<page>
KAMAN CORPORATION REPORTS 2003 SECOND QUARTER,
SIX MONTH RESULTS
BLOOMFIELD, Connecticut (July 22, 2003) - Kaman Corp. (NASDAQ:
KAMNA) today reported financial results for the second quarter
and six months ended June 30, 2003.
Net earnings for the 2003 second quarter were $3.3 million, or
$0.15 per share diluted, compared to a net loss of $50.4
million, or $2.25 loss per share diluted the previous year. Net
sales for the 2003 second quarter were $216.3 million, compared
to $209.1 million the previous year. For the 2003 six-month
period the company reported net earnings of $17.3 million, or
$0.75 per share diluted, compared to a net loss of $45.0 million,
or $2.01 loss per share diluted the previous year. Six-month net
sales were $432.3 million in 2003, compared to $432.2 million in
the 2002 period.
The 2003 second quarter did not include any special charges or
gains. The 2002 second quarter results include pre-tax charges
totaling $86.0 million ($2.50 loss per share diluted) covering
cost growth associated with the Australian SH-2G(A) helicopter
program, the write-down of the K-MAX helicopter program assets,
and the phasing out of operations at the company's Moosup, Conn.
plant as well as a pre-tax gain of $1.9 million from the sale of
the company's microwave products line. The Australia program
adjustment reduced sales in the 2002 second quarter and six-month
periods by $6.5 million.
The 2003 six-month results include a pre-tax gain of $16.5
million from the sale of the company's Electromagnetics
Development Center (EDC) in January. Six-month 2002 results
include the pre-tax charges and gain described above.
Paul R. Kuhn, chairman, president and CEO, said, "Results for the
second quarter continued to reflect weakness in key markets
served by the company, including commercial aviation and
industrial production. We were disappointed by the absence of
any significant turnaround in the economy, particularly in the
manufacturing sector; the long-anticipated recovery has not yet
materialized, and the tone of the markets we serve has not turned
positive as we enter the third quarter.
"This has been a good time to be diversified, as Kaman has
traditionally been," Kuhn continued. "Our diversified business
base along with conservative operating practices, low debt levels
and significant available unused credit provide the advantage of
resources and flexibility to weather difficult economic
conditions and take advantage of opportunities to build the
company's businesses, as we have been doing.
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"Kaman Reports Second Quarter 2003 Results"
July 22, 2003
"We have used the past years of weak domestic and world economies
to further focus the company and build market presence in
businesses considered key for the future. We have acquired
companies that are contributing to operating profits, we have
divested non-core businesses to free up capital, and we have
moved forward with marketing efforts in each segment. These
actions, taken for the long term, are expected to help improve
results as market conditions improve.
"During the quarter, staffing levels were further adjusted to
reflect conditions in the markets we serve, and a continuing
focus on reducing costs and enhancing operating efficiencies
helped the company maintain profitability in each segment. During
the first half of 2003, the company's increased investment in
working capital was driven by requirements in the Aerospace
segment. Our overall financial position, including unfunded
letters of credit, improved slightly with proceeds from the sale
of EDC and an $18 million reduction down to a balance of $20
million in the performance letter of credit on the Australian
SH-2G program."
REPORT BY SEGMENT
Aerospace Segment
- -----------------
Second quarter operating profits for the segment were $6.5
million (including the effect of $480 thousand in ongoing
relocation and re-certification costs related to the Moosup,
Conn. plant closure), compared to an operating loss of $78.0
million a year earlier as a result of the pre-tax charges.
Segment sales for the second quarter 2003 were $62.9 million,
including $7.2 million from acquisitions made during the past
year, compared to $60.4 million in the 2002 period, which
included sales of $2.9 million from two divested businesses.
In the first half of 2003, the segment had operating profits of
$13.7 million, compared to an operating loss of $68.9 million in
the 2002 six-month period as a result of the pre-tax charges.
Sales for the first six months of 2003 were $124.6 million,
including $14.3 million from acquisitions made during the past
year, compared to $136.0 million the previous year, which
included $9.7 million from two divested businesses. The
Australian program adjustment reduced segment sales in the 2002
second quarter and six month periods by $6.5 million.
