Kaman Annual Report 2016

← All annual reports

FY2016 Annual Report · Kaman

Loading PDF…

PEOPLE
POWERING
THE FUTURE

K AMAN CORPORATION · ANNUAL REPORT 2016

POWERING
THE FUTURE

CORPORATE AND
SHAREHOLDER INFORMATION
KAMAN CORPORATION AND SUBSIDIARIES

CORPORATE HEADQUARTERS

Kaman Corporation

1332 Blue Hills Avenue

Bloomfield, Connecticut 06002

(860) 243-7100

STOCK LISTING

Kaman Corporation’s common stock is traded on the

New York Stock Exchange under the symbol KAMN.

INVESTOR, MEDIA, AND PUBLIC RELATIONS

CONTACT

Eric B. Remington

Vice President, Investor Relations

(860) 243-6334

Eric.Remington@kaman.com

ANNUAL MEETING

The Annual Meeting of Shareholders is scheduled to

be held on Wednesday, April 19, 2017 at 9:00 am local

time at the offices of the Company, 1332 Blue Hills

Avenue, Bloomfield, Connecticut, 06002.

TRANSFER AGENT

Computershare

P.O. Box 30170

College Station, Texas 77842-3170

(866) 339-2742

www.computershare.com/investor

Overnight correspondence should be sent to:

Computershare

211 Quality Circle, Suite 210

College Station, Texas 77845

PEOPLE POWERING

INNOVATION

PEOPLE POWERING

VALUE-ADDED SOLUTIONS

PEOPLE POWERING

GLOBAL SUCCESS

PEOPLE POWERING

NEW RELATIONSHIPS

PEOPLE POWERING

KAMAN

KAMAN ANNUAL REPORT 2016“ When I consider the
future of Kaman, it’s
the people who inspire
the most confi dence in
our continued success.
We have an exceptional
team across all of our
businesses. They are
truly the future of this
company.”

Neal J. Keating
Chairman, President and
Chief Executive Offi cer

DEAR SHAREHOLDERS,

When thinking about Kaman’s future, what excites me

delivering outstanding experiences to our customers,

most is not our products, solutions, technologies, and

resulting in record satisfaction scores. In Aerospace,

infrastructure, important as these are to our continued

strong growth put pressure on our people to step up

success. What excites me most is the extraordinary

and meet increased demand – and they delivered

blend of skills and talents our 5,300 employees across

across the board.

the globe bring to Kaman. Every day, here in Connecticut

and as I travel to Kaman locations around the world, I see

In 2016, Kaman reported net earnings from continuing

fresh examples of their dedication to exceeding customer

operations of $58.9 million, or $2.10 per diluted share,

expectations, supporting their colleagues, and building

compared to $60.4 million, or $2.17, in 2015. Earnings

our company together.

were impacted by lower organic revenues in Distribution,

which were 6.5% lower than the prior year. Once again,

This dedication was never more evident than in 2016,

we generated very strong cash fl ow during the year:

when we delivered solid results in the face of signifi cant

$107.7 million net cash provided by operating activities in

market headwinds. In Distribution, prolonged weakness

2016, compared to $109.6 million during 2015. With our

in industrial end-markets weighed on our fi nancial results.

January 2017 dividend payment, we have paid dividends

Despite this, we continued to invest in productivity

for 47 consecutive years and remain committed to

initiatives, including operational process improvements

returning capital to shareholders. During 2016, our share

and data analytics that position our Distribution segment

repurchase program and dividends, combined, returned

to deliver improved future results. Importantly, the team

$33 million to shareholders, a record for the company.

at our Distribution segment has continued its focus on

KAMAN ANNUAL REPORT 2016

Aerospace turned in another year
of strong performance in 2016.

We have also maintained our commitment to

Boeing order in 2016. We completed the expansion of our

investing in the future of our company. This includes

facility in Bloomfield, Connecticut, and continue to invest

investments in machinery and equipment, expanded

in other facilities to meet current and projected growth.

facilities, and new ERP systems in both Distribution

and Aerospace. Perhaps most significantly, 2016

The integration of EXTEX, our 2015 acquisition, with

once again demonstrated our strong commitment to

our specialty bearings business has proceeded

investing in our people. We graduated the first class

according to plan, and we are beginning to leverage our

of the Kamatics Apprentice Training Program, a multi-

international sales force to open up significant new global

year machinist initiative. We inducted the fourth class

opportunities. The acquisition of GRW Bearing GmbH

of the Kaman Leadership Development Program for high

(GRW), our largest-ever acquisition, also closed in late

potential employees, and launched Women Advocating

2015. As with EXTEX, the integration of GRW into the

Leadership at Kaman, or WALK, which aims to increase

Kaman family during 2016 has been very successful,

Kaman’s global representation of women in leadership

and we look forward to the continued contributions of

roles. We also implemented a new Talent Management

both companies as we enter 2017.

System, “My Kaman Career Connection,” which includes

performance, succession, and learning modules that

In our fuzing and precision product lines, the JPF

empower employees and managers to better track

achieved record production, revenue, and profit in 2016.

goals and progress.

AEROSPACE

The high reliability and functionality of this product has

resulted in unprecedented interest and demand from

outside the U.S. as well as domestically. Order backlog

for the JPF remains strong, and to meet this demand, our

Aerospace turned in another year of strong performance

Orlando, Florida and Middletown, Connecticut operations

in 2016. Revenues for 2016 were $702.1 million, an

have expanded their workforces significantly.

increase of 17.5% from 2015 revenues of $597.6 million.

These results reflect higher organic sales, due primarily

In 2015, we announced that our Aerosystems group had

to increased deliveries of the Joint Programmable

resumed production of commercial K-MAX® heavy-lift

Fuze (JPF) to the U.S. Government and the contributions

utility helicopters. The aircraft are being manufactured

from our 2015 acquisitions. Operating profit for 2016

at our Jacksonville, Florida and Bloomfield, Connecticut

increased 4.2% to $115.0 million from $110.3 million

facilities. We expect the first new helicopter to be

in 2015, reflecting strong operating performance. This

delivered in the first half of 2017. The first customer for

represents a five-year compound annual growth rate

the new K-MAX® is a Chinese firm, with orders for three

of 7.4% in operating profit dollars.

helicopters. This initial sale was the result of a multi-

year effort to gain access to the significant Chinese

Our specialty bearings product lines continued to record

market. In addition, we continue to work with both the

outstanding results in 2016, led by Kamatics, which

U.S. military and Department of the Interior to develop

celebrated its 50th anniversary. Demand from the Airbus

additional functionality, with the goal of establishing a

A350 program continues to meet our high expectations.

program of record for the unmanned K-MAX® aircraft,

Our RWG facility in Höchstadt, Germany, which earned

developed with Lockheed Martin.

site qualification from Boeing in 2015, received its first

KAMAN ANNUAL REPORT 2016To continue to strengthen our
platform, we invested in facilities
and consolidated locations.

During 2016, we launched an initiative at Distribution

to strengthen the business through implementing

operational process improvements and building

proprietary data analytical tools. These efforts have been

successful; today, Distribution is well positioned for future

growth and improved profitability.

Through a number of acquisitions over the last five years,

as well as through organic expansion, Parker Hannifin

is now Distribution’s largest supplier, a partnership that

remains strong not only within the Fluid Power platform,

but also across all three Distribution platforms. During

2016, we invested in upgrading and expanding several

of our ParkerStore locations across the United States,

allowing us to provide a better, higher quality experience

to our customers.

To further strengthen our platform, we have invested in

our facility infrastructure and have consolidated locations.

Upgraded facilities will drive more efficient operations and

enable us to deliver greater value to our customers. It is

worth noting that the cost of implementing quality and

productivity enhancements tends to mask the bottom-line

improvements achieved in Distribution; we expect that

they will lead to margin growth in 2017, as the costs of

implementing these improvements wind down.

In 2016, we saw continued consolidation among

suppliers, which favors larger national service providers

like Kaman. In 2017 and beyond, we will maintain our

focus on delivering value-added services, which create

higher margins and competitive differentiation. We will

seek attractive opportunities to further build our platforms

through targeted, strategic acquisitions in the large but

still fragmented distribution industry.

Pictured in the Bloomfield paint booth is the first
K-MAX® built at the company’s Jacksonville plant.

As part of our long-term strategic plan, Kaman Aerospace

has continued expanding its footprint to capitalize on

market opportunities and stay close to current and

prospective customers. Today, we have twenty-one

facilities in six countries, including the U.S.; our non-U.S.-

based Aerospace workforce is now fully one-third that

of our domestic workforce. Kaman Aerospace is truly a

global organization well positioned in the ever-changing

aerospace market.

DISTRIBUTION

Our Distribution business faces a challenging market

environment. While the broader economy continues

to expand, mostly driven by consumer spending

on services, including housing, health care, and

transportation, the industrial sector on which our

Distribution business depends has not been growing.

Largely as a result of this, Distribution revenues declined

6.0% in 2016 to $1.11 billion, from $1.18 billion in 2015.

Operating profit from continuing operations for 2016 was

$41.9 million, compared to $49.4 million in 2015. Thanks

to dedicated expense management, designed to offset

some of the impact of the economic climate, operating

margins from continuing operations were 3.8% in 2016,

down just 40 basis points from 4.2% in 2015.

KAMAN ANNUAL REPORT 2016A LOOK AHEAD

Last year’s progress demonstrated the power of our

Before I sign off, I want to acknowledge the retirement,

diversified business strategy, as strength in Aerospace

on January 3rd, of Ronald Galla, Kaman’s Senior Vice

markets offset weakness in Distribution markets. Our

President and Chief Information Officer. When Ron joined

Aerospace business will continue to focus on further

Kaman in 1984, he was the company’s first corporate IT

developing our industry-leading portfolio of engineered

employee. Since that time, Ron has presided over three

products while driving operational excellence across

decades of revolutionary technological change that,

all areas of the business. In Distribution, we will look to

under his leadership, has transformed our organization

the margin enhancement initiatives discussed above

and supported our growth. On behalf of everyone at

to improve profitability while maintaining our focus on

Kaman, I wish Ron a long and happy retirement, which

our three-platform strategy. In both businesses, we will

he has certainly earned.

carefully evaluate acquisitions and other investments that

enable us to deliver greater value to our customers and

Finally, I began this letter by mentioning the amazing

shareholders. Across Kaman, we will be sharpening our

dedication and talent of Kaman’s 5,300 employees.

focus on sustainability, from monitoring and control of our

I would like to end it on the same note, along with deep

greenhouse gas emissions to supporting next-generation

gratitude to our loyal customers, our supportive Board

aircraft that use more sustainable fuels.

of Directors, and our shareholders.

Neal J. Keating

Chairman, President and

Chief Executive Officer

Paul Kuhn 1941 – 2016
Last year saw the passing of Paul Kuhn, who served as Chairman,
President and Chief Executive Officer of Kaman from 2001 – 2008.
Paul, who joined the company in 1999, led a fundamental transformation
of Kaman and left it much stronger than when he joined.

KAMAN ANNUAL REPORT 2016
KAMAN IS 5,300
PEOPLE WORKING
AS ONE TEAM TO
BUILD THE FUTURE
OF OUR COMPANY.

WE’D LIKE YOU TO MEET A FEW OF THEM.

KAMAN ANNUAL REPORT 2016“ As our relationship with an

international engine OEM has
grown across our sites, we’ve
been able to innovate our
manufacturing processes to
deliver even greater value.”

Brian Cormier
Program Manager
Kaman Aerosystems - Composite Structures
Bloomfi eld, Connecticut

KAMAN ANNUAL REPORT 2016

PEOPLE
POWERING
INNOVATION

FROM NEW PROCESSES TO NEXT-
GENERATION PRODUCTS.

In 2014, a large engine original equipment manufacturer awarded

Kaman Aerospace a contract to manufacture composite A-frame fairings in

support of an Airbus commercial platform. It was the beginning of a successful

relationship, based on trust and demonstrated performance, which continues

to grow. Because of the long-term nature of this relationship, Kaman has been

able to invest in innovative manufacturing processes that include purpose-built

“cells” or confi gurations that create effi ciencies benefi tting both Kaman and our

customer. We continue to implement such innovations across our sites, including

our U.K. Composites site, which was awarded a long-term contract in 2016 to

support additional engine platforms, led by program manager Wendy Crozier.

Behind this successful relationship is a cross-functional team of program

managers, engineers, technicians, and quality specialists. The team works

collaboratively, across four facilities in the United States and Great Britain,

to ensure that we continue to deliver extraordinary results – and continuous

innovation – to this important global customer.

Our focus on innovative products is exemplifi ed by Kaman Specialty

Bearings. Our industry-leading KAfl ex® and Tuffl ex® couplings are maintenance

free, repairable, and have extended service life and increased reliability.

YEARS

For over seven decades, Kaman
has consistently developed
technical breakthroughs and
innovative solutions that help our
customers solve their most critical
challenges.

Bryan Tat, a Specialty Bearings machinist at our Bloomfi eld, CT facility.

KAMAN ANNUAL REPORT 2016

“ Adding value means working
hard to understand a client’s
business and unique needs.
This is how we were able
to help Lite-Check develop
a more effi cient diagnostic
testing solution.”

Cody Harmon
Account Manager
Kaman Fluid Power
Coeur d’Alene, Idaho

10
10

KAMAN ANNUAL REPORT 2016
KAMAN ANNUAL REPORT 2016

PEOPLE
POWERING
VALUE-ADDED
SOLUTIONS

KAMAN DISTRIBUTION HAS
EVOLVED FROM SUPPLYING PARTS
TO DELIVERING SOLUTIONS.

For Kaman Distribution, delivering value to customers means being

more than a parts supplier. Today, Kaman is a true partner to our customers,

delivering complete solutions that make them more efficient and successful.

Consider our relationship with Lite-Check, a provider of diagnostic

testing equipment for the trucking industry. Kaman’s engineers designed

and manufactured a pneumatic manifold for Lite-Check that increased the

reliability of their testing machines. This solution was spearheaded by Cody

Harmon, who joined Kaman through our acquisition of Northwest Hose &

Fittings, and Tim Sly, who joined from the Calkins Fluid Power acquisition.

The success of the Lite-Check relationship thus illustrates not only our focus

on providing value-added solutions; it demonstrates our success in effectively

integrating new acquisitions – and talented people – into the Kaman way of

doing business.

$35

BILLION

Through its three platforms –
Fluid Power, Bearings &
Power Transmission, and
Automation – Kaman
addresses a $35 billion
market.

KAMAN ANNUAL REPORT 2016“ In the year following our
acquisition, I’ve been
impressed by the synergies
between GRW and Kaman.
Our cultures are both
aligned around continuous
innovation and outstanding
client service.”

Reinhard Goebel
Technologist/Machine-setter
CNC Outer/Inner Grinding
Rimpar, Germany

KAMAN ANNUAL REPORT 2016

PEOPLE
POWERING
GLOBAL
SUCCESS

A STRATEGIC APPROACH
TO GLOBAL EXPANSION.

Aerospace is among the world’s most global businesses. In recent years,

Kaman Aerospace has significantly expanded our business outside of the

United States. Today, we conduct business in over 50 countries from 21

facilities around the world, and over one-third of our aerospace employees

work outside of the U.S.

Our acquisition of GRW Bearing GmbH, a German-based designer and

manufacturer of super-precision miniature ball bearings, exemplifies our

strategic approach to global expansion. Acquired in 2015, GRW is focused

on the demanding applications segment of the miniature ball bearings market,

where low noise requirements, extreme temperatures, ultra-high speeds,

and/or caustic environments require both exceptional engineering design

and continuous operating performance capabilities. The company represents

an outstanding complement to our own market-leading specialty bearings

and engineered product lines. Like Kaman, GRW is focused on solving the

toughest problems of OEM customers and achieving the highest standards of

performance in the most demanding applications. The combined companies

will enable us to drive significant synergies through both operational

efficiencies and additional sales growth.

COUNTRIES

LOCATIONS

Kaman field engineers are
on-site all over the globe,
supported by inside sales
teams and design engineers
who provide field engineering
and customers with reports,
drawings, technical data, and
unparalleled service levels.

KAMAN ANNUAL REPORT 2016“ Our response to customers during
Hurricane Matthew demonstrated
that we really are one integrated
platform, working seamlessly across
our branches to meet urgent client
requirements.”

Kevin Regalado
Customer Service Team Leader
Kaman Industrial Technologies
Miami, Florida

KAMAN ANNUAL REPORT 2016

PEOPLE
POWERING
NEW
RELATIONSHIPS

A NATURAL DISASTER REVEALS
WHAT KAMAN IS MADE OF.

When Hurricane Matthew impacted the Southeast in October 2016, a

multinational energy company found its regional lubricants facility under water,

ruining four electric motors that were critical to its operations. Fortunately, the

Kaman Distribution team had been building the foundations of a relationship

with the customer, even before any business transpired, including a tour of

Kaman’s regional distribution center. So when disaster hit, the company knew

whom to call.

Our local branch was closed by the hurricane, so the call was

automatically routed to our Tampa facility. The team in Tampa got right to

work, providing substitute motors from our closed distribution center, which

was reopened to support the customer. Because of our quick response

and seamless coordination across the organization, the customer was able

to get back to full production without significant downtime. Since then, the

relationship with the customer has grown, and they have purchased additional

power transmission and bearing products.

240

LOCATIONS
ACROSS
THE U.S. &
PUERTO RICO

Working across locations and
regions enables Kaman to
deliver a seamless solution to
customers, anywhere.

KAMAN ANNUAL REPORT 2016“ Thanks to the Leadership
Development Program,
I was able to move from
Distribution to Aerospace,
and from marketing to
program management,
significantly enhancing
my skills and providing an
amazing opportunity to grow.”

Arti Sheth
Deputy Program Manager
Air Vehicles and MRO
Bloomfield, Connecticut

KAMAN ANNUAL REPORT 2016
PEOPLE
POWERING
KAMAN

OUR MOST IMPORTANT
INVESTMENTS ARE THOSE
WE MAKE IN OUR PEOPLE.

Highly skilled, high performing people are critical to our future. Kaman

invests in people through a wide range of programs. The Kaman Leadership

Development Program, now working with its fourth class, recognizes and

cultivates talented individuals with demonstrated potential to become future

leaders. Participants in the program meet regularly with senior management

and take on projects that complement their individual career aspirations.

To date, 49 high-potential men and women have participated in the program.

Hiring, retaining, and promoting more women is a special focus at

Kaman. In 2016, we inaugurated Women Advocating Leadership at Kaman

(WALK). This important program seeks to adapt our culture to help promote

women in leadership; provide women with equal access to development

opportunities; and create a more work-life balanced, family-friendly company

for everyone.

PARTICIPANTS

Since 2010, 49 high-potential
Kaman employees have
successfully participated
in the Kaman Leadership
Development Program.

Tribby Warfield (pictured second from the left), Senior Vice President and General
Manager of the Automation and Fluid Power platforms of our Distribution segment, is
part of the team actively involved in advancing the goals of the WALK program.

KAMAN ANNUAL REPORT 2016WE LOOK FORWARD
TO POWERING THE
FUTURE OF KAMAN
TOGETHER.

KAMAN ANNUAL REPORT 2016UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016

Commission File No. 001-35419

KAMAN CORPORATION
(Exact name of registrant as specified in its charter)

Connecticut
(State or other jurisdiction
of incorporation or organization)

06-0613548
(I.R.S. Employer
Identification No.)

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

Registrant's telephone number, including area code: (860) 243-7100

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common Stock ($1 par value)

Name of each exchange on which registered
New York Stock Exchange LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange
Act. Yes

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

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this
chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated herein by reference in Part III of this Form 10-K or any amendment to this Form 10-K

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a
smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes

The aggregate market value on July 1, 2016, (the last business day of the Company’s most recently completed second quarter) of
the voting common stock held by non-affiliates of the registrant, computed by reference to the closing price of the stock, was
approximately $1,123,840,692.

At January 27, 2017, there were 27,101,964 shares of Common Stock outstanding.

Documents Incorporated Herein By Reference
Portions of our definitive proxy statement for our 2017 Annual Meeting of Shareholders are incorporated by reference into Part
III of this Report.

Kaman Corporation
Index to Form 10-K

Part I

Item 1

Business...............................................................................................................................................................

Item 1A Risk Factors .........................................................................................................................................................

Item 1B Unresolved Staff Comments................................................................................................................................

Item 2

Item 3

Properties.............................................................................................................................................................

Legal Proceedings ...............................................................................................................................................

Item 4 Mine Safety Disclosures......................................................................................................................................

Part II

Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Securities .............................................................................................................................................................

Item 6

Selected Financial Data .......................................................................................................................................

Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations..............................

Item 7A Quantitative and Qualitative Disclosures About Market Risk ............................................................................

Item 8

Item 9

Financial Statements and Supplementary Data ...................................................................................................

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..............................

Item 9A Controls and Procedures......................................................................................................................................

Item 9B Other Information................................................................................................................................................

Part III

Item 10 Directors, Executive Officers and Corporate Governance ..................................................................................

Item 11 Executive Compensation .....................................................................................................................................

Item 12

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...........

Item 13 Certain Relationships and Related Transactions, and Director Independence ....................................................

Item 14

Principal Accounting Fees and Services..............................................................................................................

Item 15 Exhibits, Financial Statement Schedules.............................................................................................................

Item 16

Form 10-K Summary...........................................................................................................................................

Part IV

25
27

109

110

111

112

ITEM 1.

BUSINESS

GENERAL

PART I

Kaman Corporation, headquartered in Bloomfield, Connecticut, was incorporated in 1945. We are a diversified company that
conducts business in the aerospace and distribution markets. We report information for ourselves and our subsidiaries
(collectively, “we,” “us,” “our,” and “the Company”) in two business segments, Distribution and Aerospace. A discussion of
2016 developments is included in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of
Operations, in this Form 10-K.

Distribution Segment

The Distribution segment brings our commitment to technological leadership and value-added services to the distribution
business. The Distribution segment is a leading power transmission, automation and fluid power industrial distributor with
operations throughout the United States. With over 4 million SKUs, we provide electro-mechanical products, bearings, power
transmission, motion control and electrical and fluid power components to a broad spectrum of industrial markets serving both
maintenance, repair and overhaul ("MRO") and original equipment manufacturer ("OEM") customers. With approximately 240
locations, including distribution centers, assembly, fabrication and repair facilities, Kaman provides products and service
solutions to more than 65,000 active customers representing a highly diversified cross section of industry.

Aerospace Segment

The Aerospace segment 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; and safe and arming solutions for missile and bomb systems for the U.S. and allied militaries. The segment also
markets the design and supply of aftermarket parts to businesses performing MRO in aerospace markets; performs helicopter
subcontract work; restores, modifies and supports our SH-2G Super Seasprite maritime helicopters; manufactures and supports
our K-MAX® manned and unmanned medium-to-heavy lift helicopters; and provides engineering design, analysis and
certification services.

Principal customers include the U.S. military, Sikorsky Aircraft Corporation, The Boeing Company, Airbus, Lockheed Martin,
Raytheon and Bell Helicopter. The SH-2G aircraft is currently in service with the Egyptian Air Force and the New Zealand,
Peruvian and Polish navies. Operations are conducted throughout the United States, as well as in facilities located in the United
Kingdom, Germany, the Czech Republic and Mexico. Additionally, the Company maintains an investment in a joint venture in
India.

FINANCIAL INFORMATION ABOUT OUR SEGMENTS

Financial information about our segments is included in Item 7, Management’s Discussion and Analysis of Financial Condition
and Results of Operations, and Note 19, Segment and Geographic Information, of the Notes to Consolidated Financial
Statements, included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

WORKING CAPITAL

A discussion of our working capital is included in Item 7, Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Liquidity and Capital Resources, in this Form 10-K.

Our Distribution segment requires substantial working capital related to accounts receivable and inventories. Significant
amounts of inventory are carried to meet our customers’ requirements. Sales returns do not have a material effect on our
working capital requirements.

Our Aerospace segment’s working capital requirements are dependent on the nature and life cycles of the programs for which
work is performed. New programs may initially require higher working capital to complete nonrecurring start-up activities and
fund the purchase of inventory and equipment necessary to perform the work. Nonrecurring start-up costs on large and complex
programs often take longer to recover, negatively impacting working capital in the short-term and producing a corresponding
benefit in future periods. As these programs mature and efficiencies are gained in the production process, working capital
requirements generally decrease.

Our credit agreement includes a revolving credit facility which is available for additional working capital requirements and
investment opportunities. See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations,
and Note 11, Debt, of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary
Data, of this Annual Report on Form 10-K.

PRINCIPAL PRODUCTS AND SERVICES

The following table sets forth the percentage contribution of each business segment’s products and services to consolidated net
sales from continuing operations for each of the three most recently completed years:

Years Ended December 31,
2015

2014

2016

Sales..........................................................................................................................
Distribution ...............................................................................................................
Aerospace .................................................................................................................
Total...................................................................................................................

61.2%
38.8%
100.0%

66.3%
33.7%
100.0%

64.7%
35.3%
100.0%

AVAILABILITY OF RAW MATERIALS

While we believe we have sufficient sources for the materials, components, services and supplies used in our manufacturing
activities, we are highly dependent on the availability of essential materials, parts and subassemblies from our suppliers and
subcontractors. The most important raw materials required for our aerospace products are aluminum (sheet, plate, forgings and
extrusions), titanium, nickel, copper and composites. Many major components and product equipment items are procured from
or subcontracted on a sole-source basis with a number of domestic and non-U.S. companies. Although alternative sources
generally exist for these raw materials, qualification of the sources could take a year or more. We are dependent upon the ability
of a large number of suppliers and subcontractors to meet performance specifications, quality standards and delivery schedules
at anticipated costs. While we maintain an extensive qualification system to control risk associated with such reliance on third
parties, failure of suppliers or subcontractors to meet commitments could adversely affect production schedules and contract
profitability, while jeopardizing our ability to fulfill commitments to our customers. Although price increases for raw materials
important to some of our products (steel, copper, aluminum, titanium and nickel) may cause margin and cost pressures, we do
not foresee any near term unavailability of materials, components or supplies that would have an adverse effect on either of our
business segments. For further discussion of the possible effects of changes in the cost or availability of raw materials on our
business, see Item 1A, Risk Factors, in this Form 10-K.

PATENTS AND TRADEMARKS

We hold patents and trademarks reflecting functional, design and technical accomplishments in a wide range of areas covering
both basic production of certain aerospace products as well as highly specialized devices and advanced technology products in
defense related and commercial fields.

Although the Company's patents and trademarks enhance our competitive position, we believe that none of such patents or
trademarks is singularly or as a group essential to our business as a whole. We hold or have applied for U.S. and foreign patents
with expiration dates that range through the year 2035.

Registered trademarks of the Company include KAflex®, KAron®, and K-MAX®. In all, we maintain 31 U.S. and foreign
trademarks.

BACKLOG

The majority of our backlog is attributable to the Aerospace segment. We anticipate that approximately 91.2% of our backlog at
the end of 2016 will be performed in 2017. Approximately 46.0% of the Aerospace segment's backlog at the end of 2016 is
related to U.S. Government ("USG") contracts or subcontracts.

Total backlog at December 31, 2016, 2015 and 2014, and the portion of the backlog we expect to complete in 2017, is as
follows:

Total Backlog at
December 31, 2016

2016 Backlog to be
completed in 2017

Total Backlog at
December 31, 2015

Total Backlog at
December 31, 2014

In thousands
Aerospace .........................
Distribution.......................
Total ...............................

581,619

108,681

690,300

521,136

108,681

629,817

659,350

105,777

765,127

518,025

94,430

612,455

Backlog related to uncompleted contracts for which we have recorded a provision for estimated losses was $6.1 million as of
December 31, 2016. Backlog related to firm but not yet funded orders was $2.5 million as of December 31, 2016. Distribution
backlog for 2015 and 2014 has been revised to include bearings and power transmission products. See Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations, for further discussion.

REGULATORY MATTERS

Government Contracts

The USG, and other governments, may terminate any of our government contracts at their convenience or for default if we fail
to meet specified performance measurements. If any of our government contracts were to be terminated for convenience, we
generally would be entitled to receive payment for work completed and allowable termination or cancellation costs. If any of
our government contracts were to be terminated for default, generally the USG would pay only for the work that has been
accepted and can require us to pay the difference between the original contract price and the cost to re-procure the contract
items, net of the work accepted from the original contract. The USG can also hold us liable for damages resulting from the
default.

During 2016, approximately 97.8% of the work performed by the Company directly or indirectly for the USG was performed
on a fixed-price basis and the balance was performed on a cost-reimbursement basis. Under a fixed-price contract, the price
paid to the contractor is negotiated at the outset of the contract and is not generally subject to adjustment to reflect the actual
costs incurred by the contractor in the performance of the contract. Cost reimbursement contracts provide for the
reimbursement of allowable costs and an additional negotiated fee.

Compliance with Environmental Protection Laws

Our operations are subject to and affected by a variety of federal, state, local and non-U.S. environmental laws and regulations
relating to the discharge, treatment, storage, disposal, investigation and remediation of certain materials, substances and wastes.
We continually assess our compliance status and management of environmental matters in an effort to ensure our operations are
in substantial compliance with all applicable environmental laws and regulations.

Operating and maintenance costs associated with environmental compliance and management of sites are a normal, recurring
part of our operations. These costs often are allowable costs under our contracts with the USG. It is reasonably possible that
continued environmental compliance could have a material impact on our results of operations, financial condition or cash
flows if more stringent clean-up standards are imposed, additional contamination is discovered and/or clean-up costs are higher
than estimated.

See Environmental Matters in Item 3, Legal Proceedings, and Critical Accounting Estimates - Environmental Costs in Item 7,
Management's Discussion and Analysis of Financial Condition and Results of Operations, and Note 16, Commitments and
Contingencies, in the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary
Data, of this Annual Report on Form 10-K, for further discussion of our environmental matters.

With respect to all other matters that may currently be pending, in the opinion of management, based on our analysis of relevant
facts and circumstances, we do not believe that compliance with relevant environmental protection laws is likely to have a
material adverse effect upon our capital expenditures, earnings or competitive position. In arriving at this conclusion, we have
taken into consideration site-specific information available regarding total costs of any work to be performed, and the extent of
work previously performed. If we are identified as a “potentially responsible party” ("PRP") by environmental authorities at a
particular site, we, using information available to us, will also review and consider a number of other factors, including: (i) the
financial resources of other PRPs involved in each site, and their proportionate share of the total volume of waste at the site; (ii)
the existence of insurance, if any, and the financial viability of the insurers; and (iii) the success others have had in receiving
reimbursement for similar costs under similar insurance policies issued during the periods applicable to each site.

International Operations

Our international sales are subject to U.S. and non-U.S. governmental regulations and procurement policies and practices,
including regulations relating to import-export control, investment, exchange controls and repatriation of earnings. International
sales are also subject to varying currency, political and economic risks.

Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 ("ITRA") added subsection (r) to section 13 of
the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), requiring a public reporting issuer to disclose in its
annual or quarterly reports whether it or any of its affiliates have knowingly engaged in specified activities or transactions
relating to Iran, including activities not prohibited by U.S. law and conducted outside the U.S. by non-U.S. affiliates in
compliance with local law. Issuers must also file a notice with the U.S. Securities and Exchange Commission ("SEC") if any
disclosable activities under ITRA have been included in the annual or quarterly report. We did not have any disclosable
activities during the year ended December 31, 2016.

COMPETITION

The Distribution segment competes for business with several other national distributors of bearings, power transmission,
electrical and fluid power products, two of which are substantially larger, and with many regional and local distributors and
OEMs. Competitive forces have intensified due to the increasing trend towards national contracts, customers' efforts to obtain
material cost savings and the extension of supplier product authorizations within the distribution channel. We compete for
business based upon the breadth and quality of products offered, product availability, delivery performance, and price, as well
as on the basis of value-added services that we are able to provide.

The Aerospace segment operates in a highly competitive environment with many other organizations, some of which are
substantially larger than us and have greater financial strength and more extensive resources. We compete for composite and
metallic aerostructures subcontracts, and helicopter sales and structures, bearings and components business on the basis of price
and quality; product endurance and special performance characteristics; proprietary knowledge; the quality of our products and
services; the availability of facilities, equipment and personnel to perform contracts; and the reputation of our
business. Competitors for our business include small machine shops and offshore manufacturing facilities. We compete for
engineering design services business primarily on the basis of technical competence, the reputation of our business, the
availability of our personnel and price. We compete for advanced technology fuzing business primarily on the basis of technical
competence, product quality and price; and also on the basis of our experience as a developer and manufacturer of fuzes for
particular weapon types and the availability of our facilities, equipment and personnel. We are also affected by the political and
economic circumstances of our potential foreign customers and, in certain situations, the relationships of those foreign
customers with the USG as well as the USG's perceptions of those foreign customers.

