Hartford Business Journal

www.HartfordBusiness.com February 8, 2016 • Hartford Business Journal 3 Flying Strong Timely deals, diversification, China help Kaman fend off choppy headwinds By Gregory Seay gseay@HartfordBusiness.com T iming is becoming a hallmark for 71-year-old Bloomfield aerospace manufacturer and power-transmission equipment distributor Kaman Corp. Last fall, Kaman delivered its last SH-2G Seasprite helicopter to New Zealand's mili- tary. On top of that, another Kaman defense customer, the U.S. Air Force, is collecting the last of its C-17 Globemaster III cargo jets, for which Kaman supplied about $1 million of parts and components per plane. Normally, the falloff in defense orders, Kaman Chairman and CEO Neal J. Keating says, would have prompted it to curtail dozens of engineers, machinists, assemblers and other staff at plants in Bloomfield and Florida. Not this time. And in a bit of irony, China is helping save Connecticut jobs. Last October, Kaman's participation in a 2012 China trade mission led by Gov. Dannel P. Mal- loy bore its first fruit. The company sold to China two K-MAX heavy-lift aircraft, plus drew depos- its for two more, for fighting forest fires, opening the door to future aerospace sales there, Keating said. First deliveries are set for 2017. "It's an important first step for us,'' Keating said of China. "In this country, we have about 10,000 civilian and military helicopters. In China, there are only about 600 helicopters total. China has a big forest-fire problem. It's so large and its geography so vast, it's 'fire season' almost monthly.'' K-MAX production had been mothballed for a decade, except for a brief period when Kaman refitted two of the helicopters as unmanned, remote-controlled drones for the Marine Corps' successful, 33 months of com- bat-supply missions in Afghanistan, beginning in 2011. The Marines now have them in storage. K-MAX fuselages are made in Kaman's Jacksonville, Fla., plant; production of tail- rotor pylons and main rotor blades, along with final assembly and flight testing, is done in Bloomfield. Even Kaman's oilpatch exposure hasn't been as calamitous as it might have been, Keating said. The reason is that its submers- ible water pumps and other power-trans- mission equipment have other applications beyond the production of oil and natural gas. However, he said, Kaman's buildup of that segment, beginning in 2008 just as the U.S. and global economies were collapsing, didn't anticipate the fallout from the precipitous plunge in oil prices from over $120 a barrel then to around $30 a barrel today. "What we didn't have a full appreciation for,'' Keating said, "is of the second- and third- level impact from a reduction in oil prices.'' Demand has fallen, he noted, for certain types of specialty steel used for oil drilling and cracking open seams in the earth to reach untapped pockets of natural gas, and certain specialty capital goods, such as sub- mersible pumps. The strong dollar, too, is having a negative impact on overseas sales. But it is Kaman's diversification on the aerospace side that so far has been the com- pany's sweet spot. "One reason I feel so good about our business is that it is so diversified,'' the CEO said. Future strategy During the holi- day season, Keating says he spent more time away from fami- ly and the TV, ponder- ing some particular headwinds confronting his company. "First, we have to effectively manage those areas of growth where we're seeing really good growth,'' Keating said in a recent sitdown in his spacious office on Kaman's Bloomfield campus. "Second, is to manage our cost struc- ture in markets where businesses are really struggling. The third is to stay steadfast in our investment approach to our businesses.'' "We've got to take full advantage,'' the CEO said, "of the opportunities we have in markets where we will be challenged.'' Keating admits it's all a tall order, but one he and more than 700 Kaman engineers, machin- ists, managers and support staff already are taking steps to embrace in training for certifi- cation as program-management professionals. Leveraging its human resources to plumb new and existing markets could open yet another chapter for the company that late legendary Connecticut aerospace inventor- pioneer Charles H. Kaman forged in 1945 with his radical concept for intermeshing helicop- ter rotors. Charles Kaman died at 91 in 2011. Kaman's full 2015 sales and profits are due this week. However, its performance was mixed in last year's first nine months. Kaman posted higher third-quarter operating and net income despite a drop in sales at its primary business units — aerospace and power/fluid distribution. Continued Kaman Corp. Chairman and CEO Neal Keating stands within the aerospace manufacturer's Bloomfield plant. P H O T O | C O N T R I B U T E D P H O T O | L A N N Y A . N A G L E R A K-MAX helicopter. www.kelsercorp.com 111 Roberts St, Suite D East Hartford, CT 06108 860 610 2200 Technology that speaks the language of your business.

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