Kaman Corporation Announces Pricing of Offering of $175 Million Convertible Senior Notes due 2024

May 08, 2017

BLOOMFIELD, Conn.--(BUSINESS WIRE)--May 8, 2017--
Kaman Corporation (the “Company”) (NYSE:KAMN) announced today the
pricing of its offering of $175 million aggregate principal amount of
3.25% convertible senior notes due 2024 in a private offering to
qualified institutional buyers pursuant to Rule 144A under the
Securities Act of 1933, as amended (the “Securities Act”). In connection
with the offering, the Company granted the initial purchasers an option
to purchase, within the 13-day period beginning on, and including, the
date the Company first issues the notes, up to an additional $25 million
aggregate principal amount of such notes, solely to cover
over-allotments, if any.

When issued, the notes will be senior unsecured obligations of the
Company, and will pay interest at a rate of 3.25% per year payable
semi-annually in arrears on May 1 and November 1 of each year, beginning
on November 1, 2017. The notes will mature on May 1, 2024, unless
repurchased or converted in accordance with their terms prior to such
date. Prior to November 1, 2023, the notes will be convertible only upon
satisfaction of certain conditions and during certain periods, and on
and after November 1, 2023, at any time until the close of business on
the second scheduled trading day immediately preceding the maturity
date. Upon conversion, the Company will pay or deliver, as the case may
be, cash, shares of the Company’s common stock or a combination of cash
and shares of the Company’s common stock, at the Company’s election. The
conversion rate will initially be 15.3227 shares of the Company’s common
stock per $1,000 principal amount of notes (equivalent to an initial
conversion price of approximately $65.26 per share of the Company’s
common stock). The initial conversion price of the notes represents a
premium of approximately 25% to the $52.21 per share closing price of
the Company’s common stock on May 8, 2017. Holders of the notes will
have the right to require the Company to repurchase all or some of their
notes at 100% of their principal amount, plus any accrued and unpaid
interest, upon the occurrence of certain fundamental change events. The
offering is expected to close on or about May 12, 2017, subject to
satisfaction of customary closing conditions.

In connection with the offering of the notes, the Company entered into
capped call transactions with one or more of the initial purchasers or
their respective affiliates (in this capacity, the “option
counterparties”). The capped call transactions are expected generally to
reduce potential dilution to the Company’s common stock upon any
conversion of notes and/or offset any cash payments the Company is
required to make in excess of the principal amount of converted notes,
as the case may be, with such reduction and/or offset subject to a cap.
If the initial purchasers exercise their over-allotment option, the
Company expects to enter into additional capped call transactions with
the option counterparties.

The Company intends to use approximately $17.9 million of the net
proceeds from this offering to pay the cost of the capped call
transactions. The Company intends to use the remainder of the net
proceeds from the offering, along with cash received from existing
option counterparties in connection with the partial unwind of the
existing call spread transactions referred to below, to repay existing
indebtedness, including using approximately $165.3 million to repurchase
approximately $103.5 million principal amount of the Company’s
convertible notes due on November 15, 2017 (the “existing convertible
notes”) from a limited number of holders in privately negotiated
transactions, which amount includes accrued and unpaid interest on such
existing convertible notes to the date of repurchase. If the initial
purchasers exercise their over-allotment option, the Company expects to
use the net proceeds from the sale of the additional notes to enter into
additional capped call transactions with the option counterparties and
to repay indebtedness under the Company’s existing credit agreement.

In connection with establishing their initial hedges of the capped call
transactions, the option counterparties or their respective affiliates
expect to enter into various derivative transactions with respect to the
Company’s common stock concurrently with or shortly after the pricing of
the notes. This activity could increase (or reduce the size of any
decrease in) the market price of the Company’s common stock or the notes
at that time.

In addition, the option counterparties or their respective affiliates
may modify their hedge positions by entering into or unwinding various
derivatives with respect to the Company’s common stock and/or purchasing
or selling the Company’s common stock or other of the Company’s
securities in secondary market transactions following the pricing of the
notes and prior to maturity of the notes (and are likely to do so during
any observation period related to a conversion of notes). This activity
could also cause or avoid an increase or a decrease in the market price
of the Company’s common stock or the notes, which could affect the
ability to convert the notes and, to the extent the activity occurs
during any observation period related to a conversion of notes, it could
affect the number of shares and value of the consideration that holders
will receive upon conversion of the notes.

