BLOOMFIELD, Conn., Aug. 5 /PRNewswire-FirstCall/ -- Kaman Corp. (Nasdaq: KAMN) today reported financial results for the second quarter ended July 2, 2010.

     Summary of
      Financial Results
     In thousands
      except per share
      amounts -
      Unaudited                         For the Three Months Ended
                                        --------------------------
                          July 2, 2010         July 3, 2009        $Change
                          ------------         ------------        -------
     Net sales:
     Industrial
      Distribution              $210,924            $155,954       $54,970
     Aerospace                   106,163             137,269       (31,106)
                                                                   -------
     Net sales                  $317,087            $293,223       $23,864
                                ========            ========       =======

     Operating income:
     Industrial
      Distribution                $7,713              $3,065        $4,648
     Aerospace                    12,114              21,600        (9,486)
     Net gain (loss) on
      sale of assets                 (56)                (53)           (3)
     Corporate expense            (8,581)             (8,445)         (136)
                                  ------              ------          ----
     Operating income            $11,190             $16,167       $(4,977)
                                 =======             =======       =======


         Diluted earnings
          per share                $0.23               $0.37        $(0.14)
                                   =====               =====        ======

Neal J. Keating, Chairman, President and Chief Executive Officer, stated, "As previously announced, we experienced issues in our Aerospace segment during the second quarter that affected our financial performance. The largest issue, with our Joint Programmable Fuze (JPF) program, was the failure of a supplied component during acceptance testing. In cooperation with our supplier and customer, we have analyzed, tested and verified the root cause and have developed a plan for introduction of key product improvements. Consequently, we resumed JPF production earlier this week. As we expected, sales of our bearing product lines were lower than a year ago but operating margin remained strong. Aerospace benefited from higher sales from our various BLACK HAWK programs and a variety of other programs. We were most encouraged by the performance of our Industrial Distribution segment during the quarter, where market conditions continued to improve. We have completed three acquisitions in this segment in 2010 and each is exceeding our expectations for revenue and profitability. With our growth in revenues and the profitable contribution from the acquisitions, we were able to expand our Industrial Distribution operating margin significantly. Our free cash flow* in the quarter was excellent at $22.3 million as a result of a company-wide focus on cash generation."

Segment reports follow:

Industrial Distribution segment sales increased 35.2% in the 2010 second quarter to $210.9 million from $156.0 million a year ago. Acquisitions contributed $27.7 million in sales in the quarter. On a sales per sales day* basis, organic sales were up 15.6% over last year's second quarter (see table for additional details regarding the Company's sales per day performance). Segment operating income for the second quarter of 2010 was $7.7 million, a 151.6% increase from operating income of $3.1 million in the second quarter of 2009. The operating profit margin for the second quarter of 2010 was 3.7% compared to 2.7% in the first quarter of 2010 and 2.0% in the second quarter of 2009.

Industrial Distribution segment sales for the second quarter of 2010 reflect growth from acquisitions made in 2010 and healthier market conditions for the segment compared to the same period in 2009. Improved market conditions were broad based across all geographies, customers and end markets. Sales were higher on a sequential basis in the second quarter due to the contribution from acquisitions and improved market conditions. The operating margin was higher on a sequential basis as a result of the higher sales volume, and the contributions from acquisitions.

Aerospace segment sales were $106.2 million, a decrease of 22.7% from sales of $137.3 million in the second quarter of 2009. Operating income for the second quarter of 2010 was $12.1 million, compared to operating income of $21.6 million in the 2009 second quarter. The operating margin in this year's second quarter was 11.4% as compared to 15.7% in the comparable period in the prior year. The reduction in sales and profit was primarily attributable to the lower than anticipated deliveries under the JPF program, lower sales of bearing product lines, which carry higher margins than the company's other product lines, lower sales under the Egyptian SH-2G(E) maintenance and upgrade program, and cost adjustments on other programs. These reductions were partially offset by increased sales and profit from Sikorsky BLACK HAWK programs, including erosion coating work for rotor blades, and various other programs.

Outlook

Due to disruptions in JPF production, the company is adjusting its full year sales outlook to reflect lower anticipated sales of JPF fuzes in 2010 offset by higher anticipated BLACK HAWK cockpit deliveries.