RESEARCH AND DEVELOPMENT EXPENDITURES

Customer funded research expenditures (which are included in cost of sales) were $0.9 million in 2016, $0.4 million in 2015,
and $1.6 million in 2014. Independent research and development expenditures (which are included in selling, general and
administrative expenses) were $7.7 million in 2016, $6.7 million in 2015, and $6.7 million in 2014.

EMPLOYEES

As of December 31, 2016, we employed 5,265 individuals.

FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS

Financial information about geographic areas is included in Note 19, Segment and Geographic Information, of the Notes to
Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on
Form 10-K.

AVAILABLE INFORMATION

We are subject to the reporting requirements of the Exchange Act and its rules and regulations. The Exchange Act requires us to
file reports, proxy statements and other information with the SEC. Copies of these reports, proxy statements and other
information can be read and copied at:

SEC Public Reference Room
100 F Street NE
Washington, D.C. 20549

Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-732-0330. The SEC
maintains a website that contains reports, proxy statements and other information regarding issuers that file electronically with
the SEC. These materials may be obtained electronically by accessing the SEC’s website at http://www.sec.gov.

We make available, free of charge on our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, proxy
statements, and current reports on Form 8-K as well as amendments to those reports filed or furnished pursuant to Section 13 or
15(d) of the Exchange Act, together with Section 16 insider beneficial stock ownership reports, as soon as reasonably
practicable after we electronically file these documents with, or furnish them to, the SEC. These documents are posted on our
website at www.kaman.com — select the “Investors” link, then the "Financial Information" link and then the “SEC Filings”
link.

We also make available, free of charge on our website, our Certificate of Incorporation, By–Laws, Governance Principles and
all Board of Directors' standing Committee Charters (Audit, Corporate Governance, Personnel & Compensation and Finance).
These documents are posted on our website at www.kaman.com — select the “Investors” link, then the "Corporate
Governance" link and then the "Documents and Downloads" link.

The information contained on our website is not intended to be, and shall not be deemed to be, incorporated into this
Form 10-K or any other filing under the Exchange Act or the Securities Act of 1933, as amended.

EXECUTIVE OFFICERS OF THE REGISTRANT

The Company’s executive officers as of the date of this report are as follows:

Name

Age Position

Prior Experience

Neal J. Keating

61 Chairman, President, Chief Executive

Officer and Director

Steven J. Smidler

58 President of Kaman Industrial

Technologies and Executive Vice
President of Kaman Corporation

Robert D. Starr

49 Executive Vice President and Chief

Financial Officer

Gregory L. Steiner

59 President of Kaman Aerospace Group,

Inc. and Executive Vice President of
Kaman Corporation

Mr. Keating was appointed President and Chief Executive
Officer as well as elected a Director of the company
effective September 17, 2007. Effective January 1, 2008,
he was appointed to the offices of President and Chief
Executive Officer and effective March 1, 2008, he was
appointed to the additional position of Chairman. Prior to
joining the company, Mr. Keating served as Chief
Operating Officer at Hughes Supply, a $5.4 billion
industrial distributor that was acquired by Home Depot in
2006. Prior to that, he held senior positions at GKN
Aerospace, an aerospace subsidiary of GKN plc, and
Rockwell Collins Commercial Systems, and served as a
board member of GKN plc and Agusta-Westland.

Mr. Smidler assumed the role of President of Kaman
Industrial Technologies on September 1, 2010, after
joining the company in December 2009 as Senior Vice
President and Chief Operating Officer of Kaman Industrial
Technologies. Effective February 20, 2012, he was
appointed Executive Vice President of Kaman
Corporation. Mr. Smidler joined the company from Lenze
Americas Corporation where he served as Executive Vice
President, with responsibility for marketing, sales,
finance, business systems and product technology for the
Americas. Mr. Smidler was also a member of the
management committee of the Lenze Group, Germany,
held the position of President and Treasurer for Lenze
Americas and served as Treasurer and a Board member for
the Lenze ACTech production company. Prior to that, he
served as Vice President, Americas Sales Operations at
Eaton Corporation and Vice President, Marketing of the
Global Manufacturing Group at Rockwell Automation,
Inc.
Mr. Starr was appointed Executive Vice President effective
July 1, 2015, and has served as the Chief Financial Officer
of the company since July 1, 2013. Mr. Starr joined the
company in 2009 as Vice President - Treasurer. Prior to
joining Kaman, Mr. Starr served as Assistant Treasurer at
Crane Co. of Stamford, Connecticut, a $2.6 billion
diversified manufacturer of highly engineered industrial
products. He also previously served as Managing Director,
Corporate Finance at Aetna, Inc. of Hartford, Connecticut
and as Director, Capital Markets and Risk Management at
Fisher Scientific International, Inc. of Hampton, New
Hampshire. Mr. Starr was also an associate at both
Salomon Smith Barney in New York and Chase Securities,
Inc. in New York and Singapore.

Mr. Steiner joined the company as President of Kaman
Aerospace Group, Inc., with overall responsibility for the
company's Aerospace segment, effective July 7, 2008.
Effective February 20, 2012, he was appointed Executive
Vice President of Kaman Corporation. From 2005 to 2007,
Mr. Steiner was employed at GE Aviation-Systems,
serving first as Vice President and General Manager,
Military Mission Systems and then as Vice President,
Systems for GE Aviation-Systems. Prior to that, he served
as Group Vice President at Curtiss-Wright Controls, Inc.,
with responsibility for four aerospace and industrial
electronics businesses located in the U.S. and U.K. Before
Curtiss-Wright, he had an 18-year career with Rockwell
Collins, Inc., serving in a number of progressively
responsible positions, departing as Vice President and
General Manager of Passenger Systems.

Name

Age Position

Prior Experience

Phillip A. Goodrich

60 Senior Vice President - Corporate

Development

Shawn G. Lisle

50 Senior Vice President and General

Counsel

Gregory T. Troy

61 Senior Vice President – Human

Resources and Chief Human Resources
Officer

John J. Tedone

52 Vice President, Finance and Chief

Accounting Officer

Paul M. Villani

51 Senior Vice President and Chief

Information Officer

Mr. Goodrich joined the company in 2009 as Vice
President - Corporate Development and was named Senior
Vice President - Corporate Development in February 2012.
He was previously Senior Vice President, Corporate
Development with Barnes Group,
Inc., Bristol,
Connecticut. Mr. Goodrich held similar positions with
Ametek, Inc., Paoli, Pennsylvania; and General Signal
Corporation, Stamford, Connecticut.

Mr. Lisle joined the company in 2011 and was appointed
Senior Vice President and General Counsel effective
December 1, 2012. Prior to joining the company, Mr. Lisle
served as Senior Counsel for International Paper Company
in Memphis, Tennessee. Prior to that, he served as legal
counsel for Dana Corporation in Toledo, Ohio, and as an
attorney at Porter Wright Morris & Arthur LLP in
Columbus, Ohio. He also previously worked as a trial
attorney at the U.S. Department of Justice, Tax Division
in Washington, D.C. and was a Judge Advocate in the U.S.
Navy.

Mr. Troy joined the company as Senior Vice President –
Human Resources in March 2012. On February 19, 2013,
he was appointed to the position of Chief Human
Resources Officer. Prior to joining the company, Mr. Troy
served as Chief Human Resources Officer of Force
Protection, Inc. from April 2011 to March 2012, where he
was a member of the Executive Committee. Prior to joining
Force Protection, Mr. Troy served as Vice President and
Chief Human Resources Officer at Modine Manufacturing
Company from February 2006 to April 2011, providing
global human resources leadership in the Americas,
Europe and Asia. Mr. Troy also previously worked at
OMNOVA Solutions Inc., Bosch Corporation, and Mobil
Corporation, after serving as a Transportation Officer in
the United States Army.

Mr. Tedone has served as Vice President, Finance and the
company's Chief Accounting Officer since May 2007.
From April 2006 to April 2007, Mr. Tedone served as the
company's Vice President, Internal Audit and prior to that
as Assistant Vice President, Internal Audit.

Mr. Villani joined the company in 2015 and was appointed
Senior Vice President and Chief Information Officer
effective as of January 1, 2017. From August 2015 to
December 2016, Mr. Villani served as the Senior Director,
Software Development and ERP Support at Kaman
Distribution Group. Prior to joining the company, Mr.
Villani served as Chief Information Officer at Med
Solutions, Inc. from November 2013 to June 2015; and
Chief Information Officer at Triad Healthcare, Inc. from
2007 to 2013.

Each executive officer holds office for a term of one year and until his or her successor is duly appointed and qualified, in
accordance with the Company’s By-Laws.

ITEM 1A.

RISK FACTORS

Our business, financial condition, operating results and cash flows can be impacted by the factors set forth below, any one of
which could cause our actual results to vary materially from recent results or from our anticipated future results.

Our future operating results may be impacted by changes in global economic and political conditions.

Our future operating results and liquidity may be impacted by changes in general economic and political conditions which may
affect, among other things, the following:

• The availability of credit and our ability to obtain additional or renewed bank financing, the lack of which may limit

our ability to invest in capital projects and planned expansions or to fully execute our business strategy;

• Market rates of interest, any increase in which would increase the interest payable on some of our borrowings and

adversely impact our cash flow;

• The investment performance of our pension plan, as well as the associated discount rate, any adverse changes in which

may result in a deterioration in the funded status of the plan and an increase in required contributions and plan
expense;

• The relationship between the U.S. Dollar and other currencies, any adverse changes in which could negatively impact

our financial results;

• The ability of our customers to pay for products and services on a timely basis, any adverse change in which could

negatively impact sales and cash flows and require us to increase our bad debt reserves;

• The volume of orders we receive from our customers, any adverse change in which could result in lower operating

profits as well as less absorption of fixed costs due to a decreased business base; and

• The ability of our suppliers to meet our demand requirements, maintain the pricing of their products, or continue

operations, any of which may require us to find and qualify new suppliers.

While general economic and political conditions have not impaired our ability to access credit markets and finance our
operations to date, there can be no assurance that we will not experience future adverse effects that may be material to our cash
flows, competitive position, financial condition, results of operations, or our ability to access capital.

Our financial performance is significantly influenced by customer demand for the products we distribute.

The financial performance of our Distribution segment, which generated approximately 61.2% of our 2016 consolidated net
sales and approximately 26.7% of our 2016 operating income from continuing operations before corporate expenses and net
gain on sale of assets, is significantly influenced by customer demand for the products we distribute and the services we
provide. Consequently, demand for our products and services has been and will continue to be significantly influenced by the
same factors that affect demand for and production of our customers' goods and services, including the following:

•
•

•

the level of industrial production and manufacturing capacity utilization in the markets we serve;
the economic health of the manufacturing sector of the U.S. economy, as reflected by the Purchasing Managers Index®
reported by the Institute for Supply Management, as an index reading of 50 or more implies an expanding
manufacturing economy, while a reading below 50 implies a contracting manufacturing economy;
the consolidation of certain of our manufacturing customers and the trend of manufacturing operations being moved
overseas, which subsequently reduces demand for the products we distribute and the services we provide; and
the general industrial economy, which in declining conditions may cause reduced demand for industrial output.

Any adverse changes in these and other factors affecting the demand for and production of our customers' goods and materials
could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our financial performance is also significantly influenced by conditions within the aerospace and defense industries.

The financial performance of our Aerospace segment, which generated approximately 38.8% of our 2016 consolidated net
sales, and approximately 73.3% of our 2016 operating income from continuing operations before corporate expenses and net
gain on sale of assets, is directly tied to economic conditions in the commercial aviation and defense industries.

The commercial aviation industry tends to be cyclical, and capital spending by airlines and aircraft manufacturers may be
influenced by a variety of global factors including current and future traffic levels, aircraft fuel pricing, labor issues,
competition, the retirement of older aircraft, regulatory changes, terrorism and related safety concerns, general economic
conditions, worldwide airline profits and backlog levels.

The defense industry may be influenced by a changing global political environment, continued pressure on U.S. and global
defense spending, U.S. foreign policy and the activity level of military flight operations.

Changes to the aerospace and defense industries and continued pressure to reduce U.S. defense spending could have a material
impact on our current and proposed aerospace programs, which could adversely affect our operating results and future
prospects. In addition, changes in economic conditions may cause customers to request that firm orders be rescheduled or
canceled, which could put a portion of our backlog at risk.

Furthermore, because of the lengthy research and development cycle involved in bringing new products to market, we cannot
predict the economic conditions that will exist when a new product is introduced. A reduction in capital spending in the aviation
or defense industries could have a significant effect on the demand for our products, which could have an adverse effect on our
financial performance or results of operations.

Our USG programs are subject to unique risks.

We have several significant long-term contracts either directly with the USG or where the USG is the ultimate customer,
including the Sikorsky BLACK HAWK cockpit program, the Joint Programmable Fuze (“JPF”) program, the Bell Helicopter
AH-1Z program and the A-10 program. These contracts are subject to unique risks, some of which are beyond our control.
Examples of such risks include:

• The USG may modify, curtail or terminate its contracts and subcontracts at its convenience without prior notice, upon
payment for work done and commitments made at the time of termination. Modification, curtailment or termination of
our major programs or contracts could have a material adverse effect on our business, financial condition, results of
operations and cash flows.

• Our USG business is subject to specific procurement regulations and other requirements. These requirements,

although customary in USG contracts, increase our performance and compliance costs. These costs might increase in
the future, reducing our margins, which could have a negative effect on our financial condition. Although we have
procedures designed to assure compliance with these regulations and requirements, failure to do so under certain
circumstances could lead to suspension or debarment, for cause, from USG contracting or subcontracting for a period
of time and could have a material adverse effect on our business, financial condition, results of operations and cash
flows and could adversely impact our reputation and our ability to receive other USG contract awards in the future.
• The costs we incur on our USG contracts, including allocated indirect costs, may be audited by USG representatives.
Any costs found to be improperly allocated to a specific contract would not be reimbursed, and such costs already
reimbursed would have to be refunded, which could have a material adverse effect on our business, financial
condition, results of operations and cash flows. Moreover, if any audit were to reveal the existence of improper or
illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including termination
of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business
with the USG.

• We are from time to time subject to governmental inquiries and investigations of our business practices due to our

participation in domestic and foreign government contracts and programs and our transaction of business domestically
and internationally. Adverse findings associated with any such inquiry or investigation could also result in civil and
criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of
payments, fines and suspension or prohibition from doing business with domestic and foreign governments.

Our business may be adversely affected by changes in budgetary priorities of the USG.

Because a significant percentage of our revenue is derived either directly or indirectly from contracts with the USG, changes in
federal government budgetary priorities could directly affect our financial performance. A significant decline in government
expenditures, a shift of expenditures away from programs that we support or a change in federal government contracting
policies could cause federal government agencies to reduce their purchases under contracts, to exercise their right to terminate
contracts at any time without penalty or not to exercise options to renew contracts.

The cost and effort to start up new aerospace programs could negatively impact our operating results and profits.

The time required and costs incurred to ramp up a new program can be significant and include nonrecurring costs for tooling,
first article testing, finalizing drawings and engineering specifications and hiring new employees able to perform the technical
work required. New programs can typically involve a greater volume of scrap, higher costs due to inefficiencies, delays in
production and learning curves that are often more extended than anticipated, all of which could have a material effect on our
business, financial condition, results of operations and cash flows.

The ability to obtain and retain product approvals issued by the Federal Aviation Administration ("FAA") could
adversely affect our Aerospace segment’s operating results and profits.

Our Aerospace segment may be impacted by regulations set forth by the FAA to obtain Parts Manufacturer Approvals
("PMAs") to design or produce a modification or replacement aircraft part. The loss or suspension of the Company's product
and design approvals could negatively impact our operating results and profits. We believe our current design and production
processes that are subject to such regulations by the FAA are in compliance; however, there can be no assurance that we will
not lose approvals for our products in the future.

Competition from domestic and foreign manufacturers may result in the loss of potential contracts and opportunities.

The aerospace markets in which we participate are highly competitive, and we often compete for work not only with large
OEMs but also sometimes with our own customers and suppliers. Many of our large customers may choose not to outsource
production due to, among other things, their own direct labor and overhead considerations and capacity utilization objectives.
This could result in these customers supplying their own products or services and competing directly with us for sales of these
products or services, all of which could significantly reduce our revenues.

Our competitors may have more extensive or more specialized engineering, manufacturing and marketing capabilities than we
do in some areas and we may not have the technology, cost structure, or available resources to effectively compete with them.
We believe that developing and maintaining a competitive advantage requires continued investment in product development;
engineering; supply chain management; production capabilities, including technology, equipment and facilities; and sales and
marketing, and we may not have enough resources to make the necessary investments to do so. Further, our significant
customers may attempt to use their position to negotiate price or other concessions for a particular product or service without
regard to the terms of an existing contract or the underlying cost of production.

We believe our strategies for our Aerospace segment will allow us to continue to effectively compete for key contracts and
customers, but there can be no assurance that we will be able to compete successfully in this market or against such
competitors.

We could be negatively impacted by the loss of key suppliers, the lack of product availability, or changes in supplier
programs.

Our business depends on maintaining a sufficient supply of various products to meet our customers' demands. We have long-
standing relationships with key suppliers but these relationships generally are non-exclusive and could be terminated by either
party. If we were to lose a key supplier, or were unable to obtain the same levels of deliveries from these suppliers and were
unable to supplement those purchases with products obtained from other suppliers, it could have a material adverse effect on
our business. Additionally, we rely on foreign and domestic suppliers and commodity markets to secure raw materials used in
many of the products we manufacture within our Aerospace segment or sell within our Distribution segment. This exposes us to
volatility in the price and availability of raw materials. In some instances, we depend upon a single source of supply. Supply
interruptions could arise from shortages of raw materials, labor disputes or weather conditions affecting suppliers' production,
transportation disruptions, or other reasons beyond our control. Even if we continue with our current supplier relationships,
high demand for certain products may result in us being unable to meet our customers' demands, which could put us at a
competitive disadvantage. Additionally, our key suppliers could also increase the pricing of their products, which would
negatively affect our operating results if we were not able to pass these price increases through to our customers. We base our
supply management process on an appropriate balancing of the foreseeable risks and the costs of alternative practices. To
protect ourselves against such risks, we engage in strategic inventory purchases during the year, negotiate long-term vendor
supply agreements and monitor our inventory levels to ensure that we have the appropriate inventory on hand to meet our
customers' requirements.

The adoption of new accounting guidance or changes in the interpretations of existing guidance could affect our
financial results.

We prepare our financial statements in conformity with accounting principles generally accepted in the U.S. These accounting
principles are subject to interpretation by the Financial Accounting Standards Board (“FASB”) and the Securities and Exchange
Commission (the “SEC”). A change in these principles or interpretations could have a significant effect on our reported
financial results, may retroactively affect previously reported results, could cause unexpected financial reporting fluctuations,
and may require us to make costly changes to our operational processes and accounting systems. In May 2014, the FASB issued
Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing
generally accepted accounting principles ("GAAP") revenue recognition guidance. The updated standard is effective for us in
the first quarter of 2018 and we intend to transition using the cumulative effect transition method. We are currently in the
process of evaluating the likely impact of ASU 2014-09 on our consolidated financial statements, although our preliminary
analysis indicates that it will likely change the way we account for certain revenue streams. For additional information about
these matters, please refer to Note 1, Summary of Significant Accounting Policies - Recent Accounting Standards” in the Notes
to Consolidated Financial Statements in this Annual Report on Form 10-K.

Our failure to comply with the covenants contained in our senior credit facility could trigger an event of default, which
could materially and adversely affect our operating results and our financial condition.

Our senior credit facility requires us to maintain certain financial ratios and comply with various operational and other
covenants. If we were unable to maintain these ratios and comply with such covenants, we would need to seek relief from our
lenders in order to avoid, cure or have waived an event of default under the facility. There can be no assurance that we would
be able to obtain such relief on commercially reasonable terms or otherwise. If an event of default is not cured or waived, our
lenders could, among other things, cause all outstanding indebtedness under the credit facility to be due and payable
immediately. There can be no assurance that our assets or cash flows would be sufficient to enable us to fully repay those
amounts or that we would be able to refinance or restructure the indebtedness. If, as or when required, we are unable to repay,
refinance or restructure the indebtedness outstanding under our senior credit facility, or amend the financial ratios and
covenants contained therein, the lenders under our senior credit facility could elect to terminate their commitments thereunder,
cease making further loans and institute foreclosure proceedings against our assets. This, in turn, could result in an event of
default under one or more of our other financing agreements, including our convertible notes.

Future tax law changes could have a material effect on our financial results.

We are subject to income taxes in the United States and certain foreign jurisdictions. The determination of the Company’s
provision for income taxes and other tax liabilities requires judgment and is based on legislative and regulatory structures that
exist in the jurisdictions in which we operate. As a result of the change in the U.S. administration, there may be changes in tax
policy, and the nature and outcome of those potential changes is uncertain at this time. Given the uncertainty surrounding the
final outcome of the U.S. tax reform, it is not possible to predict the impact any changes would have on the Company’s
financial results.

The value of our deferred tax assets could become impaired, which could materially and adversely affect our operating
results.

As of December 31, 2016, we had approximately $52.5 million in net deferred tax assets after valuation allowance. These
deferred tax assets can be used to offset taxable income in future periods and reduce income taxes payable in those future
periods. Each quarter, we determine the probability of the realization of deferred tax assets, using significant judgments and
estimates with respect to, among other things, historical operating results, expectations of future earnings and tax planning
strategies. In the event that there is insufficient positive evidence to support the valuation of these assets, we may be required to
further adjust the valuation allowance to reduce our deferred tax assets. Such a reduction could result in a material non-cash
charge in the period in which the valuation allowance is adjusted and could have a material adverse effect on our results of
operations. Moreover, deferred tax assets are determined based on current tax rates, and the possibility of U.S. tax reform could
impact the value of our deferred tax assets. While such reform may result in future beneficial rates, it would also require a
revaluation of our deferred tax assets, and could have a material adverse effect on our results of operations for the period in
which such rate reduction is enacted.

The freezing of our defined benefit pension plan could trigger a material curtailment adjustment in favor of the USG.

Our defined benefit pension plan was frozen with respect to future benefit accruals effective December 31, 2015. U.S.
Government Cost Accounting Standard 413 ("CAS 413") requires the Company to determine the USG’s share of any resulting
pension curtailment adjustment attributable to pension expense charged to Company contracts with the USG, which could
result in an amount due to the USG if the plan is determined to be in a surplus position or an amount due to the Company if the
plan is determined to be in a deficit position. During the fourth quarter of 2016, the Company accrued a $0.3 million liability
representing our estimate of the amount due to the USG based on our pension curtailment adjustment calculation, which was
submitted to the USG for review in December. Through the date of this filing, there has been no response from the USG on this
matter. There can be no assurance that the ultimate resolution of this matter will not have a material adverse effect on our
results of operations, financial position and cash flows.

Estimates of future costs for long-term contracts impact our current and future operating results and profits.

We generally recognize sales and gross margin on long-term contracts based on the percentage-of-completion method of
accounting. This method allows for revenue recognition as our work progresses on a contract and requires that we estimate
future revenues and costs over the life of a contract. Revenues are estimated based upon the negotiated contract price, with
consideration being given to exercised contract options, change orders and, in some cases, projected customer requirements.
Contract costs may be incurred over a period of several years, and the estimation of these costs requires significant judgment
based upon the acquired knowledge and experience of program managers, engineers and financial professionals.

Estimated costs are based primarily on anticipated purchase contract terms, historical performance trends, business base and
other economic projections. The complexity of certain programs as well as technical risks and the availability of materials and
labor resources could affect our ability to accurately estimate future contract costs. Additional factors that could affect
recognition of revenue and gross margin under the percentage-of-completion method include:

• Accounting for initial program costs;
• The effect of nonrecurring work;
• Delayed contract start-up or changes to production schedules;
• Transition of work to or from the customer or other vendors;
• Claims or unapproved change orders;
•
• Delayed completion of certain programs for which inventory has been built up;
• Our ability to estimate or control scrap level;
• Accrual of contract losses; and
• Changes in our overhead rates.

Product warranty issues;

Because of the significance of the judgments and estimation processes, it is likely that materially different sales and profit
amounts could be recorded if we used different assumptions or if the underlying circumstances were to change. Changes in
underlying assumptions, circumstances or estimates may adversely affect current and future financial performance. While we
perform quarterly reviews of our long-term contracts to address and lessen the effects of these risks, there can be no assurance
that we will not make material adjustments to underlying assumptions or estimates relating to one or more long-term contracts
that have a material adverse effect on our business, financial condition, results of operations and cash flows.

We may lose money or generate lower than expected profits on our fixed-price contracts.

Our customers set demanding specifications for product performance, reliability and cost. Most of our government contracts
and subcontracts provide for a predetermined, fixed price for the products we make regardless of the costs we incur. Therefore,
we must absorb cost overruns, notwithstanding the difficulty of estimating all of the costs we will incur in performing these
contracts and in projecting the ultimate level of sales that we may achieve. Our failure to anticipate technical problems,
estimate costs accurately, integrate technical processes effectively or control costs during performance of a fixed-price contract
may reduce the profitability of a fixed-price contract or cause a loss. While we believe that we have recorded adequate
provisions in our financial statements for losses on our fixed-price contracts as required under GAAP, there can be no assurance
that our contract loss provisions will be adequate to cover all actual future losses.

The U.S. Navy contract award for the FMU-139 D/B bomb fuze could jeopardize the continued viability and
profitability of the Company's FMU-152 A/B bomb fuze program with the U.S. Air Force ("USAF").

The Company currently provides the FMU-152 A/B bomb fuze (also referred to as the JPF) to the USAF and twenty-six other
nations, but the U.S. Navy currently utilizes a different fuze - the FMU-139. During 2015, the U.S. Naval Air Systems
Command (“NAVAIR”) solicited proposals for a firm-fixed price production contract to implement improvements to the
performance characteristics of the FMU-139 (such improved fuze having been designated the FMU-139 D/B). The USAF has
stated that, if and when a contract is awarded and production begins, the funds associated with the FMU-152 A/B will be
redirected to the FMU-139 D/B. During the third quarter of 2015, the U.S. Navy awarded the FMU-139 D/B contract to a
competitor. In the event that the FMU-139 D/B program proceeds as planned and the USAF redirects the funds associated with
the FMU-152 A/B to the FMU-139 D/B, our business, financial condition, results of operations and cash flows may be
materially adversely impacted. The timing of the impact on our financial statements is dependent on the ability of our
competitor to complete the design and qualification phase of the program and other factors. Our competitor has publicly stated
that this program will have a 32-month qualification phase, after which production will begin. Therefore, the earliest the
Company may see an impact on its financial statements is 2019; however, due to the complexity of this program, the
uncertainty associated with the successful completion of each phase in accordance with the planned schedule and the pending
status of the USAF's final decision to redirect funds to the FMU-139 D/B, the timing and magnitude of the impact on the
Company's financial statements is not certain.

The start-up of the K-MAX® production line could adversely affect our operating results and cash flow generation.

The Company resumed production of the K-MAX® aircraft in 2015 and successfully delivered the first airframe in January of
2017 from its production line in Jacksonville, Florida to the Company's plant in Bloomfield, Connecticut where it is undergoing
final assembly, testing and certification. As it has been more than a decade since we last manufactured this aircraft, the
reestablishment of the production line could require significant investments of cash to fund costs associated with development
and engineering work, the acquisition of new tooling, first article testing, and production inefficiencies. The Company currently
has $15.9 million of K-MAX® inventory, excluding the inventory associated with our new build aircraft currently under
contract. If this inventory is determined to be unusable, then the Company could incur additional costs to replace such
inventory, including potentially having to requalify suppliers for the manufacture of new components. The anticipated positive
cash flows resulting from the sale of the aircraft may also be adversely impacted by production delays. Further, if we are unable
to sustain interest in this program, we may incur additional costs associated with a shut-down of the production line.

A failure to develop and retain national accounts at our Distribution segment could adversely impact our financial
results.

Companies continue to consolidate their purchases of industrial products through a small number of major distributors or
integrated suppliers, rather than a large number of vendors. Our Distribution segment has developed a strategy to compete
effectively for national accounts, but we face intensifying competition from our competitors, several of which are larger and
have a more extensive geographic footprint.

If we are not awarded additional national accounts in the future, or if existing national account agreements are not renewed, our
sales volume could be negatively impacted, which may result in lower gross margins and weaker operating results.
Additionally, national accounts may require an increased level of customer service, such as investments in the form of opening
new branches to meet our customers' needs. The cost and time associated with these activities could be significant, and if the
relationship is not maintained, we ultimately may not be able to generate a return on these investments.

The loss of the Distribution segment’s key suppliers with whom we have national reseller agreements and/or national
distributor agreements could adversely affect our operating results and profits.

An element of our Distribution segment’s strategy is to establish alignment with a single vendor in certain portions of its
business. As a result, we currently have distribution rights for certain product lines and depend on these distribution rights as a
source of business. Many of these distribution rights are ours pursuant to contracts that are subject to cancellation upon little or
no prior notice. Although we believe we could obtain alternate distribution rights in the event of such a cancellation, the
termination or limitation by any key supplier of its relationship with the Company could result in a temporary disruption of our
business and, in turn, could adversely affect our results of operations and financial condition.

A decline in sales at our Distribution segment could adversely impact the vendor incentives and rebates we earn from
suppliers.

Some of our suppliers offer vendor incentives and rebates that are tied to the amount of product that we purchase. These
incentives and rebates can be market or customer-account specific, or relate to a specified program period. A decline in sales
could adversely impact the vendor incentives and rebates we earn from suppliers.

Our information technology systems, processes and sites may suffer interruptions or failures which may affect our
ability to conduct our business.

Our information technology systems provide critical data connectivity, information and services for internal and external
users. These interactions include, but are not limited to, ordering and managing materials from suppliers, inventory
management, shipping products to customers, processing transactions, summarizing and reporting results of operations,
complying with regulatory, legal or tax requirements, and other processes necessary to manage our business. Our computer
systems face the threat of unauthorized access, computer hackers, computer viruses, malicious code, organized cyber-attacks
and other security problems and system disruptions.

Cyber-attacks are evolving and include, but are not limited to, malicious software, destructive malware, attempts to gain
unauthorized access to data, disruption or denial of service attacks and other electronic security breaches that could lead to
disruptions in critical systems, unauthorized release of confidential, personal or otherwise protected information and corruption
of data, networks or systems. We provide products and services to customers who also face cyber threats. Our products and
services may be subject to cyber threats and we may not be able to detect or deter such threats, which could result in losses that
could adversely affect our customers and our company. Additionally, we could be impacted by cyber threats in products that we
use in our partners' and customers' systems that are used in connection with our business. These events, if not prevented or
mitigated, could damage our reputation, require remedial action, lead to loss of business, regulatory actions, potential liability
and other financial losses.

We have put in place business continuity plans and security precautions for our critical systems, including a back-up data
center. However, if our information technology systems are damaged or cease to function properly due to any number of
causes, such as catastrophic events, power outages and security breaches resulting in unauthorized access or cyber-attacks, and
our business continuity plans and security precautions do not function effectively on a timely basis, we may suffer interruptions
in our operations or the misappropriation of proprietary information, which may adversely impact our business, financial
condition, results of operations and cash flows.

Our implementation of enterprise resource planning (“ERP”) systems may adversely affect our business and results of
operations or the effectiveness of internal controls over financial reporting.

We are currently implementing new ERP systems within our Aerospace and Distribution segments. ERP implementations are
complex and time-consuming projects that involve substantial expenditures on system software and implementation activities
that take several years. If we do not effectively implement the ERP systems or if the systems do not operate as intended, it
could adversely affect our financial reporting systems and our ability to produce financial reports, the effectiveness of internal
controls over financial reporting, and our business, financial condition, results of operations and cash flows.

A failure to maintain effective internal controls could adversely affect our ability to accurately report our financial
results or prevent fraud.

Our ability to provide assurance with respect to our financial reports and to effectively prevent fraud depends on effective
internal control. Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements; therefore, even effective controls can only provide reasonable assurance with respect to the preparation and fair
presentation of financial statements. If our internal controls were to be compromised, our financial statements could become
materially misleading, which could adversely affect the trading price of our common stock. Any material weakness could
adversely impact investor confidence in the accuracy of our financial statements, affecting our ability to obtain additional
financing. This would likely have an adverse effect on our business, financial condition and the market value of our stock.
Additionally, we would be required to incur costs to make the necessary improvements to our internal control systems.

