form10-q.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 10-Q

x
Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For The Quarterly Period Ended September 28, 2007

OR

o
Transition Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934 for the
Transition Period From  ___ to ___

Commission File No.  0-1093

KAMAN CORPORATION

(Exact name of registrant as specified in its charter)

Connecticut
  
06-0613548
(State or other jurisdiction
  
 (I.R.S.  Employer
of incorporation or organization)
  
 Identification No.)

1332 Blue Hills Avenue
Bloomfield, Connecticut 06002
(Address of principal executive offices)

 (860) 243-7100
Registrant's telephone number, including area code
 
    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x
  
No o
 
    Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o
  
Accelerated filer  x
  
Non-accelerated filer  o
 
    Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o
  
No x
 
Indicate the number of shares outstanding of each of the issuer's classes of common stock as of November 1, 2007:

Common Stock
24,624,309

      
       
Page 1 of 35

Part I – Financial Information
Item 1.  Financial Statements:

Condensed Consolidated Balance Sheets
(In thousands) (Unaudited)

   
September 28, 2007
    
December 31, 2006
  
Assets:
                        
Current assets:
                        
Cash and cash equivalents
         $
14,484
           $
12,720
  
Accounts receivable, net
          
179,891
            
163,163
  
Inventories
          
203,206
            
188,869
  
Deferred income taxes
          
28,297
            
24,687
  
Other current assets
          
19,025
            
16,385
  
Assets held for sale
          
114,792
            
107,407
  
Total current assets
          
559,695
            
513,231
  
                             
Property, plant & equipment, at cost
   $
161,991
             $
154,361
          
Less accumulated depreciation
                                
and amortization
    
109,879
              
104,407
          
Net property, plant & equipment
            
52,112
              
49,954
  
Goodwill
            
44,082
              
42,211
  
Other intangible assets, net
            
309
              
285
  
Deferred income taxes
            
17,097
              
16,797
  
Other assets, net
            
9,621
              
7,935
  
Total assets
           $
682,916
             $
630,413
  
                                 
Liabilities and Shareholders' Equity:
                                
Current liabilities:
                                
Notes payable
           $
1,997
             $
-
  
Current portion of long-term debt
            
-
              
1,551
  
Accounts payable - trade
            
79,682
              
77,263
  
Accrued salaries and wages
            
20,857
              
23,955
  
Accrued pension costs
            
14,012
              
2,862
  
Accrued contract losses
            
9,928
              
11,542
  
Advances on contracts
            
9,612
              
10,215
  
Other accruals and payables
            
37,364
              
39,649
  
Income taxes payable
            
-
              
8,787
  
Liabilities held for sale
            
23,317
              
23,302
  
Total current liabilities
            
196,769
              
199,126
  
                                 
Long-term debt, excl. current portion
            
97,943
              
72,872
  
Other long-term liabilities
            
56,144
              
61,854
  
Commitments and contingencies
                                
Shareholders' equity
            
332,060
              
296,561
  
 Total liabilities and shareholders’ equity  
 $
682,916
             $
630,413
  



See accompanying notes to condensed consolidated financial statements.

      
          
    
Page 2 of 35

Condensed Consolidated Statements of Operations
(In thousands except per share amounts)
(Unaudited)
 
   
For the Three Months Ended
    
For the Nine Months Ended
  
                         
   
September 28, 2007
    
September 29, 2006
    
September 28, 2007
    
September 29, 2006
  
                         
Net sales
   $
274,856
     $
252,089
     $
813,768
     $
741,176
  
                                 
Cost of sales
    
198,399
      
183,568
      
587,566
      
538,496
  
Selling, general and administrative expense
    
59,450
      
55,990
      
177,426
      
167,461
  
Net (gain)/loss on sale of assets
     (1 )    
92
       (15 )    
40
  
     
257,848
      
239,650
      
764,977
      
705,997
  
Operating income from continuing operations
    
17,008
      
12,439
      
48,791
      
35,179
  
                                 
Interest expense, net
    
1,672
      
1,665
      
4,872
      
4,582
  
Other expense, net
    
75
      
164
      
291
      
724
  
                                 
Earnings from continuing operations before income taxes
    
15,261
      
10,610
      
43,628
      
29,873
  
Income tax expense
     (5,824 )     (4,219 )     (16,111 )     (11,963 )
Net earnings from continuing operations
    
9,437
      
6,391
      
27,517
      
17,910
  
                                 
Earnings from discontinued operations before income taxes
    
3,721
      
3,798
      
7,000
      
6,731
  
Income tax expense
     (1,421 )     (1,451 )     (2,646 )     (2,497 )
Net earnings from discontinued operations
    
2,300
      
2,347
      
4,354
      
4,234
  
                                 
Net earnings
   $
11,737
     $
8,738
     $
31,871
     $
22,144
  
                                 
Net earnings per share:
                                
Basic net earnings per share from continuing operations
    
0.39
      
0.26
      
1.13
      
0.74
  
Basic net earnings per share from discontinued operations
    
0.09
      
0.10
      
0.18
      
0.18
  
Basic net earnings per share
   $
0.48
     $
0.36
     $
1.31
     $
0.92
  
                                 
Diluted net earnings per share from continuing operations
    
0.38
      
0.26
      
1.11
      
0.74
  
Diluted net earnings per share from discontinued operations
    
0.09
      
0.10
      
0.17
      
0.17
  
Diluted net earnings per share
   $
0.47
     $
0.36
     $
1.28
     $
0.91
  
                                 
Average shares outstanding:
                                
Basic
    
24,438
      
24,067
      
24,288
      
24,012
  
Diluted
    
25,336
      
24,794
      
25,217
      
24,854
  
                                 
Dividends declared per share
   $
0.140
     $
0.125
     $
0.39
     $
0.375
  
                                 


See accompanying notes to condensed consolidated financial statements.

