<page>
KAMAN CORPORATION REPORTS 2002 SECOND QUARTER,
SIX MONTH RESULTS
BLOOMFIELD, Connecticut (August 1, 2002) - Kaman Corp. (NASDAQ:
KAMNA) today reported financial results for the second quarter
and six months ended June 30, 2002.
In the quarter, the company recorded pre-tax charges totaling
$86.0 million (of which $52.7 million are non-cash) to cover the
write-down of K-MAX helicopter assets, principally inventories;
for cost growth associated with the Australian SH-2G(A)
helicopter program; and to phase out operations at its Moosup,
Conn. plant. Details are provided in the Aerospace segment
discussion.
Including the pre-tax charges, the company reported a net loss
for the second quarter of $50.4 million, or $2.25 loss per share
diluted, compared to a net loss of $12.5 million, or $0.56 net
loss per share diluted, in the 2001 second quarter. Excluding
the charges, 2002 second quarter net earnings were $5.6 million,
or $0.25 per share diluted. The 2001 second quarter loss included
a $31.2 million adjustment to sales and pre-tax earnings
associated with a change in estimated costs to complete the
SH-2G(A) helicopter program for Australia. Excluding the
adjustment, 2001 second quarter net earnings were $8.3 million,
or $0.36 per share diluted.
Revenues for the second quarter of 2002 were $209.4 million,
compared to $194.6 million the previous year. The Australia
program adjustments reduced revenue in the three-month period by
$6.5 million in 2002 and by $31.2 million in 2001.
Paul R. Kuhn, chairman, president and CEO, said, "It was a
difficult quarter as our Aerospace segment continued to work
toward completion of the Australian SH-2G(A) program with new
subcontractors while simultaneously reaching the decision to
reduce the scope of the K-MAX program. The segment also
continued to be affected by the absence of new helicopter orders
and lower commercial aircraft production rates. This was
reflected in our decision to phase out the Moosup plant and move
the operations to other, more efficient company facilities. While
these were not easy decisions, we believe they will position the
company for future growth.
"During the quarter, we continued to win new aerostructures work
and to build the advanced technology products businesses. We also
worked to bring on line two strategically important acquisitions
- -- PlasticFab, a Wichita-based aircraft component manufacturer
acquired late in 2001 and Dayron, a Florida-based leader in
precision guided munitions fuzes for the U. S. Air Force and
Army, acquired in July 2002. We also announced an agreement to
acquire RWG Frankenjura-Industrie Flugwerklager GmbH, a German
aerospace bearing manufacturer that complements our proprietary
Kamatics bearings and increases Kaman's presence in vital
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"Kaman Reports Second Quarter Results"
August 1, 2002
European aerospace markets. This acquisition was completed on
July 29.
"On the industrial side, we are starting to see some early signs
of economic improvement in the manufacturing sector which, if
they hold, would benefit our Industrial Distribution business
several months down the road," Kuhn said. "Our acquisition of
A-C Supply last fall has given us an expanded presence in the
Upper Midwest, and we are seeing good results from our purchase
this spring of a majority interest in a distributor in Mexico."
"Music Distribution had a reasonably good quarter despite the
difficult economic conditions, and toward the end of the quarter
we added another new premier product line, Sabian cymbals and
percussion accessories, to our product offerings," Kuhn said.
For the 2002 first half, including the pre-tax charges, the
company reported a net loss of $45.0 million, or $2.01 loss per
share diluted, compared to a net loss of $3.8 million, or $0.17
loss per share diluted in the same period last year. Excluding
the $86.0 million in pre-tax charges, the 2002 six-month net
earnings were $11.0 million, or $0.48 per share diluted.
Excluding the Australia program adjustment, 2001 six-month
earnings were $17.0 million, or $0.74 per share diluted.
Six-month period revenues were $432.7 million in 2002, compared
to $439.3 million for the first half of last year. The Australia
program adjustments reduced revenue in the six-month period by
$6.5 million in 2002 and by $31.2 million in 2001.
The 2002 second quarter and six month results include a pre-tax
$1.9 million gain from the sale of the company's microwave
products line. The 2001 second quarter and six month results
included gains from the sale of facilities of $0.7 million in the
first quarter and an additional $2.0 million in the second quarter.