The company's revised expectations for 2010 include:

    --  Aerospace segment sales of $480 million to $490 million
    --  Aerospace operating margins of 14.0% to 14.5%
    --  Industrial Distribution organic sales growth of 10% to 13% yielding
        sales in a range of $800 million to $815 million when combined with
        previously announced acquisitions
    --  Industrial Distribution segment operating margins of 3.0% to 3.3%
    --  Interest expense of approximately $9.6 million (net interest expense
        will be approximately $3.0 million as a result of a one-time look-back
        interest benefit)
    --  Quarterly corporate expenses on average of $9.0 million to $10.0 million

Aerospace expectations include $60 million of sales in the second half of the year from the JPF program, but do not include potential opportunities related to either the sale of SH-2G(I) inventory or deployment of the unmanned K-MAX aircraft.

CFO William C. Denninger commented, "Looking ahead to the second half of the year, recent economic data suggests that a recovery in the economy is likely to be gradual. However, at the same time, we are optimistic about the potential for improvement in our end markets for both Industrial Distribution and Aerospace. The strong second quarter performance of our Industrial Distribution segment provides us with confidence in our ability to meet our full year outlook for this business. In Aerospace, we are working diligently to implement the JPF product improvements developed from our root cause analysis and have resumed production. While sales of our bearing product lines were soft in the second quarter, as we anticipated, order intake is improving, which helps support our outlook for higher sales in the second half of the year. Overall, we believe we are well positioned to benefit from gradually improving market conditions, which should in turn result in improved second half performance."

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 quarter's results and various company programs.

A conference call has been scheduled for tomorrow, August 6, 2010 at 8:30 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. In its discussion, management may include certain non-GAAP measures related to company performance. If so, a reconciliation of that information to GAAP, if not provided in this release, will be provided in the exhibits to the conference call and will be available through the Internet link provided above.

Non-GAAP Measure Disclosure

Management believes that the non-GAAP (Generally Accepted Accounting Principles) measures indicated by an asterisk (*) used in this release or in other disclosures provide investors with important perspectives into the company's ongoing business performance. The company does not intend for the information to be considered in isolation or as a substitute for the related GAAP measures. Other companies may define the measures differently. We define the non-GAAP measures used in this report and other disclosures, as follows:

Organic Sales per Sales Day - Organic sales per sales day is defined as GAAP "Net sales from the Industrial Distribution segment" less sales derived from acquisitions, divided by the number of sales days in a given period. Sales days are essentially business days that the company's branch locations are open for business and exclude weekends and holidays. Sales days are provided as part of this release. Management believes sales per sales day provides investors with an important perspective on how net sales may be impacted by the number of days the segment is open for business.

Management uses sales per sales day as a measurement to compare periods in which the number of sales days differ. The following table illustrates the calculation of sales per sales day using "Net sales: Industrial Distribution" from the "Segment Information" footnote in the "Notes to Condensed Consolidated Financial Statements" from the company's Form 10-Q filed with the Securities and Exchange Commission on August 5, 2010 (in thousands, except days):

                                            For the three months ended
                                            --------------------------

                          July 2,        April 2,        December 31,
                            2010            2010              2009
                         --------       ---------       -------------
    Net sales             $210,924        $179,259            $149,754
    Acquisition
     related sales          27,729               -                   -
    --------------
    Organic sales         $183,195        $179,259            $149,754
    -------------         --------        --------            --------

    Sales days                  64              65                  60
    Organic sales per
     sales day              $2,862          $2,758              $2,496
    % change -
     sequential                3.8%           10.5%               -2.0%

                         October 2,       July 3,
                         2009               2009
                        -----------      --------
    Net sales              $162,921       $155,954
    Acquisition
     related sales                -              -
    --------------
    Organic sales          $162,921       $155,954
    -------------          --------       --------

    Sales days                   64             63
    Organic sales per
     sales day               $2,546         $2,475
    % change -
     sequential                 2.8%          -7.6%

Free Cash Flow - Free cash flow is defined as GAAP "Net cash provided by (used in) operating activities" less "Expenditures for property, plant & equipment." Management believes free cash flow provides investors with an important perspective on the cash available for dividends to shareholders, debt repayment, and acquisitions after making capital investments required to support ongoing business operations and long-term value creation. Free cash flow does not represent the residual cash flow available for discretionary expenditures as it excludes certain mandatory expenditures such as repayment of maturing debt.