      
      
Page 3 of 35

Condensed Consolidated Statements of Cash Flows
(In thousands except share amounts) (Unaudited)
     
For the Nine Months Ended
     
September 28,
2007
  
September 29,
2006
Cash flows from operating activities:
      
Net earnings from continuing operations
 $            27,517
  
 $            17,910
Adjustments to reconcile net earnings from continuing operations to net cash
      
 
provided by operating activities of continuing operations:
      
 
Depreciation and amortization
                 7,204
  
                 6,612
 
Change in allowance for doubtful accounts
                      77
  
                  (735)
 
Net (gain) loss on sale of assets
                    (15)
  
                      40
 
Stock compensation expense
                 3,297
  
                 1,977
 
Deferred income taxes
               (3,438)
  
                 2,259
 
Changes in assets and liabilities, excluding effects of acquisition/divestitures:
      
   
Accounts receivable
             (17,610)
  
             (22,375)
   
Inventories
             (13,667)
  
                 1,612
   
Income taxes receivable
               (1,097)
  
                         -
   
Other current assets
               (1,131)
  
               (2,372)
   
Accounts payable
                 4,204
  
               (6,649)
   
Accrued contract losses
               (1,616)
  
               (8,322)
   
Advances on contracts
                  (603)
  
               (4,708)
   
Accrued expenses and payables
               (7,308)
  
               (6,462)
   
Income taxes payable
             (10,010)
  
               (1,366)
   
Pension liabilities
                 2,120
  
                 6,739
   
Other long-term liabilities
                 6,037
  
                    926
   
Net cash provided by (used in) operating activities of continuing operations
               (6,039)
  
             (14,914)
   
Net cash provided by (used in) operating activities of discontinued operations
                 1,791
  
               (3,520)
   
Net cash provided by (used in) operating activities
               (4,248)
  
             (18,434)
       
Cash flows from investing activities:
      
 
Proceeds from sale of assets
                    193
  
                    488
 
Expenditures for property, plant & equipment
               (9,301)
  
               (7,354)
 
Acquisition of businesses including earn out adjustment
               (1,900)
  
                  (652)
 
Other, net
               (3,000)
  
               (2,284)
   
Cash provided by (used in) investing activities of continuing operations
             (14,008)
  
               (9,802)
   
Cash provided by (used in) investing activities of discontinued operations
                  (520)
  
                  (338)
   
Cash provided by (used in) investing activities
             (14,528)
  
             (10,140)
           
Cash flows from financing activities:
      
 
Net borrowings (repayments) under revolving credit agreements
               29,276
  
               34,737
 
Debt repayment
               (1,543)
  
               (1,827)
 
Net change in book overdraft
               (2,263)
  
                 1,762
 
Proceeds from exercise of employee stock plans
                 4,483
  
                 2,304
 
Dividends paid
               (9,109)
  
               (8,992)
 
Debt issuance costs
                  (150)
  
                         -
 
Windfall tax benefit
                 1,378
  
                    202
 
Other
               (5,374)
  
               (7,694)
   
Cash provided by (used in) financing activities of continuing operations
               16,698
  
               20,492
   
Cash provided by (used in) financing activities of discontinued operations
                 3,347
  
                 7,026
   
Cash provided by (used in) financing activities
               20,045
  
               27,518
Net increase (decrease) in cash and cash equivalents
                 1,269
  
               (1,056)
Effect of exchange rate changes on cash and cash equivalents
                    495
  
                    365
Cash and cash equivalents at beginning of period
               12,720
  
               12,998
Cash and cash equivalents at end of period
 $            14,484
  
 $            12,307


Non-cash financing activity for the first nine months of 2007 and 2006 includes the conversion of 2,341 and 276 debentures with a total value of $2,341 and $276 into 100,202 and 11,801 shares of common stock, respectively.

See accompanying notes to condensed consolidated financial statements.

      
      
Page 4 of 35

Notes to Condensed Consolidated Financial Statements
(In thousands except share and per share amounts) (Unaudited)

1.  Basis of Presentation

The December 31, 2006 condensed consolidated balance sheet amounts have been derived from the previously audited consolidated balance sheet of Kaman Corporation and subsidiaries. In the opinion of management, the balance of the condensed financial information reflects all adjustments, all of which are of a normal recurring nature, necessary for a fair presentation of the company’s financial position, results of operations and cash flows for the interim periods presented, unless otherwise disclosed in this report. Certain amounts in the prior period condensed consolidated financial statements have been reclassified to conform to current year presentation. The statements should be read in conjunction with the consolidated financial statements and notes included in the company’s Form 10-K (as amended) for the year ended December 31, 2006. The results of operations for the interim periods presented are not necessarily indicative of trends or of results to be expected for the entire year.

The company has a calendar year-end; however, its first three fiscal quarters follow a 13-week convention, with each quarter ending on a Friday. The third quarter for 2007 and 2006 ended on September 28, 2007 and September 29, 2006, respectively.

The company has reported the results of operations and consolidated financial position of the Music segment as discontinued operations within the unaudited consolidated financial statements for all periods presented as further discussed in note 2.

Recently Issued Accounting Pronouncements
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159), including an amendment to Statement of Financial Accounting Standards No. 115. Under SFAS 159, entities may elect to measure specified financial instruments and warranty and insurance contracts at fair value on a contract-by-contract basis, with changes in fair value recognized in earnings each reporting period. The election, called the fair value option, will enable entities to achieve an offsetting accounting effect for changes in fair value of certain related assets and liabilities without having to apply complex hedge accounting provisions. SFAS 159 is effective as of the beginning of a company’s first fiscal year that begins after November 15, 2007. The company is still in the process of evaluating the impact that adoption of SFAS 159 will have on our future consolidated financial statements.

On January 1, 2007, the company adopted FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes.”  The cumulative effect of the adoption of FIN 48 was a decrease of $415 in the liability for unrecognized tax benefits and a corresponding increase to retained earnings.  The total liability for unrecognized tax benefits upon adoption was $5,118, including interest and penalties of $1,152.  Included in unrecognized tax benefits upon adoption were items approximating $1,500 that, if recognized, would favorably affect the company’s effective tax rate in future periods.

During 2007, the liability for unrecognized tax benefits was reduced by $373 to reflect payments in settlements with tax authorities, and by $434 from expiration of statutes of limitation, which resulted in a reduction to tax expense in the third quarter of 2007 of $189.  Increases to the total liability for unrecognized tax benefits as a result of positions taken during 2007 amounted to $114.  The company does not anticipate that total unrecognized tax benefits will change significantly within the next twelve months.  The company files tax returns in numerous U.S. and foreign jurisdictions, with returns subject to examination for varying periods, but generally back to and including 2004.  It is the company’s policy to record interest and penalties on unrecognized tax benefits as income taxes.

