Letter to Shareholders

Dear Shareholders,

For nearly three-quarters of a century, Kaman has successfully delivered what our customers need most: absolute, uncompromising performance. Our customers’ success requires nothing less than this, whether we’re manufacturing landing gear components for a passenger airliner or keeping the lights on around the clock by providing parts and services for power generation.

Everyone at Kaman understands the vital role we play in the safety, growth, and prosperity of our customers. Performance underlies everything we do, and it’s the reason our customers continue to rely on Kaman.

This commitment is evident in our financial performance, which remained strong when adjusted for restructuring and tax reform. In 2017, Kaman reported net earnings of $49.8 million, or $1.75 per diluted share, compared to $58.9 million, or $2.10 in 2016. Earnings for the year reflect improved operating profit performance at Distribution, as well as continued strong performance from Aerospace. Late in 2017, the U.S. Congress passed the Tax Cuts and Jobs Act which, among other things, reduced the federal tax rate for corporations, which required us to revalue our deferred tax assets resulting in a nonrecurring charge of $9.7 million, or $0.35 per diluted share. Looking ahead, the Company will benefit from a lower federal tax rate, which will allow for increased investments in our business, expansion of our operations, and the return of additional capital to shareholders. In 2017, we generated $79.9 million net cash provided by operating activities, compared to $107.7 million during 2016. This change was primarily driven by the timing of shipments at year-end, which impacted our cash flow results.

Our January 2018 dividend payment represents the 48th consecutive year of dividend payments, and we remain committed to returning capital to shareholders. During 2017, our share repurchase program and dividends, combined, returned $33 million to shareholders.

At Kaman, we strive to balance our focus on delivering strong near-term returns with an emphasis on building long-term success. In 2017, we continued to strengthen our future potential through investments in machinery and equipment, expanded facilities, and new technology at both Distribution and Aerospace.

Additionally, we continue to invest in our people. Our Women Advocating Leadership at Kaman (WALK) program flourished in 2017, with the development of the quarterly WALK Award program and local WALK chapters across the United States. Our Kaman Leadership Development Program (KLDP) continues to mature, and this year we launched our Rising Star Mentoring Program to support the careers of our talented employees.

With an eye to our future, we named new executives to lead both of our businesses. In September, Richard R. Barnhart was appointed head of our Aerospace segment, succeeding Gregory L. Steiner, who retired from Kaman in January 2018. Rick was most recently a senior executive of Barnes Aerospace and earlier served as President of Kaman’s Aerostructures Division. It’s great to welcome Rick back to Kaman.

In November, Alphonse J. Lariviere, Jr. was appointed to serve as President of our Distribution segment. Al has served in various roles with Kaman Corporation across both of our segments since 2004, most recently as Senior Vice President – Finance & Administration of Distribution. His experience in general management, finance, supply chain management, and customer service made him an ideal candidate to lead our Distribution Group.

“Everyone at Kaman understands the vital role we play in the safety, growth and prosperity of our customers. Performance underlies everything we do, and it’s the reason our customers continue to rely on Kaman.” Neal J. Keating
Chairman, President and Chief Executive Officer


Our Aerospace segment reported strong results in 2017. Revenues for 2017 were $724.9 million, an increase of 3.3% from 2016 revenues of $702.1 million. This reflects increased deliveries of the Joint Programmable Fuze (JPF) to the U.S. Air Force and foreign militaries, and an increase in sales of our specialty bearings and engineered products. Operating profit for 2017 increased 4.2% to $119.9 million from $115.0 million in 2016. This represents a five-year growth of 16.9% in operating profit dollars. The operating profit result for the current year includes $2.7 million of costs associated with a restructuring of our composite aerostructures facilities.

At our Specialty Bearings & Engineered Products Division, Kamatics and RWG continue to be the premier airframe bearing manufacturers in the world, supplying components for virtually every aircraft platform. GRW, located in Germany and the Czech Republic, has delivered sustained growth while increasing our exposure to a variety of attractive industrial end markets. EXTEX, which provides aftermarket aircraft components, has tripled its backlog since its acquisition in 2015.

Our Fuzing & Precision Products Division also turned in a great performance in 2017, delivering almost 36,000 JPF units during the year. This is an outstanding achievement for this program and we anticipate continued strong momentum going forward.