Management uses free cash flow internally to assess both business performance and overall liquidity. The following table illustrates the calculation of free cash flow using "Net cash provided by (used in) operating activities" and "Expenditures for property, plant & equipment", GAAP measures from the cash flow statement (in thousands):

                          For the Six    For the Three    For the Three
                          Months Ended    Months Ended     Months Ended
                         July 2, 2010    April 2, 2010    July 2, 2010
                         ------------    -------------    ------------
    Net cash provided by
     (used in) operating
     activities                $13, 509         $(13,342)        $26,851
    Expenditures for
     property, plant &
     equipment                   (8,124)          (3,579)         (4,545)
    ------------------           ------           ------          ------
    Free Cash Flow               $5,385         $(16,921)        $22,306
    ==============               ======         ========         =======

Debt to Capitalization Ratio - Debt to capitalization ratio is calculated by dividing debt by capitalization. Debt is defined as GAAP "Notes payable" plus "Current portion of long-term debt" plus "Long-term debt, excluding current portion." Capitalization is defined as Debt plus GAAP "Total shareholders' equity." Management believes that debt to capitalization is a measurement of financial leverage and provides investors with an insight into the financial structure of the company and its financial strength. The following table illustrates the calculation of debt to capitalization using GAAP measures from the balance sheets (in thousands):

                                                            December 31,
                                      July 2, 2010              2009
                                      ------------         -------------
    Notes payable                            $2,599                $1,835
    Current portion of long-
     term debt                                5,000                 5,000
    Long-term debt, excluding
     current portion                         95,700                56,800
                                             ------                ------
    Debt                                    103,299                63,635
    Total shareholders' equity              334,505               312,900
    ==========================              =======               =======
    Capitalization                         $437,804              $376,535
    --------------                         --------              --------
    Debt to capitalization                     23.6%                 16.9%

Kaman Corporation, founded in 1945 by aviation pioneer Charles H. Kaman, and headquartered in Bloomfield, Connecticut conducts business in the aerospace and industrial distribution markets. The company produces and/or markets widely used proprietary aircraft bearings and components; complex metallic and composite aerostructures for commercial, military and general aviation fixed and rotary wing aircraft; safe and arm solutions for missile and bomb systems for the U.S. and allied militaries; subcontract helicopter work; and support for the company's SH-2G Super Seasprite maritime helicopters and K-MAX medium-to-heavy lift helicopters. The company is a leading distributor of industrial parts, and operates more than 200 customer service centers and five distribution centers across North America. Kaman offers more than 3.5 million items including bearings, mechanical power transmission, electrical, material handling, motion control, fluid power, automation and MRO supplies to customers in virtually every industry. Additionally, Kaman provides engineering, design and support for automation, electrical, linear, hydraulic and pneumatic systems as well as belting and rubber fabrication, customized mechanical services, hose assemblies, repair, fluid analysis and motor management.

Forward-Looking Statements

This release 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 Aerospace Wichita facility; 8) successful negotiation of the Sikorsky Canadian MH-92 program price; 9) successful resale of the SH-2G(I) aircraft, equipment and spare parts; 10) 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; 11) satisfactory resolution of the company's litigation relating to the FMU-143 program; 12) continued support of the existing K-MAX helicopter fleet, including sale of existing K-MAX spare parts inventory; 13) cost estimates associated with environmental remediation activities at the Bloomfield, Moosup and New Hartford, CT facilities and our U.K. facilities; 14) profitable integration of acquired businesses into the company's operations; 15) changes in supplier sales or vendor incentive policies; 16) the effects of price increases or decreases; 17) the effects of pension regulations, pension plan assumptions and future contributions; 18) future levels of indebtedness and capital expenditures; 19) continued availability of raw materials and other commodities in adequate supplies and the effect of increased costs for such items; 20) the effects of currency exchange rates and foreign competition on future operations; 21) changes in laws and regulations, taxes, interest rates, inflation rates and general business conditions; 22) future repurchases and/or issuances of common stock; and 23) 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 release should be considered with these factors in mind. The company assumes no obligation to update any forward-looking statements contained in this release.