Page 5 of 35
 
Cash Flow Items
Cash payments for interest were $5,140 and $4,779 for the nine months ended September 28, 2007 and September 29, 2006, respectively. Cash payments for income taxes, net of refunds, for those periods were $25,422 and $13,083, respectively.

Comprehensive Income
Comprehensive income was $35,731 and $22,822 for the nine months ended September 28, 2007 and September 29, 2006, respectively. The changes to net earnings used to determine comprehensive income are comprised of foreign currency translation adjustments and net changes in pension and post-retirement benefit plan unrecognized gains and losses as a result of the adoption of SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” as of December 31, 2006.

Sale of Product Line Assets
The company has entered into an agreement with DSE, Inc., former owner of the Dayron operation, under which DSE will purchase the 40mm assets, comprised principally of equipment and inventory.  The sale price is approximately $4,500 plus the value of inventory.  The transaction, which is subject to customary closing conditions, is expected to occur on or before December 31, 2007.

2. Discontinued Operations

On October 29, 2007, the company announced that it has entered into a definitive agreement to sell 100 percent of the stock of its wholly owned subsidiary, Kaman Music Corporation (KMC), to Fender Musical Instruments Corporation (FMIC) of Scottsdale, Arizona for approximately $117 million in cash, subject to specified post closing purchase price adjustments. The stock purchase agreement, which contains customary representations and warranties and covenants, has been approved by the Kaman Board of Directors. Closing is targeted to occur prior to January 1, 2008, subject to subject to customary working capital adjustments, indemnification provisions and the satisfaction of customary closing conditions, including termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. KMC comprises the company’s entire Music Segment.  The transaction is expected to result in an after-tax gain of approximately $14 million or $.55 per share on a fully diluted basis and generate net proceeds after fees and taxes of approximately $100 million, which will initially reduce its indebtedness and thereafter will be used to pursue strategic objectives.

Accordingly, this segment qualifies as an asset group to be disposed of under the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” As a result, the company has reported the results of operations and consolidated financial position of this segment as discontinued operations within the unaudited consolidated financial statements for all periods presented.

The following tables provide information regarding the results of discontinued operations and the assets and liabilities included in the amounts reported as assets and liabilities held for sale in the condensed consolidated balance sheets:
 

   
For the Three Months Ended
    
For the Nine Months Ended
  
   
September 28, 2007
    
September 29, 2006
    
September 28, 2007
    
September 29, 2006
  
Net sales
   $
57,066
     $
55,521
     $
155,425
     $
156,038
  
Earnings from discontinued operations
                                
  before income taxes
    
3,721
      
3,798
      
7,000
      
6,731
  
Provision for income taxes
    
1,421
      
1,451
      
2,646
      
2,497
  
Net earnings from discontinued operations
   $
2,300
     $
2,347
     $
4,354
     $
4,234
  
                                 
                                 
 
 
Page 6 of 35

 
   
September 28, 2007
    
December 31, 2006
  
Assets held for sale:
            
Accounts receivable, net
   $
29,842
     $
26,165
  
Inventory
    
47,885
      
42,481
  
Property, plant & equipment, net
    
3,564
      
4,211
  
Intangible assets, net
    
4,917
      
5,159
  
Goodwill and trademarks not subject to amortization
    
28,442
      
28,442
  
Other assets
    
142
      
949
  
    $
114,792
     $
107,407
  
                 
Liabilities held for sale:
                
Accounts payable
   $
17,739
     $
17,796
  
Accrued expenses and other liabilities
    
5,578
      
5,506
  
    $
23,317
     $
23,302
  
                 

3. Accounts Receivable, net

Accounts receivable of continuing operations consist of the following:
 
   
September 28, 2007
    
December 31, 2006
  
             
Trade receivables
   $
84,711
     $
70,030
  
                 
U.S.  Government contracts:
                
Billed
    
26,276
      
26,938
  
Costs and accrued profit – not billed
    
5,290
      
4,544
  
                 
Commercial and other government contracts:
                
Billed
    
23,943
      
21,479
  
Costs and accrued profit – not billed
    
41,556
      
41,968
  
                 
Less allowance for doubtful accounts
     (1,885 )     (1,796 )
                 
Total
   $
179,891
     $
163,163
  
                 

Included in commercial and other government contracts – not billed as of December 31, 2006 was $41,295 related to the production contract for the Australian SH-2G(A) program for the Helicopters segment. Of this balance, $40,826 remained unbilled as of September 28, 2007. A total of $1,096 was billed during the first nine months of 2007 all of which has been collected. Based upon the terms of the existing contract, the company estimates that approximately $1,000 of the currently unbilled amount will be billed after one year after the balance sheet date.  If the company performs additional work scope for the customer pursuant to currently proposed terms of a potential contract modification, certain milestone billings permitted under the existing contract will be deferred and approximately $18,000 of the currently unbilled amount will be billed after one year after the balance sheet date.


      
    
Page 7 of 35

4. Inventories

Inventories of continuing operations consist of the following:
 
   
September 28, 2007
    
December 31, 2006
  
             
Merchandise for resale
   $
90,178
     $
91,021
  
                 
Contracts and other work in process
    
99,830
      
84,329
  
                 
Finished goods
                
(including certain general stock materials)
    
13,198
      
13,519
  
                 
Total
   $
203,206
     $
188,869
  
                 
 
5. Shareholders’ Equity

Changes in shareholders’ equity for the nine months ended September 28, 2007 were as follows:
 
Balance, January 1, 2007
   $
296,561
  
         
Net earnings
    
31,871
  
Change in pension & post-retirement benefit plans, net
    
2,004
  
Foreign currency translation adjustment
    
1,856
  
Comprehensive income
    
35,731
  
         
Dividends declared
     (9,533 )
Employee stock plans and related tax benefit
    
6,545
  
Adoption of FIN 48 - adjustment to retained earnings
    
415
  
Debentures
    
2,341
  
         
Balance, September 28, 2007
   $
332,060
  
         