The tax benefit for the first half of 2002 is calculated at
approximately 34 percent and represents the combined estimated
federal and state tax effect attributable to the loss. In the
2001 period, the company adjusted its estimated tax rate to 25
percent, primarily due to reduced tax considerations on the
Australian helicopter program.
SEGMENT PERFORMANCE
Aerospace Segment
- -----------------
The Aerospace segment had an operating loss of $78.0 million in
the second quarter of 2002. Excluding the pre-tax charges
described below, the segment had an operating profit of $8.0
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"Kaman Reports Second Quarter Results"
August 1, 2002
million. In the 2001 quarter the segment had an operating loss
of $20.9 million. Excluding the sales and pre-tax earnings
adjustment, the segment had an operating profit of $10.3 million
in the 2001 second quarter. Sales for the second quarter 2002
were $60.4 million, compared to $54.6 million in the quarter last
year. Excluding the impact of the Australia program adjustments,
2002 sales for the quarter were $66.9 million, compared to $85.8
million for 2001.
In the first half of 2002, the segment had an operating loss of
$68.9 million. Excluding the pre-tax charges, the segment had
operating profit of $17.1 million. In 2001, the segment had an
operating loss of $10.7 million in the six-month period.
Excluding the 2001 second quarter adjustment, the segment had an
operating profit of $20.5 million in the six-month period. Sales
for the first six months of 2002 were $136.0 million, compared to
$146.7 million the previous year. Excluding the impact of the
Australia program adjustments, sales in the first half of 2002
were $142.5 million, compared to $177.9 million in 2001.
Helicopter Programs
Helicopter program revenues represented approximately 23 percent
of segment sales for the second quarter of 2002, compared to
approximately 21 percent a year ago, including the adjustments.
These percentages reflect reduced revenues from the SH-2G
helicopter programs for Australia and New Zealand as those
programs mature, and the absence of K-MAX helicopter sales in
both periods.
The $86.0 million in pre-tax charges include a non-cash $50.0
million charge for the write-down of K-MAX helicopter program
assets, including $46.7 million for inventories and $3.3 million
for fixed assets associated with the program. Development costs
for the aircraft were previously written off.
Following a market evaluation of the K-MAX program, management
has decided it will produce aircraft only upon firm order by a
customer. In connection with this, the company has written down
the value of existing aircraft, excess spare parts, and equipment
inventories and going forward will maintain adequate inventories
and personnel to support the fleet of K-MAX aircraft. Management
plans to pursue both a sale and short-term lease program for
existing new and used K-MAX aircraft inventory.
The pre-tax charges also include the impact of $25.0 million of
cost growth on the Australia SH-2G(A) helicopter program, which
has put the contract in a loss position. Accordingly, the
company has eliminated the $6.5 million profit element of
previously recorded sales and has recognized pre-tax loss
accruals of $18.5 million for anticipated cost growth associated
with completion, final integration and testing of the aircraft's
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"Kaman Reports Second Quarter Results"
August 1, 2002
advanced Integrated Tactical Avionics System (ITAS) software.
The Australian program involves 11 aircraft, 10 of which are
substantially complete. As previously reported, all of these
aircraft lack the full ITAS software. The company has been
required to select new subcontractors to complete the software
development as a result of a contract dispute settlement with the
original software supplier. One result of the negotiation
process with the new subcontractors is that Kaman now has
responsibility for aircraft system integration, previously a
subcontracted task. Work with the new subcontractors is
proceeding and the company continues its discussions with Royal
Australian Navy officials to develop an acceptable plan for
completion of aircraft deliveries with the full ITAS software,
which plan is expected to include phased acceptance of the
aircraft. The company anticipates that the fully completed ITAS
software will be installed and operational by the end of 2004.
Also included in the second quarter pre-tax charges is $11.0
million for the cost of phasing out the company's aircraft
manufacturing plant in Moosup, Conn. in 2003. As previously
announced, the work done at Moosup, the company's oldest and
least efficient facility, will be relocated to other company
facilities. The charges represent severance costs, asset
write-offs and the cost of closing the facility. An additional
$8.3 million of ongoing pre-tax costs are expected to be incurred
in the second half of 2002 and later periods, mostly in 2003, for
moving machinery and recertifying products and processes.