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<page>
"Kaman Reports Second Quarter 2003 Results"
July 22, 2003
Helicopter Programs
Sales generated by the SH-2G Super Seasprite and K-MAX helicopter
programs, including spare parts and sales support, totaled $18.7
million in the second quarter, which reflects a decrease in SH-2G
sales offset by a small increase in K-MAX spare parts sales,
compared to $13.7 million in the 2002 period, which included a
$6.5 million downward adjustment in sales for the Australia SH-2G
program. Helicopter programs represented approximately 30 percent
of segment sales for the quarter, compared to approximately 23
percent a year ago. Except for post-production support, the
SH-2G helicopter program for New Zealand has been successfully
completed, while the Australia program is in its later stages.
Production of the eleven SH-2G(A) aircraft for the Australia
program is essentially complete. As previously reported, the
aircraft lack the full Integrated Tactical Avionics System (ITAS)
software and progress is being made on this element of the
program. Following the company's successful completion of a
recent important performance milestone for the ITAS software, the
Australian government agreed to proceed with provisional
acceptance of each of the aircraft and this process is expected
to begin during the third quarter of 2003. Thereafter, the Royal
Australian Navy intends to use the aircraft for training purposes
until the full ITAS is installed, which is currently scheduled to
occur by the end of 2004. Meanwhile, work on the ITAS software
continues, to be followed by testing and final integration by the
company.
In a smaller program, the company completed work on the
reactivation of four SH-2G helicopters granted by the U. S.
government to Poland. Under related contracts, the company is
providing spare parts and training for Polish pilots, sensor
operators and maintenance personnel in Bloomfield and in Poland.
After training is completed later this summer the aircraft are
slated to become operational aboard two Polish Navy FFG-7 class
frigates.
Aircraft Structures and Components
Second quarter aircraft structures and components sales were
$32.9 million, compared to $33.2 million in the period a year
ago. This business contributed approximately 52 percent of the
Aerospace segment's sales in the second quarter, compared to
approximately 55 percent a year ago.
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<page>
"Kaman Reports Second Quarter 2003 Results"
July 22, 2003
Aerostructures subcontract work involves commercial and military
aircraft programs. Current programs include production of
assemblies such as wing structures and other parts for virtually
all Boeing commercial aircraft and the C-17 military transport.
This is an area the company has focused on as core to the
business and important for the future. The low current and
projected near-term build rates for commercial airliners affect
this business directly, making the market increasingly
competitive and difficult on an industry-wide basis. This is
contributing to a lower business base in the company's
aerostructures business, and active programs continue to absorb
overhead expenditures at higher rates.
Helicopter subcontract work involves commercial and military
programs. Current contracts include production of fuselages and
rotor systems for various MD Helicopters, Inc. (MDHI) aircraft.
Total orders received from MDHI have run at significantly lower
rates than originally anticipated. As previously reported, the
company has developed a large investment in these contracts
(including receivables, start-up costs, and other program
expenditures) and has experienced difficulty with receipt of
payments from MDHI. Both during and subsequent to the second
quarter the company received partial payments from MDHI. The
company has recently stopped production on these contracts while
it works with MDHI to resolve payment issues.
The company's Kamatics specialty bearing business had good
results in the reporting period with military sales helping to
offset continued softness in commercial and regional aircraft
manufacturing. The acquisition a year ago of the German specialty
bearing company, RWG Frankenjura, is expected to strengthen
Kaman's presence in the European market. Airbus Industrie is
RWG's largest customer.
Advanced Technology Products
Sales of the company's advanced technology products in the second
quarter were $11.3 million, compared to $13.5 million a year ago.
The business accounted for approximately 18 percent of Aerospace
segment sales, compared to 22 percent a year ago.
The company manufactures products for military and commercial
markets, including safe, arm and fuzing devices for a number of
major missile and bomb programs; and precision measuring systems,
mass memory systems and electro-optic systems. The company's
Kaman Dayron operation, acquired in July 2002, manufactures fuzes
for a variety of munitions programs, and has the contract to
develop a fuze for the U. S. Air Force and Navy Joint
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<page>
"Kaman Reports Second Quarter 2003 Results"
July 22, 2003
Programmable Fuze (JPF) program. As a result of qualification
test results received during the first quarter, the company found
it necessary to make certain changes to the fuze and its
production process. The company currently expects to complete
all of the changes and resume final qualification testing in the
third quarter of 2003.