Shareholders’ equity consists of the following:
 
   
September 28, 2007
    
December 31, 2006
  
             
Common stock
   $
24,623
     $
24,565
  
Additional paid-in capital
    
64,549
      
60,631
  
Retained earnings
    
241,890
      
219,137
  
Treasury Stock
     (401 )     (5,310 )
Other shareholders' equity
    
1,399
       (2,462 )
                 
Total
   $
332,060
     $
296,561
  
 
Page 8 of 35
 
6. Earnings Per Share

The following table presents a reconciliation of the numerators and denominators of basic and diluted earnings per share:
 
(In thousands except per share amounts)
  
For the Three Months Ended
    
For the Nine Months Ended
  
   
September 28, 2007
    
September 29, 2006
    
September 28, 2007
    
September 29, 2006
  
Basic:
                        
                         
Net earnings from continuing operations
   $
9,437
     $
6,391
     $
27,517
     $
17,910
  
Net earnings from discontinued operations, net of tax
    
2,300
      
2,347
      
4,354
      
4,234
  
Net earnings
   $
11,737
     $
8,738
     $
31,871
     $
22,144
  
                                 
Weighted average number of
                                
shares outstanding
    
24,438
      
24,067
      
24,288
      
24,012
  
                                 
Net earnings per share from continuing operations
   $
0.39
     $
0.26
     $
1.13
     $
0.74
  
Net earnings per share from discontinued operations
    
0.09
      
0.10
      
0.18
      
0.18
  
Net earnings per share
   $
0.48
     $
0.36
     $
1.31
     $
0.92
  
                                 
Diluted:
                                
                                 
Net earnings from continuing operations
   $
9,437
     $
6,391
     $
27,517
     $
17,910
  
Elimination of interest expense on 6% subordinated
                                
convertible debentures (net after taxes)
    
125
      
148
      
416
      
459
  
Net earnings from continuing operations (as adjusted)
    
9,562
      
6,539
      
27,933
      
18,369
  
                                 
Net earnings from discontinued operations, net of tax
    
2,300
      
2,347
      
4,354
      
4,234
  
Net earnings (as adjusted)
   $
11,862
     $
8,886
     $
32,287
     $
22,603
  
                                 
Weighted average number of
                                
shares outstanding
    
24,438
      
24,067
      
24,288
      
24,012
  
Weighted averages shares issuable
                                
on conversion of 6% subordinated
                                
 convertible debentures
    
567
      
703
      
627
      
725
  
Weighted average shares issuable
                                
on exercise of dilutive stock options
    
331
      
24
      
302
      
117
  
Total
    
25,336
      
24,794
      
25,217
      
24,854
  
                                 
Net earnings per share from continuing operations
   $
0.38
     $
0.26
     $
1.11
     $
0.74
  
Net earnings per share from discontinued operations
    
0.09
      
0.10
      
0.17
      
0.17
  
Net earnings per share -diluted
   $
0.47
     $
0.36
     $
1.28
     $
0.91
  
                                 
 
There were no anti-dilutive shares, based on average stock price, excluded from earnings per share diluted for any of the periods presented.

Page 9 of 35
 
7. Exit Activity

The following table displays the activity and balance of the restructuring accrual as of and for the nine months ended September 28, 2007:
 
Balance at January 1, 2007
   $
2,698
  
Additions to accrual
    
328
  
Cash payments
     (233 )
Release to income
    
-
  
         
Balance at September 28, 2007
   $
2,793
  
 
The accrual related to the Moosup, CT plant closure as of September 28, 2007 was $2,793, which consists of the estimated cost of ongoing voluntary environmental investigating and remediation activities. During the nine months ended September 28, 2007, the company paid $233 against this accrual for costs associated with environmental remediation activities for the facility and accrued an additional $328 of anticipated costs to complete these activities. Ongoing maintenance costs of $345 for the nine months ended September 28, 2007 related to this idle facility are included in selling, general and administrative expenses.

The current portion of the accrual of $608 is included in “Other accruals and payables” on the condensed consolidated balance sheets for the periods presented. The remaining amount is included in long-term liabilities as of September 28, 2007.

8. Product Warranty Costs

The following table presents the activity and balances of accrued product warranty costs included in “Other accruals and payables” on the condensed consolidated balance sheet as of September 28, 2007:
 
Balance at January 1, 2007
   $
2,028
  
Product warranty accrual
    
58
  
Warranty costs incurred
     (243 )
Release to income
     (67 )
         
Balance at September 28, 2007
   $
1,776
  

The company continues to work to resolve two warranty-related matters that primarily impact our FMU-143 program at the Dayron facility, which is part of our Fuzing segment, that have been previously reported. The items involved are an impact switch embedded in certain bomb fuzes that was recalled by a supplier and an incorrect part, called a bellows motor, found to be contained in bomb fuzes manufactured for the U.S. Army utilizing systems which originated before Dayron was acquired by Kaman. The U.S. Army Sustainment Command (USASC), the procurement agency that administers the FMU-143 contract, had authorized warranty rework for the bellows motor matter in late 2004/early 2005, however Dayron has not been permitted to finish the rework due to issues raised by the USASC primarily related to administrative matters and requests for verification of the accuracy of test equipment (which accuracy was subsequently verified).

Page 10 of 35
 
In December 2006, the USASC informed us that it was changing its remedy under the contract from the segment's performance of warranty rework to an "equitable adjustment" of $6.9 million to the contract price. We timely responded to that letter in January 2007 explaining our view that the segment has complied with contract requirements.  In June 2007 the USASC affirmed its position but rescinded its $6.9 million demand (stating that its full costs had not yet been determined) and gave instructions for disposition of the subject fuzes, including both the impact switch and bellows motor-related items, to a Navy facility.