In other news, all four SH-2G(NZ) helicopters for New Zealand
have been delivered and completed final acceptance by the New
Zealand Defence Force. A fifth aircraft, ordered on option under
the original contract, is scheduled for delivery before the end
of 2002.
In June 2002, the company received a $4.2 million contract to
support 10 SH-2G aircraft already in service with the Egyptian
Air Force. The company is in a competition to supply up to six
search and rescue helicopters to Egypt. The company has discussed
this potential work in previous communications and has indicated
it does not expect that any award will be made prior to the
fourth quarter of 2002. Events in that region of the world are
making it more difficult to estimate when the customer might act
on this procurement.
The company received a small initial contract in February to
begin a process toward refurbishing four existing SH-2Gs
previously in service with the U. S. Navy Reserves to operate
aboard two Polish Navy frigates in multi-mission roles such as
surface surveillance and anti-submarine warfare. The company
expects to sign a contract soon for follow-on work to provide for
reactivation of the aircraft, modifications, pilot, sensor and
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"Kaman Reports Second Quarter Results"
August 1, 2002
mechanic training, as well as initial spares and ongoing
contractor engineering and technical support.
Aircraft Structures and Components
Aircraft structures and components business represented
approximately 55 percent of segment sales for the second quarter
of 2002 compared to approximately 58 percent a year ago.
Aerostructure subcontract work involves commercial and military
aircraft programs. Current programs include production of wing
structures for virtually all Boeing commercial aircraft and major
structural assemblies for the C-17 military transport.
In May, the company received a new incremental contract from the
Boeing Commercial Airplane Group to supply aircraft subassemblies
that will become part of aircraft fuselages, wings and tail
structures for Boeing's 747, 757, 767 and 777 airliners.
Helicopter subcontract work involves commercial helicopter
programs. Current programs include the production of fuselages
and rotor systems for various MD Helicopters, Inc. aircraft; this
work is now projected to run at significantly lower sales rates
than originally anticipated.
The company's Kamatics specialty bearing business continued to be
affected by the drop-off in commercial and regional aircraft
manufacturing. This was offset to some degree by increases in
the commercial aftermarket and military programs. The
acquisition of RWG Frankenjura-Industrie Flugwerklager
complements Kamatics' existing line of proprietary bearings for
aircraft and other specialized uses. RWG employs 85 people and
had sales in 2001 of approximately U.S. $10 million. Its largest
customer is Airbus Industries.
Advanced Technology Products
The company's advanced technology products accounted for
approximately 22 percent of Aerospace segment sales in the second
quarter of 2002, compared to about 21 percent a year ago.
The company said its advanced technology product area is
benefiting from increased defense spending. The company
manufactures a mix of products for military and commercial
markets, including missile safe, arm and fuzing devices for a
number of major missile programs; and precision measuring
systems, mass memory systems, electromagnetic motors and
electro-optic systems. The company sold its microwave products
line in April.
The company's Electromagnetics Development Center (EDC) received
contracts during the quarter to supply permanent magnet motor and
electronic drives for an advanced technology bus program in
Boston and for oil and gas drilling rigs. EDC also was part of
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"Kaman Reports Second Quarter Results"
August 1, 2002
the industry team selected by the U. S. Navy to design the
integrated electric drive system for the Navy's DD(X) next
generation surface vessel. The DD(X) contract award has not yet
been made pending resolution of the losing team's protest, and
final negotiations.
On July 1, the company completed its acquisition of weapons fuze
manufacturer, Dayron, located in Orlando, Fla. Dayron
manufactures bomb fuzes for a variety of munitions programs, and
has the contract to develop a fuze for the Air Force Joint
Programmable Fuze (JPF) program. "The joining of Dayron's bomb
fuze programs with Kaman's missile fuze programs will make us the
leading fuze supplier for precision guided munitions for the
U.S. Air Force and Navy," Kuhn said.