Although management has assessed our internal control over financial reporting as effective based on criteria set forth by the
Committee of Sponsoring Organizations - Integrated Framework, we can give no assurance that material weaknesses will not
occur in the future nor that existing controls will continue to be adequate to prevent or identify irregularities or ensure fair
presentation of our financial statements in the future.

We may make acquisitions or investments in new businesses, products or technologies that involve additional risks,
which could disrupt our business or harm our financial condition or results of operations.

As part of our business strategy, we have made, and expect to continue to make, acquisitions of businesses or investments in
companies that offer complementary products, services and technologies. Such acquisitions or investments involve a number of
risks, including:

• Assimilating operations and products may be unexpectedly difficult;
• Management's attention may be diverted from other business concerns;
• We may enter markets in which we have limited or no direct experience;
• We may lose key employees, customers or vendors of an acquired business;
• We may not be able to achieve the synergies or cost savings we anticipated;
• We may not realize the assigned value of the acquired assets;
• We may experience quality control failures or encounter other customer relationship issues; and
• We may become subject to preexisting liabilities and obligations of the acquired businesses.

These factors could have a material adverse effect on our business, financial condition, results of operations and cash flows. In
addition, the consideration paid for any future acquisitions could include our stock or require that we incur additional debt and
contingent liabilities. As a result, future acquisitions could cause dilution of existing equity interests and earnings per share.

Certain of our operations are conducted through joint ventures, which entail special risks.

The Company has a 26% equity interest in Kineco-Kaman Composites - India Private Limited, a composites manufacturing
joint venture located in Goa, India. The Company relies significantly on the services and skills of its joint venture partner to
manage and conduct the local business operations of the joint venture and ensure compliance with all applicable laws and
regulations. If our joint venture partner fails to perform these functions adequately, it may adversely affect our business,
financial condition, results of operations and cash flows. Moreover, if our joint venture partner fails to honor its financial
obligations to commit capital, equity or credit support to the joint venture as a result of financial or other difficulties or for any
other reason, the joint venture may be unable to perform contracted services or deliver contracted products unless we provide
the necessary capital, equity or credit support.

Our results of operations could be adversely affected by impairment of our goodwill or other intangible assets.

When we acquire a business, we record goodwill equal to the excess of the amount we pay for the business, including liabilities
assumed, over the fair value of the tangible and identifiable intangible assets of the business we acquire. Goodwill and other
intangible assets that have indefinite useful lives must be evaluated at least annually for impairment. The specific guidance for
testing goodwill and other non-amortized intangible assets for impairment requires management to make certain estimates and
assumptions when allocating goodwill to reporting units and determining the fair value of reporting unit net assets and
liabilities, including, among other things, an assessment of market conditions, projected cash flows, investment rates, cost of
capital and growth rates, which could significantly impact the reported value of goodwill and other intangible assets. Fair value
is generally determined using a combination of the discounted cash flow, market multiple and market capitalization valuation
approaches. Absent any impairment indicators, we generally perform our evaluations annually in the fourth quarter, using
available forecast information. If at any time we determine an impairment has occurred, we are required to reflect the reduction
in value as an expense within operating income, resulting in a reduction of earnings and a corresponding reduction in our net
asset value in the period such impairment is identified.

We rely on the experience and expertise of our skilled employees, and must continue to attract and retain qualified
technical, marketing and managerial personnel in order to succeed.

Our future success will depend largely upon our ability to attract and retain highly skilled technical, operational and financial
managers and marketing personnel. There is significant competition for such personnel in the aerospace and distribution
industries. We try to ensure that we offer competitive compensation and benefits as well as opportunities for continued
development, and we continually strive to recruit and train qualified personnel and retain key employees. There can be no
assurance, however, that we will continue to be successful in attracting and retaining the personnel we require to develop new
and enhanced products and to continue to grow and operate profitably.

We are subject to litigation, tax, environmental and other legal compliance risks that could adversely affect our
operating results.

We are subject to a variety of litigation, tax and legal compliance risks. These risks include, among other things, possible
liability relating to contract-related claims, government contracts, product liability matters, personal injuries, intellectual
property rights, taxes, environmental matters and compliance with U.S. and foreign export laws, competition laws and laws
governing improper business practices. In the event that we or one of our business units engage in wrongdoing in connection
with any of these kinds of matters, we could be subject to significant fines, penalties, repayments, other damages (in certain
cases, treble damages), or suspension or debarment from government contracts. Moreover, our failure to comply with
applicable export and trade practice laws could result in civil or criminal penalties and suspension or termination of export
privileges.

As a global business, we are subject to complex laws and regulations in the U.S. and other countries in which we operate.
Those laws and regulations may be interpreted in different ways. They may also change from time to time, as may related
interpretations and other guidance. Changes in laws or regulations could result in higher expenses and payments, and
uncertainty relating to laws or regulations may also affect how we conduct our operations and structure our investments and
could limit our ability to enforce our rights. Changes in environmental and climate change laws or regulations, including laws
relating to greenhouse gas emissions, could lead to new or additional investment in product designs and could increase
environmental compliance expenditures. Changes in climate change concerns, or in the regulation of such concerns, including
greenhouse gas emissions, could subject us to additional costs and restrictions, including increased energy and raw material
costs.

Our financial results may be adversely affected by the outcome of pending legal proceedings and other contingencies that
cannot be predicted. In accordance with GAAP, if a liability is deemed probable and reasonably estimable in light of the facts
and circumstances known to us at a particular point in time, we make an estimate of material loss contingencies and establish
reserves based on our assessment. Subsequent developments in legal proceedings may affect our assessment. The accrual of a
loss contingency adversely affects our results of operations in the period in which a liability is recognized. This could also have
an adverse impact on our cash flows in the period during which damages are paid.

For a discussion of these matters, please refer to Note 16, Commitments and Contingencies, and Note 10, Environmental Costs,
in the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.

Regulations related to conflict minerals could adversely impact our business.

The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions designed to improve transparency and
accountability concerning the supply of certain minerals, known as conflict minerals, originating from the Democratic Republic
of the Congo ("DRC") and adjoining countries. In August 2012, the SEC promulgated disclosure and reporting requirements
for companies who use conflict minerals in their products. Complying with these disclosure and reporting requirements may
require us to incur substantial costs and expenditures to conduct due diligence to determine the sources of conflict minerals
used in our products. Moreover, these requirements may result in changes to the sourcing practices of our customers which may
require the identification and qualification of alternate sourcing for the components of products we manufacture, which could
impact the availability of, or cause increases in the price of, materials used in our products. We may face reputational
challenges if we determine that certain of our products contain minerals not determined to be conflict free or if we are unable to
verify the origin of conflict minerals used in our products. As there may be only a limited number of suppliers offering “conflict
free” conflict minerals, there can be no assurance that we will be able to obtain necessary conflict minerals from such suppliers
in sufficient quantities or at competitive prices.

Our foreign operations require us to comply with a number of United States and international laws and regulations,
violations of which could have a material adverse effect on our business, financial condition, results of operations and
cash flows.

Our operations outside the United States require us to comply with a number of United States and international laws and
regulations, such as the U.S. Foreign Corrupt Practices Act of 1977 (the "FCPA"), the U.K. Bribery Act of 2010 (the "Bribery
Act") and other similar anticorruption laws. The FCPA generally prohibits United States companies or their agents and
employees from providing anything of value to a foreign official for the purposes of influencing any act or decision of these
individuals in their official capacity to help obtain or retain business, direct business to any person or corporate entity or obtain
any unfair advantage. While we have internal controls and procedures and compliance programs to train our employees and
agents with respect to compliance with the FCPA and other similar international laws and regulations, there can be no assurance
that our policies, procedures and programs will always protect us from reckless or criminal acts committed by our employees or
agents. Allegations of violations of applicable anti-corruption laws, including the FCPA and the Bribery Act, may result in
internal, independent, or government investigations. Violations of the FCPA and other international laws and regulations may
lead to severe criminal or civil sanctions and could result in liabilities that have a material adverse effect on our business,
financial condition, results of operations and cash flows.

Economic conditions and regulatory changes leading up to and following the United Kingdom’s ("UK") likely exit from
the European Union ("EU") could have a material adverse effect on our business, financial condition and results of
operations.

We have business operations in both the UK and the broader EU. In June 2016, a majority of voters in the UK elected to
withdraw from the EU in a national referendum. The referendum was advisory, and the terms of any withdrawal are subject to a
negotiation period that could last at least two years after the government of the UK formally initiates a withdrawal process.
Nevertheless, the referendum has created significant uncertainty about the future relationship between the UK and the EU, and
has given rise to calls for the governments of other EU member states to consider withdrawal.

These developments, or the perception that any of them could occur, may have a material adverse effect on global economic
conditions and the stability of global financial markets, and could significantly reduce global market liquidity and restrict the
ability of key market participants to operate in certain financial markets. Asset valuations, currency exchange rates and credit
ratings may be especially subject to increased market volatility. Lack of clarity about future UK laws and regulations as the UK
determines which EU laws to replace or replicate in the event of a withdrawal, including financial laws and regulations, tax and
free trade agreements, intellectual property rights, supply chain logistics, environmental, health and safety laws and regulations,
immigration laws and employment laws, could decrease foreign direct investment in the UK, increase costs, depress economic
activity and restrict our access to capital. If the UK and the EU are unable to negotiate acceptable withdrawal terms or if other
EU member states pursue withdrawal, barrier-free access between the UK and other EU member states or among the European
economic area overall could be diminished or eliminated. Any of these factors could have a direct or indirect impact on our
business in the UK and EU, our customers and suppliers in the UK and EU and our business outside the UK and EU. Any of
these factors could have a material adverse effect on our business, financial condition and results of operations and reduce the
price of our common stock.

Our foreign operations present additional risks and uncertainties which could have a material adverse effect on our
business, financial condition, results of operations and cash flows.

Our foreign business operations create additional risks and uncertainties, including the following:

• Longer payment cycles;
• Difficulties in accounts receivable collection;
• Changes in regulatory requirements;
• Export restrictions, tariffs and other trade barriers;
• Difficulties in staffing and managing foreign operations;
•
•
•
• Cultural and legal differences impacting the conduct of business.

Seasonal reductions in business activity during the summer months in Europe and certain other parts of the world;
Political or economic instability in the markets we serve;
Potentially adverse tax consequences; and

Any one or more of these factors could have a material adverse effect on our domestic or international operations, and,
consequently, on our business, financial condition, results of operations and cash flows.

Our insurance coverage may be inadequate to cover all significant risk exposures.

We are exposed to risks that are unique to the products and services we provide. While we believe that we maintain adequate
insurance for certain risks, insurance cannot be obtained to protect against all risks and liabilities. It is therefore possible that
our insurance coverage may not cover all claims or liabilities, and we may be forced to bear substantial unanticipated costs.

Business disruptions could seriously affect our sales and financial condition or increase our costs and expenses.

Our business may be impacted by disruptions including, but not limited to, threats to physical security, information technology
attacks or failures, damaging weather or other acts of nature and pandemics or other public health crises. Any of these
disruptions could affect our internal operations or services provided to customers, and could impact our sales, increase our
expenses or adversely affect our reputation or our stock price. We have developed and are implementing business continuity
plans for each of our businesses, in order to mitigate the effects disruptions may have on our financial results.

Our revenue, cash flows and quarterly results may fluctuate, which could adversely affect our stock price.

We may in the future experience significant fluctuations in our quarterly operating results attributable to a variety of factors.
Such factors include but are not limited to:

Introduction, enhancement or announcement of products by us or our competitors;

Pricing pressures from customers;

Size, timing and shipment terms of significant orders;

• Changes in demand for our products;
•
• Market acceptance of our new products;
• The growth rates of certain market segments in which we compete;
•
• Difficulties with our technical programs;
• Budgeting cycles of customers;
•
• Mix of distribution channels;
• Mix of products and services sold;
• Mix of domestic and international revenues;
•
Fluctuations in currency exchange rates;
• Changes in the level of operating expenses;
• Changes in our sales incentive plans;
• Changes in tax laws in the jurisdictions in which we conduct business;
•
Inventory obsolescence;
• Accrual of contract losses;
•
• Health care reform;
• Completion or announcement of acquisitions; and
• General economic conditions in regions in which we conduct business.

Fluctuations in oil and utility costs;

Most of our expenses are relatively fixed in the short-term, including costs of personnel and facilities, and are not easily
reduced. Thus, an unexpected reduction in our revenue, or failure to achieve an anticipated rate of growth, could have a
material adverse effect on our profitability. If our operating results do not meet the expectations of investors, our stock price
may decline.

FORWARD-LOOKING STATEMENTS

This report 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 existence of standard government contract provisions permitting renegotiation of
terms and termination for the convenience of the government; (vi) the successful resolution of government inquiries or
investigations relating to our businesses and programs; (vii) 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; (viii) potential difficulties associated
with variable acceptance test results, given sensitive production materials and extreme test parameters; (ix) 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; (x) 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; (xi) the accuracy of current cost
estimates associated with environmental remediation activities; (xii) the profitable integration of acquired businesses into the
Company's operations; (xiii) 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; (xiv) changes in supplier sales or vendor incentive policies; (xv) the effects of price increases or decreases; (xvi)
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; (xvii) future levels of indebtedness and capital expenditures; (xviii) the continued
availability of raw materials and other commodities in adequate supplies and the effect of increased costs for such items; (xix)
the effects of currency exchange rates and foreign competition on future operations; (xx) changes in laws and regulations,
taxes, interest rates, inflation rates and general business conditions; (xxi) the effects, if any, of the UK's exit from the EU; (xxii)
future repurchases and/or issuances of common stock; (xxiii) the incurrence of unanticipated restructuring costs or the failure
to realize anticipated savings or benefits from past or future expense reduction actions; and (xxiv) other risks and uncertainties
set forth herein.

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

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None.

ITEM 2.

PROPERTIES

Our facilities are generally suitable for, and adequate to serve, their intended uses. At December 31, 2016, we occupied major
facilities at the following principal locations:

Segment

Location

Aerospace..........

Jacksonville, Florida .........................................

Property Type (1)
Leased - Manufacturing & Office

Chihuahua, Mexico ...........................................

Leased - Manufacturing & Office

Rimpar, Germany..............................................

Owned - Manufacturing & Office

Prachatice, Czech Republic...............................

Owned - Assembly & Office

Wichita, Kansas.................................................

Leased - Manufacturing & Office

Darwen, Lancashire, United Kingdom .............

Leased - Manufacturing & Office

Hyde, Greater Manchester, United Kingdom....

Leased - Manufacturing & Office

Burnley, Lancashire, United Kingdom..............

Leased - Manufacturing & Office

Orlando, Florida ................................................

Owned - Manufacturing & Office

Everett, Washington..........................................

Leased - Office

Höchstadt, Germany..........................................

Owned - Manufacturing & Office

Middletown, Connecticut..................................

Owned - Manufacturing & Office

Bloomfield, Connecticut ...................................

Owned - Manufacturing, Office & Service Center

Bennington, Vermont........................................

Owned - Manufacturing & Office

Mesa, Arizona ...................................................

Leased - Office & Service Center

Distribution .......

Bloomfield, Connecticut ...................................
Ontario, California ............................................

Owned - Office

Leased - Distribution Center & Office

Albany, New York.............................................

Leased - Distribution Center & Office

Savannah, Georgia ............................................

Leased - Distribution Center & Office

Salt Lake City, Utah..........................................

Leased - Distribution Center & Office

Louisville, Kentucky .........................................

Leased - Distribution Center & Office

Gurabo, Puerto Rico..........................................

Leased - Distribution Center & Office

Bolingbrook, Illinois .........................................

Leased - Office & Branch

Rochester, New York.........................................

Leased - Office & Branch

Akron, Ohio ......................................................

Leased - Office

Teterboro, New Jersey.......................................

Leased - Office & Branch

Corporate...........

Bloomfield, Connecticut ...................................

Owned - Office & Information Technology Back-

Up Data Center

Distribution (2) ......................................................................................................................................................
Aerospace.............................................................................................................................................................
Corporate (3) .........................................................................................................................................................
Total ...................................................................................................................................................................

Square Feet

2,289,755

2,238,915

103,041
4,631,711

(1) Owned facilities are unencumbered.
(2) The Distribution segment also has approximately 240 branches located across the United States and in Puerto Rico,

generally operating in leased facilities.

(3) We occupy a 40,000 square foot corporate headquarters building, 38,000 square foot mixed use building and 8,000

square foot data center in Bloomfield, Connecticut.

ITEM 3.

LEGAL PROCEEDINGS

General

From time to time, as a normal incident of the nature and kinds of businesses in which the Company and its subsidiaries are,
and were, engaged, various claims or charges are asserted and legal proceedings are commenced by or against the Company
and/or one or more of its subsidiaries. Claimed amounts may be substantial but may not bear any reasonable relationship to the
merits of the claim or the extent of any real risk of court or arbitral awards. We record accruals related to those matters for
which we consider a loss to be both probable and reasonably estimable. Gain contingencies, if any, are not recognized until
they are realized. Legal costs are generally expensed when incurred.

We evaluate, on a quarterly basis, developments in legal proceedings that could affect the amount of any accrual and
developments that would make a loss contingency both probable and reasonably estimable. Our loss contingencies are subject
to substantial uncertainties, however, including for each such contingency the following, among other factors: (i) the procedural
status of the case; (ii) whether the case has been or may be certified as a class action suit; (iii) the outcome of preliminary
motions; (iv) the impact of discovery; (v) whether there are significant factual issues to be determined or resolved; (vi) whether
the proceedings involve a large number of parties and/or parties and claims in multiple jurisdictions or jurisdictions in which
the relevant laws are complex or unclear; (vii) the extent of potential damages, which are often unspecified or indeterminate;
and (viii) the status of settlement discussions, if any, and the settlement postures of the parties. Because of these uncertainties,
management has determined that, except as otherwise noted below, the amount of loss or range of loss that is reasonably
possible in respect of each matter described below (including any reasonably possible losses in excess of amounts already
accrued), is not reasonably estimable.

While it is not possible to predict the outcome of these matters with certainty, based upon available information, management
believes that all settlements, arbitration awards and final judgments, if any, which are considered probable of being rendered
against us in legal proceedings and that can be reasonably estimated are accrued for at December 31, 2016. Despite this
analysis, there can be no assurance that the final outcome of these matters will not have a material adverse effect on our
business, financial condition, results of operations or cash flows.

Except as set forth below, as of December 31, 2016, neither the Company nor any of its subsidiaries is a party, nor is any of its
or their property subject, to any material pending legal proceedings, other than ordinary routine litigation incidental to the
business of the Company and its subsidiaries. Additional information relating to certain of these matters is set forth in Note 16,
Commitments and Contingencies of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements
and Supplementary Data, of this Annual Report on Form 10-K.

Environmental Matters

The Company and its subsidiaries are subject to numerous U.S. Federal, state and international environmental laws and
regulatory requirements and are involved from time to time in investigations or litigation of various potential environmental
issues concerning activities at our facilities or former facilities or remediation as a result of past activities (including past
activities of companies we have acquired). From time to time, we receive notices from the U.S. Environmental Protection
Agency or equivalent state or international environmental agencies that we are a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act (commonly known as the “Superfund Act”) and/or
equivalent laws. Such notices assert potential liability for cleanup costs at various sites, which may include sites owned by us,
sites we previously owned and treatment or disposal sites not owned by us, allegedly containing hazardous substances
attributable to us from past operations. We are currently named as a potentially responsible party at one site. While it is not
possible to predict the outcome of these proceedings, in the opinion of management, any payments we may be required to make
as a result of all such claims in existence at December 31, 2016, will not have a material adverse effect on our business,
financial condition and results of operations or cash flows.

Asbestos Litigation

Like many other industrial companies, the Company and/or one of its subsidiaries may be named as a defendant in lawsuits
alleging personal injury as a result of exposure to asbestos integrated into certain products sold or distributed by the Company
and/or the named subsidiary. A substantial majority of these asbestos-related claims have been covered by insurance or other
forms of indemnity or have been dismissed without payment. The rest have been resolved for amounts that are not material to
the Company, either individually or in the aggregate. Based on information currently available, we do not believe that the
resolution of any currently pending asbestos-related matters will have a material adverse effect on our business, financial
condition, results of operations or cash flows.

ITEM 4.

MINE SAFETY DISCLOSURES

Information concerning mine safety violations required by Section 1503(a) of the Dodd-Frank Wall Street Reform and
Consumer Protection Act ("Dodd-Frank Act") and Item 104 of Regulation S-K was not required for this Annual Report on
Form 10-K as there were no reportable violations during 2016.

PART II

ITEM 5.

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET, DIVIDEND AND SHAREHOLDER INFORMATION

Our Common Stock is traded on the New York Stock Exchange under the symbol "KAMN". As of January 27, 2017, there
were 3,258 registered holders of our Common Stock. Holders of the Company’s Common Stock are eligible to participate in
the Computershare Shareowner Services program, which offers a variety of services including dividend reinvestment. A
booklet describing the program may be obtained by contacting Computershare at (800) 522-6645 or via the web at
www.cpushareownerservices.com.

The following table sets forth the high, low and closing sale prices per share of the Company’s Common Stock and the
dividends declared for the periods indicated:

2016
First quarter ......................................................................................
Second quarter..................................................................................
Third quarter.....................................................................................
Fourth quarter ...................................................................................
2015
First quarter ......................................................................................
Second quarter..................................................................................
Third quarter.....................................................................................
Fourth quarter ...................................................................................

ISSUER PURCHASES OF EQUITY SECURITIES

Market Quotations

High

Low

Dividend
Declared

44.27
43.82
45.62
50.94

42.82
43.47
42.29
41.82

37.13
40.43
41.64
40.85

37.54
41.00
35.09
36.06

42.57
42.37
43.92
48.93

42.31
42.06
35.96
40.81

0.18
0.18
0.18
0.18

The following table provides information about purchases of Common Stock by the Company during the three months ended
December 31, 2016:

Period
October 1, 2016 – October 28, 2016.......................
October 29, 2016 – November 25, 2016.................
November 26, 2016 – December 31, 2016 .............
Total

Total Number
of Shares
Purchased (a)
20,800
36,208
48,460
105,468

Average
Price Paid
per Share
42.78
$
46.30
$
49.82
$

Total Number of
Shares Purchased as
Part of a Publicly
Announced Plan (b)
20,800
36,000
48,460
105,260

Approximate
Dollar Value of
Shares That
May Yet Be
Purchased
Under the

Plan

(in thousands)
78,958
$
77,291
$
74,877
$

(a) During the quarter the Company purchased 208 shares in connection with employee tax withholding obligations as
permitted by our equity compensation plans, which are SEC Rule 16b-3 qualified compensation plans. These are not purchases
under our publicly announced program.
(b) On April 29, 2015, the Company announced that its Board of Directors approved a $100.0 million share repurchase
program ("2015 Share Repurchase Program"). This program will expire December 31, 2019.

PERFORMANCE GRAPH

Following is a comparison of our total shareholder return for the period 2011 – 2016 compared to the S&P 600 Small Cap
Index and the Russell 2000 Small Cap Index. The performance graph does not include a published industry or line-of-business
index or peer group of similar issuers because during the performance period the Company was conducting operations in
diverse lines of business and we do not believe a meaningful industry index or peer group can be reasonably identified.
Accordingly, as permitted by regulation, the graph includes the S&P 600 Small Cap Index and the Russell 2000 Small Cap
Index, both of which are comprised of issuers with market capitalizations generally similar to that of the Company.

Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
December 2016

240.00

220.00

200.00

180.00

160.00

140.00

120.00

100.00

80.00

60.00

40.00

20.00

0.00

2011

2012

2013

2014

2015

2016

Kaman Corporation

Russell 2000 Index

S&P Smallcap 600 Index

Kaman Corporation ..........................
S&P Small Cap 600..........................
Russell 2000 .....................................

100.00
100.00
100.00

137.26
114.09
116.35

150.83
164.38
161.52

154.62
173.84
169.42

160.22
170.41
161.95

195.28
215.67
196.45

2011

2012

2013

2014

2015

2016

ITEM 6.

SELECTED FINANCIAL DATA

FIVE-YEAR SELECTED FINANCIAL DATA
(in thousands, except per share amounts, shareholders and employees)

OPERATIONS

Net sales from continuing operations.......................
Operating income from continuing operations.........
Earnings from continuing operations before
income taxes .............................................................
Income tax expense ..................................................
Earnings from continuing operations .......................
Earnings (loss) from discontinued operations, net
of taxes .....................................................................
Gain (loss) on disposal of discontinued operations,
net of taxes ...............................................................
Net earnings..............................................................

FINANCIAL POSITION

Current assets ...........................................................
Current liabilities......................................................
Working capital ........................................................
Property, plant and equipment, net...........................
Total assets ...............................................................
Long-term debt, excluding current portion ..............
Shareholders’ equity.................................................

PER SHARE AMOUNTS

Basic earnings per share from continuing
operations .................................................................
Basic earnings (loss) per share from discontinued
operations .................................................................
Basic earnings (loss) per share from disposal of
discontinued operations............................................
Basic earnings per share ...........................................
Diluted earnings per share from continuing
operations .................................................................
Diluted earnings (loss) per share from discontinued
operations .................................................................

Diluted earnings (loss) per share from disposal of
discontinued operations............................................
Diluted earnings per share........................................
Dividends declared ...................................................
Shareholders’ equity.................................................
Market price range – High .......................................
Market price range – Low ........................................

AVERAGE SHARES OUTSTANDING

Basic .........................................................................
Diluted......................................................................

GENERAL STATISTICS

Registered shareholders............................................
Employees ................................................................

20161

20152

20143

20134

20125

$ 1,808,376
105,923

$ 1,775,125
104,519

$ 1,794,962
110,507

$ 1,653,921
103,346

$ 1,563,342
91,589

89,704

30,850
58,854

87,989

27,551
60,438

96,502

30,722
65,780

90,654

31,588
59,066

79,695

26,748
52,947

—

(2,924)

(2,386)

755

—
58,854

698,553
353,886
344,667
176,521
1,426,286
296,598
565,787

—
60,438

676,035
236,689
439,346
175,586
1,439,611
434,227
543,077

(4,984)
57,872

662,256
221,724
440,532
147,825
1,199,281
269,308
517,665

420
57,100

665,205
227,956
437,249
148,508
1,138,088
262,112
511,292

1,323
55,025

618,045
223,952
394,093
128,669
1,093,876
246,468
420,193

2.17

2.22

2.43

2.21

$
$

—

—
2.22

2.17

—

—
2.17
0.72
20.09
43.47
35.09

27,177
27,868

3,402
5,258

$
$

(0.11)

(0.18)
2.14

2.37

(0.11)

(0.18)
2.08
0.64
19.08
44.60
37.43

27,053
27,777

3,532
4,797

$
$

(0.09)

0.02
2.14

2.17

(0.09)

0.02
2.10
0.64
19.04
40.35
32.16

26,744
27,143

3,642
4,743

2.00

0.03

0.05
2.08

1.99

0.03

0.05
2.07
0.64
15.79
37.54
26.10

26,425
26,622

3,685
5,007

(See Footnotes below)

$
$

—

—
2.17

2.10

—

—
2.10
0.72
20.87
50.94
37.13

27,107
28,072

3,261
5,265

(Footnotes to Five-Year Selected Financial Data above)

Included within certain annual results are a variety of unusual or significant items that may affect comparability. The most
significant of such items are described below.

1. Results for 2016 include $5.1 million of acquisition transaction and integration costs related to our 2015 acquisitions,
$2.5 million of severance costs at our Aerospace segment, of which $1.1 million is included in acquisition transaction
and integration costs, and $1.0 million of restructuring and severance costs at our Distribution segment. Additionally,
the carrying amount of the Convertible Notes was reclassified to current liabilities, as these Notes are convertible
through April 3, 2017. Upon closure of the conversion period, the Notes will remain in current liabilities due to their
scheduled maturity.

2. Results for 2015 include $5.1 million in expense related to the acquisitions at both the Aerospace and Distribution
segments, $4.0 million in expense associated with the resolution of the matters related to our AH-1Z program, $3.0
million of expenses related to foreign currency transactions associated with the purchase of GRW Bearing GmbH
("GRW"), and $2.4 million of expenses associated with restructuring and severance costs at our Distribution segment.

3. Results for 2014 include the sale of the Distribution segment's Mexican operations for $9.6 million on December 19,

2014. The net loss of $5.3 million resulting from the sale is included in the loss on disposal of discontinued operations
for 2014. Additionally, we incurred $2.2 million of costs associated with the sale of our Moosup facility.

4. Results for 2013 include a $2.1 million non-cash non-tax deductible charge for the impairment of goodwill related to
Vermont Composites and a gain on discontinued operations due to a $0.4 million favorable tax result versus previous
estimates and other activity related to the settlement of the closing balance sheet of the Distribution segment's
Canadian operations.

5. The Company sold substantially all of the assets and liabilities of the Distribution segment's Canadian operations for

$8.7 million on December 31, 2012, resulting in a net gain of $1.3 million. Additionally in 2012, we recorded $3.3
million of net loss related to the resolution of an Aerospace segment program related matter.

ITEM 7.

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. MD&A presents in narrative form
information regarding our financial condition, results of operations, liquidity and certain other factors that may affect our
future results. This should allow the readers of this report to obtain a comprehensive understanding of our businesses,
strategies, current trends and future prospects. MD&A should be read in conjunction with the Consolidated Financial
Statements and related Notes included in this Form 10-K.

OVERVIEW OF BUSINESS

Kaman Corporation conducts business through two business segments:

• The Distribution segment is a leading power transmission, automation and fluid power industrial distributor with
operations throughout the United States. The segment provides electro-mechanical products, bearings, power
transmission, motion control and electrical and fluid power components to a broad spectrum of industrial markets
serving both MRO and OEM customers.

• The Aerospace segment 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; and safe and arming solutions for missile and bomb systems for the U.S. and allied
militaries. The segment also markets the design and supply of aftermarket parts to businesses performing MRO in
aerospace markets; performs helicopter subcontract work; restores, modifies and supports our SH-2G Super Seasprite
maritime helicopters; manufactures and supports our K-MAX® manned and unmanned medium-to-heavy lift
helicopters; and provides engineering design, analysis and certification services.

Company financial performance

• Net sales from continuing operations increased 1.9% compared to the prior year.
• Earnings from continuing operations decreased 2.6% compared to the prior year.
• Diluted earnings per share from continuing operations decreased to $2.10 in 2016 compared to $2.17 in the prior

year.

• Cash flows provided by operating activities from continuing operations were $107.7 million for 2016, a decrease of

$1.9 million when compared to the prior year.

Recent events

• On February 21, 2017, the Board of Directors raised the quarterly dividend from $0.18 per share to $0.20 per share,
an 11% increase to our quarterly dividend. This dividend will be paid on April 6, 2017, to shareholders of record on
March 21, 2017.
In December 2016, the Company successfully delivered its first airframe from the K-MAX® production line in
Jacksonville, Florida, to the Company’s plant in Bloomfield, Connecticut, where it is undergoing final assembly,
testing, and certification. Delivery of this aircraft to our customer is expected to occur in the second quarter of 2017.

•

• On January 1, 2017, Paul M. Villani became the Company's Senior Vice President and Chief Information Officer,

following the retirement of Ronald M. Galla, former Senior Vice President and Chief Information Officer.

• On July 13, 2016, our Aerospace segment announced it had been awarded a three-year contract with NAVAIR for the
establishment of depot level maintenance capabilities for the Egyptian Air Force ("EAF") SH-2G(E) helicopter
program, in support of the ten aircraft currently in operation. The EAF recently acquired seven Excess Defense
Article ("EDA") SH-2G aircraft from NAVAIR, which could potentially increase the fleet size from ten to seventeen
aircraft.

•

• On July 12, 2016, the Company announced that its Aerospace segment secured a contract for $39.8 million with
General Dynamics Mission Systems—Canada to commence work on the implementation phase of the previously
announced Peruvian Navy's SH-2G Super Seasprite aircraft program. The total expected value to Kaman for the
combined program, including this contract and previously issued contracts, now totals $50.5 million.
In June 2016, the Aerospace segment received PMA for the main driveshaft on the MD500 helicopter, representing
the first PMA achieved in collaboration between EXTEX, a business acquired in November 2015, and our legacy
specialty bearing and engineered products operations.
In May 2016, the Company announced that its Aerospace segment was awarded the production, manufacture and
supply of Bombardier Challenger CL350 and Global Express 5000/6000 metallic detail wing structure packages by
MHI Canada Aerospace, Inc. Deliveries of these components will begin this year and extend through 2020.

