'It's Good to Be Diversified'

Kaman Corporation reported earnings for Q2_03 at a slim $3.3 million, so very much better than a net loss of $50.4 million in the same period 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, compared to a net loss of $45.0 million the previous year. Six-month net sales were $432.3 million in 2003, compared to $432.2 million in the 2002 period.

"We're waiting..."

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."

Sales generated by the SH-2G Super Seasprite (right) and K-MAX helicopter (above and below) 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.

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.

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."

Kuhn concluded, "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."

FMI: www.kaman.com/aerospace