Kuhn said, "The Aerospace segment continues to deal with the
combined effects of a lack of helicopter sales, costs associated
with completion of the Australia contract, lower demand for
commercial aircraft, and delayed qualification for the JPF fuze.
While we are working through these issues, we continue to market
our products and capabilities to current and potential customers
here and abroad. We also have taken steps to reduce costs in
order to bring overhead operating rates in line with the revenue
base while positioning the business for future growth. In
addition, we continue to explore possible acquisitions that are
accretive in the short term and advance our goal of expanding the
subcontracting side of this business."
Industrial Distribution Segment
- -------------------------------
Industrial Distribution's operating profit was $3.4 million in
the second quarter, compared to $3.5 million the previous year.
Sales for the quarter were $121.9 million, compared to $121.0
million in the 2002 quarter.
For the six-month period, the segment had operating profits of
$6.2 million, compared to $6.1 million in the same period last
year. Sales for the six months were $242.1 million, compared to
$238.5 million a year ago.
Kaman distributes more than 1.5 million power transmission and
motion control items - everything from bearings to complete
material handling systems - through a network of nearly 200
branches and regional distribution centers in the U.S., Canada
and Mexico. The customer base includes over 50,000 businesses in
nearly every sector of heavy and light industry, and this segment
is affected by the health of these industries.
Over the past several years, large companies have increasingly
centralized their purchasing through suppliers that can service
all of their plant locations across a wide geographic area. As
this trend continues, Kaman has expanded its presence in
geographic markets considered key to winning these customers
through acquisitions in the Upper Midwest and Mexico, and the
Page 5
<page>
"Kaman Reports Second Quarter 2003 Results"
July 22, 2003
selective opening of new branches. Efforts of this nature are
continuing. Success in the market requires a combination of
competitive pricing and value-added services that save the
customer money while helping them become more efficient and
productive. During the quarter, the company worked on
integrating new business with Campbell Soup Company (including
Pepperidge Farms), Hershey Foods, and Phelps Dodge.
Kuhn said, "The Industrial Distribution segment performed in line
with national industrial production trends, which remain soft. We
are using our recognized production process know-how, our
emphasis on saving the customer money, and our access to capital
to compete for business in this segment, and we believe we are in
a good position to take advantage of the recovery in
manufacturing when it occurs. Pricing pressures are expected to
continue, reflecting the highly competitive nature of this
business. In addition, the industry practice of offering vendor
incentives remains an important factor in profitability."
Music Distribution Segment
- --------------------------
Music Distribution's operating profit was $1.4 million in the
second quarter, compared to $707 thousand the previous year.
Sales for the quarter were $31.5 million, including $4.9 million
from Latin Percussion, acquired in October 2002, compared to
$27.7 million the prior year.
For the six-month period the segment had operating profits of
$3.2 million, compared to $2.1 million in the first half of 2002.
Sales for the six months of 2003 were $65.6 million, including
$8.9 million contributed by Latin Percussion, compared to $57.7
million in 2002.
The segment is America's largest independent distributor of music
instruments and accessories, offering more than 10,000 products
to retailers of all sizes, from national chains to local shops.
Kuhn said, "The Music Distribution segment is directly affected
by changes in consumer confidence, and is driven to a
considerable extent by Christmas season sales. Financial results
to date this year reflect a weaker than hoped-for spring season
in the base business, more than offset by the addition of Latin
Percussion, the world leader in hand percussion instruments. The
distribution agreement with Gretsch drums is also contributing,
along with newer agreements with the makers of Sabian cymbals and
Elixir strings, both highly popular, high-end products. With an
Page 6
<page>
"Kaman Reports Second Quarter 2003 Results"
July 22, 2003
outstanding product line up of premier brand guitars, percussion
instruments and accessories, and its market leading distribution
systems, the company continues to strengthen its leadership
position in the industry."
Concluding Remark
- -----------------
Kuhn said, "The company's performance during the second quarter
and first half of 2003 reflects both the absence of meaningful
recovery in the markets Kaman serves, and the process of working
through a series of challenges, particularly in the Aerospace
segment. Actions taken to reduce costs and increase our presence
in strategic markets have helped and are expected to benefit the
company increasingly when economic recovery occurs."