•

RESULTS OF CONTINUING OPERATIONS

Consolidated Results

Net Sales from Continuing Operations

In thousands
Distribution....................................................................................................
Aerospace ......................................................................................................
Total........................................................................................................
$ change.........................................................................................................
% change .......................................................................................................

$ 1,106,322
702,054
$ 1,808,376
33,251

$ 1,177,539
597,586
$ 1,775,125
(19,837)

$ 1,161,992
632,970
$ 1,794,962
141,041

1.9%

(1.1)%

8.5%

2016

2015

2014

The following table details the components of the above changes as a percentage of consolidated net sales:

2016

2015

2014

Organic Sales:

Distribution ..........................................................................................................
Aerospace.............................................................................................................
Total Organic Sales .........................................................................................

Acquisition Sales:

Distribution ..........................................................................................................
Aerospace.............................................................................................................
Total Acquisition Sales....................................................................................

(4.3)%
2.3 %
(2.0)%

0.3 %
3.6 %
3.9 %

(2.0)%
(2.4)%
(4.4)%

2.9 %
0.4 %
3.3 %

% change in net sales .............................................................................................

1.9 %

(1.1)%

2.0%
1.1%
3.1%

5.4%
—%
5.4%

8.5%

The increase in net sales from continuing operations for 2016 as compared to 2015 was attributable to the contribution of $68.7
million in sales from our 2015 acquisitions and an increase in organic sales at our Aerospace segment. These increases were
offset by a decrease in organic sales at our Distribution segment. Foreign currency exchange rates relative to the U.S. dollar had
an unfavorable impact of $5.9 million on net sales.

The decrease in net sales from continuing operations for 2015 as compared to 2014 was attributable to a decrease in organic
sales at both our Aerospace and Distribution segments and the unfavorable impact on sales of foreign currency exchange rates
of $8.1 million. These decreases were offset by the contribution of $60.1 million in sales from acquisitions completed in 2015
and 2014.

See Segment Results of Operations and Financial Condition below for further discussion of segment net sales.

Gross Profit from Continuing Operations

In thousands
Gross profit ...............................................................................................................
$ change ....................................................................................................................
% change...................................................................................................................
% of net sales ............................................................................................................

$ 549,092
31,858

$ 517,234
9,295

$ 507,939
44,628

6.2%
30.4%

1.8%
29.1%

9.6%
28.3%

2016

2015

2014

Gross profit from continuing operations increased in 2016 as compared to 2015, primarily due to the contribution of $22.6
million of gross profit from our 2015 acquisitions and organic growth at our Aerospace segment. The increase in organic gross
profit at our Aerospace segment is primarily attributable to higher sales of our JPF and commercial bearing products, increased
sales associated with our K-MAX® program and legacy missile fuze programs and the absence of $4.0 million in expense
associated with the resolution of matters related to our AH-1Z program in 2015. These increases were partially offset by lower

sales under the SH-2G(I) contract with New Zealand, lower sales volume of our military bearing products and a decrease in
gross margin on the Boeing 767/777 program attributable to cost growth. Additionally, there was a decline in organic gross
profit at our Distribution segment primarily due to decreases in sales in the mining, merchant wholesalers durable goods and
machinery manufacturing industries. These decreases were partially offset by increases in sales in the food manufacturing,
chemical manufacturing and primary metal manufacturing industries. Additionally, gross profit as a percentage of net sales
increased due to management's continued productivity and efficiency initiative to improve operating performance at the
Distribution segment.

Gross profit from continuing operations increased in 2015 reflecting higher gross profit at both our Distribution and Aerospace
segments. The primary driver of the increases was the contribution of $17.7 million of gross margin from acquisitions
completed in 2015 and 2014. Additionally, gross profit as a percentage of net sales increased due to the mix of sales shifting to
higher margin programs in our Aerospace segment, specifically higher JPF direct commercial sales, the contribution of gross
profit on our SH-2G program with Peru, higher sales volume and corresponding gross profit on our military bearing products
and the contribution of gross profit on our commercial bearing products primarily used in distribution, regional aircraft and
engines. These increases were partially offset by lower sales under our SH-2G(I) program with New Zealand, lower sales
volume on our legacy missile fuze programs, a decline in gross margin on certain composite structure programs, $4.0 million in
expense associated with the resolution of matters related to our AH-1Z program and lower sales volume on our Bell Helicopter
composite blade program. Additionally, there was a decline in organic gross profit at our Distribution segment primarily due to
decreases in the machinery manufacturing, merchant wholesalers durable goods, mining and transportation equipment
manufacturing industries. These decreases were partially offset by increases in the computer and electronic product
manufacturing, paper manufacturing and chemical manufacturing industries.

Selling, General & Administrative Expenses (S,G&A) associated with Continuing Operations

In thousands
S,G&A......................................................................................................................
$ change....................................................................................................................
% change ..................................................................................................................
% of net sales............................................................................................................

$ 443,158
30,115

$ 413,043
15,844

$ 397,199
39,447

7.3%
24.5%

4.0%
23.3%

11.0%
22.1%

2016

2015

2014

S,G&A increased for the year ended December 31, 2016, as compared to 2015. The following table details the components of
this change:

Organic S,G&A:

Distribution.........................................................................................................
Aerospace ...........................................................................................................
Corporate ............................................................................................................
Total Organic S,G&A....................................................................................

Acquisition S,G&A:

Distribution.........................................................................................................
Aerospace ...........................................................................................................
Total Acquisition S,G&A...............................................................................

2016

2015

2014

1.0 %
2.5 %
(1.1)%
2.4 %

0.3 %
4.6 %
4.9 %

—%
0.2%
0.2%
0.4%

3.1%
0.5%
3.6%

2.5%
0.2%
2.5%
5.2%

5.8%
—%
5.8%

% change in S,G&A..............................................................................................

7.3 %

4.0%

11.0%

S,G&A expenses associated with continuing operations increased for 2016 as compared to 2015 primarily due to $20.0 million
of incremental S,G&A expenses related to our 2015 acquisitions and higher expenses at both our Aerospace and Distribution
segments. The Aerospace segment experienced higher costs associated with the sale of government contract program inventory
which included previously capitalized general and administrative expenses. The increase in expenses at our Distribution
segment was primarily due to the implementation of our productivity and efficiency initiative to improve operating
performance and related incentive compensation costs. These increases were partially offset by benefits received from, and the

absence of costs associated with, the Distribution segment's 2015 restructuring activities and lower costs associated with the
vehicle fleet at Distribution. Additionally, partially offsetting the increases in our segment S,G&A expenses were lower
corporate expenses primarily due to the absence of acquisition related costs.

S,G&A expenses associated with continuing operations increased for 2015 as compared to 2014 primarily due to $14.4 million
of S,G&A expenses related to our 2015 and 2014 acquisitions, a $0.9 million increase in corporate expenses and higher
expenses at our Aerospace segment. Corporate expenses increased due to acquisition costs associated with our 2015
acquisitions and an increase in consulting costs. These increases were partially offset by the absence of costs incurred in the
prior year in connection with the sale of our Moosup facility, lower salary and benefit expenses and lower long-term incentive
compensation costs. The increase in expenses at our Aerospace segment was primarily due to a reduction of inventory on
government contracts where allowable general and administrative expenses are included in inventory. Organic expenses at our
Distribution segment remained relatively flat from 2014 to 2015. This was a result of lower expenses primarily due to a
decrease in salary and benefit expenses, specifically lower incentive compensation costs, and lower costs associated with our
vehicles, offset by costs related to restructuring activities, higher pension expense, an increase in consulting costs and higher
depreciation and project expenses in part attributable to the introduction of the new Enterprise Resource Planning ("ERP")
system.

Operating Income from Continuing Operations

In thousands
Operating income .....................................................................................................
$ change....................................................................................................................
% change ..................................................................................................................
% of net sales............................................................................................................

$ 105,923
1,404

$ 104,519
(5,988)

$ 110,507
7,161

1.3%
5.9%

(5.4)%
5.9 %

6.9%
6.2%

2016

2015

2014

The increase in operating income from continuing operations for 2016 as compared to 2015 was due to the contribution of
operating income from our 2015 acquisitions, an increase in organic operating income at our Aerospace segment and lower
corporate expenses, primarily due to the absence of acquisition related costs. These changes were partially offset by a decrease
in operating income at our Distribution segment. The decrease in operating income from continuing operations for 2015 as
compared to 2014 was driven by lower organic operating income at our Distribution segment and higher corporate expenses.
These decreases were partially offset by an increase in operating income at our Aerospace segment and the contribution of
operating income from our acquisitions completed in 2015 and 2014. See Segment Results of Operations and Financial
Condition below for further discussion of segment operating income.

Interest Expense, Net

In thousands
Interest expense, net .................................................................................................

15,747

13,144

13,382

2016

2015

2014

Net interest expense generally consists of interest charged on the revolving credit facility and other borrowings and the
amortization of debt issuance costs, offset by interest income. The increase in net interest expense for 2016 as compared to
2015 was primarily due to higher average borrowings under our revolving credit facility and a higher interest rate. At
December 31, 2016, the interest rate for outstanding amounts on both the revolving credit facility and term loan agreement was
2.19% compared to 1.67% at December 31, 2015.

The decrease in net interest expense for 2015 as compared to 2014 was primarily due to lower average borrowings under our
revolving credit facility. At December 31, 2015, the interest rate for outstanding amounts on both the revolving credit facility
and term loan agreement was 1.67% compared to 1.70% at December 31, 2014.

Effective Income Tax Rate for Continuing Operations

Effective income tax rate..........................................................................................

34.4%

31.3%

31.8%

2016

2015

2014

The effective tax rate for continuing operations represents the combined federal, state and foreign tax effects attributable to
pretax earnings for the year. The increase in the effective rate for 2016 as compared to 2015 was primarily the result of discrete
items recognized in 2015 related to changes in tax laws. Prior to the law changes, we had established valuation allowances
against certain net operating loss carryforwards. Some of these allowances were no longer deemed necessary as the changes to
the tax laws made it more likely than not that these benefits will be realized.

The effective rate for 2015 was lower than the statutory rate in large part due to the impact of the discrete items discussed in the
preceding paragraph. The primary cause of the 2014 effective tax rate being lower than the statutory tax rate was favorable
adjustments recorded in 2014 reflecting differences between the provision for taxes recorded in 2013 and the actual returns
filed for 2013 during 2014.

Gain/(Loss) on Disposal of Discontinued Operations, Net of Tax

The Company sold the Distribution segment's Mexican business unit, Delamac, on December 19, 2014. The sale resulted in a
net loss on disposal of discontinued operations of $5.3 million for the year ended December 31, 2014.

The Company sold substantially all of the assets and liabilities of our Distribution segment's Canadian operations on December
31, 2012. We recorded a $0.3 million adjustment to the net gain on disposal of discontinued operations during the year ended
December 31, 2014.

There were no earnings or losses from these discontinued operations during 2016 and 2015. More information on these
transactions can be found in Note 2, Discontinued Operations, in the Notes to Consolidated Financial Statements included in
this Form 10-K.

Other Matters

Information regarding our various environmental remediation activities and associated accruals can be found in Note 16,
Commitments and Contingencies, in the Notes to Consolidated Financial Statements included in this Form 10-K.

SEGMENT RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Distribution Segment

Our Strategy

The Distribution segment's strategy is to offer a comprehensive portfolio of products and services to serve the mechanical,
automation and fluid power markets driven by a highly trained technical sales and service organization while investing in
technology to drive increased productivity and improved operating margins.

Results of Operations

The following table presents selected financial data for our Distribution segment:

In thousands
Net sales from continuing operations ................................................................
$ change.............................................................................................................
% change ...........................................................................................................

$ 1,106,322
(71,217)

$ 1,177,539
15,547

$ 1,161,992
122,038

(6.0)%

1.3 %

11.7%

2016

2015

2014

Operating income ..............................................................................................
$ change.............................................................................................................
% change ...........................................................................................................
% of net sales.....................................................................................................

41,859
(7,582)
(15.3)%
3.8 %

49,441
(7,324)
(12.9)%
4.2 %

56,765
10,559

22.9%
4.9%

Net sales from continuing operations

Organic sales per sales day is a metric management uses to evaluate performance trends in its Distribution segment and is
calculated by taking total organic sales during a specific period divided by the number of sales days in that period. See
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Financial Measures, in
this Form 10-K.

Organic Sales Per Sales Day
(in thousands, except numbers of sales days)
Current period
Net sales from continuing operations ................................................
Acquisition sales (a) ............................................................................
Organic sales......................................................................................
Sales days...........................................................................................
Organic sales per sales day for the current period .............................

Prior period
Net sales from the prior year..............................................................
Sales days in the prior year ................................................................
Organic sales per sales day from the prior year.................................

2016

2015

2014

$ 1,106,322
5,171
$ 1,101,151
253
4,352

$ 1,177,539
52,798
$ 1,124,741
253
4,446

$ 1,161,992
89,388
$ 1,072,604
253
4,240

$ 1,177,539
253
4,654

$ 1,161,992
253
4,593

$ 1,039,954
253
4,110

% change in organic sales per sales day ............................................ (a-b)/b

(6.5)%

(3.2)%

3.2%

(a) Sales contributed by an acquisition are included in organic sales beginning with the thirteenth month following the date
of acquisition. Prior period information is adjusted to reflect acquisition sales for that period as organic sales when
calculating organic sales per sales day.

2016 versus 2015

The decrease in net sales from continuing operations for 2016 as compared to 2015 was driven by lower sales volume to both
our maintenance, repair and overhaul customers and original equipment manufacturer customers. Looking at the markets we
serve, sales were lower in the mining, machinery manufacturing, merchant wholesalers durable goods and paper manufacturing
markets. Partially offsetting these decreases, were higher sales in food manufacturing and nonmetallic mineral product markets.

2015 versus 2014

Net sales from continuing operations for 2015 increased as compared to 2014 due to the contribution of $52.8 million in sales
in 2015 from our 2015 and 2014 acquisitions. The Distribution segment's organic sales per sales day decreased in 2015
primarily due to lower sales volume to our original equipment manufacturer customers. Looking at the markets we serve, sales
were lower in the mining, machinery manufacturing and merchant wholesalers durable goods markets. Partially offsetting these
decreases, were higher sales in paper manufacturing and chemical manufacturing.

Operating Income

2016 versus 2015

Operating income from continuing operations decreased during 2016 as compared to 2015 primarily due to lower organic sales
and related gross profit and higher S,G&A costs. The increase in S,G&A expenses at our Distribution segment mostly relates to
$12.6 million of implementation expenses incurred in 2016 associated with our productivity initiative which includes
operational process improvements and data analytics, primarily focused on expanding operating margins. These costs are not
expected to recur at the same levels in future periods. These increases were partially offset by benefits received and the absence
of costs associated with restructuring activities undertaken in the fourth quarter of 2015 and lower costs associated with our
vehicles.

2015 versus 2014

Operating income from continuing operations decreased during 2015 as compared to 2014 primarily due to lower operating
income associated with lower organic sales. This was partially offset by the contribution of operating income from our 2015
and 2014 acquisitions. Organic operating expenses remained relatively flat from 2014 to 2015. This was a result of lower
expenses primarily due to a decrease in salary and benefit expenses, specifically lower incentive compensation costs, and lower
costs associated with our vehicles, offset by costs related to restructuring activities, higher pension expense, an increase in
consulting costs and higher depreciation and project expenses in part attributable to the introduction of the new ERP system.

Other Matters

Enterprise Resource Planning System

In July 2012, we announced a decision to invest in a new ERP business system for our Distribution segment with an estimated
total cost of $45.0 million. Since our announcement in 2012, Distribution has acquired nine businesses. To date, we have
implemented the new ERP system at four acquired entities, of which two were not included in the original project scope.
Additionally, an upgraded version of the software was released during the early stages of our initial implementation plan and
Distribution elected to install this major upgrade because of the increased functionality, enhanced features and new user
interface it offered. Recently, we completed another upgrade to the latest commercially available version of the software, which
resulted in improved performance and functionality at the four locations currently on the ERP system. In order to accomplish
full deployment to the bearings and transmission platform, there remains a significant amount of effort to ensure the systems
will operate to our specifications and provide expected benefits, while limiting any potential disruption to our business and
ancillary information technology systems. As a result of the unplanned implementations at the acquired businesses and the
software upgrades, our implementation timeline has been extended. With the extension of our implementation timeline, the
estimated total project cost has increased to $51.1 million.

For the years ended December 31, 2016, 2015, and 2014, expenses incurred totaled approximately $1.4 million, $1.0 million
and $0.8 million, respectively, and capital expenditures totaled $3.7 million, $5.1 million, and $8.0 million, respectively. Total
to date ERP system capital expenditures as of December 31, 2016 were $34.5 million. Depreciation expense for the ERP
system for the years ended December 31, 2016, 2015, and 2014, totaled $2.8 million, $2.9 million and $1.9 million,
respectively.

Aerospace Segment

Our Strategy

Our strategic goals for the Aerospace segment are built upon four objectives: Depth, Diversity, Differentiation and
Development. In order to achieve these objectives, we focus our efforts on improving balance between commercial and defense
program content, leveraging our broad capabilities to expand market positions, executing strategic acquisitions and increasing
focused investments in our people and infrastructure to increase capabilities and drive continuous improvement. The creation of
our “One Kaman” approach combines design and build capabilities to provide customers with global integrated solutions. This
approach provides us with the size and strength to address larger, integrated work packages from OEMs and Tier 1 suppliers.

Results of Operations

The following table presents selected financial data for our Aerospace segment:

In thousands
Net sales ...................................................................................................................
$ change....................................................................................................................
% change ..................................................................................................................

$ 702,054
104,468

$ 597,586
(35,384)

$ 632,970
19,003

17.5%

(5.6)%

3.1%

2016

2015

2014

Operating income .....................................................................................................
$ change....................................................................................................................
% change ..................................................................................................................
% of net sales............................................................................................................

$ 115,005
4,677

$ 110,328
1,631

$ 108,697
6,124

4.2%
16.4%

1.5 %
18.5 %

6.0%
17.2%

Net Sales

2016 versus 2015

Aerospace segment net sales increased due to the contribution of $63.5 million of sales from our 2015 acquisitions and an
increase in organic sales of $41.0 million. Organic sales increased due to increases in sales of both our commercial and military
product programs of $34.8 million and $6.2 million, respectively.

The increase in organic sales generated by our commercial programs/products is primarily attributable to higher sales
associated with our K-MAX® program and higher commercial bearing product sales to original equipment manufacturers,
totaling $33.9 million.

The increase in organic sales generated by our military programs/products is primarily due to increased sales of our JPF to the
USG, higher sales associated with our legacy missile fuze programs, increased sales volume on our Bell Helicopter composite
blade program and sales under the SH-2G program with Peru. These increases, totaling $50.6 million, were partially offset by a
$43.5 million decrease due to lower sales associated with our SH-2G(I) contract with New Zealand, lower sales on the Boeing
A-10 program, a decrease in military bearing product sales and lower sales under the AH-1Z program.

Foreign currency exchange rates relative to the U.S. dollar had an unfavorable impact of $5.9 million on net sales.

2015 versus 2014

Aerospace segment net sales decreased due to decreases in sales of both our military and commercial product programs of
$28.7 million and $6.7 million, respectively, including an adverse impact of foreign currency translation of $8.1 million. The
decrease in military sales was primarily attributable to lower sales associated with the JPF program with the USG, our SH-2G
contracts with New Zealand and Egypt, legacy missile and bomb fuze programs, certain composite structure programs and the
Sikorsky BLACK HAWK helicopter program. Additionally, the absence of sales under the C-17 program contributed to this
decrease, as this program was completed in 2014. These decreases, totaling $99.0 million, were offset by $70.6 million in
increases, primarily due to higher direct sales to foreign militaries of the JPF, higher sales under the AH-1Z program and sales
under the SH-2G program with Peru.

The decrease in commercial sales was primarily attributable to lower sales associated with our Bell Helicopter composite blade
program and certain composite structure programs and a decline in sales volume on commercial bearing products primarily
used in regional aircraft and engines and sold through distribution channels. These decreases, totaling $25.5 million, were
partially offset by a $19.1 million increase in commercial sales associated with our K-MAX® program, higher commercial
bearing product sales to original equipment manufacturers, higher composite imaging sales, an increase in sales associated with
our Boeing 747-8 wing-to-body program and $7.0 million in sales from our 2015 acquisitions.

Operating Income

2016 versus 2015

The increase in operating income for 2016 as compared to 2015 was primarily due to the contribution of $21.2 million of gross
profit from our 2015 acquisitions and higher organic gross profit. The increase in organic gross profit was primarily
attributable to higher sales of our JPF and commercial bearing products, increased sales under our K-MAX® program and
legacy missile fuze programs and the absence of $4.0 million in expense associated with the resolution of matters related to our
AH-1Z program in 2015. These increases, totaling $34.6 million, were partially offset by the S,G&A expenses of the businesses
we acquired in 2015, lower sales and associated gross profit under the SH-2G(I) contract with New Zealand, lower military
bearing products sales volume and a decrease in gross margin on the Boeing 767/777 program attributable to cost growth.

Additionally, offsetting some of the increase in operating income was higher S,G&A expenses attributable to the sale of
inventory associated with government contracts which included previously capitalized general and administrative expenses.
See the table below for the expense recorded or benefit received from S,G&A expenses capitalized in inventory for certain
government contracts.

2015 versus 2014

The increase in operating income for 2015 as compared to 2014 was primarily due to higher direct sales to foreign militaries of
our JPF and the corresponding gross profit from these sales. In addition, operating income increased, to a lesser extent, due to
gross profit contribution from our SH-2G program with Peru, higher military bearing products sales volume, higher sales
volume for our commercial bearing products primarily used in regional aircraft and engines and sold through distribution
channels and the contribution of gross margin from our 2015 acquisitions. Additionally, improved performance on our long-
term contracts leading to changes in our contract cost estimates contributed approximately $4.8 million to operating income in
2015, the largest of these improvements being approximately $3.4 million associated with our JPF program. These increases
totaled $35.8 million and were partially offset by lower sales associated with our SH-2G(I) program with New Zealand, lower
sales volume on our legacy missile fuze programs, a decline in gross margin on certain composite structure programs, $4.0
million in expense associated with the resolution of matters related to our AH-1Z program and lower sales volume on our Bell
Helicopter composite blade program.

For certain USG contracts, S,G&A expenses are capitalized in inventory until revenue is recognized, to the extent that gross
profit is available to offset the S,G&A expenses. See the table below for the expense recorded or benefit received from S,G&A
expenses capitalized in inventory for certain government contracts.

In thousands
S,G&A expensed (capitalized), net ..........................................................................

2,465

(3,267) $

786

2016

2015

2014

Long-Term Contracts

For long-term aerospace contracts, we generally recognize sales and income based on the percentage-of-completion method of
accounting, which allows for recognition of revenue as work on a contract progresses. We recognize sales and profit based on
either (1) the cost-to-cost method, which results in costs being reported as cost of sales as incurred and sales (and profit) being
recorded based upon the ratio of costs incurred to estimated total costs to complete the contract, or (2) the units-of-delivery
method, which results in sales being recognized as deliveries are made and cost of sales being computed on the basis of the
estimated ratio of total contract cost to total contract sales.

Revenue and cost estimates for all significant long-term contracts for which revenue is recognized using the percentage-of-
completion method of accounting are reviewed and reassessed quarterly. Based upon these reviews, we record the effects of
adjustments in profit estimates each period. If at any time management determines that in the case of a particular contract total
costs will exceed total contract revenue, we record a provision for the entire anticipated contract loss at that time. The net
decrease in our operating income from changes in contract estimates totaled $0.8 million for the year ended December 31,
2016. The decrease in 2016 was primarily a result of cost growth on various programs, including the Boeing 767/777 program,
the A-10 program and certain composites structures and assembly programs. This cost growth was partially offset by improved
performance on the JPF program. For the year ended December 31, 2015, the net increase in our operating income from
changes in contract estimates totaled $4.8 million, excluding $4.0 million in expense associated with the resolution of matters
related to our AH-1Z program. The increase in 2015 was primarily a result of improved performance on the JPF and another
legacy bomb fuze program. The net increase in our operating income from changes in contract estimates totaled $1.9 million
for the year ended December 31, 2014. The increase in 2014 was primarily a result of improved performance on the New
Zealand SH-2G(I) program, the JPF program and a mix of composite programs. These improvements were slightly offset by
cost growth on the Sikorsky BLACK HAWK helicopter program.

Backlog

In thousands
Backlog...............................................................................................

581,619

659,350

518,025

2016

2015

2014

The backlog balance decreased from 2015 to 2016, primarily due to deliveries under various programs. These decreases were
partially offset by orders associated with our AH-1Z helicopter program and the SH-2G program with Peru.

The backlog balance increased from 2014 to 2015, primarily due to the USG JPF Program Option 12 award and JPF
commercial sales orders received for foreign militaries, orders for our K-MAX® aircraft and orders under certain legacy

missile and bomb fuze programs. These increases were partially offset by work performed on the SH-2G(I) New Zealand
program.

Major Programs/Product Lines

Defense Markets

A-10

The segment has contracted with Boeing to produce the wing control surfaces (inboard and outboard flaps, slats and deceleron
assemblies) for the USAF’s A-10 fleet. This contract has a potential value of over $110.0 million; however, annual quantities
will vary, as they are dependent upon the orders Boeing receives from the USAF. Initial deliveries under this program began in
the third quarter of 2010 and full rate production began during the fourth quarter of 2012. Through December 31, 2016, 162
shipsets have been delivered over the life of the program, and approximately 11 shipsets remain in backlog. In 2016, the USAF
indicated that they would delay the retirement of the A-10 fleet due to its vital close air support, search and rescue capabilities
and the lack of a suitable replacement. We continue to monitor the defense budget and understand that despite this positive
indication, the future of this program could be at risk without the continued support of Congress. We have not received any
orders for additional shipsets, and as such, we expect a break in production as we complete the units we currently have on order
and wait for follow-on orders from our customer. We have not received any indication from our customer that this program will
be terminated. Production and deliveries under this contract have been extended through the first quarter of 2017. Tooling and
nonrecurring costs on this program are being amortized over 242 shipsets, the number of shipsets expected to be delivered
under this program. At December 31, 2016 and 2015, our program backlog was $5.3 million and $14.4 million, respectively,
and total program inventory was $12.8 million and $17.1 million, respectively. The current total program inventory includes
nonrecurring costs of $8.7 million, which may not be recoverable in the event of a significant break in production or contract
termination prior to the completion of the 242 shipsets.

Bearings

Our bearings products are included on numerous military platforms manufactured in North America, Asia and Europe. These
products are used as original equipment and/or specified as replacement parts by the manufacturers. The most significant
portion of our military bearings sales is derived from U.S. military platforms, such as the AH-64 helicopter, Virginia Class
submarine and Joint Strike Fighter aircraft, and sales in Europe for the Typhoon program. These products are primarily
proprietary self-lubricating, ball and roller bearings for aircraft flight controls, turbine engines and landing gear, and helicopter
driveline couplings.

BLACK HAWK

The Sikorsky BLACK HAWK helicopter cockpit program involves the manufacture of cockpits including the installation of all
wiring harnesses, hydraulic assemblies, control pedals and sticks, seat tracks, pneumatic lines, and the composite structure that
holds the windscreen for most models of the BLACK HAWK helicopter. As a result of lower customer demand, we delivered
74 cockpits in 2016 as compared to the 76 cockpits delivered in 2015. Included in backlog at December 31, 2016 and 2015,
was $45.6 million and $56.5 million, respectively, for orders on this program. We anticipate cockpit deliveries to total 73 in
2017.

AH-1Z

In February 2016, we reached an agreement with our customer that modified the scope of the AH-1Z contract and which,
among other things, resolved outstanding claims associated with this program. We agreed to pay our customer $4.0 million, all
of which had been accrued at the end of 2015, and the customer agreed to pay us $4.3 million. Both of these transactions were
completed during the third quarter of 2016. Given the current volume of firm orders, we estimate the contract to be a zero
margin program, taking into consideration the $1.4 million of S,G&A costs capitalized in inventory associated with this
contract. As of December 31, 2016 and 2015, our backlog for this program was $45.4 million and $10.2 million, respectively.

SH-2G Peru

During 2016, we were awarded a contract for $41.0 million with General Dynamics Mission Systems—Canada to commence
work on the implementation phase of the previously announced Peruvian Navy's SH-2G Super Seasprite aircraft program. This
contract is for the remanufacture and upgrade of four Kaman SH-2G Super Seasprite aircraft and support for the operation of a
fifth aircraft for the Peruvian Navy. The total expected value to Kaman for the combined program, including this contract and
38

previously issued contracts, now totals $50.5 million. Total backlog at December 31, 2016 and 2015, was $32.4 million and
$10.8 million, respectively.

FMU-152 A/B – Joint Programmable Fuze

We manufacture the JPF, an electro-mechanical bomb safe and arming device, which allows the settings of a weapon to be
programmed in flight. We occasionally experience lot acceptance test failures due to the complexity of the product and the
extreme parameters of the acceptance test. Given the maturity of the product, we now generally experience isolated failures,
rather than systemic ones. As a result, identifying a root cause can take longer and result in inconsistent delivery quantities
from quarter to quarter.

Sales of these fuzes can be direct to the USG, Foreign Military Sales ("FMS") through the USG and direct commercial sales to
foreign militaries that, although not funded by the USG, require proper regulatory approvals from the USG. During 2016, we
were awarded direct commercial sales contracts totaling $93.0 million. The delay in receipt of government approvals has
shifted deliveries for this JPF DCS award into the fourth quarter of 2017.

A total of 5,470 fuzes passed acceptance testing and were delivered to our customers during the fourth quarter of 2016, for a
total of 31,058 fuzes delivered in 2016, representing $136.3 million of sales. We expect to deliver 33,000 to 37,000 fuzes in
2017. A significant portion of these deliveries will be under Option 12 of our JPF program with the USG. Fuzes under Option
12 were negotiated at a lower selling price than Option 11 and the transition to Option 12 is expected to have an unfavorable
margin impact of approximately $6.5 million in 2017.

The Company currently provides the FMU-152 A/B to the USAF and twenty-six other nations, but the U.S. Navy currently
utilizes a different fuze - the FMU-139. In 2015, NAVAIR solicited proposals for a firm fixed price production contract to
implement improvements to the performance characteristics of the FMU-139 (such improved fuze having been designated the
FMU-139 D/B), and the USAF has stated that, if and when a contract is awarded and production begins, the funds associated
with the FMU-152 A/B will be redirected to the FMU-139 D/B. During the third quarter of 2015, the U.S. Navy announced that
a competitor was awarded the contract for the FMU-139 D/B. In the event the FMU-139 D/B program proceeds as planned and
the USAF redirects the funds associated with the FMU-152 A/B to the FMU-139 D/B, our business, financial condition, results
of operations and cash flows may be materially adversely impacted. The timing of the impact on our financial statements is
dependent on the ability of our competitor to complete the design and qualification phase of the program and other factors. Our
competitor has publicly stated that this program is expected to have a 32-month qualification phase, preceding production.
Therefore, the earliest the Company may see an impact on its financial statements is 2019; however, due to the complexity of
this program, the uncertainty associated with the successful completion of each phase in accordance with the planned schedule
and the pending status of the USAF's final decision to redirect funds to the FMU-139 D/B, the timing and magnitude of the
impact on the Company's financial statements is not certain. The Company believes there remains strong foreign demand for
the FMU-152 A/B. Total JPF backlog at December 31, 2016, was $175.0 million, which represents orders for delivery into
2018. At December 31, 2015, total JPF backlog was $213.4 million.

Commercial Markets

K-MAX®

During the second quarter of 2015, we announced that our Aerospace segment was resuming production of commercial K-
MAX® aircraft. The aircraft are being manufactured at our Jacksonville, Florida and Bloomfield, Connecticut facilities. The
first new helicopter is expected to be delivered in the second quarter of 2017. As of December 31, 2016 and 2015, our backlog
for this program was $13.7 million and $30.0 million, respectively. In addition to the six aircraft on order, we believe there is
additional demand for new aircraft to support firefighting, logging and other industries requiring repetitive aerial lift
capabilities for which K-MAX® is extremely well suited.

