business
Slide 15
Complementary platform positions - improves diversification
AEROSTRUCTURES: Platforms
AEROSTRUCTURES WICHITA UPDATE
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§ Issues
q Entered into three large complex assembly programs without adequate
infrastructure
infrastructure
q Resulted in significant operational charges in 2008
♦ Goodwill impairment - - $7.8 million (Q2)
♦ Tooling - $2.5 million (Q1)
♦ Inventory - $1.8 million (Q3)
♦ Inefficiencies and other - $5.9 million (Q1-Q4)
§ Actions
q Installed new leadership
q Invested in people, tooling, and equipment to rebuild infrastructure
§ Results
q Resumed production for major customer
q AS9100 certification reinstituted
q Targeting break-even results late 2009/early 2010
Aerospace:
ü Appointed Greg Steiner, President Kaman Aerospace Group
ü Helicopters - Settlement negotiated with Commonwealth of Australia
ü Aerostructures - Awarded multi-year contract with a potential value in excess of
$100 million to supply Boeing with components for the A-10 re-wing program
$100 million to supply Boeing with components for the A-10 re-wing program
ü Aerostructures - European expansion through established footprint; acquired
Brookhouse Holdings, Limited
Slide 17
ü Specialty Bearings - Kamatics received UTC Supplier Gold Award
2008 SIGNIFICANT EVENTS
2008 SIGNIFICANT EVENTS
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Industrial Distribution:
ü Acquired Industrial Supply Corporation of Richmond, VA on 3/31/08
ü Savannah Distribution Center opened to support increased business in the
Southeast
Southeast
ü Acquired Industrial Rubber and Mechanics, Inc. of Puerto Rico on 10/3/08
Corporate:
ü Closed on a $50 million term loan in October
ü Appointed William Denninger, CFO to replace the retired Robert Garneau
Aerospace:
ü Helicopters - Took title to eleven SH-2G(I) aircraft formerly belonging to
the Commonwealth of Australia
Slide 19
Corporate:
ü Appointed Phil Goodrich VP Business Development with responsibility for:
1. Strategic planning and development
2. Mergers and acquisitions
3. New market development
4. Strategic Goal Deployment Initiative
2009 SIGNIFICANT EVENTS
§ Aerostructures - - Follow through on significant new business
opportunities (e.g. JSF, C-27J)
§ Precision Products - Obtain sole source award with higher price on JPF
USG sales under options 6, 7 and 8
USG sales under options 6, 7 and 8
§ Industrial Distribution - capitalize on acquisition opportunities for
regional/local competitors
regional/local competitors
§ Company-wide - - achieve $35M To $40M free cash flow
Slide 20
§ Helicopters - - Comprehensive marketing program for eleven SH-2G(I) aircraft,
significant P&L upside potential
2009 KEY INITIATIVES
FINANCIAL REVIEW
38%
2008 Sales $1.25 billion
Slide 21
1 Corporate expense percentage is to Total Sales
(In thousands) SEGMENTS | Net Sales | Operating Income/(Loss) | Operating Margin | |||
2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |
1. Industrial Distribution | $ 776,970 | $ 700,174 | $35,397 | $33,038 | 4.6% | 4.7% |
2. Specialty Bearings | 141,540 | 124,009 | 50,168 | 41,387 | 35.4% | 33.4% |
3. Precision Products | 118,009 | 87,455 | 7,299 | 10,546 | 6.2% | 12.1% |
4. Helicopters | 69,435 | 72,031 | 10,066 | 2,631 | 14.5% | 3.7% |
5. Aerostructures | 147,641 | 102,362 | (5,925) | 13,219 | (4.0%) | 12.9% |
6. Subtotal Aerospace | 476,625 | 385,857 | 61,608 | 67,783 | 12.9% | 17.6% |
7. Net gain/(loss) on sale of assets | 221 | 2,579 | ||||
8. Corporate expense | (31,960) | (38,672) | 1 (2.5%) | 1(3.6%) | ||
9. Sales/Op. inc. from continuing ops | $1,253,595 | $1,086,031 | $65,266 | $64,728 | 5.2% | 6.0% |
Slide 22
INCOME STATEMENT HIGHLIGHTS
For years ended December 31, 2008 and 2007
For years ended December 31, 2008 and 2007
(In Millions) | As of 12/31/08 | As of 12/31/07 | As of 12/31/06 |
1. Cash and Cash Equivalents | $8.2 | $73.9 | $12.7 |
2. Notes Payable and Long-term Debt | $94.2 | $12.9 | $74.4 |
3. Shareholders’ Equity | $274.3 | $394.5 | $296.6 |
4. Debt as % of Total Capitalization | 25.6% | 3.2% | 20.1% |
5. Capital Expenditures (YTD Continuing Operations) | $16.0 | $14.2 | $12.1 |
6. Depreciation & Amortization (YTD Continuing Operations) | $12.8 | $9.9 | $8.8 |
BALANCE SHEET AND CAPITAL FACTORS
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Forward-Looking Statements
This presentation may contain forward-looking information relating to the company's business and prospects, including the Aerospace and