Industrial Distribution Segment
- -------------------------------
Industrial Distribution's operating profit was $3.5 million in
the quarter, compared to $3.6 the previous year. Sales for the
2002 quarter were $121.0 million (including $9.8 million from
recent acquisitions), compared to $113.0 million in the 2001
quarter.
For the six-month period, segment sales were $238.5 million
(including $17.3 million from recent acquisitions) with operating
profit of $6.1 million. In the comparable period last year,
sales were $236.1 million with operating profit of $8.7 million.
Before taking into account the recent acquisitions, second
quarter sales were off only 1.6 percent from the prior year's
quarter, the segment's best showing in a prior year quarter
comparison since the end of 2000. Cost reduction activity, which
has been ongoing, has helped keep this segment profitable during
he manufacturing downturn and should put the segment in position
to see increased profit margins when sales begin to recover.
Operating results from the recent acquisitions, however, have
thus far been marginal as the company works to integrate them
into the segment.
Kuhn said, "Industrial Distribution performed well in the quarter
in light of intense pricing pressures and very difficult economic
conditions affecting its customer base. There are indications
that the manufacturing sector is slowly starting a turnaround.
If the turnaround is real, we could start seeing the benefits
later this year. We are pleased with early results from Delamac,
the industrial products distribution company in Mexico in which
we acquired a majority interest in March."
Music Distribution Segment
- --------------------------
Music Distribution's operating profit was $707,000 in the second
quarter, compared to $563,000 the previous year. Sales for the
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"Kaman Reports Second Quarter Results"
August 1, 2002
quarter were $27.7 million, compared to $26.8 million the prior
year. For the six-month period, the segment had operating
profits of $2.1 million, compared to $1.9 million in the first
half of 2001. Sales for the six months of 2002 were $57.7
million, compared to $56.0 million in 2001.
Kuhn said, "Kaman Music had a good quarter despite continued
sluggishness in both domestic and international markets. While
sales to large domestic national chain stores were slower than
hoped for, we did see gains in the balance of our customer base.
During the quarter, Music added Sabian cymbals and percussion
accessories to its line of premium products."
Forward-Looking Statements
This report contains forward-looking information relating to the
corporation's business and prospects, including the SH-2G and
K-MAX helicopter programs, aerostructures, helicopter structures,
and components, the industrial and music 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 and
thereafter contract negotiations with government authorities,
including foreign governments; 2) political developments in
countries where the corporation intends to do business; 3)
standard government contract provisions permitting renegotiation
of terms and termination for the convenience of the government;
4) economic and competitive conditions in markets served by the
corporation, including industry consolidation in the United
States and global economic conditions; 5) timing of satisfactory
completion of the Australian SH-2G(A) program; 6) timing, degree
and scope of market acceptance for products such as a repetitive
lift helicopter; 7) U.S. industrial production levels; 8) changes
in supplier sales policies; 9) the effect of price increases or
decreases; and 10) currency exchange rates, taxes, changes in
laws and regulations, inflation rates, general business
conditions and other factors. Any forward-looking information
should be considered with these factors in mind.
###
Contact:
- -------
Russell H. Jones, Vice President & Treasurer (860) 243-6307
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"Kaman Reports Second Quarter Results"
August 1, 2002
KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Summaries of Operations
(In thousands except per share amounts)
<table>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
<s> <c> <c> <c> <c>
2002 2001 2002 2001
- ---------------------------------------------------------------------------
Revenues $209,378 $194,641 $432,741 $439,333
Costs and expenses:
Cost of sales* 228,800 167,865 391,483 350,557
Selling, general and
administrative expense 50,083 47,272 101,490 96,319
Restructuring costs** 8,290 - 8,290 -
Interest (income)/expense, net 421 18 867 (8)
Other (income)/expense, net (1,280) (2,044) (1,064) (2,531)
- ---------------------------------------------------------------------------
286,314 213,111 501,066 444,337
- ---------------------------------------------------------------------------
Earnings (loss) before income taxes (76,936) (18,470) (68,325) (5,004)
Income taxes (benefit) (26,570) (5,975) (23,300) (1,250)
- ---------------------------------------------------------------------------
Net earnings (loss) $(50,366) $(12,495) $(45,025) $ (3,754)
===========================================================================
Net earnings (loss) per share:
Basic $ (2.25) $ (.56) $ (2.01) $ (.17)
Diluted*** $ (2.25) $ (.56) $ (2.01) $ (.17)
===========================================================================
Average shares outstanding:
Basic 22,409 22,377 22,369 22,343
Diluted 23,651 23,710 23,609 23,694
===========================================================================
Dividends declared per share $ .11 $ .11 $ .22 $ .22
===========================================================================
<fn>
*Cost of sales for 2002 includes the write-off of K-MAX assets of $50,000
and Moosup facility assets of $2,679 and are associated with the
charge taken in the Aerospace segment.