777 / 767

In January 2015, we signed a multi-year follow-on contract with Boeing for the production of fixed trailing edge ("FTE")
assemblies for the Boeing 777 and 767 commercial aircraft. To date, Kaman has provided more than 1,000 FTE kits and
assemblies for each of the 777 and 767 programs since 1995 and 1986, respectively. During 2016, on average we delivered
eight shipsets per month on the Boeing 777 platform and two shipsets per month on the Boeing 767 platform, which includes
one shipset per month associated with a military tanker derivative of the 767. For 2017, we estimate deliveries on the 777
program to be six shipsets per month and on the 767 program to be two shipsets per month which includes one shipset per
month associated with a military tanker derivative of the 767. The total contract value is estimated to be in excess of $75

million; however, annual quantities will vary, as they are dependent upon the orders Boeing receives from its customers. As of
December 31, 2016 and 2015, our backlog for these programs was $20.4 million and $26.1 million, respectively.

Airbus

Our U.K. Composites operations provide composite components for many Airbus platforms. The most significant of these are
the A320, A330 and A350. Orders for all of these platforms are dependent on the customer’s build rate.

Bearings

Our bearings products are included on commercial airliners and regional/business jets manufactured in North and South
America, Europe and Asia and are used as original equipment and/or specified as replacement parts by airlines and aircraft
manufacturers. These products are primarily proprietary self-lubricating, ball and roller bearings for aircraft flight controls,
turbine engines, landing gear, and helicopter driveline couplings. The most significant portion of our commercial sales is
derived from Boeing and Airbus platforms, such as the Boeing 737, 747, 777 and 787 and the Airbus A320, A330, A350 and
A380.

Additionally, our bearings offerings include super precision miniature ball bearings used primarily in aerospace applications,
dental products, surgical power tools, analytical devices and various industrial applications.

Bell Helicopter

In November 2014, we were awarded an extension to our current contract with Bell Helicopter to manufacture skin and skin-to-
core components for several of Bell’s commercial helicopter models. This three-year follow on contract has an expected value
in excess of $24.0 million. The components are manufactured at our full-service aerospace innovation and manufacturing
support center in Bloomfield, Connecticut. At December 31, 2016 and 2015, $8.9 million and $12.1 million, respectively was
included in backlog for orders under this program. Annual quantities for this program will vary, as they are dependent upon the
orders Bell receives from its customers.

Engineering Design Services

The Company offers engineering design services to Aerospace OEM customers. Engineering design service programs generate
revenue primarily through the billing of employees' time spent on customer projects. Our engineers provide value to new
aircraft development and product improvement programs.

Other Matters

Learjet 85

In 2010, our U.K. Composites operation was awarded a contract to manufacture composite passenger entry and over-wing exit
doors for the Learjet 85, a mid-sized business jet built primarily from composites and featuring advances in aerodynamics,
structures and efficiency; however, in October 2015, Bombardier Inc. announced the cancellation of its Learjet 85 business
aircraft program. At December 31, 2016, total accounts receivable and inventory related to the program was $3.1 million, all of
which we anticipate recovering. During the fourth quarter, we filed suit against our customer for the purposes of collecting the
above amount.

For a discussion of other matters related to our Aerospace segment see Note 16, Commitments and Contingencies, in the Notes
to Consolidated Financial Statements included in this Form 10-K.

LIQUIDITY AND CAPITAL RESOURCES

Discussion and Analysis of Cash Flows

We assess liquidity in terms of our ability to generate cash to fund working capital requirements and investing and financing
activities. Significant factors affecting liquidity include: cash flows generated from or used by operating activities, capital
expenditures, investments in our business segments and their programs, acquisitions, divestitures, dividends, availability of
future credit, adequacy of available bank lines of credit, and factors that might otherwise affect the Company's business and
operations generally, as described under the heading “Risk Factors” and “Forward-Looking Statements” in Item 1A of Part I of
this Form 10-K.

We continue to rely upon bank financing as an important source of liquidity for our business activities including acquisitions.
We believe this, when combined with cash generated from operating activities, will be sufficient to support our anticipated cash
requirements for the foreseeable future. However, we may decide to raise additional debt or equity capital to support other
business activities including potential future acquisitions. We anticipate our capital expenditures will be approximately $35.0
million in 2017, primarily related to machinery and equipment and information technology infrastructure.
In addition to our working capital requirements, one or more of the following items could have an impact on our liquidity
during the next 12 months:

•

•
•
•
•
•
•

the matters described in Note 16, Commitments and Contingencies, in the Notes to Consolidated Financial Statements,
including the cost of existing environmental remediation matters and deposits required to be made to the
environmental escrow for the Moosup facility sold in 2014 discussed in Note 10, Environmental Costs;
contributions to our qualified pension plan and Supplemental Employees’ Retirement Plan (“SERP”);
deferred compensation payments to former directors and officers;
repurchase of common stock under the 2015 Share Repurchase Program;
payment of dividends;
costs associated with the start-up of new aerospace programs; and
the extension of payment terms by our customers.

In addition, our $115.0 million Convertible Notes became convertible during the third quarter and are scheduled to mature on
November 15, 2017, unless earlier redeemed, repurchased or converted. We are currently assessing potential alternatives for the
refinancing of these instruments prior to their scheduled maturity; however, there is sufficient borrowing capacity under our
revolving credit agreement to provide the cash that would be required should the noteholders elect to convert their notes or to
fund the settlement of the notes. We do not believe any of these matters will lead to a shortage of capital resources or liquidity
that would adversely impact our business or results of operations.

We regularly monitor credit market conditions to identify potential issues that may adversely affect, or provide opportunities
for, the securing and/or pricing of additional financing, if any, that may be necessary to continue with our growth strategy and
finance working capital requirements.

Management regularly monitors its pension plan asset performance and the assumptions used in the determination of our
benefit obligation, comparing them to actual experience. We continue to believe the assumptions selected are valid due to the
long-term nature of our benefit obligation. In 2015 and prior, we used a single-weighted average discount rate to calculate
interest and service cost associated with our defined benefit pension plans. For 2016, we utilized a "spot rate approach" in the
calculation of interest and service cost for these plans. The spot rate approach applies separate discount rates for each projected
benefit payment in the calculation of pension interest and service cost. This calculation change is considered a change in
accounting estimate and was applied prospectively in 2016. The use of the spot rate approach had a $4.7 million favorable
impact on pension expense in 2016 relative to our estimate of what the expense would have been had we not changed our
approach. See additional details in the "Critical Accounting Estimates" section below.

Effective December 31, 2015, the qualified pension plan was frozen with respect to future benefit accruals. Under CAS 413 we
must calculate the USG’s share of any pension curtailment adjustment resulting from the freeze. Such adjustments can result in
an amount due to the USG for pension plans that are in a surplus position or an amount due to the contractor for plans that are
in a deficit position. During the fourth quarter of 2016, the Company accrued a $0.3 million liability representing our estimate
of the amount due to the USG based on our pension curtailment adjustment calculation which was submitted to the USG for
review in December. There can be no assurance that the ultimate resolution of this matter will not have a material adverse effect
on our results of operations, financial position and cash flows.

A summary of our consolidated cash flows from continuing operations is as follows:

2016

2015

2014

16 vs. 15

15 vs.14

(in thousands)
Total cash provided by (used in):

Operating activities ................................................
Investing activities..................................................
Financing activities ................................................

Free Cash Flow(a) :

Net cash provided by (used in) operating
activities .................................................................
Expenditures for property, plant and equipment ....
Free cash flow...........................................................

107,707
(37,583)
(43,959)

109,584
(232,608)
127,588

109,089
(100,059)
(3,538)

(1,877) $

195,025
(171,547)

495
(132,549)
131,126

107,707
(29,777)
77,930

109,584
(29,932)
79,652

109,089
(28,283)
80,806

(1,877) $
155
(1,722) $

495
(1,649)
(1,154)

(a) Free Cash Flow, a non-GAAP financial measure, is defined as net cash provided by operating activities less expenditures for
property plant and equipment, both of which are presented in our Consolidated Statements of Cash Flows. See Management’s
Discussion and Analysis of Financial Condition and Results of Operations-Non-GAAP Financial Measures, in this Form 10-K.

2016 vs. 2015

Net cash provided by operating activities of continuing operations decreased $1.9 million in 2016 compared to 2015, due to
growth in inventory primarily attributable to the timing of deliveries on our JPF program and the build-up of inventory
associated with the production of the K-MAX®, partially offset by higher depreciation and amortization expense, which is an
adjustment to reconcile earnings from continuing operations to cash flows provided by operations. Depreciation and
amortization expense increased as compared to the prior year due to the intangible and fixed assets acquired in 2015.

Net cash used in investing activities of continuing operations decreased $195.0 million primarily due to a decrease in cash used
for acquisitions.

Net cash used in financing activities of continuing operations for 2016 was $44.0 million, compared to net cash provided by
financing activities of continuing operations for 2015 of $127.6 million. This change is due to a $179.4 million net decrease in
borrowings under our revolving credit facility and Term Loan facility. Borrowings under our revolving credit facility were
higher in 2015 due to the acquisitions completed during the year. These decreases were partially offset by the change in
repayments under the Term Loan facility. In 2016, we had repayments of $5.0 million, compared to $83.8 million of
repayments in the prior year. The higher repayments in 2015 were a result of the completion of the amended and restated Credit
Agreement in May 2015.

2015 vs. 2014

Net cash provided by operating activities of continuing operations increased $0.5 million in 2015 compared to 2014, primarily
due to higher accounts receivable collections, advances on contracts received for our Peru and K-MAX® programs and cash
generated as we near completion of our SH-2G(I) program. Offsetting these changes were a growth in inventory due to a delay
in sales associated with our legacy missile fuze and composite structure programs, and higher employee benefit related
payments.

Net cash used in investing activities of continuing operations increased $132.5 million primarily due to a $123.6 million
increase in cash used for acquisitions and the absence of $7.9 million of proceeds received in 2014 from the disposal of our
Distribution segment's Mexico business unit, Delamac.

Net cash provided by financing activities of continuing operations increased $131.1 million primarily due to a $227.2 million
increase in borrowings under our revolving credit facility and Term Loan facility. These increases were partially offset by
repayments under the revolving credit agreement in 2015 of $83.8 million, compared to $10.0 million of repayments in the
prior year, and $12.0 million of cash used to buy treasury stock under our share repurchase program.

Financing Arrangements

Credit Agreement

On May 6, 2015, the Company closed on an amended and restated $700.0 million Credit Agreement (the "Credit Agreement")
with JPMorgan Chase Bank N.A., as Administrative Agent, Bank of America, N.A. and Citizens Bank, N.A. as Co-Syndication
Agents and SunTrust Bank, KeyBank N.A., TD Bank, N.A., BB&T and Fifth Third Bank, as Co-Documentation Agents. The
Credit Agreement amends and restates the Company's previously existing credit facility in its entirety to, among other things:
(i) extend the maturity date to May 6, 2020; (ii) increase the aggregate amount of revolving commitments from $400.0 million
to $600.0 million; (iii) reinstate the aggregate amount of outstanding Term Loans to $100.0 million; (iv) modify the affirmative
and negative covenants set forth in the facility; and (v) effectuate a number of additional modifications to the terms and
provisions of the facility, including its pricing. Capitalized terms used but not defined within this discussion of the Credit
Agreement have the meanings ascribed thereto in the Credit Agreement.

The Term Loan commitment requires quarterly payments of principal (which commenced on June 30, 2015) at the rate of $1.25
million, increasing to $1.875 million on June 30, 2017, and then to $2.5 million on June 30, 2019, with $65.0 million payable
in the final quarter of the facility's term. The facility includes an accordion feature that allows the Company to increase the
aggregate amount available up to $900.0 million with additional commitments from the Lenders.

Interest rates on amounts outstanding under the Credit Agreement are variable. At December 31, 2016 and 2015, the interest
rates for the outstanding amounts on the Credit Agreement were 2.19% and 1.67%, respectively. In addition, we are required to
pay a quarterly commitment fee on the unused revolving loan commitment amount at a rate ranging from 0.175% to 0.300%
per annum, based on the Consolidated Senior Secured Leverage Ratio. Fees for outstanding letters of credit range from 1.25%
to 2.00%, based on the Consolidated Senior Secured Leverage Ratio.

The financial covenants associated with the Credit Agreement include a requirement that (i) the Consolidated Senior Secured
Leverage Ratio cannot be greater than 3.50 to 1.00, with an election to increase the maximum to 3.75 to 1.00 for four
consecutive quarters, in connection with a Permitted Acquisition with consideration in excess of $125.0 million; (ii) the
Consolidated Total Leverage Ratio cannot be greater than 4.00 to 1.00, with an election to increase the maximum to 4.25 to
1.00 for four consecutive quarters, in connection with a Permitted Acquisition with consideration in excess of $125.0 million;
(iii) the Consolidated Interest Coverage Ratio cannot be less than 4.00 to 1.00; and (iv) Liquidity: (a) as of the last day of the
fiscal quarter of the Company ending two full fiscal quarters prior to the stated maturity of the Specified Convertible Notes,
cannot be less than an amount equal to 50% of the outstanding principal amount of the Specified Convertible Notes, and (b) as
of the last day of each fiscal quarter of the Company ending thereafter, cannot be less than an amount equal to the outstanding
principal amount of the Specified Convertible Notes as of such day. The Company was in compliance with those financial
covenants as of and for the quarter ended December 31, 2016, and management does not anticipate noncompliance in the
foreseeable future.

Total average bank borrowings under our revolving credit facility and term loan facility during the year ended December 31,
2016, were $315.6 million compared to $192.5 million for the year ended December 31, 2015. As of December 31, 2016 and
2015, there was $209.5 million and $259.9 million available for borrowing, respectively, net of letters of credit. Letters of
credit are generally considered borrowings for purposes of calculating available borrowings. A total of $5.9 million in letters of
credit were outstanding as of December 31, 2016 and 2015.

Convertible Notes

In November 2010, we issued convertible unsecured notes due on November 15, 2017, in the aggregate principal amount of
$115.0 million in a private placement offering (the "Convertible Notes"). These notes bear 3.25% interest per annum on the
principal amount, payable semiannually in arrears on May 15 and November 15 of each year, beginning on May 15, 2011.
Proceeds from the offering were $111.0 million, net of fees and expenses which were capitalized. The proceeds were used to
repay $62.2 million of borrowings outstanding on the Company’s Revolving Credit Agreement, make a $25.0 million voluntary
contribution to the Qualified Pension Plan and pay $13.2 million for the purchase of call options related to the convertible note
offering. See below for further discussion of the call options.

The Convertible Notes will mature on November 15, 2017, unless earlier redeemed, repurchased by the Company or converted.
Upon conversion, the Convertible Notes require net share settlement, where the aggregate principal amount of the notes will be
paid in cash and remaining amounts due, if any, will be settled in cash, shares of the Company's common stock or a
combination of cash and shares of common stock, at the Company's election.

At December 31, 2016, the market value of the Company's Common Stock exceeded 130% of the conversion price for the
notes for 20 or more of the last 30 consecutive trading days preceding the quarter end. As a result, the Convertible Notes are
convertible at the option of the noteholders and will continue to be convertible through April 3, 2017. The carrying amount of
the Convertible Notes was reclassified to current liabilities and a portion of the equity component, representing the unamortized
debt discount, was reclassified to temporary equity on the Company's Consolidated Balance Sheet as of December 31, 2016.
Upon closure of the conversion period, the Notes will remain in current liabilities due to the scheduled maturity and the
temporary equity will be reclassified into permanent equity.

The following table illustrates the conversion rate at each date:

Convertible Notes
Conversion Rate per $1,000 principal amount (1)..........................................
Conversion Price (2) .......................................................................................
Contingent Conversion Price (3) ....................................................................
Aggregate shares to be issued upon conversion (4)........................................

December 31, 2016

December 31, 2015

29.9134

33.4298

43.46

29.8059

33.5504

43.62

3,440,045

3,427,679
(1) Represents the number of shares of Common Stock hypothetically issuable per $1,000 principal amount of Notes,
subject to adjustments per the Convertible Note Indenture dated November 19, 2010. At the date the Company issued
the Convertible Notes, the conversion rate initially equaled 29.4499 shares of common stock per $1,000 principal
amount of notes (which is equivalent to an initial conversion price of approximately $33.96 per share of common
stock). The conversion rate is subject to adjustment upon the occurrence of certain specified events, such as an
increase in the dividend paid to shareholders.
(2) Represents $1,000 divided by the conversion rate as of such date. The conversion price reflects the strike price of
the embedded option within the Convertible Note. Were the Company's share price to exceed the conversion price at
conversion the noteholders would be entitled to receive additional consideration either in cash, shares or a
combination thereof, the form of which is at the sole discretion of the Company.
(3) Prior to May 15, 2017, the notes are convertible only in the following circumstances: (1) during any fiscal quarter
commencing after April 1, 2011, and only during any such fiscal quarter, if the last reported sale price of our common
stock was greater than or equal to 130% of the applicable conversion price for at least 20 trading days (whether or not
consecutive) during the 30 consecutive trading days ending on the last trading day of the previous fiscal quarter, (2)
upon the occurrence of specified corporate transactions, or (3) during the five consecutive business-day period
following any five consecutive trading-day period in which, for each day of that period, the trading price for the notes
was less than 98% of the product of the last reported sale price of our common stock and the applicable conversion
rate on such trading day. On and after May 15, 2017, until the close of business on the second scheduled trading day
immediately preceding the maturity date, holders may convert their notes at any time, regardless of the foregoing
circumstances. Upon a change in control or termination of trading, holders of the notes may require us to repurchase
all or a portion of their notes for cash at a repurchase price equal to 100% of the principal amount, plus any accrued
and unpaid interest.
(4) Represents the number of shares hypothetically issuable upon conversion of the principal balance of the Convertible
Notes at each date; however, as the terms of the Convertible Notes require net share settlement, the aggregate principal
amount of the notes will be paid in cash. Amounts due in excess of the principal, if any, may be settled in cash, shares of
the Company's common stock or a combination of cash and shares of common stock, at the Company's election.

Because the embedded conversion option is indexed to the Company’s own stock and would be classified in shareholders’
equity, it does not meet the criterion under FASB Accounting Standards Codification Topic 815 - Derivatives and Hedging
("ASC 815") that would require separate accounting as a derivative instrument.

In connection with the offering, we entered into convertible note hedge transactions with affiliates of the initial purchasers.
These transactions are intended to reduce the potential dilution to our Company's shareholders upon any future conversion of
the notes. The call options, which cost an aggregate $13.2 million, were recorded as a reduction of additional paid-in capital.
The Company also entered into warrant transactions concurrently with the offering, pursuant to which we sold warrants to
acquire up to approximately 3.4 million shares of our common stock to the same counterparties that entered into the convertible
note hedge transactions. Proceeds received from the issuance of the warrants totaled approximately $1.9 million and were
recorded as additional paid-in capital. The convertible note hedge and warrant transactions effectively increased the conversion
price of the convertible notes.

The following table illustrates the warrant price at each date:

Warrants
Warrant Price..................................................................................................

43.72

43.87

December 31, 2016

December 31, 2015

The note payable principal balance at the date of issuance of $115.0 million was bifurcated into the debt component of
$101.7 million and the equity component of $13.3 million. The difference between the note payable principal balance and the
value of the debt component is being accreted to interest expense over a period of 7 years. The debt component was recognized
at the present value of associated cash flows discounted using a 5.25% discount rate, the borrowing rate at the date of issuance
for a similar debt instrument without a conversion feature. We recorded $0.5 million of debt issuance costs as an offset to
additional paid-in capital. The balance, $3.1 million, is being amortized over the term of the notes. Total amortization expense
for the years ended December 31, 2016, 2015, and 2014 was $0.6 million, $0.5 million and $0.5 million.

The following table illustrates the dilutive effect of securities issued under the convertible debt and warrants at various
theoretical average share prices for our stock as of December 31, 2016:

Theoretical Average Share Price of Kaman Stock

$33.43

$43.72

$46.50

$50.00

$55.00

Dilutive Shares associated with:

Convertible Debt.......................................................
Warrants....................................................................
Total dilutive shares.............................................

—

809,417

—

966,926

205,974

1,140,045

1,349,135

432,359

705,785

809,417

1,172,900

1,572,404

2,054,920

Debt Issuance Costs

Total expense associated with the amortization of debt issuance costs for the years ended December 31, 2016, 2015 and 2014,
was $1.0 million, $1.0 million and $1.1 million, respectively.

Interest Rate Swaps

During 2015, we entered into interest rate swap agreements for the purposes of hedging the eight quarterly variable-rate Term
Loan interest payments due in 2016 and 2017. Additionally, we have entered into interest rate swap agreements to effectively
convert $83.8 million of our variable rate revolving credit facility debt to a fixed interest rate. These interest rate swap
agreements were designated as cash flow hedges and intended to manage interest rate risk associated with our variable-rate
borrowings and minimize the impact on our earnings and cash flows of interest rate fluctuations attributable to changes in
LIBOR rates. Interest expense associated with these interest rate swap agreements for the year ended December 31, 2016, was
$0.9 million. There was no interest expense associated with these interest rate swaps in 2015.

During 2013, we entered into interest rate swap agreements for the purposes of hedging the eight quarterly variable-rate Term
Loan interest payments due in 2014 and 2015. These interest rate swap agreements were designated as cash flow hedges and
intended to manage interest rate risk associated with our variable-rate borrowings and minimize the impact on our earnings and
cash flows of interest rate fluctuations attributable to changes in LIBOR rates. Interest expense associated with the interest rate
swap agreements for the years ended December 31, 2015 and 2014, was $0.3 million and $0.4 million, respectively. As of
December 31, 2015, these interest rate swaps had matured.

Other Sources/Uses of Capital

Pension

We contributed $10.0 million to the qualified pension plan and paid $0.5 million in SERP benefits during both 2016 and 2015.
In 2017, we have contributed $10.0 million to the qualified pension plan (as of the date of this filing) and do not anticipate
making any further contributions this year. We expect to pay $3.1 million in SERP benefits in 2017.

Acquisitions

The following table illustrates the cash paid for acquisitions:

For the year ended December 31,

2016

2015

2014

In thousands
Cash paid for acquisitions completed during the year ...................... $
Cash paid for holdback payments during the year ............................
Earn-out and other payments during the year ...................................

Total cash paid for acquisitions ...................................................... $

— $

196,395

1,014

5,617

6,631

3,404

1,453

201,252

70,948

3,060

3,610

77,618

Total consideration for acquisitions completed in 2015 and 2014 was $197.1 million and $71.9 million, respectively. We anticipate
that we will continue to identify and evaluate potential acquisition candidates, the purchase of which may require the use of
additional capital.

Stock Repurchase Plans

On April 29, 2015, we announced that our Board of Directors approved a share repurchase program ("2015 Share Repurchase
Program") authorizing the repurchase of up to $100.0 million of the common stock, par value $1.00 per share, of the Company.
This new program replaces our 2000 Stock Repurchase Program. We currently intend to repurchase shares to offset the annual
issuance of shares under our employee stock plans, but the timing and actual number of shares repurchased will depend on a
variety of factors including stock price, market conditions, corporate and regulatory requirements, capital availability and other
factors, including acquisition opportunities. As of December 31, 2016, we had repurchased 600,000 shares under the 2015
Share Repurchase Program and approximately $74.9 million remained available for repurchases under this authorization.

NON-GAAP FINANCIAL MEASURES

Management believes that the non-GAAP measures used in this report on Form 10-K provide investors with important
perspectives into our ongoing business performance. We do 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

Organic Sales is defined as "Net Sales" less sales derived from acquisitions completed during the preceding twelve months. We
believe that this measure provides management and investors with a more complete understanding of underlying operating
results and trends of established, ongoing operations by excluding the effect of acquisitions, which can obscure underlying
trends. We also believe that presenting Organic Sales separately for our segments provides management and investors with
useful information about the trends impacting our segments and enables a more direct comparison to other businesses and
companies in similar industries. Management recognizes that the term "Organic Sales" may be interpreted differently by other
companies and under different circumstances.

Organic Sales (in thousands)

Distribution

2016

2015

2014

Net sales ...................................................................................................................
Less: Acquisition Sales ..........................................................................................
Organic Sales .........................................................................................................

$1,106,322

$1,177,539

$1,161,992

5,171

52,798

89,388

$1,101,151

$1,124,741

$1,072,604

Aerospace

$ 702,054

$ 597,586

$ 632,970

63,483

7,297

—

$ 638,571

$ 590,289

$ 632,970

Consolidated

$1,808,376

$1,775,125

$1,794,962

68,654

60,095

89,388

$1,739,722

$1,715,030

$1,705,574

Organic Sales per Sales Day

Organic sales per sales day is defined as GAAP “Net sales of the Distribution segment,” less sales derived from acquisitions
completed during the preceding twelve months, divided by the number of sales days in a given period. Sales days ("Sales
Days") are the days that the Distribution segment’s branch locations were open for business and exclude weekends and
holidays. Management believes Organic Sales per Sales Day provides an important perspective on how net sales may be
impacted by the number of days the segment is open for business and provides a basis for comparing periods in which the
number of sales days differs.

Free Cash Flow

Free cash flow is defined as GAAP “Net cash provided by (used in) operating activities” in a period less “Expenditures for
property, plant & equipment” in the same period. Management believes Free Cash Flow provides an important perspective on
our ability to generate cash from our business operations and, as such, that it is an important financial measure for use in
evaluating the Company's financial performance. Free Cash Flow should not be viewed as representing the residual cash flow
available for discretionary expenditures such as dividends to shareholders or acquisitions, as it may exclude certain mandatory
expenditures such as repayment of maturing debt and other contractual obligations. Management uses Free Cash Flow
internally to assess overall liquidity.

CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

Contractual Obligations

The following table summarizes certain of the Company’s contractual obligations as of December 31, 2016:

Contractual Obligations
Long-term debt ....................................................
Convertible notes.................................................
Interest payments on debt (a) ................................
Operating leases...................................................
Capital leases .......................................................
Purchase obligations (b)........................................
Other long-term obligations (c).............................
Planned funding of pension and SERP (d)............
Total.....................................................................

Payments due by period (in millions)

Total

Within 1 year

1-3 years

3-5 years

More than 5
years

303.9

6.9

16.9

280.1

115.0

66.9

87.8

3.0

141.2

49.7

19.1

115.0

14.3

25.3

0.5

119.5

14.3

13.1

—

27.3

34.2

1.4

17.5

15.2

1.0

—

25.3

15.6

0.9

4.2

3.9

2.6

786.6

308.9

113.5

332.6

—

12.7

0.2

—

16.3

2.4

31.6

Note: For more information refer to Note 11, Debt; Note 16, Commitments and Contingencies; Note 15, Other Long-Term
Liabilities; Note 14, Pension Plans, and Note 13, Income Taxes in the Notes to Consolidated Financial Statements included in
this Form 10-K.

(a) Interest payments on debt are calculated based on the applicable rate and payment dates for each instrument. For variable-

rate instruments, interest rates and payment dates are based on management’s estimate of the most likely scenarios for each
relevant debt instrument.

(b) This category includes purchase commitments to suppliers for materials and supplies as part of the ordinary course of

business, consulting arrangements and support services. Only obligations of at least $50,000 are included.

environmental liabilities, acquisition holdbacks and unrecognized tax benefits.

(d) This category includes planned funding of the Company’s SERP and qualified pension plan. Projected funding for the
qualified pension plan beyond one year has not been included as there are several significant factors, such as the future
market value of plan assets and projected investment return rates, which could cause actual funding requirements to differ
materially from projected funding.

Off-Balance Sheet Arrangements

The obligation to pay earn-out amounts depends upon the attainment of specific milestones by an aerospace operating unit
acquired in 2002. Through December 31, 2016, the Company has recorded additional goodwill of $25.0 million related to the
contingency payments to the former owners of the Aerospace Orlando operations. The final contingency payment of $1.4
million recorded in 2016 will occur in the second quarter of 2017.

As of December 31, 2016, we had $5.9 million of outstanding standby letters of credit, of which, $5.7 million were under the
revolving credit facility.

CRITICAL ACCOUNTING ESTIMATES

Our significant accounting policies are outlined in Note 1 to the Consolidated Financial Statements included in this Form 10-K.
The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues, and expenses and related disclosures based upon historical experience, current trends and other
factors that management believes to be relevant. We are also responsible for evaluating the propriety of our estimates,
judgments and accounting methods as new events occur. Actual results could differ from those estimates. Management
periodically reviews the Company’s critical accounting policies, estimates and judgments with the Audit Committee of our
Board of Directors. The most significant areas currently involving management judgments and estimates are described below.

Long-Term Contracts

Methodology

For long-term aerospace contracts, we generally recognize sales and income based on the percentage-of-completion method of
accounting, which allows for recognition of revenue as work on a contract progresses. We recognize sales and profit based
upon either (1) the cost-to-cost method, in which sales and profit are recorded based upon the ratio of costs incurred to
estimated total costs to complete the contract, or (2) the units-of-delivery method, in which sales are recognized as deliveries
are made and cost of sales is computed on the basis of the estimated ratio of total contract cost to total contract sales.

Management performs detailed quarterly reviews of all of our significant long-term contracts. Based upon these reviews, we
record the effects of adjustments in profit estimates each period. If at any time management determines that in the case of a
particular contract total costs will exceed total contract revenue, we record a provision for the entire anticipated contract loss at
that time.

Judgment and Uncertainties

The percentage-of-completion method requires that we estimate future revenues and costs over the life of a contract. Revenues
are estimated based upon the original contract price, with consideration being given to exercised contract options, change
orders and in some cases projected customer requirements. Contract costs may be incurred over a period of several years, and
the estimation of these costs requires significant judgment based upon the acquired knowledge and experience of program
managers, engineers and financial professionals. Estimated costs are based primarily on anticipated purchase contract terms,
historical performance trends, business base and other economic projections. The complexity of certain programs as well as
technical risks and uncertainty as to the future availability of materials and labor resources could affect the Company’s ability
to accurately estimate future contract costs.

The Company utilizes units-of-delivery to measure percentage of completion for fixed price programs involving the repetitive
production and delivery of parts, components, or shipsets over an extended period of time. For other programs, the Company
utilizes cost-to-cost when measuring percentage of completion. The following table illustrates the amount of revenue
recognized under the percentage-of-completion method.

2016

2015

2014

In thousands

Revenue recognized under percentage of completion method

Units-of-delivery ...............................................................................
Cost-to-cost........................................................................................
Total revenue recognized under percentage of completion method.......

307,294

47,085

354,379

270,525

52,734

323,259

282,975

67,936

350,911

% of consolidated net sales - Units-of-delivery .....................................
% of consolidated net sales - Cost-to-cost .............................................
% of consolidated net sales - Percentage-of-completion method ..........

17.0%

2.6%

19.6%

15.2%

3.0%

18.2%

15.8%

3.8%

19.6%

Effect if Actual Results Differ From Assumptions

While we do not believe there is a reasonable likelihood there will be a material change in estimates or assumptions used to
calculate our long-term revenues and costs, estimating the percentage of work complete on certain programs is a complex task.
As a result, changes to these estimates could have a significant impact on our results of operations. These programs include the
Sikorsky BLACK HAWK program, the JPF program, the K-MAX® program, the Boeing A-10 program, the AH-1Z program,
our other Bell Helicopter programs and several other programs. Estimating the ultimate total cost of these programs is
challenging due to the complexity of the programs, unanticipated increases in production requirements, the nature of the
materials needed to complete these programs, change orders related to the programs and the need to manage our customers’
expectations. These programs are an important element in our continuing strategy to increase operating efficiencies and
profitability as well as broaden our business base. Management continues to monitor and update program cost estimates
quarterly for these contracts. A significant change in an estimate on one or more of these programs could have a material effect
on our financial position and results of operations. The net decrease in our operating income from changes in contract estimates
totaled $0.8 million for the year ended December 31, 2016. The net increase in our operating income from changes in contract
estimates totaled $4.8 million, excluding the $4.0 million in expense associated with the resolution of the matters related to our
AH-1Z program, and $1.9 million for the years ended December 31, 2015 and 2014, respectively.

Allowance for Doubtful Accounts

Methodology

The allowance for doubtful accounts represents management’s best estimate of probable losses inherent in the receivable
balance. These estimates are based on known past due amounts and historical write-off experience, as well as trends and factors
impacting the credit risk associated with specific customers. In an effort to identify adverse trends for trade receivables, we
perform ongoing reviews of account balances and the aging of receivables. Amounts are considered past due when payment has
not been received within a pre-determined time frame based upon the credit terms extended. For our government and
commercial contracts, we evaluate, on an ongoing basis, the amount of recoverable costs. The recoverability of costs is
evaluated on a contract-by-contract basis based upon historical trends of payments, program viability and the customer’s credit-
worthiness.