Forward-Looking Statements
- --------------------------
This report contains forward-looking information relating to the
company's business and prospects, including the SH-2G and K-MAX
helicopter programs, aerostructures and helicopter subcontract
programs and components, advanced technology products, 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
company 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 company, particularly
industrial production and commercial aviation, and global economic
conditions; 5) attainment of remaining project milestones and
satisfactory completion of the Australian SH-2G(A) program; 6)
recovery of the company's investment in the MD Helicopters, Inc.
contracts; 7) actual costs for moving equipment and recertifying
products and processes in connection with phase out of the Moosup,
Connecticut facility; 8) JPF program final qualification test
results and receipt of production orders; 9) achievement of
enhanced business base in the Aerospace segment in order to better
absorb overhead; 10) successful sale or lease of existing K-MAX
inventory; 11) profitable integration of acquired businesses into
the company's operations; 12) changes in supplier sales or vendor
incentive policies; 13) the effect of price increases or
Page 7
<page>
decreases; and 14) 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, Sr. Vice Pres. & Treasurer
(860) 243-6307
rhj-corp@kaman.com
www.kaman.com
Page 8
<page>
"Kaman Reports Second Quarter 2003 Results"
July 22, 2003
KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements 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>
2003 2002 2003 2002
- --------------------------------------------------------------------------
Net sales $ 216,311 $ 209,141 $ 432,321 $ 432,234
Costs and expenses:
Cost of sales(1) 160,414 228,800 320,370 391,483
Selling, general and
administrative expense 49,908 50,083 99,045 101,490
Restructuring costs(2) - 8,290 - 8,290
Other operating
(income) / expense, net (341) (237) (614) (507)
Interest expense, net 751 421 1,519 867
Net (gain) loss on sale of
product lines and
other asset 23 (1,904) (16,826) (1,904)
Other (income) / expense, net 187 624 592 840
- --------------------------------------------------------------------------
210,942 286,077 404,086 500,559
- --------------------------------------------------------------------------
Earnings (loss) before
income taxes 5,369 (76,936) 28,235 (68,325)
Income taxes (benefit) 2,085 (26,570) 10,985 (23,300)
- --------------------------------------------------------------------------
Net earnings (loss) $ 3,284 $ (50,366) $ 17,250 $ (45,025)
==========================================================================
Net earnings (loss) per share:
Basic $ .15 $ (2.25) $ .77 $ (2.01)
Diluted(3) $ .15 $ (2.25) $ .75 $ (2.01)
==========================================================================
Average shares outstanding:
Basic 22,551 22,409 22,523 22,369
Diluted 23,484 22,409 23,482 22,369
==========================================================================
Dividends declared per share $ .11 $ .11 $ .22 $ .22
==========================================================================
<fn>
(1) Cost of sales for 2002 includes the write-off of K-MAX assets of $50,000
and Moosup facility assets of $2,679 associated with the charge taken in the
Aerospace segment.
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<page>
"Kaman Reports Second Quarter 2003 Results"
July 22, 2003
(2) Restructuring costs relate to the closure of the Moosup facility in 2003
and are associated with the charge taken in the Aerospace segment in 2002.
(3) The calculated diluted per share amounts for 2002 are anti-dilutive,
therefore, amounts shown are equal to the basic per share calculation.
</fn>
</table>
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<page>
"Kaman Reports Second Quarter 2003 Results"
July 22, 2003
KAMAN CORPORATION AND SUBSIDIARIES
Segment Information
(In thousands)
<table>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
<s> <c> <c> <c> <c>
2003 2002 2003 2002
- --------------------------------------------------------------------------
Net sales:
Aerospace $ 62,912 $ 60,426 $ 124,636 $ 136,027
Industrial Distribution 121,862 121,034 242,128 238,475
Music Distribution 31,537 27,681 65,557 57,732
- --------------------------------------------------------------------------
216,311 209,141 432,321 432,234
==========================================================================
Operating profit (loss):
Aerospace 6,515 (78,024) 13,725 (68,874)
Industrial Distribution 3,365 3,464 6,162 6,057
Music Distribution 1,391 707 3,238 2,062
- --------------------------------------------------------------------------
11,271 (73,853) 23,125 (60,755)
Interest, corporate and
other expense, net (1) (5,879) (4,987) (11,716) (9,474)
Net gain (loss) on sale of product
lines and other assets (23) 1,904 16,826 1,904
- --------------------------------------------------------------------------
Earnings (loss) before
income taxes $ 5,369 $ (76,936) $ 28,235 $ (68,325)
==========================================================================
<fn>
(1) "Interest, corporate and other expense, net" increased for the three
months ended June 30, 2003 primarily due to pension and interest expense.