In September 2007, the USASC informed us that it is considering termination of the contract for default and provided an opportunity as required by law for the segment to respond, which we have done. USASC based its action on an allegation that there was a "latent defect" in some fuzes produced due to allegedly unauthorized rework during production.  In October 2007, the USASC purported to revoke acceptance of fuzes in over twenty lots delivered over several years for this reason and has reported that it is continuing to review other lots of previously accepted fuzes, but the USASC has not yet indicated what amounts, if any, it may request for reimbursement from the company.  Management continues to believe that the segment has performed in accordance with the contract and that a termination for default is inappropriate and that it is the government, not the company, that has materially breached the contract. As a result in October 2007, the segment initiated cancellation of its contract with USASC due to USASC’s material breaches of the agreement.

The net reserve as of the end of the third quarter of 2007 related to these two matters was $1,032.  The total gross amount of inventory for this program as of September 28, 2007 is $3,411. In light of this additional information, the company has evaluated its exposure of under SFAS No. 5 “Accounting For Contingencies” and does not currently believe that any additional reserve is probable or can be reasonably estimated relative to this matter and therefore, has not recorded a liability in addition to the warranty liability as of September 28, 2007.

As previously disclosed, in March 2005 the U.S. Attorney's Office for the Middle District of Florida and the Defense Criminal Investigative Service (DCIS) initiated an investigation into the second warranty matter. Dayron has cooperated fully with the authorities, working to resolve the matter in a mutually satisfactory manner. As of the date of this report, the segment has not received any notification from the authorities regarding final disposition of the investigation.

The company also has a warranty reserve for $677 for a matter related to our Aerostructures segment’s facility in Wichita, Kansas as previously disclosed. There has been no activity with respect to this matter during the nine-month period ended September 28, 2007.

9. Accrued Contract Losses

The following is a summary of activity and balances of accrued contract losses as of and for the nine months ended September 28, 2007:
 
Balance at January 1, 2007
   $
11,542
  
Additions to loss accrual
    
7,826
  
Costs incurred
     (9,057 )
Release to income
     (383 )
Balance at September 28, 2007
   $
9,928
  

Page 11 of 35
 
During 2007, the company has recorded an additional $5,617 of pretax charges for the SH-2G(A) Helicopter Program, of which $768 was recorded during the third quarter of 2007.  These charges were based upon additional work that is necessary to complete the production portion of the program. This contract has been in a loss position since 2002. The remaining accrued contract loss for the Australia program as of September 28, 2007 was $8,885. This contract loss accrual continues to be monitored and adjusted as necessary to reflect the anticipated cost of the complex integration process and the results of the software testing.

10. Pension Cost

Components of net pension cost for the qualified pension plan and Supplemental Employees’ Retirement Plan (SERP) are as follows:

   
Qualified Pension Plan
  
   
For the Three Months Ended
    
For the Nine Months Ended
  
   
September 28, 2007
    
September 29, 2006
    
September 28, 2007
    
September 29, 2006
  
                         
Service cost for benefits earned
   $
3,329
     $
3,143
     $
9,988
     $
9,427
  
Interest cost on projected
                                
benefit obligation
    
6,931
      
6,602
      
20,792
      
19,808
  
Expected return on plan assets
     (8,074 )     (7,362 )     (24,222 )     (22,086 )
Net amortization and deferral
    
225
      
752
      
676
      
2,256
  
Net pension cost
   $
2,411
     $
3,135
     $
7,234
     $
9,405
  

   
SERP
  
   
For the Three Months Ended
    
For the Nine Months Ended
  
   
September 28, 2007
    
September 29, 2006
    
September 28, 2007
    
September 29, 2006
  
                         
Service cost for benefits earned
   $
116
     $
528
     $
348
     $
1,584
  
Interest cost on projected
                                
benefit obligation
    
505
      
432
      
1,515
      
1,296
  
Expected return on plan assets
    
-
      
-
      
-
      
-
  
Net amortization and deferral
    
883
      
390
      
2,648
      
1,168
  
Net pension cost
   $
1,504
     $
1,350
     $
4,511
     $
4,048
  

For the 2007 plan year, the company expects to contribute $10,000 to the qualified pension plan and $2,438 to the SERP. Through the first nine months of 2007, the company has paid $5,000 and $2,173 with respect to the qualified pension plan and SERP, respectively, for the 2007 plan year.


      
      
Page 12 of 35

11. Business Segments

Summarized financial information by business segment is as follows:
 
   
For the Three Months Ended
    
For the Nine Months Ended
  
   
September 28, 2007
    
September 29, 2006
    
September 28, 2007
    
September 29, 2006
  
Net sales:
                        
Aerostructures
   $
25,713
     $
21,450
     $
74,214
     $
55,422
  
Fuzing
    
22,104
      
22,310
      
64,566
      
55,986
  
Helicopters
    
18,220
      
15,425
      
54,703
      
42,140
  
Specialty Bearings
    
30,729
      
26,158
      
94,179
      
79,829
  
  Subtotal Aerospace Segments
    
96,766
      
85,343
      
287,662
      
233,377
  
Industrial Distribution
    
178,090
      
166,746
      
526,106
      
507,799
  
Net sales from continuing operations
    
274,856
      
252,089
      
813,768
      
741,176
  
                                 
Discontinued operations
    
57,066
      
55,521
      
155,425
      
156,038
  
Total net sales
   $
331,922
     $
307,610
     $
969,193
     $
897,214
  
                                 
Operating income (loss):
                                
Aerostructures
   $
1,631
     $
3,457
     $
9,862
     $
7,821
  
Fuzing
    
2,687
      
2,450
      
9,232
      
6,877
  
Helicopters
    
2,283
       (1,073 )    
1,014
       (4,299 )
Specialty Bearings
    
10,859
      
6,975
      
31,622
      
22,074
  
  Subtotal Aerospace Segments
    
17,460
      
11,809
      
51,730
      
32,473
  
Industrial Distribution
    
9,045
      
8,590
      
26,043
      
28,663
  
Net gain (loss) on sale of assets
    
1
       (92 )    
15
       (40 )
Corporate expense
     (9,498 )     (7,868 )     (28,997 )     (25,917 )
Operating income from continuing operations
    
17,008
      
12,439
      
48,791
      
35,179
  
                                 
Discontinued operations
    
3,694
      
3,781
      
6,918
      
6,684
  
Total operating income
    
20,702
      
16,220
      
55,709
      
41,863
  
                                 
Interest expense, net
     (1,638 )     (1,648 )     (4,782 )     (4,536 )
                                 