Judgment and Uncertainties

Write-offs are charged against the allowance for doubtful accounts only after we have exhausted all collection efforts. Actual
write-offs and adjustments could differ from the allowance estimates due to unanticipated changes in the business environment
as well as factors and risks associated with specific customers.

Effect if Actual Results Differ From Assumptions

As of December 31, 2016 and 2015, our allowance for doubtful accounts was $4.1 million and $3.0 million, respectively.
Receivables written off, net of recoveries, in 2016 and 2015 were $2.1 million and $2.0 million, respectively.

Currently we do not believe that we have a significant amount of risk relative to the allowance for doubtful accounts. A 10%
change in the allowance would have a $0.4 million effect on pre-tax earnings.

Inventory Valuation

Methodology

We have five types of inventory (a) merchandise for resale, (b) raw materials, (c) contracts in process, (d) other work in
process, and (e) finished goods. Merchandise for resale and raw materials are stated at the lower of the cost of the inventory or
its fair market value. Contracts in process, other work in process and finished goods are valued at production cost comprised of
material, labor and overhead, including general and administrative expenses on certain government contracts. Contracts in
process, other work in process and finished goods are reported at the lower of cost or net realizable value. Raw material
includes certain general stock materials but primarily relates to purchases that were made in anticipation of specific programs
that have not been started as of the balance sheet date.

Judgment and Uncertainties

The process for evaluating inventory obsolescence or market value often requires the Company to make subjective judgments
and estimates concerning future sales levels, quantities and prices at which such inventory will be sold in the normal course of
business. We adjust our inventory by the difference between the estimated market value and the actual cost of our inventory to
arrive at net realizable value. Changes in estimates of future sales volume may necessitate future write-downs of inventory
value. The K-MAX® inventory balance, consisting of work in process and finished goods, was $15.9 million as of December
31, 2016. We believe it is stated at net realizable value, although lack of demand for spare parts in the future could result in
additional write-downs of the inventory value. Overall, management believes that our inventory is appropriately valued and not
subject to further obsolescence in the near term.

Management believes $3.8 million of the SH-2G(I) inventory will be sold after December 31, 2017. This balance represents
spares requirements and inventory to be used in SH-2G programs.

Effect if Actual Results Differ From Assumptions

Inventory valuation at our Distribution segment generally requires less subjective management judgment than the valuation of
certain inventory in the Aerospace segment. Management reviews the K-MAX® inventory balance on an annual basis to
determine whether any additional write-downs are necessary. We believe this inventory is stated at net realizable value,
although lack of demand for spare parts in the future could result in additional write-downs of the inventory value. Overall,
management believes that our inventory is appropriately valued and not subject to further obsolescence in the near term. If such

a write-down were to occur, this could have a significant impact on our operating results. A 10% write-down of the December
31, 2016, inventory balance would have affected pre-tax earnings by approximately $1.6 million in 2016.

The balance of SH-2G(I) inventory projected to be sold after December 31, 2017, represents spares requirements and inventory
to be used to support the SH-2G programs in future periods and as such is appropriately valued as of December 31, 2016.

Goodwill and Other Intangible Assets

Methodology

Goodwill and certain intangible assets that have indefinite lives are evaluated at least annually for impairment. The annual
evaluation is generally performed during the fourth quarter, using forecast information. All intangible assets are also reviewed
for possible impairment whenever changes in conditions indicate that their carrying value may not be recoverable. For
reporting units that qualify for a qualitative assessment, management will perform the two-step impairment test after a period of
three years has elapsed since the test was last performed.

In accordance with generally accepted accounting principles, we test goodwill for impairment at the reporting unit level. The
identification and measurement of goodwill impairment involves the estimation of fair value of the reporting unit as compared
to its carrying value. In the Distribution segment, this testing is conducted at the segment level as no components represent
reporting units. In the Aerospace segment, testing is conducted one level below the segment level, and components are not
aggregated for purposes of goodwill testing.

As previously disclosed in our 2015 Form 10-K, RWG, EXTEX and GRW were reorganized under the single management
team of Kaman Specialty Bearings and Engineered Products. This new reporting unit was the basis for our annual test for
goodwill impairment in 2016. We tested the new reporting unit for impairment immediately after its creation by comparing the
sum of the fair values of the entities moved into the new reporting unit to the carrying value of the new reporting unit, noting
the fair value exceeded the carrying value. Prior to the reorganization, these reporting units were standalone reporting units.
The fair value of RWG was assessed as part of our 2015 annual test for goodwill impairment during the fourth quarter of 2015.
EXTEX and GRW were acquired during the fourth quarter of 2015 and, as such, were not included in the 2015 annual test for
goodwill impairment. There were no significant changes to the conditions of the entities in the new reporting unit that would
have impacted the results of the analysis as of January 1, 2016. Since this is the first year the Company assessed goodwill at
this reporting unit level, the two-step impairment test was performed.

The carrying value of goodwill as of December 31, 2016, was $149.2 million and $188.7 million for the Distribution and
Aerospace segments, respectively. The specific Aerospace reporting units contributing to the total goodwill balance were as
follows: Precision Products Orlando facility ("KPP-Orlando"), $41.4 million; Specialty Bearings and Engineered Products,
$97.7 million; and Aerosystems, $49.6 million. During 2016, it was determined that the two-step impairment test would be
performed for the following reporting units: Distribution, Aerosystems and Specialty Bearings and Engineered Products. See
Note 9, Goodwill and Other Intangible Assets, Net, in the Notes to Consolidated Financial Statements for additional
information regarding these assets.

The carrying value of other intangible assets as of December 31, 2016, was $45.9 million and $80.5 million for the Distribution
and Aerospace segments, respectively.

Judgment and Uncertainties

In years that management performs a qualitative assessment we consider the following qualitative factors: general economic
conditions in the markets served by the reporting units carrying goodwill, relevant industry-specific performance statistics,
changes in the carrying value of the individual reporting units and assumptions used in the most recent fair value calculation,
including forecasted results of operations, the weighted average cost of capital and recent transaction multiples.

For Step 1 of the two-step impairment test, management estimated the fair value of the reporting units using an income
methodology based on management's estimates of forecasted cash flows, with those cash flows discounted to present value
using rates commensurate with the risks associated with those cash flows. In addition, management used a market-based
valuation method involving analysis of market multiples of revenues and earnings before interest, taxes, depreciation and
amortization (“EBITDA”) for (i) a group of comparable public companies and (ii) recent transactions, if any, involving
comparable companies. In estimating the fair value of the reporting units, a weighting of 80% to the income approach and 20%
to the market-based valuation method was selected, consistent with the prior year. A higher weighting was applied to the
estimate derived from the income approach as it is based on management's assumptions specific for the reporting units, which
are the outcome of an internal planning process. While the guideline companies in the market based valuation method have

comparability to the reporting units, they may not fully reflect the market share, product portfolio and operations of the
reporting units.

In performing our step one test for the reporting units, we used assumed terminal growth rates ranging from 2.5% - 3.0%. The
discount rate utilized to reflect the risk and uncertainty in the financial markets and specifically in our internally developed
earnings projections ranged from 10.0% - 11.0% for these reporting units. Changes in these estimates and assumptions could
materially affect the results of our tests for goodwill impairment.

Under Step 2, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the
implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting
unit in a manner similar to a purchase price allocation. The residual fair value after this allocation is the implied fair value of
the reporting unit goodwill. The results of the Step 1 tests indicated that the Company did not need to proceed to Step 2 for any
of the reporting units tested.

Effect if Actual Results Differ From Assumptions

For each reporting unit, we performed the Step 1 test and the percentage by which the fair value exceeded the carrying value
was in excess of 25% for the reporting units other than Aerosystems. Aerosystems' fair value exceeded the carrying value by
approximately 4.0%. A decrease of 1% in our terminal growth rate or an increase of 1% in our discount rate would not result in
a fair value calculation less than the carrying value for Distribution and Specialty Bearings and Engineered Products. An
increase of 1% in our discount rate would result in a fair value approximately 5% less than the carrying value for the
Aerosystems reporting unit. A decrease of 1% in our terminal growth rate would not result in a fair value less than the carrying
value for the Aerosystems reporting unit.

As with all assumptions, there is an inherent level of uncertainty and actual results, to the extent they differ from those
assumptions, could have a material impact on fair value. For example, multiples for similar type reporting units could
deteriorate due to changes in technology or a downturn in economic conditions. A reduction in customer demand would impact
our assumed growth rate resulting in a reduced fair value. Potential events or circumstances could have a negative effect on the
estimated fair value. The loss of a major customer or program could have a significant impact on the future cash flows of the
reporting unit(s). Advances in technology by our competitors could result in our products becoming obsolete.

We do not currently believe there to be a reasonable likelihood that actual results will vary materially from estimates and
assumptions used to test goodwill and other intangible assets for impairment losses. However, if actual results are not
consistent with our estimates or assumptions, we may be exposed to an impairment charge that could be material.

Long-Term Incentive Programs

Methodology

The Company maintains a Stock Incentive Plan, which provides for share-based payment awards, including non-statutory stock
options, restricted stock, stock appreciation rights and long-term incentive program ("LTIP") awards. We determine the fair
value of our non-qualified stock option awards at the date of grant using a Black-Scholes model. We determine the fair value of
our restricted share awards at the date of grant using an average of the high and low market price of our stock.

LTIP awards provide certain senior executives an opportunity to receive award payments, generally in cash. For each
performance cycle, the Company’s financial results are compared to the Russell 2000 indices for the same periods based upon
the following: (a) average return on total capital, (b) earnings per share growth and (c) total return to shareholders. No awards
will be payable if the Company’s performance is below the 25th percentile of the designated indices. The maximum award is
payable if performance reaches the 75th percentile of the designated indices. Awards will be paid out at 100% at the 50th
percentile. Awards for performance between the 25th and 75th percentiles are determined by straight-line interpolation between
0% and 200%.

In order to estimate the liability associated with LTIP awards, management must make assumptions as to how our current
performance compares to current Russell 2000 data based upon the Russell 2000’s historical results. This analysis is performed
on a quarterly basis. When sufficient Russell 2000 data for a year is available, which typically will not be until May or June of
the following year, management will adjust the liability to reflect its best estimate of the total award. Actual results could differ
significantly from management’s estimates. The total estimated liability as of December 31, 2016, was $16.3 million.

Judgment and Uncertainties

Option-pricing models and generally accepted valuation techniques require management to make assumptions and to apply
judgment to determine the fair value of our awards. These assumptions and judgments include estimating the future volatility of
our stock price, expected dividend yield, future employee turnover rates and future employee stock option exercise behaviors.
Changes in these assumptions can materially affect the fair value estimate.

Our LTIP requires management to make assumptions regarding the likelihood of achieving long-term Company goals as well as
estimate future Russell 2000 results.

Effect if Actual Results Differ From Assumptions

We do not currently believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions
we use to determine stock-based compensation expense. However, if actual results are not consistent with our estimates or
assumptions, we may be exposed to changes in share-based compensation expense that could be material.

If actual results are not consistent with the assumptions used, the share-based compensation expense reported in our financial
statements may not be representative of the actual economic cost of the share-based compensation. A 10% change in our share-
based compensation expense for the year ended December 31, 2016, would have affected pre-tax earnings by approximately
$0.6 million in 2016. Due to the timing of availability of the Russell 2000 data, there is a risk that the amount we have recorded
as LTIP expense could be different from the actual payout. A 10.0 percentage point increase in the total performance factor
earned for our LTIP would result in a reduction of 2016 pretax earnings of $1.6 million.

Pension Plans

Methodology

We maintain a qualified defined benefit pension, as well as a non-qualified Supplemental Employees Retirement Plan ("SERP")
for certain key executives. See Note 14, Pension Plans, in the Notes to Consolidated Financial Statements included in this
Form 10-K for further discussion of these plans.

Expenses and liabilities associated with each of these plans are determined based upon actuarial valuations. Integral to these
actuarial valuations are a variety of assumptions including expected return on plan assets and discount rates. We regularly
review these assumptions, which are updated at the measurement date, December 31st. In accordance with generally accepted
accounting principles, the impact of differences between actual results and the assumptions are accumulated and generally
amortized over future periods, which will affect expense recognized in future periods.

In previous years we utilized the weighted-average discount rate in the calculation of service and interest costs, both of which
are components of pension expense. For 2016 we utilized a "spot rate approach" in the calculation of pension interest and
service cost. The spot rate approach applies separate discount rates for each projected benefit payment in the calculation of
pension interest and service cost. This calculation change is considered a change in accounting estimate and was applied
prospectively in 2016. The use of the spot rate approach resulted in a favorable impact to pension expense of $4.7 million in
2016 relative to what pension expense would have been had we not changed our approach.

Judgment and Uncertainties

The discount rate represents the interest rate used to determine the present value of future cash flows currently expected to be
required to settle the pension obligation. Management uses the Citigroup Above Median Double-A Curve for discount rate
assumptions. This index was designed to provide a market average discount rate to assist plan sponsors in valuing the liabilities
associated with postretirement obligations. Additionally, we reviewed the changes in the general level of interest rates since the
last measurement date noting that overall rates had decreased when compared to 2015.

Based upon this information, we used a 3.98% discount rate as of December 31, 2016, for the qualified defined benefit pension
plan. This rate takes into consideration the participants in our pension plan and the anticipated payment stream as compared to
the Citigroup Above Median Double-A Curve. For the SERP, we used the same methodology as the pension plan and derived a
discount rate of 3.43% in 2016 for the benefit obligation. The difference in the discount rates is primarily due to the expected
duration of SERP payments, which is shorter than the anticipated duration of benefit payments to be made to the average
participant in the pension plan. The qualified defined benefit pension plan and SERP used discount rates of 4.17% and 3.47% at
December 31, 2015, respectively, for purposes of calculating the benefit obligation.

The expected long-term rate of return on plan assets of 7.5% represents the average rate of earnings expected on the funds
invested to provide for anticipated benefit payments. The expected return on assets assumption is developed based upon several
factors. Such factors include current and expected target asset allocation, our historical experience of returns by asset class
type, a risk premium and an inflation estimate.

Effect if Actual Results Differ From Assumptions

A lower discount rate increases the present value of benefit obligations and increases pension expense. A one percentage point
decrease in the assumed discount rate would have increased pension expense in 2016 by $5.2 million. A one percentage point
increase in the assumed discount rate would have decreased pension expense in 2016 by $4.6 million.

A lower expected rate of return on pension plan assets would increase pension expense. For 2016 and 2015, the expected rate
of return on plan assets was 7.5%. A one-percentage point increase/decrease in the assumed return on pension plan assets would
have changed pension expense in 2016 by approximately $5.4 million. During 2016, the actual return on pension plan assets of
7.5% was consistent with our expected long-term rate of return on pension plan assets of 7.5%.

Income Taxes

Methodology

Deferred tax assets and liabilities generally represent temporary differences between the recognition of tax benefits/expenses in
our financial statements and the recognition of these tax benefits/expenses for tax purposes.

We establish reserves for deferred taxes when, despite our belief that our tax return positions are valid and defensible, we
believe that certain positions may not prevail if challenged. We adjust these reserves in light of changing facts and
circumstances, such as the progress of a tax audit or changes in tax legislation. Our effective tax rate includes the impact of
reserve provisions and changes to reserves that we consider appropriate. This rate is then applied to our quarterly operating
results. In the event that there is a significant unusual or one-time item recognized in our operating results, the tax attributable
to that item would be separately calculated and recorded at the same time as the unusual or one-time item.

As of December 31, 2016, we had recognized $52.5 million of deferred tax assets, net of valuation allowances. A portion of this
amount, $2.7 million, is related to a capital loss recorded on the disposition of our Distribution segment’s Mexico operations.
The realization of these benefits is dependent in part on future taxable capital gains and tax planning strategies designed to
realize the benefit associated with the capital loss. For those jurisdictions where the expiration of tax loss or credit
carryforwards or the projection of operating results indicates that realization is not likely, a valuation allowance is provided.

Judgment and Uncertainties

Management believes that sufficient income will be earned in the future to realize deferred income tax assets, net of valuation
allowances recorded. The realization of these deferred tax assets can be impacted by changes to tax laws or statutory tax rates
and future taxable income levels.

Our effective tax rate on earnings from continuing operations was 34.4% for 2016. Our effective tax rate is based on expected
or reported income or loss, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which
we operate. Significant judgment is required in determining our effective tax rate and in evaluating our tax positions.

Effect if Actual Results Differ From Assumptions

We do not anticipate a significant change in our unrecognized tax benefits within the next twelve months. We file tax returns in
numerous U.S. and foreign jurisdictions, with returns subject to examination for varying periods, but generally back to and
including 2012. It is our policy to record interest and penalties on unrecognized tax benefits as income taxes. A one percent
increase/decrease in our tax rate would have affected our 2016 earnings by $0.9 million.

Environmental Costs

Methodology

Our operations are subject to environmental regulation by federal, state and local authorities in the United States and regulatory
authorities with jurisdiction over our foreign operations. As a result, we have established and update, as necessary, policies
relating to environmental standards of performance for our operations worldwide.

When we become aware of an environmental risk, we perform a site study to ascertain the potential magnitude of
contamination and the estimated cost of remediation.

We continually evaluate the identified environmental issues to ensure the time to complete the remediation and the total cost of
remediation are consistent with our initial estimate. If there is any change in the cost and/or timing of remediation, the accrual
is adjusted accordingly.

Judgment and Uncertainties

Environmental costs are accrued when it is probable that a liability has been incurred and the amount can be reasonably
estimated. The most likely cost to be incurred is accrued based on an evaluation of currently available facts with respect to each
individual site, including existing technology, current laws and regulations and prior remediation experience. Conditions of the
site must be monitored throughout the remediation process as numerous factors could affect the estimated liability, including,
but not limited to, the discovery of geological formations affecting the behavior or movement of contaminants; soil conditions
and soil chemistry affecting the degradation of contaminants; or the discovery of further sources or types of contaminants.
Liabilities with fixed or readily determinable payment dates are discounted.

We believe that expenditures necessary to comply with the present regulations governing environmental protection will not
have a material effect upon our competitive position, consolidated financial position, results of operations or cash flows.

Effect if Actual Results Differ From Assumptions

At December 31, 2016, amounts accrued for known environmental remediation costs were $6.6 million. A 10% change in this
accrual would have impacted pre-tax earnings by $0.7 million. Further information about our environmental costs is provided
in Note 10, Environmental Costs, in the Notes to Consolidated Financial Statements.

RECENT ACCOUNTING STANDARDS

A summary of recent accounting standards is included in Note 1, Summary of Significant Accounting Policies, in the Notes to
Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K.

SELECTED QUARTERLY FINANCIAL DATA

2016

Net sales ...................................................................
Gross profit...............................................................
Net earnings..............................................................
Basic earnings per share ...........................................
Diluted earnings per share........................................

2015

First
Quarter

451,198

134,430

9,777

0.36

0.35

First
Quarter

442,782

127,911

12,749

0.47

0.46

Fourth
Third
Second
Quarter
Quarter
Quarter
(in thousands, except per share amounts)
433,062
$

470,642

453,474

143,766

16,495

0.61

0.59

135,490

17,455

0.64

0.62

135,406

15,127

0.56

0.53

Fourth
Third
Second
Quarter
Quarter
Quarter
(in thousands, except per share amounts)
452,277
$

433,742

446,324

131,952

21,691

0.80

0.77

129,926

17,224

0.63

0.62

127,445

8,774

0.32

Total
Year

$ 1,808,376

549,092

58,854

2.17

2.10

Total
Year

$ 1,775,125

517,234

60,438

2.22

2.17

Included within certain quarterly results are a variety of unusual or significant adjustments that may affect comparability. The
most significant of such adjustments are described below as well as within Management’s Discussion and Analysis of Financial
Condition and Results of Operations and the Notes to Consolidated Financial Statements. Additionally, due to the nature of the
earnings per share calculation, the sum of quarterly earnings per share data may not equal the cumulative earnings per share
data for the year.

Items within the 2016 quarterly results that may affect comparability are as follows:

2016

First
Quarter

Second
Quarter

Third
Quarter
(in thousands)

Fourth
Quarter

Total
Year

Costs associated with Distribution productivity
initiatives ..................................................................
Restructuring and severance costs............................
Acquisition and integration costs .............................

3,125

460

2,002

2,083

312

2,302

2,787

780

546

4,582

869

295

Items within the 2015 quarterly results that may affect comparability are as follows:

2015

First
Quarter

Second
Quarter

Restructuring and severance costs............................
Resolution of AH-1Z contract claims.......................

Foreign currency transactions associated with
purchase of GRW .....................................................
Recognition of tax (benefit) expense from tax law
changes .....................................................................

12,577

2,421

5,145

Total
Year

2,344

4,000

3,002

(2,289)

Third
Quarter
(in thousands)
$

— $

589

— $

Fourth
Quarter

1,496

4,000

259

— $

3,002

— $

(4,402) $

— $

2,113

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have various market risk exposures that arise from our ongoing business operations. Market risk is the potential economic
loss that may result from adverse changes in the fair value of financial instruments. Our financial results are impacted by
changes in interest rates, certain foreign currency exchange rates and commodity prices.

Foreign Currencies

We have manufacturing, sales, and distribution facilities in various locations throughout the world. As a result, we make
investments and conduct business transactions denominated in various currencies, including the U.S. dollar, the British pound,
the European euro, the Czech koruna, the Japanese yen and the Indian rupee. Total annual foreign sales from continuing
operations, including foreign export sales, averaged approximately $282.8 million over the last three years. Foreign sales from
continuing operations represented 18.1% of consolidated net sales from continuing operations in 2016. We estimate a
hypothetical 10% adverse change in foreign currency exchange rates relative to the U.S dollar for 2016 would have had an
unfavorable impact of $7.7 million on sales and a $0.4 million favorable impact on operating income. We manage foreign
currency exposures that are associated with committed foreign currency purchases and sales and other assets and liabilities
created in the normal course of business at the subsidiary operations level. Sometimes we may, through the use of forward
contracts, hedge the price risk associated with committed and forecasted foreign denominated payments and rates. Historically
the use of these forward contracts has been minimal. We do not use derivatives for speculative or trading purposes.

Interest Rates

Our primary exposure to interest rate risk results from our outstanding debt obligations. The level of fees and interest charged
on revolving credit commitments and borrowings are based upon leverage levels and market interest rates.

Our principal debt facilities are contained within a variable rate credit agreement that provides a $600.0 million revolving credit
facility and a $100.0 million term loan commitment. Both these agreements were amended and restated on May 6, 2015, and
expire on May 6, 2020. Total average bank borrowings for 2016 were $315.6 million. The impact of a hypothetical 100 basis
point increase in the interest rates on our average bank borrowings would have resulted in a $0.8 million increase in interest
expense.

In November 2010, we issued $115.0 million convertible unsecured senior notes, due on November 15, 2017, in a private
placement offering. These notes bear 3.25% interest per annum on the principal amount, payable semiannually in arrears on
November 15 and May 15 of each year, beginning on May 15, 2011, and have an effective interest rate of 5.25%.

From time to time we will enter into interest rate swap contracts for the purpose of securing a fixed interest rate on our variable
interest rate borrowings. These contracts allow us to create certainty with respect to future cash flows associated with our
variable rate debt that would otherwise be impacted by fluctuations in LIBOR rates.

Commodity Prices

We are exposed to volatility in the price of raw materials used in certain manufacturing operations as well as a variety of items
procured by our distribution business. These raw materials include, but are not limited to, aluminum, titanium, nickel, copper
and other specialty metals. We manage our exposure related to these price changes through strategic procurement practices.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Kaman Corporation:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of
comprehensive income, of shareholders’ equity, and of cash flows present fairly, in all material respects, the financial position
of Kaman Corporation and its subsidiaries at December 31, 2016 and December 31, 2015, and the results of their operations
and their cash flows for each of the three years in the period ended December 31, 2016 in conformity with accounting
principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Company's management is responsible for these financial statements, for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in
Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express
opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated
audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement and whether effective internal control over financial reporting was maintained in
all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our
audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Hartford, Connecticut
February 28, 2017

CONSOLIDATED BALANCE SHEETS
KAMAN CORPORATION AND SUBSIDIARIES
(In thousands, except share and per share amounts)

Current assets:

Assets

Cash and cash equivalents ......................................................................................................
Accounts receivable, net.........................................................................................................
Inventories ..............................................................................................................................
Income tax refunds receivable ................................................................................................
Other current assets.................................................................................................................
Total current assets ..........................................................................................................
Property, plant and equipment, net of accumulated depreciation of $226,366 and $202,648,
respectively ...............................................................................................................................
Goodwill....................................................................................................................................
Other intangible assets, net .......................................................................................................
Deferred income taxes ..............................................................................................................
Other assets ...............................................................................................................................
Total assets ................................................................................................................................
Liabilities and Shareholders’ Equity

Current liabilities:

Current portion of long-term debt...........................................................................................
Accounts payable – trade........................................................................................................
Accrued salaries and wages ....................................................................................................
Advances on contracts ............................................................................................................
Income taxes payable..............................................................................................................
Other current liabilities ...........................................................................................................
Total current liabilities.......................................................................................................
Long-term debt, excluding current portion ...............................................................................
Deferred income taxes ..............................................................................................................
Underfunded pension ................................................................................................................
Other long-term liabilities .........................................................................................................
Commitments and contingencies (Note 16)..............................................................................
Temporary equity, convertible notes.........................................................................................
Shareholders' equity:

Preferred stock, $1 par value, 200,000 shares authorized; none outstanding........................
Common stock, $1 par value, 50,000,000 shares authorized; voting; 28,162,497 and
27,735,757 shares issued, respectively ..............................................................................
Additional paid-in capital ......................................................................................................
Retained earnings ..................................................................................................................
Accumulated other comprehensive income (loss).................................................................
Less 1,054,364 and 698,183 shares of common stock, respectively, held in treasury, at
cost .....................................................................................................................................
Total shareholders’ equity................................................................................................
Total liabilities and shareholders’ equity...................................................................................

December 31,
2016

December 31,
2015

41,205
230,864
393,814
6,065
26,605
698,553

176,521
337,894
126,444
59,373
27,501
1,426,286

119,548
116,663
43,165
13,356
1,165
59,989
353,886
296,598
6,875
156,427
44,916

1,797

—

16,462
238,102
385,747
3,591
32,133
676,035

175,586
352,710
144,763
66,815
23,702
1,439,611

5,000
117,014
40,284
11,274
326
62,791
236,689
434,227
15,207
158,984
51,427

—

28,162
171,162
560,200
(156,393)

27,736
156,803
520,865
(140,138)

(37,344)
565,787
1,426,286

(22,189)
543,077
1,439,611

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF OPERATIONS
KAMAN CORPORATION AND SUBSIDIARIES
(In thousands, except per share amounts)

Net sales ...................................................................................................................
Cost of sales .............................................................................................................
Gross profit...............................................................................................................
Selling, general and administrative expenses...........................................................
Net loss (gain) on sale of assets ...............................................................................
Operating income from continuing operations.........................................................
Interest expense, net .................................................................................................
Other expense, net ....................................................................................................
Earnings from continuing operations before income taxes ......................................
Income tax expense ..................................................................................................
Earnings from continuing operations .......................................................................
Loss from discontinued operations, net of taxes ......................................................
Loss on disposal of discontinued operations, net of taxes .......................................
Total loss from discontinued operations...................................................................
Net earnings..............................................................................................................
Earnings per share:

Basic earnings per share from continuing operations ............................................
Basic loss per share from discontinued operations ................................................
Basic loss per share from disposal of discontinued operations..............................
Basic earnings per share ...........................................................................................
Diluted earnings per share from continuing operations.........................................
Diluted loss per share from discontinued operations.............................................
Diluted loss per share from disposal of discontinued operations ..........................
Diluted earnings per share........................................................................................
Weighted average shares outstanding:

Basic.......................................................................................................................
Diluted....................................................................................................................
Dividends declared per share ...................................................................................

For the Year Ended December 31,

2016

2015

2014

$ 1,808,376

$ 1,775,125

$ 1,794,962

1,259,284

1,257,891

1,287,023

549,092

443,158

105,923

15,747

472

89,704

30,850

58,854

—

58,854

2.17

—

2.17

2.10

—

517,234

413,043
(328)
104,519

13,144

3,386

87,989

27,551

60,438

—

60,438

2.22

—

2.22

2.17

—

2.10

2.17

507,939

397,199

233

110,507

13,382

623

96,502

30,722

65,780
(2,924)
(4,984)
(7,908)
57,872

2.43
(0.11)
(0.18)
2.14

2.37
(0.11)
(0.18)
2.08

27,107

28,072

27,177

27,868

0.72

27,053

27,777

0.64

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
KAMAN CORPORATION AND SUBSIDIARIES
(In thousands)

Net earnings..............................................................................................................
Other comprehensive income, net of tax:

Foreign currency translation adjustments ..............................................................
Change in unrealized loss on derivative instruments, net of tax expense of $6,
$158, and $161, respectively .................................................................................
Pension plan adjustments, net of tax benefit of $2,412, $7,382, and $23,583,
respectively ............................................................................................................
Other comprehensive income (loss)....................................................................
Total comprehensive income....................................................................................

For the Year Ended December 31,

2016

2015

2014

58,854

60,438

57,872

(12,271)

(1,949)

(6,457)

263

264

(3,993)
(16,255) $
$
42,599

(12,191)
(13,877) $
$
46,561

(38,947)
(45,140)
12,732

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
KAMAN CORPORATION AND SUBSIDIARIES
(In thousands, except share amounts)

Common Stock

Additional
Paid-In

Retained

Accumulated
Other
Comprehensive

Treasury Stock

Total
Shareholders'

Capital

Earnings

Income (Loss)

Equity

Balance at December 31, 2013
Net earnings ..............................................
Other comprehensive income ...................
Dividends ..................................................
Purchase of treasury shares.......................
Employee stock plans,

net of tax expense of $834 .....................
Share-based compensation expense..........
Balance at December 31, 2014
Net earnings ..............................................
Other comprehensive income ...................
Dividends ..................................................
Purchase of treasury shares.......................
Employee stock plans,

27,189,922
—
—

$ 27,190
—
—

$ 133,517
—
—

$ 439,441
57,872
—

—
—

(17,329)
—

235,233
93,071
27,518,226
—
—
—
—

235
93
$ 27,518
—
—
—
—

6,992
5,336
$ 145,845
—
—
—
—

—
—
$ 479,984
60,438
—
(19,557)
—

(81,121)
—
(45,140)

—
—

—
—
(126,261)
—
(13,877)
—
—

net of tax expense of $327 .....................
Share-based compensation expense..........
Balance at December 31, 2015
Net earnings ..............................................
Other comprehensive income ...................
Dividends ..................................................
Amounts reclassified to temporary equity
Purchase of treasury shares.......................
Employee stock plans ...............................
Share-based compensation expense..........
Balance at December 31, 2016

137,037
80,494
27,735,757
—
—
—
—
—
344,221
82,519
28,162,497

4,649
—
6,309
—
$ 156,803
(140,138)
—
—
—
(16,255)
—
—
(1,797)
—
—
—
10,541
—
5,615
—
$ 171,162
(156,393)
See accompanying notes to consolidated financial statements.

—
—
$ 520,865
58,854
—
(19,519)
—
—
—
—
$ 560,200

137
81
$ 27,736
—
—
—
—
—
344
82
$ 28,162

330,487
—
—

—
21,312

16,352
17,791
385,942
—
—
—
319,234

(8,857)
1,864
698,183
—
—
—
—
316,545
28,672
10,964
1,054,364

$ (7,735) $
—
—

—
(853)

(815)
(18)
$ (9,421) $
—
—
—
(12,836)

70
(2)

$(22,189) $
—
—
—
—
(13,792)
(1,352)
(11)
$(37,344) $

511,292
57,872
(45,140)

(17,329)
(853)

6,412
5,411
517,665
60,438
(13,877)
(19,557)
(12,836)

4,856
6,388
543,077
58,854
(16,255)
(19,519)
(1,797)
(13,792)
9,533
5,686
565,787

CONSOLIDATED STATEMENTS OF CASH FLOWS
KAMAN CORPORATION AND SUBSIDIARIES
(In thousands)

Cash flows from operating activities:
Earnings from continuing operations .............................................................................
Adjustments to reconcile earnings from continuing operations to net cash provided
by (used in) operating activities of continuing operations:

Depreciation and amortization ................................................................................
Accretion of convertible notes discount..................................................................
Provision for doubtful accounts ..............................................................................
Net (gain) loss on sale of assets ..............................................................................
Net loss on derivative instruments ..........................................................................
Stock compensation expense ..................................................................................
Excess tax benefit from share-based compensation arrangements .........................
Deferred income taxes ............................................................................................
Changes in assets and liabilities, excluding effects of acquisitions/divestitures:

Accounts receivable..............................................................................................
Inventories ............................................................................................................
Income tax refunds receivable ..............................................................................
Other current assets...............................................................................................
Accounts payable - trade ......................................................................................
Accrued contract losses ........................................................................................
Advances on contracts ..........................................................................................
Other current liabilities .........................................................................................
Income taxes payable............................................................................................
Pension liabilities..................................................................................................
Other long-term liabilities.....................................................................................
Net cash provided by operating activities of continuing operations ..................
Net cash used in operating activities of discontinued operations.......................
Net cash provided by operating activities ..........................................................

