EX-99.1 2 ex99-1.htm EXHIBIT 99.1 ex99-1.htm  
Kaman Corporation (NASDAQ-GS: KAMN)
Kaman Corporation (NASDAQ-GS: KAMN)
Investor Presentation
March 22, 2011
 
 
 
2
Investment Summary
 § Significant long-term organic growth opportunities in Aerospace
 and Industrial Distribution
 § High margin Aerospace business anchored by market leading
 position in specialty bearings
 § Military platforms in Aerospace provide recurring revenue stream
 § Industrial Distribution business benefiting from industrial sector
 momentum and gaining scale via recent acquisitions
 § Investing in new product development, new product applications,
 acquisitions and technology for long-term growth
 § Strong balance sheet to drive growth and strategic initiatives
 § New, experienced management team
 
 
 
3
Distribution
63%
Aerospace
37%
2010 Sales
§ Kaman Corporation is a diversified company that conducts
 business in the aerospace and industrial distribution markets
§ The Company has two segments
 – Industrial Distribution
 • Third largest distributor in the power transmission / motion
 control market
 • Distributes over four million SKUs to over 50K customers
   via 207 branches
 – Aerospace
 • Manufacturer and subcontractor in the global commercial
 and military aerospace and defense market
 • Diverse customer base of government divisions and blue
 chip customers
§ Publicly listed on NASDAQ with a market capitalization of
 $795 million as of March 17, 2011
§ 2010 Sales $1.3 billion; 4,300 Employees
Corporate Overview
(1) Operating profit after depreciation and before interest and corporate charges
Distribution
31%
Aerospace
69%
2010 Segment
Operating Income (1)
 
 
 
4
 
 2009
2010
Change
Sales
$ 1,146
$ 1,319
+15.0%
Earnings per share
$ 1.27
 $  1.59(1)
+25.2%
Free cash flow
$ 56.9
 $  15.8(2)
-72.2%
Market capitalization
$ 594.9
$ 756.6
+27.2%
Price per share
$ 23.09
$ 29.07
+25.9%
(In millions except per share amounts)
(2) Includes a $25 million voluntary pension plan contribution
(1) Adjusted - excludes $6.4 million goodwill impairment charge, $2.0 million aerospace
  contract settlement and $6.6 million look-back interest benefit
Key Metrics
 
 
 
5
§ Acquisitions and expansions
 – Industrial Distribution
 • Acquired Minarik Corporation of Glendale, CA, a national
 distributor of motion control and automation products
 • Acquired Allied Bearings Supply Company of Tulsa, OK
 • Acquired the assets of Fawick de Mexico, S.A. de C. V. of Mexico
 City, Mexico
 – Aerospace
 • Acquired Global Aerosystems, LLC, a provider of aerostructure
 engineering design analysis and FAA certification services to the
 aerospace industry
 • Opened a new, state of the art manufacturing facility in
 Chihuahua, Mexico
Recent Significant Events
 
 
 
6
Recent Significant Events
§ Contract Awards
 – Last twelve months awarded purchase orders for JPF fuzes totaling
 $150 million
 – Awarded a contract with a potential value in excess of $60 million to
 manufacture cabins for the AH-1Z attack helicopter
 – Awarded a contract from Bombardier to manufacture composite
 doors for the Learjet 85 business jet
 – Team K-MAX awarded a $45.8 million contract for the evaluation of
 unmanned aircraft systems for the USMC
§ Financing
 – Completed new four-year $275 million revolving credit facility
 – Completed $115 million offering of 3.25% convertible senior notes
 due 2017
 – S&P reaffirmed Kaman’s BBB- investment grade credit rating
 
 
 
7
AEROSPACE
2010 Sales $487 Million
 
 
 
8
Aerospace
 OBJECTIVE:
 § $1 billion in sales - “high teens” operating profit margin by 2014
 STRATEGY:
 § GROWTH - Increased capabilities through both internal development
 and acquisitions to win major OEM and Tier 1 programs
 § BALANCE - Expand commercial content via growth initiatives to
 achieve a better balance of aerospace revenues
 § PROFITABILITY - Expand engineering capability to provide
 differentiation and improved margins
 