Other income (expense), net
     (82 )     (164 )     (299 )     (723 )
                                 
Earnings before income taxes
   $
18,982
     $
14,408
     $
50,628
     $
36,604
  

 
      
     
Page 13 of 35

12. Share-Based Arrangements

The following table summarizes share-based compensation expense recorded during each period presented:
 
   
Three Months Ended
    
Nine Months Ended
  
   
September 28, 2007
    
September 29, 2006
    
September 28, 2007
    
September 29, 2006
  
Stock options
   $
701
     $
233
     $
1,136
     $
696
  
Restricted stock awards
    
132
      
77
      
762
      
640
  
Stock appreciation rights
    
253
       (10 )    
1,237
      
485
  
Employee stock purchase plan
    
54
      
50
      
162
      
156
  
                                 
Total share-based compensation expense
   $
1,140
     $
350
     $
3,297
     $
1,977
  
                                 

Stock option activity was as follows:
 
         
Weighted-
  
         
Average
  
Stock options outstanding:
  
Options
    
Exercise Price
  
Balance at January 1, 2007
    
900,639
     $
14.49
  
Options granted
    
109,800
      
23.68
  
Options exercised
     (249,394 )    
13.93
  
Options forfeited or expired
     (12,355 )    
18.42
  
Balance at September 28, 2007
    
748,690
     $
15.96
  
                 

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model. The following table indicates the weighted average assumptions used in estimating fair value for the following periods:

   
Three Months Ended
    
Nine Months Ended
  
   
September 28, 2007
    
September 29, 2006
    
September 28, 2007
    
September 29, 2006
  
Expected option term
    
-
    
6.5 years
    
6.5 years
    
6.5 years
  
Expected volatility
    
-
      
39.5%
    
36.2%
    
41.5%
Risk-free interest rate
    
-
      
4.7%
    
4.6%
    
4.5%
Expected dividend yield
    
-
      
2.6%
    
2.5%
    
2.5%
Per share fair value of options granted
    
-
     $
6.63
     $
8.04
     $
7.96
  
 
There were no awards granted in the third quarter of 2007.


      
      
    
Page 14 of 35

Restricted Stock activity is as follows:
 
         
Weighted-
  
         
Average
  
         
Grant Date
  
Restricted Stock outstanding:
  
 
    
Fair Value
  
Nonvested at January 1, 2007
    
53,695
     $
16.52
  
RSA granted
    
85,675
      
25.83
  
Vested
     (40,315 )    
18.17
  
Forfeited or expired
     (1,871 )    
22.68
  
Nonvested at September 28, 2007
    
97,184
     $
23.92
  
                 

Stock Appreciation Rights (SAR) activity is as follows:
 
         
Weighted-
  
         
Average
  
SARs outstanding:
  
 
    
Exercise Price
  
Balance at January 1, 2007
    
139,060
     $
10.65
  
SARs granted
    
-
      
-
  
SARs exercised
     (72,940 )    
11.11
  
SARs forfeited or expired
    
-
      
-
  
Balance at September 28, 2007
    
66,120
     $
10.14
  
                 

Total cash paid to settle SARs (at intrinsic value) during the third quarter of 2007 and 2006 was $170 and $0, respectively. Total cash paid to settle SARs (at intrinsic value) for the first nine months of 2007 and 2006 was $1,212 and $1,227, respectively.

13. Contingencies
In 2006, the company submitted an Offer to Purchase (OTP) to NAVAIR and the General Services Administration to purchase the portion of the Bloomfield campus that Kaman Aerospace Corporation (of which the Helicopters segment forms a part) currently leases from NAVAIR and has operated for several decades for the principal purpose of performing U.S. government contracts.  The OTP is subject to negotiation of terms mutually acceptable to the company and the government that include, in consideration for the transfer of title, the company's assumption of responsibility for environmental remediation at the facility as may be required under the Connecticut Transfer Act. As of the date of this report, management believes that the negotiations are substantially complete and it is expected that in the next several months, various government-required processes for approval of the transaction will be undertaken. Once formal government approval has been obtained and the title transfer documentation has been prepared by the General Services Administration, transfer of title to the property can take place.  Upon such transfer, the company's responsibility for the environmental remediation discussed above will become effective.  In anticipation of the transfer, the company continues its efforts to define the scope of the remediation that will be required by the Connecticut Department of Environmental Protection (CTDEP).  The OTP and the company's lease of the facility have been extended through December 31, 2007 as the process continues. 

In preparation for disposal of the Moosup, Connecticut facility, CTDEP has given the company conditional approval for reclassification of groundwater in the vicinity of the facility consistent with the character of the area. The company has substantially completed the process of connecting neighboring properties to public drinking water in accordance with such approval and in coordination with the CTDEP and local authorities. The company anticipates that this project will be completed in 2007.

Page 15 of 35
 
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide readers of our consolidated financial statements with the perspectives of management in the form of a narrative regarding our financial condition, results of operations, liquidity and certain other factors that may affect our future results. The MD&A is presented in seven sections:

I.
Overview of Business
II.
Quarter Highlights
III.
Results of Operations
IV.
Critical Accounting Estimates
V.
Liquidity and Capital Resources
VI.
Contractual Obligations and Off-Balance Sheet Arrangements
VII.
Recent Accounting Standards

Our MD&A should be read in conjunction with our Form 10-K (as amended) for the year ended December 31, 2006.

I.  
OVERVIEW OF BUSINESS

Kaman Corporation is composed of five business segments with continuing operations.  They are Industrial Distribution as well as four reporting segments within the aerospace industry: Aerostructures, Fuzing, Helicopters, and Specialty Bearings (collectively, the “Aerospace Segments”).

AEROSTRUCTURES SEGMENT

The Aerostructures segment produces aircraft subassemblies and other parts for commercial and military airliners and helicopters. Its principal customers are Boeing and Sikorsky. Operations involving the use of metals are conducted principally at the company's Jacksonville, Florida facility, while operations involving composite materials are conducted principally at the Wichita, Kansas facility.