In addition, if any such capped call transactions fail to become
effective, whether or not this offering of notes is completed, the
option counterparties or their respective affiliates may unwind their
hedge positions with respect to the Company’s common stock, which could
adversely affect the value of the Company’s common stock and, if the
notes have been issued, the value of the notes.

In connection with the existing convertible notes, the Company entered
into convertible note hedge transactions and warrant transactions (the
“existing call spread transactions”) with certain financial institutions
(the “existing option counterparties”). In connection with the Company’s
intended repurchase of existing convertible notes, the Company entered
into agreements with the existing option counterparties to terminate a
portion of such existing call spread transactions, in each case, in a
notional amount corresponding to the amount of such existing convertible
notes repurchased. In connection with any termination of existing call
spread transactions and the related unwinding of the existing hedge
position of the existing option counterparties with respect to such
transactions, such existing option counterparties and/or their
respective affiliates may sell shares of the Company’s common stock in
secondary market transactions, and/or enter into or unwind various
derivative transactions with respect to the Company’s common stock. This
activity could decrease (or reduce the size of any increase in) the
market price of the Company’s common stock at that time and it could
decrease (or reduce the size of any increase in) the market value of the
notes. In connection with these transactions, the Company expects to
separately receive payments in connection with the partial unwind of
such convertible note hedge transactions and expects to make deliveries
of shares of the Company’s common stock in connection with the partial
unwind of such warrant transactions, in each case, in amounts that
depend on the market price of the Company’s common stock at such times
as agreed with the existing option counterparties.

The Company also expects that, in connection with the repurchase a
portion of its existing convertible notes, those holders of the existing
convertible notes that sell their existing convertible notes to the
Company may enter into or unwind various derivatives with respect to the
Company’s common stock and/or purchase or sell shares of the Company’s
common stock in the market to hedge their exposure in connection with
these transactions. In particular, the Company expects that many holders
of the existing convertible notes employ a convertible arbitrage
strategy with respect to the existing convertible notes and have a short
position with respect to the Company’s common stock that they would
close, through purchases of the Company’s common stock, in connection
with the Company’s repurchase of their existing convertible notes. This
activity could increase (or reduce the size of any decrease in) the
market price of the Company’s common stock or the notes at that time,
and could result in a higher effective conversion price for the notes.

The notes will be offered to qualified institutional buyers pursuant to
Rule 144A under the Securities Act. Neither the notes nor the common
stock issuable upon conversion of the notes have been registered under
the Securities Act or the securities laws of any state or other
jurisdiction and may not be offered or sold in the United States absent
registration or an applicable exemption from such a registration
requirements.

This press release does not and shall not constitute an offer to sell or
the solicitation of an offer to buy any notes or common stock, nor shall
there be any sale of notes or common stock, in any state or jurisdiction
in which such an offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any state or
any jurisdiction. Any offer, if at all, will be made only pursuant to
Rule 144A under the Securities Act.

About Kaman Corporation

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
markets proprietary aircraft bearings and components; super precision,
miniature ball bearings; complex metallic and composite aerostructures
for commercial, military and general aviation fixed and rotary wing
aircraft; safe and arming solutions for missile and bomb systems for the
U.S. and allied militaries; subcontract helicopter work; restoration,
modification and support of our SH-2G Super Seasprite maritime
helicopters; manufacture and support of our K-MAX® manned and unmanned
medium-to-heavy lift helicopters; and engineering design, analysis and
certification services. The company is a leading distributor of
industrial parts, and operates approximately 240 customer service
centers and five distribution centers across the U.S. and Puerto Rico.
Kaman offers more than four 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 press release contains "forward-looking statements" within the
meaning of the safe harbor provisions of the U.S. Private Securities
Litigation Reform Act of 1995. Forward-looking statements also may be
included in other publicly available documents issued by the Company and
in oral statements made by our officers and representatives from time to
time. These forward-looking statements are intended to provide
management's current expectations or plans for our future operating and
financial performance, based on assumptions currently believed to be
valid. They can be identified by the use of words such as "anticipate,"
"intend," "plan," "goal," "seek," "believe," "project," "estimate,"
"expect," "strategy," "future," "likely," "may," "should," "would,"
"could," "will" and other words of similar meaning in connection with a
discussion of future operating or financial performance. Examples of
forward looking statements include, among others, statements relating to
future sales, earnings, cash flows, results of operations, uses of cash
and other measures of financial performance.