The increase for the six months ended June 30, 2003 is primarily due to a
reduction in group insurance liabilities in 2002 that did not recur in 2003,
and growth in pension and interest expenses, partially offset by lower stock
appreciation rights expense.
</fn>
</table>
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<page>
"Kaman Reports Second Quarter 2003 Results"
July 22, 2003
KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<table>
June 30, December 31,
2003 2002
- -----------------------------------------------------------------
<s> <c> <c>
Assets
Current assets:
Cash and cash equivalents $ 8,197 $ 5,571
Accounts receivable, net 209,251 195,857
Inventories 180,320 164,715
Income taxes receivable - 5,192
Deferred income taxes 28,459 28,450
Other current assets 13,185 14,460
- -----------------------------------------------------------------
Total current assets 439,412 414,245
- -----------------------------------------------------------------
Property, plant and equipment, net 53,825 61,635
Goodwill and other intangible assets 50,662 50,994
Other assets 8,562 8,666
- -----------------------------------------------------------------
$ 552,461 $ 535,540
=================================================================
Liabilities and shareholders' equity
Current liabilities:
Notes payable $ 9,488 $ 10,307
Accounts payable 50,850 46,664
Accrued contract loss 28,889 26,674
Accrued restructuring costs 7,223 7,594
Other accrued liabilities 24,665 23,583
Advances on contracts 22,279 22,318
Other current liabilities 19,613 19,954
Income taxes payable 997 -
- -----------------------------------------------------------------
Total current liabilities 164,004 157,094
- -----------------------------------------------------------------
Long-term debt, excluding current portion 55,737 60,132
Other long-term liabilities 26,866 26,367
Shareholders' equity 305,854 291,947
- -----------------------------------------------------------------
$ 552,461 $ 535,540
=================================================================
</table>
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<page>
"Kaman Reports Second Quarter 2003 Results"
July 22, 2003
KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
<table> For the Six Months
Ended June 30,
- ---------------------------------------------------------------------
2003 2002
---- ----
<s> <c> <c>
Cash flows from operating activities:
Net earnings (loss) $ 17,250 $ (45,025)
Depreciation and amortization 5,131 5,698
Net gain on sale of product lines
and other assets (16,826) (1,904)
Restructuring costs (371) 8,290
Non-cash write-down of assets - 52,679
Deferred income taxes - (19,596)
Other, net 905 1,753
Changes in current assets and liabilities,
excluding effects of acquisition/divestiture
Accounts receivable (15,664) (13,300)
Inventory (16,651) (55)
Income taxes receivable 5,192 (6,776)
Accounts payable 3,757 (7,034)
Accrued contract loss 2,214 18,495
Advances on contracts 740 (612)
Income taxes payable 1,015 -
Changes in other current assets
and liabilities 2,375 (7,751)
- ------------------------------------------------------------------------
Cash provided by (used in)
operating activities (10,933) (15,138)
- ------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of product line
and other assets 28,025 7,500
Expenditures for property,
plant & equipment (4,175) (2,752)
Acquisition of business,
less cash acquired - (1,724)
Other, net (574) 62
- ------------------------------------------------------------------------
Cash provided by (used in)
investing activities 23,276 3,086
- ------------------------------------------------------------------------
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<page>
Cash flows from financing activities:
Changes to notes payable (819) 184
Reductions of long-term debt (4,395) (1,660)
Dividends paid (4,948) (4,913)
Purchases of treasury stock (205) -
Proceeds from sale of stock 650 820
- -----------------------------------------------------------------------
Cash provided by (used in
financing activities (9,717) (5,569)
- -----------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 2,626 (17,621)
Cash and cash equivalents at
beginning of period 5,571 30,834
- -----------------------------------------------------------------------
Cash and cash equivalents at
end of period $ 8,197 $ 13,213
========================================================================
###
</table>
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