Cash flows from investing activities:

Proceeds from sale of assets....................................................................................
Proceeds from sale of discontinued operations.......................................................
Expenditures for property, plant & equipment........................................................
Acquisition of businesses including earn out adjustments, net of cash acquired....
Other, net.................................................................................................................
Cash used in investing activities of continuing operations...................................
Cash provided by investing activities of discontinued operations........................
Cash used in investing activities...........................................................................

Cash flows from financing activities:

Net borrowings (repayments) under revolving credit agreements..........................
Borrowings under Term Loan Facility....................................................................
Debt repayment .......................................................................................................
Bank overdraft.........................................................................................................
Proceeds from exercise of employee stock awards.................................................
Purchase of treasury shares .....................................................................................
Dividends paid ........................................................................................................
Debt issuance costs .................................................................................................
Windfall tax benefit.................................................................................................
Other........................................................................................................................
Cash provided by (used in) financing activities of continuing operations ...........
Cash provided by (used in) financing activities of discontinued operations ........
Cash provided by (used in) financing activities ...................................................
Net increase in cash and cash equivalents......................................................................
Effect of exchange rate changes on cash and cash equivalents......................................
Cash and cash equivalents at beginning of period .........................................................
Cash and cash equivalents at end of period....................................................................

For the Year Ended December 31,
2015

2016

2014

58,854

60,438

65,780

44,929
2,144
2,635
11
1,007
5,686
—
7,928

(778)
(11,891)
(2,474)
4,859
693
745
2,082
1,049
351
(9,087)
(1,036)
107,707
—
107,707

201
—
(29,777)
(6,631)
(1,376)
(37,583)
—
(37,583)

(15,147)
—
(5,000)
275
9,533
(13,792)
(19,510)
—
—
(318)
(43,959)
—
(43,959)
26,165
(1,422)
16,462
41,205

37,729
2,035
1,694
(328)
579
6,388
(327)
(1,281)

4,556
(2,928)
(3,463)
(2,823)
4,697
2
8,868
(1,144)
(2,403)
(2,300)
(405)
109,584
—
109,584

719
—
(29,932)
(201,252)
(2,143)
(232,608)
—
(232,608)

143,025
100,000
(83,750)
(3,462)
4,856
(12,836)
(19,026)
(1,348)
327
(198)
127,588
—
127,588
4,564
(513)
12,411
16,462

36,209
1,931
853
233
1,071
5,411
(834)
1,434

(23,876)
30,181
2,292
(2,560)
(3,858)
(1,899)
(7,065)
6,746
4,455
(6,380)
(1,035)
109,089
(2,902)
106,187

39
7,863
(28,283)
(77,618)
(2,060)
(100,059)
3
(100,056)

15,788
—
(10,000)
1,568
6,411
(853)
(17,286)
—
834
—
(3,538)
—
(3,538)
2,593
(566)
10,384
12,411

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2016, 2015 and 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Kaman Corporation, headquartered in Bloomfield, Connecticut, was incorporated in 1945 and is a diversified company that
conducts business in the aerospace and distribution markets. Kaman Corporation reports information for itself and its
subsidiaries (collectively, the "Company") in two business segments, Distribution and Aerospace.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All
intercompany balances and transactions have been eliminated in consolidation. Certain amounts in prior year financial
statements and notes thereto have been reclassified to conform to current year presentation.

Use of Estimates

The preparation of the consolidated financial statements in accordance with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Significant items subject to such estimates and assumptions include
the carrying amount of property, plant and equipment, goodwill and other intangible assets; valuation allowances for
receivables, inventories and income taxes; valuation of share-based compensation; vendor incentives; assets and obligations
related to employee benefits; estimates of environmental remediation costs; and accounting for long-term contracts including
claims. Actual results could differ from those estimates.

Foreign Currency Translation

The Company has certain operations outside the United States that prepare financial statements in currencies other than the U.S.
dollar. For these operations, results of operations and cash flows are translated using the average exchange rate throughout the
period. Assets and liabilities are generally translated at end of period rates. The gains and losses associated with these
translation adjustments are included as a component of accumulated other comprehensive income (loss) in shareholders’ equity.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of trade accounts
receivable. The carrying amounts of these items, as well as trade accounts payable and notes payable, approximate fair value
due to the short-term maturity of these instruments. At December 31, 2016 and 2015, no individual customer accounted for
more than 10% of consolidated accounts receivable or consolidated net sales. Foreign sales associated with continuing
operations were approximately 18.1%, 15.6% and 13.6% of the Company’s net sales in 2016, 2015 and 2014, respectively, and
are concentrated in the United Kingdom, Germany, France, New Zealand and Asia.

Additional Cash Flow Information

Non-cash investing activities in 2016 include an accrual of $2.3 million for purchases of property and equipment (including
capital lease obligations), $1.4 million in earn-out payments to the former owners of an aerospace acquisition and an adjustment
of $0.2 million for a certain tax matter. Non-cash financing activities in 2016 include an adjustment to other comprehensive
income related to the underfunding of the pension and SERP plans and changes in the fair value of derivative financial
instruments that qualified for hedge accounting. The total net adjustment was $4.0 million, net of tax of $2.5 million.
Additionally, non-cash financing activities in 2016 include $4.9 million of dividends declared but not yet paid. Non-cash
investing activities in 2015 include $5.4 million in earn-out payments to the former owners of an aerospace acquisition. Non-
cash financing activities in 2015 include an adjustment to other comprehensive income related to the underfunding of the
pension and SERP plans and changes in the fair value of derivative financial instruments that qualified for hedge accounting.
The total net adjustment was $11.9 million, net of tax of $7.2 million. Additionally, non-cash financing activities in 2015
include $4.9 million of dividends declared but not yet paid. Non-cash investing activities in 2014 include an accrual of $1.5
million for purchases of property and equipment and $1.5 million in earn-out payments to the former owners of an aerospace
acquisition. Non-cash financing activities in 2014 include an adjustment to other comprehensive income related to the
underfunding of the pension and SERP plans and changes in the fair value of derivative financial instruments that qualified for
hedge accounting. The total adjustment was $38.7 million, net of tax of $23.4 million. Additionally, non-cash financing
activities in 2014 include $4.3 million of dividends declared but not yet paid.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Additional Cash Flow Information - continued

The Company describes its pension obligations in more detail in Note 14, Pension Plans. The Company describes the earn-out
payments to the former owners of the aerospace acquisition in more detail in Note 3, Acquisitions.

Revenue Recognition

Sales and estimated profits under long-term contracts are generally recognized using the percentage-of-completion method of
accounting, using as a measurement basis either the ratio that costs incurred bear to estimated total costs (after giving effect to
estimates of costs to complete based upon most recent information for each contract) or units-of-delivery. Reviews of contracts
are made routinely throughout their lives and the impact of revisions in profit estimates are recorded in the accounting period in
which the revisions are made. Anticipated contract losses are charged to operations when they are probable. In cases where we
have multiple contracts with a single customer, each contract is generally treated as a separate profit center and accounted for as
such. Except in the case of contracts accounted for using the cost-to-cost method of percentage-of-completion accounting,
revenues are recognized when the product has been shipped or delivered, depending upon when title and risk of loss have
passed. For certain U.S. Government ("USG") contracts delivery is deemed to have occurred when work is substantially
complete and acceptance by the customer has occurred by execution of a Material Inspection and Receiving Report, DD Form
250 or Memorandum of Shipment.

Sales contracts are initially reviewed to ascertain if they involve multiple element arrangements. If such an arrangement exists
and there is no evidence of stand-alone value for each element of the undelivered items, recognition of sales for the
arrangement is deferred until all elements of the arrangement are delivered and risk of loss and title have passed (except in the
case of contracts accounted for using the percentage-of-completion method of accounting). For elements that do have stand-
alone value or contracts that are not considered multiple element arrangements, sales and related costs of sales are recognized
as services are performed or when the product has been shipped or delivered depending upon when title and risk of loss have
passed.

Pre-contract costs incurred for items such as materials or tooling for anticipated contracts are included in inventory if recovery
of such costs is considered probable. Thereafter, if the Company determines it will not be awarded an anticipated contract and
the associated pre-contract costs cannot be applied to another program the costs are expensed immediately. As of December 31,
2016 and 2015, approximately $2.0 million and $2.4 million, respectively, of pre-contract costs were included in inventory,
which, in both cases, represented less than 1% of total inventory. Learning or start-up costs incurred in connection with
existing or anticipated follow-on contracts are charged to the existing contract unless the terms of the contract permit recovery
of these costs over a specific contractual term and provide for reimbursement if the contract is canceled.

If it is probable that a claim with respect to change orders will result in additional contract revenue and the amount of such
additional revenue can be reliably estimated, then the additional contract revenue is considered in our accounting for the
program, but only if the contract provides a legal basis for the claim, the additional costs were unforeseen and not caused by
deficiencies in our performance, the costs are identifiable and reasonable in view of the work performed and the evidence
supporting the claim is objective and verifiable. If these requirements are met, the claim portion of the program is accounted for
separately to ensure revenue from the claim is recorded only to the extent claim related costs have been incurred; accordingly,
no profit with respect to such costs is recorded until the change order is formally approved. If these requirements are not met,
the forecast of total contract cost at completion (which is used to calculate the gross margin rate) for the basic contract is
generally increased to include all incurred and anticipated claim related costs.

Recognition of sales not accounted for under the cost-to-cost method of percentage-of-completion accounting occurs when the
sales price is fixed, collectability is reasonably assured and the product’s title and risk of loss has transferred to the customer.
The Company includes freight costs charged to customers in net sales and the correlating expense as a cost of sales. Sales tax
collected from customers is excluded from net sales in the accompanying Consolidated Statements of Operations.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Cost of Sales and Selling, General and Administrative Expenses

Cost of sales includes costs of products and services sold (i.e., purchased product, raw material, direct labor, engineering labor,
outbound freight charges, depreciation and amortization, indirect costs and overhead charges). Selling expenses primarily
consist of advertising, promotion, bid and proposal, employee payroll and corresponding benefits and commissions paid to sales
and marketing personnel. General and administrative expenses primarily consist of employee payroll including executive,
administrative and financial personnel and corresponding benefits, incentive compensation, independent research and
development, consulting expenses, warehousing costs, depreciation and amortization. Legal costs are expensed as incurred and
are generally included in general and administrative expenses. The Aerospace segment includes general and administrative
expenses as an element of program cost and inventory for certain government contracts.

Certain inventory related costs, including purchasing costs, receiving costs and inspection costs, for the Distribution segment
are not included in cost of sales. For the years ended December 31, 2016, 2015 and 2014, $3.5 million, $3.2 million and $3.4
million, respectively, of such costs are included in general and administrative expenses.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, demand deposits and short-term cash investments. These investments are
liquid in nature and have original maturities of three months or less. Bank overdraft positions, which occur when total
outstanding issued checks exceed available cash balances at a single financial institution at the end of a reporting period, are
reclassified to other current liabilities within the consolidated balance sheets. At December 31, 2016 and 2015, the Company
had bank overdrafts of $4.3 million and $4.0 million, respectively, included in other current liabilities.

Accounts Receivable

The Company has three types of accounts receivable: (a) Trade receivables, which consist of amounts billed and currently due
from customers; (b) USG contracts, which consist of (1) amounts billed, and (2) costs and accrued profit – not billed; and (c)
Commercial and other government contracts, which consist of (1) amounts billed, and (2) costs and accrued profit – not billed.

The allowance for doubtful accounts reflects management’s best estimate of probable losses inherent in the trade accounts
receivable and billed contracts balance. Management determines the allowance based on known troubled accounts, historical
experience and other currently available evidence.

Inventories

Inventory of merchandise for resale is stated at cost (using the average costing method) or market, whichever is lower.
Contracts and other work in process and finished goods are valued at production cost represented by raw material, labor and
overhead. For certain government contracts, allowable general and administrative expenses are also included in inventory.
Initial tooling and startup costs may be included, where applicable. Contracts and other work in process and finished goods are
not reported at amounts in excess of net realizable values. The Company includes raw material amounts in the contracts in
process and other work in process balances. Raw material includes certain general stock materials but primarily relates to
purchases that were made in anticipation of specific programs for which production has not been started as of the balance sheet
date.

Property, Plant and Equipment

Property, plant and equipment is recorded at cost. Depreciation is computed primarily on a straight-line basis over the estimated
useful lives of the assets. The estimated useful lives for buildings range from 15 to 40 years and for leasehold improvements
range from 1 to 20 years, whereas machinery, office furniture and equipment generally have useful lives ranging from 3 to 15
years. At the time of retirement or disposal, the acquisition cost of the asset and related accumulated depreciation are eliminated
and any gain or loss is credited to or charged against income.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Property, Plant and Equipment - continued

Long-lived assets, such as property, plant and equipment and purchased intangible assets subject to amortization, are reviewed
for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.
If circumstances require a long-lived asset be tested for possible impairment, the Company first compares undiscounted cash
flows expected to be generated by an asset to the carrying value of the asset. If the carrying value of the long-lived asset is not
recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair
value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market
values and third-party independent appraisals, as considered necessary.

Maintenance and repair items are charged against income as incurred, whereas renewals and betterments are capitalized and
depreciated.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a purchase
business combination and is reviewed for impairment at least annually.

Accounting Standards Codification Topic 350, "Intangibles - Goodwill and Other," ("ASC 350") permits the assessment of
qualitative factors to determine whether events and circumstances lead to the conclusion that it is necessary to perform the two-
step goodwill impairment test required under ASC 350. The qualitative assessment management performs takes into
consideration the following factors: general economic conditions, industry specific performance, changes in carrying values of
the reporting units, the assessment of assumptions used in the previous fair value calculation and changes in transaction
multiples.

In the first step of the two-step test, the fair value of the reporting unit is compared with its carrying value (including goodwill).
If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting
unit and the enterprise must perform step two of the impairment test (measurement). In Step 2, an impairment loss is recognized
for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied
fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price
allocation. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill.

Fair value of the reporting unit is determined using an income methodology based on management’s estimates of forecasted
cash flows for each business unit, with those cash flows discounted to present value using rates commensurate with the risks
associated with those cash flows. In addition, management uses a market-based valuation method involving analysis of market
multiples of revenues and earnings before interest, taxes, depreciation and amortization ("EBITDA") for (i) a group of
comparable public companies and (ii) recent transactions, if any, involving comparable companies. If the fair value of the
reporting unit exceeds its carrying value, step two need not be performed.

Goodwill and intangible assets with indefinite lives are evaluated annually for impairment in the fourth quarter, based on annual
forecast information. Intangible assets with finite lives are amortized using the straight-line method over their estimated period
of benefit. Goodwill and other intangible assets are reviewed for possible impairment whenever changes in conditions indicate
that the fair value of a reporting unit is more likely than not below its carrying value. No such charges were recorded in 2016,
2015 or 2014.

Vendor Incentives

The Company’s Distribution segment enters into agreements with certain vendors providing for inventory purchase incentives
that are generally earned upon achieving specified volume-purchasing levels. The Company recognizes rebate income relative
to specific rebate programs as a reduction of the cost of inventory based on a systematic and rational allocation of the cash
consideration offered to each of the underlying transactions that results in progress toward earning the rebate, provided that the
amounts are probable and reasonably estimable. As of December 31, 2016 and 2015, total vendor incentive receivables,
included in other current assets, were approximately $13.3 million and $16.4 million, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Self-Insured Retentions

To limit exposure to losses related to group health, workers’ compensation, auto and product general liability claims, the
Company obtains third-party insurance coverage. The Company has varying levels of deductibles for these claims. The total
liability/deductible for group health is limited to $0.3 million per claim, workers’ compensation is limited to $0.4 million per
claim and for product/general liability and auto liability the limit is $0.3 million per claim. The cost of such benefits is
recognized as expense based on claims filed in each reporting period and an estimate of claims incurred but not reported
(“IBNR”) during such period. The estimates for the IBNR are based upon historical trends and information provided to us by
the claims administrators, and are periodically revised to reflect changes in loss trends. These amounts are included in other
accruals and payables on the Consolidated Balance Sheets.

Liabilities associated with these claims are estimated in part by considering historical claims experience, severity factors and
other actuarial assumptions. Projections of future losses are inherently uncertain because of the random nature of insurance
claim occurrences and the potential for differences between actual developments and actuarial assumptions. Such self-insurance
accruals will likely include claims for which the ultimate losses will be settled over a period of years.

Restructuring Costs

During the fourth quarter of 2015, the Company initiated restructuring activities at its Distribution segment in order to align the
cost structure of the organization to its then current revenue levels. Such actions included workforce reductions and the
consolidation of field operations where its Distribution segment had multiple facilities in the same location.

The restructuring resulted in net workforce reductions of 60 employees and the exiting of four facilities. As of December 31,
2015, we had communicated the workforce reductions to affected employees. The Company recorded all the related workforce
reduction and facility consolidation costs during 2015 in "Selling, general and administrative expenses" on the Company's
Consolidated Statements of Operations.

The following table summarizes the accrual balances by cost type for the 2015 restructuring actions:

In thousands
Restructuring accrual balance at December 31, 2015 ......
Provision........................................................................
Cash payments...............................................................
Restructuring accrual balance at December 31, 2016 ......

(a) Includes costs associated with consolidation of facilities

Severance

Other(a)

Total

654
(75)
(579)

— $

375

6
(381)

— $

1,029
(69)
(960)
—

During the third quarter of 2016, the Company offered a voluntary retirement program to certain employees of its Distribution
segment. This program resulted in $0.3 million of expense, all of which was included in "Selling, general and administrative
expenses" on the Company's Consolidated Statements of Operations for the year ended December 31, 2016. In addition to the
restructuring activity, the Distribution segment and Aerospace segment incurred $0.7 million and $2.5 million of severance
expense in 2016, respectively. These amounts are not included in the table above.

Research and Development

Customer funded research expenditures (which are included in cost of sales) were $0.9 million in 2016, $0.4 million in 2015,
and $1.6 million in 2014. Research and development costs not specifically covered by contracts are charged against income as
incurred and included in selling, general and administrative expenses. Such costs amounted to $7.7 million, $6.7 million and
$6.7 million in 2016, 2015 and 2014, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income Taxes

Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and operating loss, capital loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.

The Company records a benefit for uncertain tax positions in the financial statements only when it determines it is more likely
than not that such a position will be sustained upon examination by taxing authorities based on the technical merits of the
position. Unrecognized tax benefits represent the difference between the position taken in the tax return and the benefit
reflected in the financial statements.

Share-Based Payment Arrangements

The Company records compensation expense for share-based awards based upon an assessment of the grant date fair value of
the awards. The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation
model. A number of assumptions are used to determine the fair value of options granted. These include expected term, dividend
yield, volatility of the options and the risk free interest rate. See Note 18, Share-Based Arrangements, for further information.

Derivative Financial Instruments

The Company is exposed to certain risks relating to its ongoing business operations, including market risks relating to
fluctuations in foreign currency exchange rates and interest rates. Derivative financial instruments are recognized on the
Consolidated Balance Sheets as either assets or liabilities and are measured at fair value. Changes in the fair values of
derivatives are recorded each period in earnings or accumulated other comprehensive income, depending on whether a
derivative is effective as part of a hedged transaction. Gains and losses on derivative instruments reported in accumulated other
comprehensive income are subsequently included in earnings in the periods in which earnings are affected by the hedged item.
The Company does not use derivative instruments for speculative purposes. See Note 6, Derivative Financial Instruments, for
further information.

Pension Accounting

The Company accounts for its defined benefit pension plan by recognizing the overfunded or underfunded status of the plan,
calculated as the difference between the plan assets and the projected benefit obligation, as an asset or liability on the balance
sheet, with changes in the funded status recognized in comprehensive income in the year in which they occur.

Expenses and liabilities associated with the plan are determined based upon actuarial valuations. Integral to the actuarial
valuations are a variety of assumptions including expected return on plan assets and discount rate. The Company regularly
reviews the assumptions, which are updated at the measurement date, December 31st. The impact of differences between actual
results and the assumptions are accumulated and generally amortized over future periods, which will affect expense recognized
in future periods. See Note 14, Pension Plans, for further information.

Recent Accounting Standards

In January 2017, the FASB issued Accounting Standards Update ("ASU") 2017-04, "Intangibles—Goodwill and Other (Topic
350): Simplifying the Test for Goodwill Impairment". The objective of this standard update is to simplify the subsequent
measurement of goodwill, eliminating Step 2 from the goodwill impairment test. Under this ASU, an entity should perform its
annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity would
recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, assuming
the loss recognized does not exceed the total amount of goodwill for the reporting unit. The standard update is effective for
fiscal years beginning after December 15, 2019. Early adoption is permitted. The adoption of this standard update is not
expected to have a material impact on the Company's consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Standards - continued

In November 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows (Topic 230) - Restricted Cash". The objective of
this standard update is to address the diversity in classification and presentation of changes in restricted cash on the statement of
cash flows. Under this ASU, amounts generally described as restricted cash and restricted cash equivalents should be included
with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the
statement of cash flows. The standard update is effective for fiscal years, and interim periods within those years, beginning after
December 15, 2017. Early adoption is permitted. The adoption of this standard update is not expected to have a material impact
on the Company's consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740) - Intra-Entity Transfers of Assets Other Than
Inventory". Under this ASU, income tax consequences of an intra-entity transfer of an asset other than inventory will be
recognized when the transfer occurs. The standard update is effective for fiscal years, and interim periods within those years,
beginning after December 15, 2017. Early adoption is permitted. The adoption of this standard update is not expected to have a
material impact on the Company's consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230) - Classification of Certain Cash
Receipts and Cash Payments". This standard update was issued to address diversity in practice in how certain cash receipts and
cash payments are presented and classified. The provisions of ASU 2016-15 will be effective for interim and annual periods
beginning after December 15, 2017. Early adoption is permitted. The adoption of this standard update is not expected to have a
material impact on the Company's consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718) - Improvements to
Employee Share-Based Payment Accounting”. The objective of this standard update is to simplify several aspects of the
accounting for share-based payment transactions, including, but not limited to, income tax consequences, classification of
awards as equity or liabilities and classification on the statement of cash flows. The standard update is effective for fiscal years,
and interim periods within those years, beginning after December 15, 2016. As early adoption is permitted, the Company
adopted this standard during the fourth quarter, resulting in a tax benefit of $0.5 million for 2016. See Note 13, Income Taxes,
and Note 18, Share-Based Arrangements, for further information.

In March 2016, the FASB issued ASU 2016-07, “Investments - Equity Method and Joint Ventures (Topic 323) - Simplifying the
Transition to the Equity Method of Accounting”. This standard update eliminates the requirement to retroactively adopt the
equity method of accounting when an investment qualifies for use of the equity method. The standard update is effective for
fiscal years, and interim periods within those years, beginning after December 15, 2016. The adoption of this standard update is
not expected to have a material impact on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU 2016-06, “Derivatives and Hedging (Topic 815) - Contingent Put and Call Options in
Debt Instruments”. The objective of this standard update is to eliminate inconsistent practices with regards to assessing
embedded contingent put and call options in debt instruments. The standard update is effective for fiscal years, and interim
periods within those years, beginning after December 15, 2016. The adoption of this standard update is not expected to have a
material impact on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU 2016-05, “Derivatives and Hedging (Topic 815) - Effect of Derivative Contract
Novations on Existing Hedge Accounting Relationships”. The objective of this standard update is to clarify whether a change in
the counterparty to a derivative instrument results in a requirement to dedesignate that hedging relationship and discontinue the
application of hedge accounting. The standard update is effective for fiscal years, and interim periods within those years,
beginning after December 15, 2016. The adoption of this standard update is not expected to have a material impact on the
Company’s consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Standards - continued

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. Under this ASU as amended, lessees will be required
to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (i) a lease liability,
which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) a right-of-
use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.
Lessor accounting is largely unchanged under this ASU as amended. This standard update is effective for fiscal years, and
interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is
developing a project plan to implement this standard update and is currently assessing the potential impact this standard update
might have on its consolidated financial statements. The Company anticipates the ASU will have a material impact on its assets
and liabilities due to the addition of right-of-use assets and lease liabilities to the balance sheet, however it does not expect the
ASU to have a material impact on the Company's cash flows or results of operations.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10) - Recognition and
Measurement of Financial Assets and Financial Liabilities”. The objective of this standard update is to remove inconsistent
practices with regards to the accounting for financial instruments between Generally Accepted Accounting Principles ("US
GAAP") and International Financial Reporting Standards (“IFRS”). The standard update intends to improve the reporting
model for financial instruments to provide users of financial statements with more decision-useful information. The provisions
of this standard update are effective for interim and annual periods beginning after December 15, 2017. The Company does not
expect these changes to have a material impact on its consolidated financial statements.

In September 2015, the FASB issued ASU 2015-16, “Business Combinations: Simplifying the Accounting for Measurement-
Period Adjustments”. This standard update requires that an acquirer recognize adjustments to provisional amounts that are
identified during the measurement period in the reporting period in which the adjustment amounts are determined. The standard
update became effective the first quarter of 2016. The adoption of this standard update did not have a material impact on the
Company’s consolidated financial statements.

In August 2015, the FASB issued ASU 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated
with Line-of-Credit Arrangements”, which amends ASC 835-30, “Interest - Imputation of Interest”. This standard update
clarifies the presentation and subsequent measurement of debt issuance costs associated with lines of credit. These costs may be
presented as an asset and amortized ratably over the term of the line of credit arrangement, regardless of whether there are
outstanding borrowings on the arrangement. The standard update became effective the first quarter of 2016. The adoption of
this standard update did not have a material impact on the Company’s consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, "Inventory (Topic 330) - Simplifying the Measurement of Inventory". ASU
2015-11 requires an entity to measure inventory within the scope of the standard at the lower of cost and net realizable value.
Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of
completion, disposal, and transportation. The standard update is effective for fiscal years beginning after December 15, 2016,
including interim periods within those years. The adoption of this standard update is not expected to have a material impact on
the Company's consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, "Interest - Imputation of Interest (Subtopic 835-30): Simplifying the
Presentation of Debt Issuance Costs". ASU No. 2015-03 requires that debt issuance costs be presented in the balance sheet as a
direct deduction from the carrying amount of the related liability. Such treatment is now consistent with the presentation of debt
discounts or premiums. As it stood prior to amendment, debt issuance costs were reported in the balance sheet as an asset (i.e., a
deferred charge), whereas debt discounts and premiums were, and remain, reported as deductions from or additions to the debt
itself. Recognition and measurement guidance for debt issuance costs is not affected by this standard update. The standard
update became effective the first quarter of 2016. The adoption of this standard update did not have a material impact on the
Company's consolidated financial statements.

In February 2015, the FASB issued ASU No. 2015-02, "Consolidation (Topic 810)". ASU 2015-02 focuses on the consolidation
evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. The
standard update became effective the first quarter of 2016. The adoption of this standard update had no impact on the
Company's consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Standards - continued

In January 2015, the FASB issued ASU No. 2015-01, "Income Statement - Extraordinary and Unusual Items (Subtopic
225-20)". The standard update eliminates the concept of extraordinary items and their segregation from the results of ordinary
operations and expands presentation and disclosure guidance to include items that are both unusual in nature and occur
infrequently. The standard update became effective the first quarter of 2016. The adoption of this standard update had no impact
on the Company's consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements - Going Concern (Subtopic 205-40):
Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern". The standard update provides guidance
regarding management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a
going concern and to provide related footnote disclosures. The standard update became effective the first quarter of 2016. The
adoption of this standard update had no impact on the Company's consolidated financial statements.

In June 2014, the FASB issued ASU No. 2014-12, "Compensation - Stock Compensation (Topic 718) - Accounting for Share-
Based Payments When the Terms of an Award Provide that a Performance Target Could Be Achieved after the Requisite
Service Period". The objective of this standard update is to eliminate inconsistent practices with regards to the accounting
treatment of share-based payment awards. The provisions of this standard update became effective the first quarter of 2016. The
adoption of this standard update did not have a material impact on the Company's consolidated financial statements.

Revenue Recognition

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)". The objective of this
standard update is to remove inconsistent practices with regard to revenue recognition between US GAAP and IFRS. The
standard intends to improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital
markets. The provisions of ASU No. 2014-09 will be effective for interim and annual periods beginning after December 15,
2017, with early adoption permitted for annual periods beginning after December 15, 2016. The Company has developed a
project plan that includes a three-phase approach to implementing this standard update. Phase one, the assessment phase, was
completed in early 2016. The Company concluded the second phase of the project, which included conversion activities such as
establishing policies, identifying system impacts and understanding the initial financial impact this standard update will have,
during the fourth quarter of 2016. Phase three, which began during the first quarter of 2017, includes the integration of the
standard update into financial reporting processes and systems, and developing a more robust understanding of the financial
impact of this standard update on the Company's consolidated financial statements. The Company anticipates the transition to
the new standard could have a material impact on the Company's consolidated financial statements but will be unable to
quantify that impact until the third phase of the project has been completed. The Company intends to transition using the
modified retrospective method upon adoption of this standard update. The Distribution segment currently recognizes the
majority of its revenue at a point in time, whereas the new standard will result in certain revenue streams moving to an overtime
revenue recognition model. The majority of our long-term contracts in the Aerospace segment are currently accounted for under
the percentage-of-completion method using units-of-delivery as a measurement basis. The Company anticipates that many of
these contracts will move to a cost-to-cost model under the percentage-of-completion method. The Company expects the cost of
the activities it is undertaking to transition to the new standard will result in an increase in selling, general and administrative
expenses in 2017 and beyond.

Subsequent to the issuance of ASU No. 2014-09, the FASB has issued the following updates: ASU 2016-08, “Revenue from
Contracts with Customers (Topic 606) - Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”; ASU
2016-10, "Revenue from Contracts with Customers (Topic 606) - Identifying Performance Obligations and Licensing"; ASU
2016-12, "Revenue from Contracts with Customers (Topic 606) - Narrow-Scope Improvements and Practical Expedients"; and
ASU 2016-20, "Technical Corrections and Improvements to Topic 606". The amendments in these updates affect the guidance
contained within ASU 2014-09 and will be assessed as part of the Company's revenue recognition project plan.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

2. DISCONTINUED OPERATIONS

The following table provides information regarding the results of discontinued operations:

In thousands
Net sales of discontinued operations................................................... $
Operating loss from discontinued operations......................................
Other expense from discontinued operations......................................
Loss from discontinued operations before income taxes and loss on
disposal................................................................................................
Income tax benefit...............................................................................
Loss from discontinued operations before loss on disposal................
Loss on disposal of discontinued operations.......................................
Income tax benefit...............................................................................
Net loss on disposal of discontinued operations .................................
Net loss from discontinued operations................................................ $

Delamac Disposal

For the year ended December 31,

2016

2015

2014

— $

—

— $

23,540
(3,806)
(353)

(4,159)
1,235
(2,924)
(7,567)
2,583
(4,984)
(7,908)

On December 19, 2014, the Company sold its Distribution segment's Mexico business unit, Delamac. As a result, the Company
has reported the results of operations of this component as discontinued operations within the consolidated financial statements
for all periods presented. The sale resulted in a net loss on disposal of discontinued operations of $5.3 million for the year
ended December 31, 2014.

Canadian Operations Disposal

On December 31, 2012, the Company sold substantially all of the assets and liabilities of the Distribution segment's Canadian
operations. During 2014, the Company recorded earnings from discontinued operations of $0.3 million due to a pension
settlement that resulted from this disposal.