 
 
9
Aerospace Sales
Business/
Regional
3%
Defense
72%
Commercial
25%
Based on 2010 Sales
 
 
 
10
Fixed trailing edge
Fuel tank access doors
Top covers
Red denotes bearing products
Nose landing gear
Rudder
Main landing gear
Flaps
Horizontal stabilizer
Door assemblies
Engine/thrust reverser
Aircraft Programs/Capabilities
Flight controls
Doors
 
 
 
11
Manufacture of cockpit
Blade erosion coating
Manufacture and assembly
of tail rotor pylon
Manufacture, sub assembly
and joining of fuselage
Blade manufacture,
repair and overhaul
Driveline couplings
Bushings
Flight control bearings
Aircraft Programs/Capabilities
Red denotes bearing products
 
 
 
12
Aerospace - Budget Impact on Military
Programs
 § Backlog is comprised largely of programs that are unaffected by the
 proposed near-term budget cuts
 – UH-60 BLACK HAWK Program
 – Joint Programmable Fuze
 – Joint Strike Fighter
 – A-10
 – AH-1Z
 § C-17 has a firm backlog into 2013
 § Canceled programs had minimal overall impact to the company
 – Nuclear ballistic missile defense
 – Naval surface ships
 – F-22
 – Future Combat System
 
 
 
13
Strong Base Business
 § BLACK HAWK
 § Joint Programmable Fuze (JPF)
 § C-17
 
 
 
14
Growth Programs
 § A-10 re-wing
 § Boeing 787
 § F-35 (Joint Strike Fighter)
 § Airbus A380
 § Bell Helicopter - AH-1Z/Commercial
 § Unmanned K-MAX®
 § Learjet 85
 
 
 
15
 
 § Teamed with Lockheed Martin to
 develop an unmanned military
 version of the Kaman K-MAX
 commercial helicopter
 § Lockheed Martin / Kaman team
 awarded a $45.8 million contract
 for the evaluation of unmanned
 aircraft systems by the USMC
Contract Award - Unmanned K-MAX®
 
 
 
16
New Program - Bell Helicopter AH-1Z
 § Latest version of the AH-1 attack
 helicopter for the USMC
 § Leverages capabilities of the
 Aerospace Group
 – New cabins will be
 manufactured in Jacksonville
 facility
 – Tooling will be designed and
 built by UK tooling division
 § Initial period of performance
 runs through 2015
 § Program value could exceed $60
 million
 
 
 
17
§ LJ85 mid-size eight passenger
 business jet
§ Kaman will manufacture:
 – Passenger door composite
 assembly
 – Stair assembly
 – Over wing emergency exit door
§ First significant award from
 Bombardier for aerostructures
New Program - Learjet 85
 
 
 
18
 
 
 
19
UP
24%
$533 Million
at 12/31/10
$431 Million
at 12/31/09
Backlog
 
 
 
20
INDUSTRIAL DISTRIBUTION
2010 Sales $832 Million
 
 
 
21
 § Third largest industrial distribution firm serving $15 billion of the $23
 billion power transmission / motion control market.
 
 § 207 branches and 5 distribution centers
 § Major product categories:
 – Bearings
 – Mechanical and electrical power transmission
 – Fluid Power
 – Motion control
 – Automation
 – Material handling
 § Metrics:
 – $470,000 sales per employee (2010)
 – 2,000 employees (approximately one third outside sales)
 – 4.0 million SKUs
 – 50,000+ customers
Industrial Distribution Overview
 
 
 
22
Industrial Distribution
OBJECTIVE:
 § $1.5 billion in sales - 7% operating profit margin by 2014
STRATEGY:
 § SCALE/GROWTH - Broaden product offering organically and through
 acquisitions. Expand geographic footprint to enhance position in the
 national accounts market
 § PRODUCTIVITY - Execute organizational realignment and implement
 multi-faceted technology investments
 § PROFITABILITY - Recognize sales and cost synergies from the three
 acquisitions completed in 2010. Enhance margins through new higher
 margin product lines, a focus on pricing management and leverage
 increased purchasing scale
 