** Restructuring costs relate to the closure of the Moosup facility in 2003
and are associated with the charge taken in the Aerospace segment.
*** The calculated diluted per share amounts for 2002 and 2001 are
anti-dilutive, therefore, amounts shown are equal to the basic per share
calculation.
</fn>
</table>
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"Kaman Reports Second Quarter Results"
August 1, 2002
KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<table>
<s> <c> <c>
June 30, December 31,
2002 2001
- ----------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 13,213 $ 30,834
Accounts receivable, net 200,365 186,798
Inventories 142,722 197,400
Income taxes receivable 7,118 342
Deferred income taxes 36,500 16,938
Other current assets 11,245 10,339
- ----------------------------------------------------------------
Total current assets 411,163 442,651
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Property, plant and equipment, net 58,198 60,769
Other assets 19,044 18,526
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$ 488,405 $ 521,946
================================================================
Liabilities and shareholders' equity
Current liabilities:
Notes payable $ 4,310 $ 4,038
Accounts payable 45,966 52,044
Accrued contract loss 18,495 -
Accrued restructuring costs 8,290 -
Other accrued liabilities 27,747 25,332
Advances on contracts 30,169 30,781
Other current liabilities 20,868 29,065
- ----------------------------------------------------------------
Total current liabilities 155,845 141,260
- ----------------------------------------------------------------
Long-term debt, excluding current portion 21,566 23,226
Other long-term liabilities 25,959 23,879
Shareholders' equity 285,035 333,581
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$ 488,405 $ 521,946
================================================================
</table>
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"Kaman Reports Second Quarter Results"
August 1, 2002
KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
<table>
For the Six Months
Ended June 30,
- --------------------------------------------------------------------------
<s> <c> <c>
2002 2001
Cash flows from operating activities:
Net earnings (loss) $ (45,025) $(3,754)
Depreciation and amortization 5,698 5,654
Net gain on sale of product line and other assets (1,904) (2,640)
Restructuring costs 8,290 -
Non-cash write-down of assets 52,679 -
Deferred income taxes (19,596) -
Other, net 1,753 585
Changes in current assets and liabilities,
excluding effects of acquisition/divestiture:
Accounts receivable (13,300) 26,043
Inventory (55) 5,480
Income taxes receivable (6,776) (14,896)
Accounts payable - trade (7,034) (13,893)
Accrued contract loss 18,495 -
Advances on contracts (612) (6,201)
Changes in other current assets and liabilities (7,751) (834)
- --------------------------------------------------------------------------
Cash provided by (used in) operating activities (15,138) (4,456)
- --------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of product line and other assets 7,500 4,038
Expenditures for property, plant & equipment (2,752) (2,991)
Acquisition of business, less cash acquired (1,724) -
Other, net 62 (44)
- --------------------------------------------------------------------------
Cash provided by (used in) investing activities 3,086 1,003
- --------------------------------------------------------------------------
Cash flows from financing activities:
Changes to notes payable 184 172
Reductions of long-term debt (1,660) (1,660)
Dividends paid (4,913) (4,906)
Proceeds from exercise of employee stock plans 820 747
- --------------------------------------------------------------------------
Cash provided by (used in) financing activities (5,569) (5,647)
- --------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (17,621) (9,100)
Cash and cash equivalents at beginning of period 30,834 48,157
- --------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 13,213 $ 39,057
==========================================================================
</table>
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