    A summary of segment information follows (in thousands, unaudited):

                             Summary of Segment Information

                          For the three months ended For the six months ended
                          -------------------------- ------------------------
                                             July 3,    July 2,     July 3,
                          July 2, 2010        2009       2010        2009
                          ------------      --------   --------    --------
    Net sales:
       Industrial
        Distribution           $210,924      $155,954   $390,183    $332,860
       Aerospace                106,163       137,269    203,676     254,398
         Net sales             $317,087      $293,223   $593,859    $587,258
                               ========      ========   ========    ========

    Operating income:
       Industrial
        Distribution             $7,713        $3,065    $12,525      $5,844
       Aerospace                 12,114        21,600     21,747      36,897
       Net gain (loss) on
        sale of assets              (56)          (53)       520          40
       Corporate expense         (8,581)       (8,445)   (19,109)    (17,211)
                                 ------        ------    -------     -------
         Operating income       $11,190       $16,167    $15,683     $25,570
                                =======       =======    =======     =======

                         KAMAN CORPORATION AND SUBSIDIARIES
                   Condensed Consolidated Statements of Operations
                 (In thousands except per share amounts)(Unaudited)

                          For the Three Months         For the Six Months
                                  Ended                      Ended
                          --------------------     ------------------
                        July 2,         July 3,   July 2,        July 3,
                         2010            2009      2010            2009
                       --------        --------  --------       --------

    Net sales           $317,087        $293,223  $593,859       $587,258
    Cost of sales        233,827         214,752   437,844        431,092
                         -------         -------   -------        -------
                          83,260          78,471   156,015        156,166

    Selling, general
     and
     administrative       72,014          62,251   140,852        130,636
    Net (gain)/loss on
     sale of assets           56              53      (520)           (40)
                             ---             ---      ----            ---
    Operating income      11,190          16,167    15,683         25,570
    Interest expense,
     net                   2,337           1,195     4,391          2,639
    Other (income)
     expense, net           (451)            752      (667)           614
                            ----             ---      ----            ---

    Earnings before
     income taxes          9,304          14,220    11,959         22,317
    Income tax expense     3,227           4,826     4,156          7,547
                           -----           -----     -----          -----
    Net earnings          $6,077          $9,394    $7,803        $14,770
                          ======          ======    ======        =======

    Net earnings per
     share:
    Basic net earnings
     per share             $0.23           $0.37     $0.30          $0.58
    Diluted net
     earnings per
     share                 $0.23           $0.37     $0.30          $0.58
    Average shares
     outstanding:

    Basic                 25,926          25,638    25,877         25,586
    Diluted               26,093          25,721    26,055         25,659
                          ======          ======    ======         ======

    Dividends declared
     per share             $0.14           $0.14     $0.28          $0.28
                           =====           =====     =====          =====

                            KAMAN CORPORATION AND SUBSIDIARIES
                           Condensed Consolidated Balance Sheets
                                 (In thousands)(Unaudited)

                                           July 2, 2010    December 31, 2009
                                           ------------    -----------------
                        Assets
    Current assets:
      Cash and cash equivalents                    $7,136            $18,007
      Accounts receivable, net                    167,215            135,423
      Inventories                                 306,765            285,263
      Deferred income taxes                        28,190             23,040
      Income taxes receivable                       3,540                  -
      Other current assets                         23,427             20,870
                                                   ------             ------
         Total current assets                     536,273            482,603
                                                  -------            -------
    Property, plant and equipment,
     net                                           83,481             81,322
    Goodwill                                      109,339             88,190
    Other intangibles assets, net                  43,580             28,684
    Deferred income taxes                          45,467             69,811
    Other assets                                   18,179             22,457
                                                   ------             ------
    Total assets                                 $836,319           $773,067
                                                 ========           ========