FUZING SEGMENT

The Fuzing segment manufactures products for military and commercial markets, primarily related to military safe, arm and fuzing devices for several missile and bomb programs; as well as precision non-contact measuring systems for industrial and scientific use; and high reliability memory systems for airborne, shipboard, and ground-based programs. Principal customers include the U.S. military, Boeing, Lockheed Martin and Raytheon. Operations are conducted at the Middletown, Connecticut, Orlando, Florida and Tucson, Arizona facilities.

HELICOPTERS SEGMENT

The Helicopters segment markets its helicopter engineering expertise and performs subcontract work for other manufacturers. It also refurbishes, provides upgrades and supports Kaman SH-2G maritime helicopters operating with foreign militaries as well as K-MAX® “aerial truck” helicopters operating with government and commercial customers in several countries. The SH-2G aircraft is currently in service with the Egyptian Air Force and the New Zealand and Polish navies. Operations are primarily conducted at the Bloomfield, Connecticut facility.

Page 16 of 35
 
SPECIALTY BEARINGS SEGMENT

The Specialty Bearings segment primarily manufactures proprietary self-lubricating bearings used in aircraft flight controls, turbine engines and landing gear. These bearings are currently used in nearly all military and commercial aircraft produced in North and South America and Europe and are market-leading products for applications requiring a highly sophisticated level of engineering and specialization in the airframe bearing market. The Specialty Bearings segment also manufactures proprietary power transmission couplings for helicopters and other applications and custom designed and manufactured rolling element and self-lubricating bearings for aerospace applications. Operations for the Specialty Bearings segment are conducted at the Bloomfield, Connecticut and Dachsbach, Germany facilities.

INDUSTRIAL DISTRIBUTION SEGMENT

The Industrial Distribution segment is the third largest power transmission/motion control industrial distributor in North America. The segment provides products including bearings, electrical/mechanical power transmission, fluid power, motion control and materials handling components to a broad spectrum of industrial markets throughout North America. Locations consist of nearly 200 branches, distribution centers and call centers across the United States and in Canada and Mexico. We offer almost two million items, as well as value-added services, to a base of more than 50,000 customers representing a highly diversified cross-section of North American industry.

II.
QUARTER HIGHLIGHTS

On October 29, 2007, the company announced that it has entered into a definitive agreement to sell 100 percent of the stock of its wholly owned subsidiary, Kaman Music Corporation (KMC), to Fender Musical Instruments Corporation (FMIC) of Scottsdale, Arizona for approximately $117 million in cash, subject to specified post closing purchase price adjustments. The stock purchase agreement, which contains customary representations and warranties and covenants, has been approved by the Kaman Board of Directors. Closing is targeted to occur prior to January 1, 2008, subject to subject to customary working capital adjustments, indemnification provisions and the satisfaction of customary closing conditions, including termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. KMC comprises the company’s entire Music Segment.  The transaction is expected to result in an after-tax gain of approximately $14 million or $.55 per share on a fully diluted basis and generate net proceeds after fees and taxes of approximately $100 million, which will initially reduce its indebtedness and thereafter will be used to pursue strategic objectives.

Accordingly, this segment qualifies as an asset group to be disposed of under the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” As a result, the company has reported the results of operations and consolidated financial position of this segment as discontinued operations within the unaudited consolidated financial statements for all periods presented.

Page 17 of 35
 
The following is a summary of other key events that occurred during the third quarter of 2007:

·  
On September 17, 2007, Neal J. Keating joined the company as President and Chief Operating Officer and a member of the Board of Directors.  Mr. Keating will assume the position of Chief Executive Officer on or before January 1, 2008.  Following Mr. Keating's appointment as CEO, Mr. Kuhn will continue to serve as Chairman until his scheduled retirement in February 2008.
·  
Our net sales from continuing operations increased 9.0 percent in the third quarter of 2007 compared to the third quarter of 2006.
·  
Our net earnings from continuing operations increased 47.7 percent in the third quarter of 2007 compared to the third quarter of 2006.
·  
Total net earnings increased 34.3 percent in the third quarter of 2007 compared to the third quarter of 2006.
·  
Earnings per share diluted from continuing operations increased 46.2 percent to $0.38 per share diluted in the third quarter of 2007 compared to the third quarter of 2006.
·  
Total earnings per share diluted increased 30.6 percent to $0.47 per share diluted in the third quarter of 2007 compared to the third quarter of 2006.
·  
In the third quarter of 2007, the company increased its quarterly dividend 12 percent from $0.125 per share to $0.14 per share.
·  
All reporting segments experienced an increase in sales for the third quarter of 2007 compared to the third quarter of 2006, except for the Fuzing segment, which remained relatively flat.
·  
The Helicopters and Specialty Bearings segment experienced strong operating income in the third quarter of 2007 due to continued strength in both the commercial and military aerospace markets.

 
III.
RESULTS OF CONTINUING OPERATIONS

RESULTS OF CONTINUING OPERATIONS - CONSOLIDATED

NET SALES OF CONTINUING OPERATIONS
 
   
For the Three Months Ended
    
For the Nine Months Ended
  
In thousands
  
September 28, 2007
    
September 29, 2006
    
September 28, 2007
    
September 29, 2006
  
Net sales
   $
274,856
     $
252,089
     $
813,768
     $
741,176
  
$ change
    
22,767
      
25,010
      
72,592
      
58,917
  
% change
     9.0 %     11.0 %     9.8 %     8.6 %

The increase in consolidated net sales for the third quarter of 2007 was primarily attributable to the Industrial Distribution segment and the Specialty Bearings, Aerostructures, and Helicopters segments as a result of increased production for several key programs and customers.  The increase in consolidated net sales for the first nine months of 2007 was primarily due to stronger performance in all of the reporting segments within the aerospace industry in a strong commercial and military aerospace market.  The Industrial Distribution segment also experienced modest sales growth for the first nine months of 2007.

