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Kaman reports first quarter 2008 Results

May 2, 2008, Bloomfiekld CN- Kaman Corp. yesterday reported financial results for the first quarter ended March 28, 2008.


May 2, 2008
By Corrie


Topics

May 2, 2008, Bloomfiekld CN- Kaman Corp. yesterday reported financial results for the first quarter ended
March 28, 2008.

Net earnings from continuing operations for the first quarter of 2008 were
$8.9 million, or $0.35 per share diluted, compared to $9.1 million, or $0.37
per share diluted, in the first quarter of 2007. The first quarter results for
2007 include a $2.5 million pretax charge for the SH-2G(A) helicopter program
for Australia. Net sales from continuing operations for the first quarter of
2008 were $285.8 million compared to $266.5 million in the first quarter of
2007.

Neal J. Keating, Chairman, President and Chief Executive Officer, said,
"We experienced improved operational performance at several of our businesses
and achieved a significant milestone with the Australian program settlement.
However, we are disappointed that issues in our Aerostructures and Fuzing
segments prevented the improvement from being fully evident in our financial
results. Specifically, operational difficulties at our Wichita facility and
continuing profit margin issues for the Joint Programmable Fuze (JPF) program
significantly impacted the quarter. However, our overall sales growth of 7.2%
in the quarter testifies to the diversity of markets in which we participate
and our strong competitive position within those markets.

Industrial Distribution increased both its revenue and operating profits
despite weakness in certain sectors of the economy and increased expenses
associated with supporting our national account initiative. Our success with
these accounts not only drives revenue growth, but also increases our
participation in less cyclical sectors of the economy. We are also benefiting
from increases in market share, as we prove ourselves to be the partner of
choice for world-class companies who need service across their national
footprint. An important step for us in expanding our geographic reach was the
purchase of Industrial Supply Corporation, which occurred early in the second
quarter. ISC brings a strong reputation for customer service, a very
experienced management team and gives us a stronger presence in the important
Virginia and North Carolina markets."

Mr. Keating concluded, "First quarter performance in our Aerospace
segments was mixed. Specialty Bearings produced another set of excellent
results. For Helicopters, the major news was the successful negotiation of a
settlement agreement with the Commonwealth of Australia for the SH-2G (A)
program. Once the agreement is implemented, significant management time and
resources will be freed up to focus on growing the business, including
remarketing and selling the SH-2G (A) Super Seasprite helicopters. And while
our Jacksonville Aerostructures facility had a strong sales quarter, Wichita
continues to experience operational issues in ramping up production to meet
the concurrent demands of three significant programs. In early February we
consolidated operational management for both facilities under the Jacksonville
leadership team in order to address the performance issues and in the quarter
we recorded charges related to additional tooling costs and production
inefficiencies. We are dedicated to working through these issues to satisfy
our customers, continuing to win new business and delivering bottom line
results. While this may take some time to achieve, I believe that we now have
the right management in place to do so."

Segment reports follow:

Aerostructures segment operating loss for the first quarter of 2008 was
$1.0 million, compared to operating income of $4.6 million for the first
quarter of 2007. Segment sales were $28.8 million in the first quarter of
2008, compared to $25.2 million for the first quarter of 2007. The growth in
net sales was primarily due to higher production levels and increased
shipments to Sikorsky for the BLACK HAWK helicopter program. Total operating
results decreased primarily as the result of $4.5 million in charges related
to the concurrent ramp up of three significant programs at the Wichita
facility.

Fuzing segment operating income for the first quarter of 2008 was $1.8
million, compared to $2.5 million in the first quarter of 2007. Segment sales
were $24.1 million for the first quarter of 2008, compared to $18.5 million in
the first quarter of 2007. The increase in sales occurred as a result of
higher shipments on the JPF program to the U.S. Government as well as higher
shipments on several legacy programs. Total operating income decreased
primarily due to the essentially break even gross margins generated from JPF
program sales to the U.S. Government.

Helicopters segment operating income for the first quarter of 2008 was
$0.9 million, compared to an operating loss of $1.0 million for the first
quarter of 2007. Segment sales were $14.6 million for the first quarter of
2008 compared to $17.5 million for the first quarter of 2007. There was a
certain amount of nonrecurring work performed for Egypt in the 2007 quarter
that was not repeated during 2008. Additionally, sales for Sikorsky, which are
based on the level of order activity for join and subcontract work in the
relative periods, were lower in the first quarter of 2008. Operating income
increased primarily due to the absence of an accrued contract loss charge for
the Australia program in the first quarter of 2008 compared to a $2.5 million
charge recorded in the first quarter of 2007.

Specialty Bearings segment operating income for the first quarter of 2008
was a record $13.0 million, compared to $10.6 million in the first quarter of
2007. Segment sales were a record $36.1 million in the first quarter of 2008,
compared to $32.0 million in the first quarter of 2007. The increase in net
sales was a result of higher shipments to our customers in the commercial jet
liner market, regional jet market, military aircraft market and commercial
helicopter market. The increase in operating income primarily reflects the
leverage gained from increased sale volume.

Collectively, the four Aerospace Segments generated operating income for
the first quarter of 2008 of $14.6 million, compared to $16.6 million for the
first quarter of 2007; and sales of $103.6 million and $93.1 million,
respectively for the same periods.

Industrial Distribution segment operating income for the first quarter of
2008 was $9.1 million, compared to $8.7 million in the first quarter of 2007.
Segment sales were $182.2 million in the first quarter of 2008, compared to
$173.4 million in the first quarter of 2007. The increase in sales is
primarily due to the ramp up of national account business, as well as strong
demand in the food & beverage, mining, chemical and paper markets. This sales
increase was achieved with one fewer sales day in 2008 compared to 2007. The
increase in operating income is a result of the increased sales volume offset
partially by greater costs associated with new branch openings.

Discontinued Operations: On December 31, 2007, the company completed the
sale of its wholly owned subsidiary, Kaman Music Corporation, to Fender
Musical Instruments Corporation for approximately $120 million in cash. Kaman
Music comprised the company's entire Music segment, and operating results are
reported as discontinued operations for 2007.

Please see the MD&A section of the company's SEC Form 10-Q filed
concurrent with the issuance of this release for greater detail on the
quarters' results and various company programs.

The company held its annual meeting of shareholders on April 16, 2008. At
that meeting, shareholders elected four directors, including Neal J. Keating
to a term expiring in 2010; and Brian E. Barents, Edwin A. Huston and Thomas
W. Rabaut, each to a term expiring in 2011. This is in addition to five other
directors whose terms extended beyond this meeting. Shareholders also approved
the company's Cash Bonus Plan (Amended and Restated as of January 1, 2008) and
ratified the company's appointment of KPMG LLP as its independent registered
public accounting firm.

A conference call has been scheduled for tomorrow, May 2, 2008 at 11:00 AM
EDT. Listeners may access the call live over the Internet through a link on
the home page of the company's website at http://www.kaman.com. Management may
provide exhibits to the conference call and these will be available through
the Internet link provided above.

Forward-Looking Statements

This release 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) successful implementation of the Deed
of Settlement agreed upon with the Commonwealth of Australia, which would
conclude the Australia SH-2G (A) program with a mutual release of claims; 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 the company's contract 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 Moosup and New Hartford, CT
facilities and such potential activities at the Bloomfield, CT facility; 12)
profitable integration of acquired businesses into the company's operations;
13) changes in supplier sales or vendor incentive policies; 14) the effect 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 in adequate supplies; 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; and 20) 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 release.



SOURCE Kaman Corp.


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