             Liabilities and Shareholders'
                         Equity
    Current liabilities:
      Notes payable                                $2,599             $1,835
      Current portion of long-term
       debt                                         5,000              5,000
      Accounts payable - trade                     95,310             79,309
      Accrued salaries and wages                   22,904             19,049
      Accrued pension costs                         6,903              1,105
      Accrued contract losses                       3,027              1,310
      Advances on contracts                        10,039              1,800
      Current portion of amount due
       to Commonwealth of Australia                20,471                  -
      Other accruals and payables                  51,322             39,204
      Income taxes payable                              -              5,458
                                                      ---              -----
          Total current liabilities               217,575            154,070
                                                  -------            -------
    Long-term debt, excluding
     current portion                               95,700             56,800
    Deferred income taxes                           7,657              8,352
    Underfunded pension                           122,763            157,266
    Due to Commonwealth of
     Australia, excluding current
     portion                                       10,806             34,067
    Other long-term liabilities                    47,313             49,612
    Commitments and contingencies
    Shareholders'' equity:
      Capital stock, $1 par value
       per share:
           Preferred stock, 200,000
            shares authorized; none
            outstanding                                 -                  -
         Common stock, 50,000,000
          shares authorized, voting,
          26,004,293 and                           26,004             25,817
         25,817,477  shares issued,
          respectively
      Additional paid-in capital                   93,717             89,624
      Retained earnings                           302,605            302,058
      Accumulated other
       comprehensive income (loss)                (86,955)          (104,042)
      Less 63,130 and 51,000 shares
       of common stock,
       respectively,
         held in treasury, at cost                   (866)              (557)
                                                     ----               ----
         Total shareholders' equity               334,505            312,900
                                                  -------            -------
    Total liabilities and
     shareholders' equity                        $836,319           $773,067
                                                 ========           ========

                            KAMAN CORPORATION AND SUBSIDIARIES
                     Condensed Consolidated Statements of Cash Flows
                                (In thousands)(Unaudited)

                                             For the Six Months Ended
                                             ------------------------


                                         July 2, 2010       July 3, 2009
                                         ------------       ------------
    Cash flows from operating
     activities:
    Net earnings                                 $7,803           $14,770
    Adjustments to reconcile
     net earnings to
      net cash provided by (used
       in) operating activities
      Depreciation and
       amortization                               9,457             7,692
      Change in allowance for
       doubtful accounts                            (93)              172
      Net (gain) loss on sale of
       assets                                      (520)              (40)
      (Gain) loss on Australian
       payable, net of loss on
       derivative instruments                      (487)              862
      Stock compensation expense                  2,654             1,727
      Excess tax expense
       (benefit) from share-
       based compensation
       arrangements                                (179)               71
      Deferred income taxes                      (2,364)            1,357
      Changes in assets and
       liabilities, excluding
       effects of acquisitions/
       divestures:
        Accounts receivable                     (14,867)           (2,780)
        Inventories                             (10,470)           18,989
        Income tax receivable                    (2,417)            3,450
        Other current assets                      2,226             1,603
        Accounts payable                          7,918           (12,169)
        Accrued contract losses                   1,719              (251)
        Advances on contracts                     8,238              (684)
        Accrued expenses and
         payables                                 4,277            (3,928)
        Income taxes payable                     (4,912)            1,571
        Pension liabilities                       6,675            (8,869)
        Other long-term
         liabilities                             (1,149)             (654)
                                                 ------              ----
        Net cash provided by (used
         in) operating activities                13,509            22,889
                                                 ------            ------

    Cash flows from investing
     activities:
      Proceeds from sale of
       assets                                     1,075                31
      Expenditures for property,
       plant & equipment                         (8,124)           (5,508)
      Acquisition of businesses
       including earn out
       adjustment, net of cash
       received                                 (50,637)             (550)
      Other, net                                    963            (1,237)
              Cash provided by (used in)
               investing activities             (56,723)           (7,264)
                                                -------            ------

    Cash flows from financing
     activities:
      Net borrowings (repayments)
       under revolving credit
       agreements                                41,266            (1,117)
      Debt repayment                             (2,500)           (2,500)
      Net change in book
       overdraft                                  1,288            (1,989)
      Proceeds from exercise of
       employee stock plans                       1,599               899
      Dividends paid                             (7,444)           (7,350)
      Debt issuance costs                           (43)                -
      Windfall tax (expense)
       benefit                                      179               (71)
      Other                                        (211)              (36)
        Cash provided by (used in)
         financing activities                    34,134           (12,164)
                                                 ------           -------

    Net increase (decrease) in
     cash and cash equivalents                   (9,080)            3,461
    Effect of exchange rate
     changes on cash and cash
     equivalents                                 (1,791)              797
    Cash and cash equivalents
     at beginning of period                      18,007             8,161
                                                 ------             -----
    Cash and cash equivalents
     at end of period                            $7,136           $12,419
                                                 ======           =======

SOURCE Kaman Corp.