GROSS PROFIT OF CONTINUING OPERATIONS
 
   
For the Three Months Ended
    
For the Nine Months Ended
  
In thousands
  
September 28, 2007
    
September 29, 2006
    
September 28, 2007
    
September 29, 2006
  
Gross profit
    
76,457
      
68,521
      
226,202
      
202,680
  
$ change
    
7,936
      
20,492
      
23,522
      
36,040
  
% change
     11.6 %     42.7 %     11.6 %     21.6 %
% of net sales
     27.8 %     27.2 %     27.8 %     27.3 %
                                 
 
Page 18 of 35
 
The increase in the consolidated gross profit for the third quarter and the first nine months of 2007 was primarily attributable to sales growth in the Industrial Distribution, Specialty Bearings, Aerostructures, and Helicopters segments as well as lower accrued contract loss charges on the Helicopters segment’s Australia program, for which total charges in the third quarter of 2007 were $0.8 million as compared to $2.5 million in the third quarter of 2006.  Total charges on the Australia program for the first nine months of 2007 were $5.6 million as compared to $7.8 million for the first nine months of 2006.  Additionally, gross profit as a percentage of sales (gross margin) has improved slightly for both the third quarter and first nine months of 2007 as compared to the same periods in 2006 as a result of higher sales volume, increased efficiencies and a growing business base at all of our reporting segments that participate in the aerospace industry.
 
SELLING, GENERAL & ADMINISTRATIVE EXPENSES OF CONTINUING OPERATIONS
 
   
For the Three Months Ended
    
For the Nine Months Ended
  
In thousands
  
September 28, 2007
    
September 29, 2006
    
September 28, 2007
    
September 29, 2006
  
Selling, general and
                        
  administrative expenses (S,G&A)
    
59,450
     $
55,990
      
177,426
     $
167,461
  
$ change
    
3,460
      
352
      
9,965
      
5,148
  
% change
     6.2 %     0.6 %     6.0 %     3.2 %
% of net sales
     21.6 %     22.2 %     21.8 %     22.6 %

The increase in S,G&A for the third quarter and for the first nine months of 2007 compared to the third quarter and the first nine months of 2006 was primarily driven by the Industrial Distribution segment and corporate expenses. Higher operating expenses in our Industrial Distribution segment primarily drove the aggregate cost increase in our reporting segments due to additional expenses incurred for new branch openings and overall higher personnel costs.  Corporate expense increased primarily as a result of higher stock appreciation rights expense, due to the recent increase in the stock price, as well as higher group insurance expense.

OPERATING INCOME OF CONTINUING OPERATIONS
 
   
For the Three Months Ended
    
For the Nine Months Ended
  
In thousands
  
September 28, 2007
    
September 29, 2006
    
September 28, 2007
    
September 29, 2006
  
Operating income
    
17,008
      
12,439
      
48,791
      
35,179
  
$ change
    
4,569
      
20,189
      
13,612
      
30,901
  
% change
     36.7 %     260.5 %     38.7 %     721.6 %
% of net sales
     6.2 %     4.9 %     6.0 %     4.7 %

The improvement in operating income for the third quarter of 2007 compared to the third quarter of 2006 was primarily due to the higher sales volume and gross margin at the Specialty Bearings and Helicopters segments.  The increase in operating income for the first nine months of 2007 was primarily attributable to stronger operating results in all of the reporting segments within the aerospace industry. The Industrial Distribution segment's operating income increased slightly for the third quarter of 2007 as compared to the third quarter of 2006 although the segment’s operating income was still lower for the first nine months of 2007 compared to the first nine months of 2006 partially as a result of a variety of expenses incurred for start up costs relative to several new contracts.

ADDITIONAL CONSOLIDATED RESULTS
Interest expense, net, remained relatively flat for the third quarter of 2007 compared to the third quarter of 2006. Interest expense, net, increased 6.4 percent to $4.9 million for the first nine months of 2007 compared to $4.6 million for the first nine months of 2006. Net interest expense generally consists of interest charged on the company’s revolving credit facility and convertible debentures offset by interest income. The increase in net interest expense was primarily due to higher interest rates charged on borrowings during the first nine months of 2007 as compared to the same period in 2006.

For the nine-months ended September 28, 2007, the effective income tax rate for continuing operations is 36.9 percent as compared to an effective tax rate of 40.0 percent for the nine-months ended September 29, 2006. The 2007 effective tax rate was favorably impacted by one-time adjustments resulting from tax law changes in the U.S., as well as internationally.  The effective tax rate represents the combined estimated federal, state and foreign tax effects attributable to pretax earnings for the year.

Page 19 of 35
 
COMBINED AEROSPACE SEGMENTS’ RESULTS

The following table presents selected financial data for the combined Aerospace Segments:
 
   
For the Three Months Ended
    
For the Nine Months Ended
  
In thousands
  
September 28, 2007
    
September 29, 2006
    
September 28, 2007
    
September 29, 2006
  
Net sales
   $
96,766
     $
85,343
     $
287,662
     $
233,377
  
$ change
    
11,423
      
14,713
      
54,285
      
21,027
  
% change
     13.4 %     20.8 %     23.3 %     9.9 %
                                 
Operating income
   $
17,460
     $
11,809
     $
51,730
     $
32,473
  
$ change
    
5,651
      
12,133
      
19,257
      
15,634
  
% change
     47.9 %     3477.8 %     59.3 %     92.8 %
% of net sales
     18.0 %     13.8 %     18.0 %     13.9 %

In the paragraphs that follow you will find further information with respect to sales growth and significant programs for the four individual Aerospace reporting segments.

THE AEROSPACE INDUSTRY MARKET
Both the commercial and military aerospace markets continue to be strong during 2007, and several major prime contractors are anticipating a large number of shipments of commercial and military aircraft over the next few years.

OUR STRATEGY
Before 2005, our Kaman Aerospace Corporation (KAC) subsidiary operations were designed to support our prime helicopter operations. We found it difficult to compete effectively in our target markets in part due to higher operating expenses as a result of a lower than sufficient business base. In 2005, the subsidiary was realigned to create separate divisions that allowed for greater transparency and accountability through a more focused management structure. This realignment, along with upgrades to our facilities, lean initiatives and strategic positioning as a subcontractor to the prime aerospace contractors, has allowed us to build our business base and develop our reputation as a lower cost, high quality domestic partner. We have been able to successfully build upon several key programs, which are discussed in the following paragraphs.

AEROSTRUCTURES SEGMENT

The following table presents selected financial data for the Aerostructures segment:
 
   
For the Three Months Ended