In 2017, we delivered our first four new K-MAX® heavy-lift helicopters to Chinese, Swiss, and American companies. The innovative design of the K-MAX® has proven itself worldwide as a low-maintenance helicopter with unique capabilities and high reliability rates. The delivery of two helicopters to China’s Lectern Aviation is a significant first entry for Kaman into this large and growing aerospace market. In fact, due to the program’s success, we have extended commercial K-MAX® helicopter production into at least 2019, and continue to pursue opportunities around the globe. Our program to supply the Peruvian Navy with SH-2G maritime helicopters achieved a major milestone with the glass cockpit “light up” in December. These updated aircraft will provide the Peruvian Navy with advanced capabilities, such as the glass cockpit, which modernizes the instrumentation of the aircraft and increases the situational awareness of the pilots.

As noted, we restructured our composite aerostructures facilities in 2017 to improve capacity utilization and operating efficiency while supporting continued top-line growth. At our Jacksonville facility, we have delivered more than 1,300 Blackhawk cockpits since the inception of that program in 2005, and in 2017 we were awarded a new multi-year contract with Sikorsky that will extend the program through 2022. Aerosystems launched a long-term agreement with Rolls-Royce to manufacture composite components for the production phase of the Trent 7000 engine program. This engine was specifically engineered for the Airbus A330neo aircraft, and promises quieter operations and lower fuel consumption. Components will be produced at our facilities in Vermont, Kansas, and the U.K.

In 2017, we also expanded our presence outside of the United States, increasing our stake in Kineco Kaman Composite Structures, a joint venture in Goa, India that manufactures advanced composite structures for aerospace, imaging, and medical industries. The increased ownership stake reflects our commitment to the joint venture, and confidence in the rapidlygrowing Indian aerospace industry.


Our Distribution business reported improved earnings on relatively flat revenues, a testament to the success of our productivity initiatives. In 2017, Distribution revenues were down 2.3% to $1.08 billion, from $1.11 billion in 2016. Operating profit increased 25.4% for 2017 to $52.5 million, compared to $41.9 million in 2016. Operating margins were 4.9% in 2017, up 110 basis points from 3.8% in 2016.

Deep and long-term customer relationships, supported by outstanding service and unparalleled technical expertise, are central to Distribution’s growth strategy. Our success in establishing and maintaining such relationships was underscored in 2017 when we were named “Supplier of the Year” in the MRO category by Berry Plastics for 2016. The selection criteria for the award included quality, delivery, pricing/economics, technology/technical support, and customer service. This marks the second time Kaman received this award from Berry Plastics, a Fortune 500 global manufacturer and marketer of plastic packaging products.

Our productivity initiatives program continued to deliver benefits, as reflected in our 2017 results. Late in the year we began expanding these initiatives to our Automation and Fluid Power product lines. As we move into 2018, we are focused on fostering organic growth, while taking advantage of a number of trends that continue to favor our Distribution business model. These include the consolidation of suppliers and the increased need for value-added services. As the large and fragmented supplier market continues to consolidate, our national accounts strategy will be increasingly important and valuable. Similarly, factory automation trends are driving adoption of the valueadded fluid power and high-speed automation solutions that we offer, benefiting two of our major platforms.

Looking Ahead

As the economy continues to gain strength, Kaman will maintain our focus on three core strategies. First, we will make investments to drive future growth while returning capital to shareholders. Second, we will sharpen our focus on innovation, which has been a hallmark of the company since our founder, Charlie Kaman, flew the first K-125 helicopter in 1947. Finally, we will redouble our commitment to operational efficiency, customer service, and technical excellence to maintain our differentiation and drive productivity.

Amid much to be thankful for in 2017, the entire Kaman family was saddened by the death of Eileen Kraus, who served as a Director of the Company for twenty years. Eileen’s guidance was vitally important to our company and to me personally and she will be missed. We were proud to partner with the Connecticut Women’s Hall of Fame to establish the Eileen Kraus Scholarship for College-Bound Students, under which the first grant was awarded in 2017. With the Company’s support and the outpouring of memorial donations from friends and family in Eileen’s honor, we are pleased to report that the scholarship has become a perpetual program to forever honor her legacy.

Each year in this letter, I acknowledge the dedication and resourcefulness of Kaman’s 5,300 employees. In 2017, both of these attributes were put to the test by the devastation caused by hurricanes in Puerto Rico, Florida, and Texas. Our people came through admirably, raising more than $65,000 for the American Red Cross relief effort and donating their time to rebuilding affected communities. This is the spirit of teamwork and commitment I see every day, and this is the spirit that will continue to build a bigger, stronger company for our shareholders, our customers, our communities, and our employees.


Neal Keating

Neal J. Keating
Chairman, President and
Chief Executive Officer

Eileen Kraus

Eileen Kraus 1939 – 2017

"She understood what it meant to lead, not as a man or woman but as a leader. She knew how to express her vision. She was honest, authentic, and very no-nonsense".
— Kathryn Gloor, Executive Director, Connecticut Women’s Hall of Fame

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