 
 
23
Executing Strategy and Building Network
 
 
 
24
 § Strong organic growth
 – Q410 up 23.0%, Q310 up 17.1%, Q210 up 17.5%
 – OEM markets extremely strong
 – MRO markets turned positive in Q210
 – Broad based growth across geographies and end markets
 – January and February 2011 daily sales levels were above comparable
 months in the fourth quarter of 2010
 § Acquisitions accelerating top line and building scale
 – Added geographic coverage, product line expansions, strong franchises
 – Acquisitions added $96.2 million in sales in 2010
 – Minarik and Allied were accretive in 2010
Growth is Well Rounded
 
 
 
25
Industrial Distribution Sales Per Day
2,670
2,744
2,839
2,880
3,481
3,490
3,457
3,454
3,685
3,518
3,636
3,771
3,469
3,718
Organic
Acquisition
 
 
 
26
Industrial Distribution Opportunities
 § Broaden product offering organically and through acquisition to win
 additional business from existing customers and gain market share
 § Enhance margins through new higher margin product lines, a focus
 on pricing management and leverage from higher sales
 § Recognize sales and cost synergies from the three acquisitions
 completed in 2010
 § Expand geographic footprint through additional acquisitions to
 enhance Kaman’s position in the competition for national accounts
 § Improve productivity through technology investments to enhance
 return on sales
 
 
 
27
 § Full year 2011 Industrial Distribution’s sales to be approximately
 $930M to $960M, up 12.0% to 15.0%. Operating margins are
 projected to be between 4.2% and 4.5%
 § Full year 2011 Aerospace sales to be approximately $550M to
 $565M, up 13.0% to 16.0%. Operating margins are estimated to be
 15.2% to 15.5%
 § Net interest expense will be approximately $12.5M
 § Corporate expenses are expected to be in the range of $10.0M to
 $10.5M per quarter
 § Free cash flow is expected to be $30.0M to $35.0M
Outlook
 
 
 
28
Kaman Investment Merits
 § A Leading Market Position in Both Business Segments
 § Two Distinct Markets Balance Overall Company
 Performance
 § Continued Focus on Profit Optimization, Increasing Cash
 Flows and Strengthening Competitive Position
 § Strong Liquidity and Conservative Financial Profile
 § Disciplined and Focused Acquisition Strategy
 § New, experienced Management Team
 
 
 
29
FINANCIAL SUMMARY
37%
2010 Sales $1.32 Billion
 
 
 
30
(1)Adjusted - excludes $6.4 million goodwill impairment, $2.0 million aerospace contract settlement and
 $6.6 look-back interest benefit
Financial Highlights - Full Year
 
 
 
31
(1)Adjusted - excludes $6.4 million goodwill impairment
Financial Highlights - Q4 2010
 
 
 
32
(In Millions)
As of 12/31/10
As of 12/31/09
As of 12/31/08
Cash and Cash Equivalents
$ 32.2
$ 18.0
$ 8.2
Notes Payable and Long-term Debt
$ 148.4
$ 63.6
 94.2
Shareholders’ Equity
$ 362.7
$ 312.9
$ 274.3
Debt as % of Total Capitalization
 29.0%
 16.9%
 25.6%
Capital Expenditures
$ 21.5
$ 13.6
$ 16.0
Depreciation & Amortization
$ 20.5
$ 16.1
$ 12.8
Balance Sheet and Capital Factors
 
 
 
33
APPENDIX I
 
 
 
34
Source: Boeing and Airbus historical data and ISM
Aerospace Orders and Deliveries vs. ISM Index
Why Two Businesses? Diversifies Revenue
0
500
1,000
1,500
2,000
2,500
3,000
30.0
35.0
40.0
45.0
50.0
55.0
60.0
65.0
70.0
Boeing
Airbus
Boeing
Airbus
ISM index
Orders
Deliveries
 