Industrial Distribution 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 the defense, commercial aviation and industrial production markets; 5) risks associated with successful
implementation and ramp up of significant new programs; 6) management's success in resolving operational issues at the Aerostructures
Wichita facility, including successful negotiation of the Sikorsky Canadian MH-92 program; 7) successful resale of the aircraft, equipment and
spare parts obtained in connection with the Australia SH-2G (A) program termination; 8) receipt and successful execution of production
orders for the JPF U.S. government contract, including the exercise of all contract options, successful negotiation of price increases with the
U.S. government, and receipt of orders from allied militaries, as all have been assumed in connection with goodwill impairment evaluations; 9)
satisfactory resolution of the company’s litigation with the U.S. Army procurement agency relating to the FMU-143 program; 10) continued
support of the existing K-MAX helicopter fleet, including sale of existing K-MAX spare parts inventory; 11) cost growth in connection with
environmental remediation activities at the Bloomfield, Moosup and New Hartford, CT facilities and our recently acquired Brookhouse facilities;
12) profitable integration of acquired businesses into the company's operations; 13) changes in supplier sales or vendor incentive policies; 14)
the effects of price increases or decreases; 15) pension plan assumptions and future contributions; 16) future levels of indebtedness and
capital expenditures; 17) continued availability of raw materials and other commodities in adequate supplies and the effect of increased costs
therefor; 18) the effects of currency exchange rates and foreign competition on future operations; 19) changes in laws and regulations, taxes,
interest rates, inflation rates, general business conditions and other factors; 20) future repurchases and/or issuances of common stock; 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 presentation should be considered with these factors in mind. The company assumes no obligation to update any
forward-looking statements contained in this presentation.
Industrial Distribution 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 the defense, commercial aviation and industrial production markets; 5) risks associated with successful
implementation and ramp up of significant new programs; 6) management's success in resolving operational issues at the Aerostructures
Wichita facility, including successful negotiation of the Sikorsky Canadian MH-92 program; 7) successful resale of the aircraft, equipment and
spare parts obtained in connection with the Australia SH-2G (A) program termination; 8) receipt and successful execution of production
orders for the JPF U.S. government contract, including the exercise of all contract options, successful negotiation of price increases with the
U.S. government, and receipt of orders from allied militaries, as all have been assumed in connection with goodwill impairment evaluations; 9)
satisfactory resolution of the company’s litigation with the U.S. Army procurement agency relating to the FMU-143 program; 10) continued
support of the existing K-MAX helicopter fleet, including sale of existing K-MAX spare parts inventory; 11) cost growth in connection with
environmental remediation activities at the Bloomfield, Moosup and New Hartford, CT facilities and our recently acquired Brookhouse facilities;
12) profitable integration of acquired businesses into the company's operations; 13) changes in supplier sales or vendor incentive policies; 14)
the effects of price increases or decreases; 15) pension plan assumptions and future contributions; 16) future levels of indebtedness and
capital expenditures; 17) continued availability of raw materials and other commodities in adequate supplies and the effect of increased costs
therefor; 18) the effects of currency exchange rates and foreign competition on future operations; 19) changes in laws and regulations, taxes,
interest rates, inflation rates, general business conditions and other factors; 20) future repurchases and/or issuances of common stock; 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 presentation should be considered with these factors in mind. The company assumes no obligation to update any
forward-looking statements contained in this presentation.
Contact:
Eric B. Remington, Vice President
(860) 243-6334
Eric.Remington@kaman.com
Eric B. Remington, Vice President
(860) 243-6334
Eric.Remington@kaman.com