Because forward-looking statements relate to the future, they are
subject to inherent risks, uncertainties and other factors that may
cause the Company's actual results and financial condition to differ
materially from those expressed or implied in the forward-looking
statements. Such risks, uncertainties and other factors include, among
others: (i) changes in domestic and foreign economic and competitive
conditions in markets served by the Company, particularly the defense,
commercial aviation and industrial production markets; (ii) changes in
government and customer priorities and requirements (including
cost-cutting initiatives, government and customer shut-downs, the
potential deferral of awards, terminations or reductions of expenditures
to respond to the priorities of Congress and the Administration, or
budgetary cuts resulting from Congressional actions or automatic
sequestration); (iii) changes in geopolitical conditions in countries
where the Company does or intends to do business; (iv) the successful
conclusion of competitions for government programs (including new,
follow-on and successor programs) and thereafter successful contract
negotiations with government authorities (both foreign and domestic) for
the terms and conditions of the programs; (v) the timely receipt of any
necessary export approvals and/or other licenses or authorizations from
the U.S. Government; (vi) the existence of standard government contract
provisions permitting renegotiation of terms and termination for the
convenience of the government; (vii) the successful resolution of
government inquiries or investigations relating to our businesses and
programs; (viii) risks and uncertainties associated with the successful
implementation and ramp up of significant new programs, including the
ability to manufacture the products to the detailed specifications
required and recover start-up costs and other investments in the
programs; (ix) potential difficulties associated with variable
acceptance test results, given sensitive production materials and
extreme test parameters; (x) the receipt and successful execution of
production orders under the Company's existing U.S. government JPF
contract, including the exercise of all contract options and receipt of
orders from allied militaries, but excluding any next generation
programmable fuze programs, as all have been assumed in connection with
goodwill impairment evaluations; (xi) the continued support of the
existing K-MAX® helicopter fleet, including sale of existing K-MAX®
spare parts inventory and the receipt of orders for new aircraft
sufficient to recover our investment in the restart of the K-MAX®
production line; (xii) the accuracy of current cost estimates associated
with environmental remediation activities; (xiii) the profitable
integration of acquired businesses into the Company's operations; (xiv)
the ability to implement our ERP systems in a cost-effective and
efficient manner, limiting disruption to our business, and allowing us
to capture their planned benefits while maintaining an adequate internal
control environment; (xv) changes in supplier sales or vendor incentive
policies; (xvi) the effects of price increases or decreases; (xvii) the
effects of pension regulations, pension plan assumptions, pension plan
asset performance, future contributions and the pension freeze,
including the ultimate determination of the U.S. Government's share of
any pension curtailment adjustment calculated in accordance with CAS
413; (xviii) future levels of indebtedness and capital expenditures;
(xix) the continued availability of raw materials and other commodities
in adequate supplies and the effect of increased costs for such items;
(xx) the effects of currency exchange rates and foreign competition on
future operations; (xxi) changes in laws and regulations, taxes,
interest rates, inflation rates and general business conditions; (xxii)
the effects, if any, of the UK's exit from the EU; (xxiii) future
repurchases and/or issuances of common stock; (xxiv) the incurrence of
unanticipated restructuring costs or the failure to realize anticipated
savings or benefits from past or future expense reduction actions; and
(xxv) other risks and uncertainties set forth herein, in our 2016 Form
10-K and in our Form 10-Q for the fiscal quarter ended March 31, 2017.

Any forward-looking information provided in this press release should be
considered with these factors in mind. We assume no obligation to update
any forward-looking statements contained in this press release.

Source: Kaman Corporation

Kaman Corporation
James Coogan, 860-243-6342
Vice President,
Investor Relations
james.coogan@kaman.com