 
 
35
Industrial Distribution Acquisitions
3 Acquisitions Completed in 2010:
 § Minarik (April 30, 2010)
 – Only national distributor of motion control & automation products
 – 2009 sales: $84 million; Purchase price: $42.5 million
 – Expands geographic coverage in 3 of the top 15 markets where Kaman has not been
 well represented (e.g. San Jose, Cleveland, Chicago)
 – Diversifies traditional MRO customer base through primary OEM presence
 – Expands product offering; positions Kaman as a leader in motion control &
 automation
 § Allied Bearings Supply (April 5, 2010)
 – Distributor of bearings, power transmission, material handling, and industrial supplies
 – 2009 sales: $22 million; Purchase price: $15 million
 – Expands Kaman’s coverage in Oklahoma, Arkansas and Texas
 – Adds volume in core product lines and provides access to chemical and petro-
 chemical industries and oil and gas industries
 § Fawick de Mexico (February 26, 2010)
 – Mexico City based fluid power distributor with coverage throughout most of Mexico
 – 2009 sales: ~$4 million (USD); Purchase price: ~$5.0 million (USD)
 
 
 
36
Industrial Distribution Improving
Productivity Illustration
 § Ft. Wayne Processing Center
 § Processes accounts payable and accounts receivable transactions -
 more than 1.4 million documents annually
 § Disburses more than $600 million annually
 § Applies more than $700 million in cash collections annually
 § From 2007 to 2010 utilizing process improvements and new
 technology improved productivity per employee 32% on a 19%
 reduction in headcount
 
 
 
37
Global Aerosystems
 § Global Aerosystems acquisition (December 2010)
 – Strongly supports strategic initiative to grow design content for
 higher more protected margins (life of program vs. build to print)
 – Strong experienced base of 120 engineers
 – Key customer positions
 • Boeing, Kawasaki Heavy Industries, Mitsubishi Aircraft
 Corporation, Mitsubishi Heavy Industries, Bombardier, Aviation
 Partners Boeing and the Department of Defense
 – Already bidding on design and build packages
 
 
 
38
Market Leading Self Lube Airframe Bearing
Product Lines
 § Content on virtually every aircraft manufactured today
 with a growing installed base
 § Proprietary technology:
 
 – KAron® bearing liner system
 – KAflex® driveline couplings
 – Tufflex® machined driveline couplings
 § 95% of sales are for custom engineered applications
 § Operational excellence through lean manufacturing
 § Industry leading lead times
 
 
 
39
Kamatics Lean Journey
 § Bloomfield Kamatics facility has successfully
 implemented lean manufacturing processes
 § Since introducing lean in 2000 Kamatics has:
 – Doubled sales
 – Increased return on identifiable assets by more than
 5,400 basis points
 – Kept headcount constant
 – Doubled sales per employee
 – Increased on-time deliveries to more than 90% from
 less than 50%
 – Developed industry leading lead-times of 4-8 weeks
 from 12-18 weeks
 
 
 
40
Learjet 85 Award
Stair Assembly - fitted to
PAX composite door
assembly along with door
opening mechanism
Over Wing Emergency
Exit Door
 
 
 
41
March 2010
Option 7 USG
$ 46 million
September 2010
Option 7 FMS
$ 36 million
November 2010
Commercial
$ 25 million
December 2010
Commercial
$ 19 million
March 2011
Option 8 USG
$ 24 million
TOTAL
 
$150 million
JPF Orders - Last Twelve Months
 
 
 
42
Aerospace Awards
 § UTC Supplier Gold at Kamatics
 § Top 100 Supplier to Sikorsky
 – Kamatics
 – Aerostructures - Jacksonville
 § Aviation Week - Top Performing Companies
 – 2009 Five-Year Most Improved
 
 
 
43
 
Pension Plan Funded Status
§ During 2010 Kaman took numerous actions to address the
 company’s unfunded pension liability including:
 – Executed comprehensive pension plan redesign
 – Successfully implemented Liability Driven Investment strategy
 – Made $25 million voluntary contribution in December 2010
 • Funded with convertible bond proceeds
 
 
 
44
APPENDIX II
Executive Compensation &
Corporate Governance
 
 
 
45
Executive Compensation Aligned with
Shareholder Interests
§ Alignment with the market allows Company to attract and retain
 key talent
§ Company and individual performance drive base salary, annual
 cash incentives and long-term incentives
§ Total compensation only reaches the median of market when
 Company financial performance also is at the median of similar
 sized industrial companies
§ The direct linkage to company financial performance serves
 shareholder interests
§ SERP and Pensions benefit accruals ended in 2010
§ Perquisites have been eliminated for executive officers (MERP,
 financial counseling, tax planning)
 
 
 
46
 
 § Base Salary    
 § Long-Term Incentive
 
 § Benefit Plans - Same plans as all other employees
 § Car Allowance - Limited to executive officers and business unit heads
 § Perquisites - Other executive perquisites eliminated
 § Management Agreements - Limited to six key executives
 All compensation components compared to industrial surveys of similar
 sized companies every 2-3 years
 Total compensation is driven by company and individual performance
 75% of CEO’s compensation in 2010 was performance related
 Targeted at the median of
 industrial companies of similar size
Compensation Components
 
 
 
47
Performance-Driven Annual Cash Incentive
 § Annual cash incentive driven by financial performance
 – Corporate - compared against the 5-year average of Russell 2000:
 • Return on Investment 
 • EPS growth
 • EPS performance against plan
 • Individual Performance
 § Business Units - compared against the 3-year moving average of past
 performance
 • Return on Investment
 • Growth in operating income
 • Additional annual objectives determined by business priorities
 Reviewed and approved by the Personnel and Compensation
 Committee of the Board of Directors
 
 
 
48
Corporate Governance
 § Strong and Independent Board of Directors
 § Ten members; nine are independent with no relationship to the
 Company other than Board service.
 § Independent Lead Director in place since 2002
 § Board has majority voting policy for director elections
 § Directors have broad senior leadership qualifications:
 – Chief executive or chief financial officer roles
 – Industry experience includes aerospace, defense, engineering,
  distribution and financial services, both domestic and international
 
 § Virtually all directors serve on the board of other public companies
 (generally not more than three)
 
 
 
49
Forward Looking Statement
This presentation contains 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) potential difficulties associated with variable acceptance test results, given
sensitive production materials and extreme test parameters; 7) management's success in increasing the volume of profitable work at
the Wichita facility; 8) successful resale of the SH-2G(I) aircraft, equipment and spare parts; 9) 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 all
have been assumed in connection with goodwill impairment evaluations; 10) satisfactory resolution of the company’s litigation relating to the
FMU-143 program; 11) continued support of the existing K-MAX® helicopter fleet, including sale of existing K-MAX® spare parts inventory;
12) cost estimates associated with environmental remediation activities at the Bloomfield, Moosup and New Hartford, CT facilities and our U.K.
facilities; 13) profitable integration of acquired businesses into the company's operations; 14) changes in supplier sales or vendor incentive
policies; 15) the effects of price increases or decreases; 16) the effects of pension regulations, pension plan assumptions and future
contributions; 17) future levels of indebtedness and capital expenditures; 18) continued availability of raw materials and other commodities in
adequate supplies and the effect of increased costs for such items; 19) the effects of currency exchange rates and foreign competition on
future operations; 20) changes in laws and regulations, taxes, interest rates, inflation rates and general business conditions; 21) future
repurchases and/or issuances of common stock; and 22) other risks and uncertainties set forth in the company's annual, quarterly and current
releases, proxy statements and other filings with the U.S. Securities and Exchange Commission. 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 Remington
V.P., Investor Relations
(860) 243-6334
Eric.Remington@kaman.com