3. ACQUISITIONS

The following table illustrates cash paid for acquisitions:

For the year ended December 31,

2016

2015

2014

Total cash paid for acquisitions ...................................................... $

— $

196,395

1,014

5,617

6,631

3,404

1,453

201,252

70,948

3,060

3,610

77,618

Included in acquisition costs are contingency payments to the former owners of the Aerospace Orlando operations acquired in
2002. These payments are based on the attainment of certain milestones, and over the term of the agreement totaled $25.0
million. Additional goodwill totaling $1.6 million, $5.4 million and $1.5 million was recorded during 2016, 2015 and 2014,
respectively, related to the attainment of certain milestones. Through December 31, 2016, the Company has recorded additional
goodwill of $25.0 million related to these contingency payments. The final contingency payment of $1.4 million recorded in
2016 will occur in the second quarter of 2017.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

3. ACQUISITIONS (CONTINUED)

2015 Acquisitions

On November 30, 2015, the Company acquired GRW Bearing GmbH ("GRW"), a German-based designer and manufacturer of
super precision, miniature ball bearings, at a purchase price of approximately €134.1 million , net of cash acquired. GRW is
focused on the demanding applications segment of the miniature ball bearings market, where low noise requirements, extreme
temperatures, ultra-high speeds and/or caustic environments require both exceptional engineering design and continuous
operating performance capabilities. GRW operates from two state-of-the-art production facilities in Rimpar, Germany and
Prachatice, Czech Republic. GRW brings additional scale and new market segments to the Company's specialty bearing and
engineered products lines. The businesses are aligned through a focus on solving the critical problems of original equipment
manufacturer ("OEM") customers and achieving the highest standards of performance in the most demanding applications.

On October 21, 2015, the Company acquired Timken Alcor Aerospace Technologies, Inc. ("TAAT") of Mesa, Arizona, at a
purchase price of approximately $44.5 million, net of cash acquired. TAAT, which was renamed EXTEX Engineered Products,
Inc. ("EXTEX"), designs and supplies aftermarket parts to support businesses conducting maintenance, repair and overhaul
("MRO") in aerospace markets primarily located in North America. This acquisition strengthened the Company's position in the
MRO market and provides synergy opportunities to leverage the Company's global sales organization to accelerate growth.
EXTEX complements the aftermarket business of the Company's specialty bearings and engineered products lines.

On January 30, 2015, the Company acquired substantially all the operating assets of G.C. Fabrication, Inc. ("GCF") for a
purchase price of approximately $9.5 million, net of cash acquired. Now located in Teterboro, New Jersey, GCF is a premier
Schneider Electric/Square D distributor and carries a variety of electrical power, automation, process controls, specialized
HVAC, water and wastewater systems, communication and networking devices from a premier set of global manufacturers. The
acquisition of GCF has expanded the Company's automation, control and energy product offerings into the New York metro
market. This acquisition is immaterial to the Company's results of operations and financial position.

In addition to the above acquisitions, the Company's Distribution segment acquired substantially all the assets of Calkins Fluid
Power, Inc. ("Calkins"), a small distributor of fluid power components and systems, on December 1, 2015. This acquisition is
immaterial to the Company's results of operations and financial position.

These acquisitions were accounted for as purchase transactions. The following amounts represent the fair value of the assets
acquired and liabilities assumed from the 2015 acquisitions, including adjustments made for the GRW acquisition during the
one-year measurement period from the date of acquisition.

In thousands
Cash .............................................................................................................................................
Accounts receivable.....................................................................................................................
Inventories ...................................................................................................................................
Property, plant and equipment.....................................................................................................
Other tangible assets....................................................................................................................
Goodwill ......................................................................................................................................
Other intangible assets.................................................................................................................
Liabilities.....................................................................................................................................
Net assets acquired....................................................................................................................
Less cash received.....................................................................................................................
Net consideration ......................................................................................................................

6,345
10,786
24,319
24,790
7,305
99,606
61,323
(30,980)
203,494
(6,345)
197,149

The preliminary purchase price allocations for the acquisitions of GRW and EXTEX, completed during the fourth quarter of
2015, were based upon a preliminary valuation and the Company's estimates and assumptions for these acquisitions were
adjusted as additional information was obtained during the measurement periods. The principle areas of these purchase price
allocations that were not yet finalized related to certain environmental matters, income and non-income based taxes and
residual goodwill. During the purchase price measurement period, the Company made adjustments to the purchase price
allocation related to the GRW acquisition. These adjustments were for the finalization of certain tax matters and the reduction
of the accrual related to the environmental remediation at the Rimpar, Germany facility.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

3. ACQUISITIONS (CONTINUED)

2015 Acquisitions - continued

The goodwill associated with these acquisitions is tax deductible and is the result of expected synergies from combining the
operations of the acquired businesses with the Company's operations and intangible assets that do not qualify for separate
recognition, such as an assembled workforce. Included in the Consolidated Statements of Operations for the years ended
December 31, 2016 and 2015 is $95.4 million and $26.1 million, respectively, of revenue from these acquisitions.

The fair value of the identifiable intangible assets of $61.3 million, consisting of customer relationships, developed
technologies, non-compete agreements, trade names and acquired backlog, was determined using the income approach.
Specifically, the discounted cash flows method was utilized for the customer relationships, backlog and non-compete
agreements, and the relief-from-royalty method was utilized for the trade names and developed technology. The fair value of
the customer relationships ($36.0 million) is being amortized on a straight-line basis over periods ranging from 6 to 26 years;
the fair value of the developed technologies ($19.1 million) is being amortized over periods ranging from 10 to 20 years; the
fair value of the non-compete agreements ($0.6 million) is being amortized over 1 year; the fair value of the trade names ($4.8
million) is being amortized over periods ranging from 3 to 15 years; and the fair value of the acquired backlog ($0.8 million) is
being amortized over 2 years. These amortization periods represent the estimated useful lives of the assets.

The following table reflects the unaudited pro forma operating results of the Company for the years ended December 31, 2015
and 2014, which give effect to the acquisitions of GRW, EXTEX, GCF, and Calkins as if the companies had been acquired on
January 1, 2014. The pro forma results are based on assumptions that the Company believes are reasonable under the
circumstances. The pro forma results are not necessarily indicative of the operating results that would have occurred had the
acquisitions been effective January 1, 2015 or 2014, nor are they intended to be indicative of results that may occur in the
future. The underlying pro forma information includes the historical financial results of the Company and the four acquired
businesses adjusted for certain items including depreciation and amortization expenses associated with the assets acquired and
the Company’s expenses related to financing arrangements, with the related tax effects. The pro forma information does not
include the effects of any synergies, cost reduction initiatives or anticipated integration costs related to the acquisitions.

For the year ended December 31,

2015

2014

In thousands
Net sales.............................................................................................................................
Earnings from continuing operations ................................................................................
Net earnings.......................................................................................................................

1,844,535

69,450

1,895,990

59,223

51,315

The pro forma earnings during the year ended December 31, 2015, were adjusted to exclude non-recurring items including
acquisition-related costs and expenses related to the fair value adjustments to inventory. The pro forma earnings in 2014 were
adjusted to include these items, reflecting acquisition-related costs of $4.2 million and expenses of $3.0 million related to
adjustments to inventory.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

4. ACCOUNTS RECEIVABLE, NET

Accounts receivable consist of the following:

In thousands
Trade receivables.......................................................................................................................
U.S. Government contracts:

At December 31,

2016

2015

143,471

144,616

17,244
1,478

Commercial and other government contracts:

Billed..................................................................................................................................
Costs and accrued profit – not billed .................................................................................
Less allowance for doubtful accounts .......................................................................................
Total............................................................................................................................

50,560
22,234
(4,123)
230,864

20,289
4,248

68,066
3,872
(2,989)
238,102

The increase in commercial and other government contracts unbilled costs and accrued profits is primarily related to receivables
due under the K-MAX® program. The decrease in commercial and other government contracts billed is primarily due to the
receipt of payments under the JPF program.

Additionally, $3.7 million of unbilled receivables and accrued profit for the K-MAX® program were included in Other assets
on the Company's Consolidated Balance Sheet as of December 31, 2016, as the amounts due are expected to be collected after
December 31, 2017.

Accounts receivable, net includes amounts for matters such as contract changes, negotiated settlements and claims for
unanticipated contract costs. These amounts are as follows:

In thousands
Contract changes, negotiated settlements and claims for unanticipated contract costs ......
Total......................................................................................................................

900

At December 31,

2016

2015

5. FAIR VALUE MEASUREMENTS

Fair value is defined as the exchange price that would be received for an asset or the price paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants at the measurement date.

The Company uses a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy
requires us to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs
used to measure fair value are as follows:

• Level 1 — Quoted prices in active markets for identical assets or liabilities.

• Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for markets that are

not active or other inputs that are observable or can be corroborated by observable market data.

• Level 3 — Unobservable inputs that are supported by little or no market activity and are significant to the fair value of

the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar
techniques that use significant unobservable inputs.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

5. FAIR VALUE MEASUREMENTS (CONTINUED)

The following table provides the carrying value and fair value of financial instruments that are not carried at fair value at
December 31, 2016 and 2015:

In thousands
Long-term debt:

2016

2015

Carrying Value

Fair Value

Carrying Value

Fair Value

Level 1 ...........................................
Level 2 ...........................................
Total..................................................

113,203
303,855
417,058

170,935
279,582
450,517

111,058
329,763
440,821

140,156
305,681
445,837

The above fair values were computed based on quoted market prices and discounted future cash flows, as applicable.
Differences from carrying amounts are attributable to interest rate changes subsequent to when the transactions occurred. The
fair values of Cash and cash equivalents, Accounts receivable, net, Notes payable and Accounts payable - trade approximate
their carrying amounts due to the short-term maturities of these instruments.

Recurring Fair Value Measurements

The Company holds derivative instruments for foreign exchange contracts and interest rate swaps that are measured at fair
value using observable market inputs such as forward rates and our counterparties’ credit risks. Based on these inputs, the
derivative instruments are classified within Level 2 of the valuation hierarchy and have been included in Other current assets
and Other assets on the Consolidated Balance Sheet at December 31, 2016 and 2015. Based on the continued ability to trade
and enter into forward contracts and interest rate swaps, we consider the markets for our fair value instruments to be active.

The Company evaluated the credit risk associated with the counterparties to these derivative instruments and determined that as
of December 31, 2016, such credit risks have not had an adverse impact on the fair value of these instruments.

Nonrecurring Fair Value Measurements

Goodwill and indefinite-lived intangible assets are tested for possible impairment during the fourth quarter of each year. The
nonrecurring fair value measurement for goodwill was developed using significant unobservable inputs (Level 3). For step-one
of the impairment analysis, the primary valuation technique used was an income methodology based on management’s
estimates of forecasted cash flows for each business unit, with those cash flows discounted to present value using rates
commensurate with the risks associated with those cash flows. In addition, management used a market-based valuation method
involving analysis of market multiples of revenues and EBITDA for a group of comparable public companies.

6. DERIVATIVE FINANCIAL INSTRUMENTS

The Company is exposed to certain risks relating to its ongoing business operations, including market risks relating to
fluctuations in foreign currency exchange rates and interest rates. Derivative financial instruments are reported on the
Consolidated Balance Sheets at fair value. Changes in the fair values of derivatives are reported each period in earnings or
accumulated other comprehensive income, depending on whether a derivative is effective as part of a hedged transaction. Gains
and losses on derivative instruments reported in accumulated other comprehensive income are subsequently included in
earnings in the periods in which earnings are affected by the hedged item. The Company does not use derivative instruments for
speculative purposes.

The Company held forward exchange contracts designed to hedge forecasted transactions denominated in foreign currencies
and to minimize the impact of foreign currency fluctuations on the Company’s earnings and cash flows. Some of those
contracts were designated as cash flow hedges. The Company will include in earnings amounts currently included in
accumulated other comprehensive income upon recognition of cost of sales related to the underlying transaction.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

6. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

Cash Flow Hedges

Interest Rate Swaps

The Company’s Term Loan Facility (“Term Loan”) contains floating rate obligations and is subject to interest rate
fluctuations. During 2013, the Company entered into interest rate swap agreements for the purposes of hedging the eight
quarterly variable-rate interest payments on its Term Loan due in 2014 and 2015. These interest rate swap agreements were
designated as cash flow hedges and intended to manage interest rate risk associated with the Company’s variable-rate
borrowings and minimize the impact on the Company's earnings and cash flows of interest rate fluctuations attributable to
changes in LIBOR rates. These agreements were not material to the Company's Consolidated Financial Statements for the years
ended 2015 and 2014. As of December 31, 2015, these interest rate swap agreements had all matured.

During 2015, we entered into interest rate swap agreements for the purposes of hedging the eight quarterly variable-rate Term
Loan interest payments due in 2016 and 2017. Additionally, we entered into interest rate swap agreements to effectively convert
$83.8 million of our variable rate revolving credit facility debt to a fixed interest rate. These interest rate swap agreements were
designated as cash flow hedges and intended to manage interest rate risk associated with our variable-rate borrowings and
minimize the impact on our earnings and cash flows of interest rate fluctuations attributable to changes in LIBOR rates. These
agreements are not material to the Company's Consolidated Balance Sheets for the years ended December 31, 2016 and 2015.

The Company reclassified $0.9 million of expense from other comprehensive income for the year ended December 31, 2016.
There was no expense reclassified from other comprehensive income associated with these interest rate swaps in 2015. Over
the next twelve months, the expense related to cash flow hedges expected to be reclassified from other comprehensive income
is $0.1 million.

Derivatives Not Designated as Hedges

Forward Exchange Contracts

From time to time, the Company will enter into foreign exchange contracts that are not designated as hedging instruments.
These contracts are entered into in order to minimize the impact of foreign currency fluctuations on the Company's earnings
and cash flows. The Company reports expense related to these contracts in Other expense, net on the Consolidated Statements
of Operations.

During the fourth quarter of 2015, the Company entered into forward exchange contracts to minimize the impact of foreign
currency fluctuations on the Company's earnings and cash flows. These contracts were entered into as a result of forecasted
foreign currency transactions associated with a portion of the purchase price of GRW in the amount of €135.0 million . For the
year ended December 31, 2015, the Company reported expense of $2.2 million in Other expense, net related to the change in
the value of these contracts from the date we entered into them to their settlement date. At the settlement date, the Company
took delivery of the Euros and further decreases in the exchange rate resulted in expense of $0.8 million, reported in Other
expense, net for the period of time between the settlement of the contracts and the closing of the acquisition.

In addition to the forward exchange contract mentioned above, the Company held forward exchange contracts to mitigate the
risk associated with foreign currencies that were not designated as hedging instruments as of December 31, 2016 and 2015. The
balances associated with the contracts and the gains or losses reported in Other expense, net were not material for the years
ended December 31, 2016, 2015 or 2014.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

7. INVENTORIES

Inventories consist of the following:

In thousands
Merchandise for resale ..............................................................................................................
Raw materials............................................................................................................................
Contracts in process:

U.S. Government, net of progress payments of $28,824 and $28,812 in 2016 and 2015,
respectively .............................................................................................................................
Commercial and other government contracts .........................................................................
Other work in process (including certain general stock materials) ........................................
Finished goods ..........................................................................................................................
Total............................................................................................................................

At December 31,

2016

2015

158,618

161,691

20,592

24,721

85,779

81,420

22,096

25,309

88,345

61,197

26,588

23,205

393,814

385,747

General and administrative costs charged to inventory by Aerospace segment operations during 2016 and 2015 were $13.0
million and $15.8 million, respectively. The estimated amounts of general and administrative costs remaining in contracts in
process at December 31, 2016 and 2015, were $11.0 million and $13.5 million, respectively. These estimates are based on the
ratio of such costs to total costs of production.

The Company had inventory of $6.4 million and $6.5 million as of December 31, 2016 and 2015, respectively, on consignment
at customer locations, the majority of which is held by Distribution segment customers.

Inventories include amounts associated with matters such as contract changes, negotiated settlements and claims for
unanticipated contract costs, which totaled $3.6 million and $7.1 million at December 31, 2016 and 2015, respectively. The
reduction in this balance is due to the resolution of the of the AH-1Z claims as discussed further in Note 16, Commitments and
Contingencies.

K-MAX® inventory of $15.9 million and $14.9 million as of December 31, 2016 and 2015, respectively, is included in
contracts and other work in process inventory and finished goods. These amounts exclude the inventory associated with our
new build aircraft currently under contract. Management believes that a significant portion of this K-MAX® inventory will be
sold after December 31, 2017, based upon the anticipation of additional aircraft manufacturing and supporting the fleet for the
foreseeable future.

At December 31, 2016 and 2015, $7.2 million and $9.0 million, respectively, of SH-2G(I), formerly SH-2G(A), inventory was
included on the Company's balance sheet in contracts and other work in process inventory. Management believes that
approximately $3.8 million of the SH-2G(I) inventory will be sold after December 31, 2017. This balance represents spares
requirements and inventory to be used in SH-2G programs.

At December 31, 2016, backlog for the A-10 program with Boeing was $5.3 million, representing 11 shipsets, and total
program inventory was $12.8 million, of which $8.7 million is associated with nonrecurring costs. Through December 31,
2016, the Company has delivered 162 shipsets over the life of the program. During 2016, the U.S. Air Force ("USAF")
indicated that they would delay the retirement of the A-10 fleet due to its vital close air support, search and rescue capabilities
and the lack of a suitable replacement. The Company continues to monitor the defense budget and understands that despite this
positive indication, the future of this program could be at risk without the continued support of Congress. The Company has not
received any orders for additional shipsets in 2016; however, the customer has not given any indication that this program will
be terminated. Production and deliveries under this contract have been extended through the first quarter of 2017. Tooling and
nonrecurring costs on this program are being amortized over 242 shipsets, the number of shipsets under the program of record.
These nonrecurring costs may not be recoverable in the event of a significant break in production or contract termination prior
to the completion of the 242 shipsets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

8. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net is summarized as follows:

In thousands
Land......................................................................................................................................
Buildings ..............................................................................................................................
Leasehold improvements......................................................................................................
Machinery, office furniture and equipment..........................................................................
Construction in process ........................................................................................................
Total...............................................................................................................................
Less accumulated depreciation.............................................................................................
Property, plant and equipment, net.......................................................................................

At December 31,

2016

2015

14,921
97,265
20,068
249,068
21,565
402,887
(226,366)
176,521

14,115
93,465
18,430
242,147
10,077
378,234
(202,648)
175,586

Depreciation expense was $27.5 million, $24.1 million and $23.8 million for 2016, 2015 and 2014, respectively.

The Company is currently implementing new enterprise resource planning ("ERP") systems at both its Aerospace segment and
its Distribution segment. For the years ended December 31, 2016, 2015, and 2014, expenses incurred totaled approximately
$2.0 million, $1.2 million and $1.1 million, respectively, and capital expenditures totaled $4.1 million, $6.4 million, and $9.8
million, respectively. Total to date ERP system capital expenditures as of December 31, 2016, were $44.6 million. Depreciation
expense for the ERP systems for the years ended December 31, 2016, 2015, and 2014, totaled $3.9 million, $3.8 million and
$2.6 million, respectively.

Capital Leases

For the year ended December 31, 2016, $3.6 million of assets purchased under the Company's master leasing agreement with
PNC and accounted for as capital leases was included in machinery, office furniture and equipment and construction in process,
with accumulated depreciation of $0.4 million. For the year ended December 31, 2015, $1.6 million of assets purchased under
the Company's master leasing agreement with PNC and accounted for as capital leases was included in machinery, office
furniture and equipment with accumulated depreciation of $0.1 million. Depreciation expense associated with the capital leases
was $0.3 million and $0.1 million for 2016 and 2015, respectively. There was no depreciation expense associated with the
capital leases in 2014. See Note 16, Commitments and Contingencies, for a discussion on the master leasing agreement.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

9. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Goodwill

The following table sets forth the change in the carrying amount of goodwill for each reportable segment and for the Company:

2016

2015

Distribution Aerospace

Total

Distribution

Aerospace

Total

In thousands

Gross balance at beginning of
period...........................................
Accumulated impairment ..........
Net balance at beginning of
period ........................................
Additions .....................................
Impairments.................................
Foreign currency translation........
Purchase price adjustment ...........
Net balance at end of period........

Accumulated impairment at end
of period.......................................

149,204

—

149,204

—

—
—

149,204

219,758
(16,252)

368,962
(16,252)

141,612

—

113,221
(16,252)

254,833
(16,252)

203,506

2,138

—
(7,342)
(9,612)
188,690

352,710

2,138

—
(7,342)
(9,612)
337,894

141,612

7,592

96,969

106,488

238,581

114,080

—

—
—

—

49
—

—

49
—

149,204

203,506

352,710

— $

(16,252) $

— $

(16,252) $

(16,252)

Additions to goodwill in the Company's Aerospace segment primarily relate to an earnout payment associated with a previous
acquisition. See Note 3, Acquisitions, for further discussion of these acquisitions. During the purchase price measurement
period, the Company made adjustments to the purchase price allocation related to the GRW acquisition. These adjustments
were for the finalization of certain tax matters and the reduction of the accrual related to the environmental remediation at the
Rimpar, Germany facility.

2016 Analysis

The Company performed a reevaluation of its reporting units for the purposes of its annual goodwill assessment. As previously
disclosed in our 2015 Form 10-K, RWG, EXTEX and GRW were reorganized under the single management team of Kaman
Specialty Bearings and Engineered Products. The Company tested the new reporting unit for impairment immediately after its
creation by comparing the sum of the fair values of the entities moved into the new reporting unit to the carrying value of the
new reporting unit, noting the fair value exceeded the carrying value. Prior to the reorganization, these reporting units were
stand-alone reporting units. The fair value of RWG was assessed as part of our 2015 annual test for goodwill impairment,
prepared during the fourth quarter of 2015. EXTEX and GRW were acquired during the fourth quarter of 2015 and as such
were not included in the 2015 annual test for goodwill impairment. There were no significant changes to the conditions of the
entities in the new reporting unit that would have impacted the results of the analysis as of January 1, 2016. Since this is the
first year the Company assessed goodwill at this reporting unit level, the two-step impairment test was performed.

In accordance with ASC 350, Intangibles – Goodwill and Other (“ASC 350”), the Company evaluates goodwill for possible
impairment on at least an annual basis. Upon completion of our 2016 qualitative assessment of events and circumstances
affecting recorded goodwill as described in Note 1, Summary of Significant Accounting Policies, the Company concluded that
all reporting units, other than KPP - Orlando, should receive a Step 1 analysis. The qualitative assessment performed for KPP -
Orlando took into consideration the following factors: general economic conditions, industry specific performance, changes in
carrying values of the reporting unit, the assessment of assumptions used in the previous fair value calculation and changes in
transaction multiples. The results of this analysis indicated that this reporting unit did not need to proceed to the two-step
impairment test.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

9. GOODWILL AND OTHER INTANGIBLE ASSETS, NET (CONTINUED)

Goodwill - continued

2016 Analysis - continued

For the remaining reporting units the Company performed a Step 1 analysis. The results of the Step 1 analyses indicated that
the Company did not need to proceed to Step 2, as the percentage by which the fair value exceeds the carrying value was
greater than 25% for all reporting units other than Aerosystems, whose fair value exceeded carrying value by 4%. The
Company performed a sensitivity analysis relative to the discount rate and growth rate selected and determined a decrease of
1% in the terminal growth rate or an increase of 1% in the discount rate would not result in a fair value calculation less than the
carrying value for the Kaman Specialty Bearings and Engineered Products and Kaman Distribution reporting units. An increase
of 1% in the discount rate would result in a fair value approximately 5% less than the carrying value for the Kaman
Aerosystems reporting unit. A decrease of 1% in the terminal growth rate would not result in a fair value calculation less than
the carrying value for the Kaman Aerosystems reporting unit.

2015 Analysis

In accordance with ASC 350, the Company evaluates goodwill for possible impairment on at least an annual basis. For the
Company's 2015 annual assessment a Step 1 analysis was performed for all of its reporting units that carry goodwill. The result
of these analyses indicated that the Company did not need to proceed to Step 2, as the percentage by which the fair value
exceeded the carrying value was greater than 13% for all reporting units. The Company performed a sensitivity analysis
relative to the discount rate and growth rate selected and determined a decrease of 1% in the terminal growth rate or an increase
of 1% in the discount rate would not result in a fair value calculation less than the carrying value for any of the reporting units.

Other Intangible Assets

Other intangible assets consisted of:

In thousands
Customer lists / relationships ............
Developed technologies ....................
Trademarks / trade names .................
Non-compete agreements and other..
Patents ...............................................
Total...................................................

At December 31,
2016

At December 31,
2015

Amortization
Period

Gross
Amount

Accumulated
Amortization

Gross
Amount

Accumulated
Amortization

6-26 years

10-20 years

3-15 years

1-9 years

17 years

154,745

19,049

8,344

8,096

523

190,757

(51,800) $
(1,394)
(3,250)
(7,444)
(425)
(64,313) $

158,831

19,055

8,478

8,453

523

195,340

(41,445)
(154)
(2,556)
(6,006)
(416)
(50,577)

The decrease in the other intangible assets balance at December 31, 2016, as compared to December 31, 2015, is primarily due
to amortization. See Note 3, Acquisitions, for further discussion of these acquisitions. Intangible asset amortization expense
was $15.6 million, $11.8 million and $10.6 million in 2016, 2015 and 2014, respectively.

In accordance with ASC 360 - Property, Plant, and Equipment ("ASC 360"), the Company is required to evaluate long-lived
intangible assets for possible impairment whenever events or changes in circumstances indicate that their carrying amounts may
not be recoverable. During the fourth quarter of 2016, the Company evaluated certain long-lived intangible assets associated with
our U.K. Composites facility. The Company compared the carrying amount of these long-lived intangible assets to the sum of the
undiscounted cash flows expected to result from the use and eventual disposition of the assets. The carrying value did not exceed
the fair value, indicating there was no impairment of long-lived intangible assets held by the U.K. Composites business.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

9. GOODWILL AND OTHER INTANGIBLE ASSETS, NET (CONTINUED)

Other Intangible Assets - continued

Estimated amortization expense for the next five years associated with intangible assets existing as of December 31, 2016, is as
follows:

In thousands
2017.......................................................................................................................................................... $
2018.......................................................................................................................................................... $
2019.......................................................................................................................................................... $
2020.......................................................................................................................................................... $
2021.......................................................................................................................................................... $

15,435

14,173

12,217

11,718

11,232

In order to determine the useful life of acquired intangible assets, the Company considered numerous factors, most importantly
the industry considerations associated with the acquired entities. The Company determined the amortization period for the
acquired intangible assets for its acquisitions in 2015 based primarily on an analysis of their historical customer sales attrition
information and the period over which the assets are expected to deliver meaningful cash flow generation in support of the fair
value of the asset.

10. ENVIRONMENTAL COSTS

The following table displays the activity and balances associated with accruals related to environmental costs included in other
accruals and payables and other long-term liabilities:

2016

2015

In thousands
Balance at January 1 .................................................................................................................
4,731
Additions to accrual ...........................................................................................................
(3,714)
Payments ............................................................................................................................
Other1 .................................................................................................................................
—
(6)
Changes in foreign currency exchange rates .....................................................................
11,609
Balance at December 31 ...........................................................................................................
1 In 2015, the Company recorded approximately $4.2 million related to environmental remediation at the newly acquired Rimpar, Germany
facility. During 2016, the Company reduced this liability to approximately $0.5 million based on the results of the Phase II assessment. See
Note 16, Commitments and Contingencies for further detail on this matter.

314
(1,543)
(3,779)
34

11,609

10,598

6,635

Bloomfield

In August 2008, the Company completed its purchase of the portion of the Bloomfield campus that Kaman Aerospace
Corporation had leased from NAVAIR for many years. In connection with the purchase, the Company has assumed
responsibility for environmental remediation at the facility as may be required under the Connecticut Transfer Act (the
“Transfer Act”) and it continues the effort to define the scope of the remediation that will be required by the Connecticut
Department of Environmental Protection (“CTDEP”). The transaction was recorded by taking the undiscounted estimated
remediation liability of $20.8 million and discounting it at a rate of 8% to its present value. The fair value of the Navy Property
asset, which at that time approximated the discounted present value of the assumed environmental liability of $10.3 million, is
included in Property, plant and equipment, net. This remediation process will take many years to complete.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

10. ENVIRONMENTAL COSTS (CONTINUED)

Bloomfield - continued

The following represents estimated future payments for the undiscounted environmental remediation liability related to the
Bloomfield campus as of December 31, 2016:

In thousands
2017........................................................................................................................................................................ $
2018........................................................................................................................................................................
2019........................................................................................................................................................................
2020........................................................................................................................................................................
2021........................................................................................................................................................................
Thereafter ...............................................................................................................................................................

Total ..................................................................................................................................................................... $

1,003

403

451

171

513

6,375

8,916

Other

During 2014, the Company sold its former manufacturing facility in Moosup, Connecticut to TD Development, LLC. In
connection with the sale, the Company agreed to contribute $4.0 million in cash to an escrow account over a four-year period to
fund TD's environmental remediation work performed on the site. The Company funded $1.6 million to the escrow account
between 2014 and 2015. TD stopped work on the site in 2016 and is in default of its obligations under the sale agreements. The
accrual related to this matter remained at $2.4 million as of December 31, 2016, unchanged from the prior year.

The Company's environmental accrual also includes estimated environmental remediation costs that the Company expects to
incur at the former Music segment’s New Hartford, CT facility and the Aerospace segment’s facility in Rimpar, Germany. The
Company continues to assess the work that may be required at each of these facilities, which may result in a change to this
accrual. For further discussion of these matters, see Note 16, Commitments and Contingencies.

11. DEBT

Long-Term Debt

The Company has long-term debt as follows:

At December 31,

2016

2015

In thousands
Revolving credit agreement ......................................................................................................
Term loan ..................................................................................................................................
Convertible notes ......................................................................................................................
Total ...................................................................................................................................
Less current portion ..................................................................................................................
Total excluding current portion..........................................................................................

212,605

233,513

91,250

113,203

417,058

120,078

96,250

111,058

440,821

5,000

296,980

435,821

At December 31, 2016 and 2015, the Company's Consolidated Balance Sheets were net of debt issuance costs of $0.9 million
and $1.6 million, respectively.

The weighted average interest rate on long-term borrowings outstanding as of December 31, 2016 and 2015, was 2.48% and
2.08%, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

11. DEBT (CONTINUED)

Long-Term Debt - continued

For the years ended December 31, 2016 and 2015, $2.6 million and $1.1 million, respectively of liabilities associated with our
capital leases are included in other long-term liabilities. See note 16, Commitments and Contingencies, for a discussion of the
master leasing agreement.

The aggregate annual maturities of long-term debt for each of the next five years are approximately as follows:

In thousands
2017........................................................................................................................................................................ $
2018........................................................................................................................................................................
2019........................................................................................................................................................................
2020........................................................................................................................................................................
2021........................................................................................................................................................................

121,875
7,500
9,375
280,105
—

In the above table, the total principal of the Convertible Notes of $115.0 million is included in the amount due in 2017. The
carrying value of the Convertible Notes at December 31, 2016, is $113.2 million.

Revolving Credit and Term Loan Agreements

On May 6, 2015, the Company closed on an amended and restated $700.0 million Credit Agreement (the "Credit Agreement")
with JPMorgan Chase Bank N.A., as Administrative Agent, Bank of America, N.A. and Citizens Bank, N.A. as Co-Syndication
Agents and SunTrust Bank, KeyBank N.A., TD Bank, N.A., BB&T and Fifth Third Bank, as Co-Documentation Agents. The
Credit Agreement amends and restates the Company's previously existing credit facility in its entirety to, among other things:
(i) extend the maturity date to May 6, 2020; (ii) increase the aggregate amount of revolving commitments from $400.0 million
to $600.0 million; (iii) reinstate the aggregate amount of outstanding Term Loans to $100.0 million; (iv) modify the affirmative
and negative covenants set forth in the facility; and (v) effectuate a number of additional modifications to the terms and
provisions of the facility, including its pricing. Capitalized terms used but not defined within this Note 11, Debt, have the
meanings ascribed thereto in the Credit Agreement.

The Term Loan commitment requires quarterly payments of principal (which commenced on June 30, 2015) at the rate of $1.25
million, increasing to $1.875 million on June 30, 2017, and then to $2.5 million on June 30, 2019, with $65.0 million payable in
the final quarter of the facility's term. The facility includes an accordion feature that allows the Company to increase the
aggregate amount available up to $900.0 million with additional commitments from the Lenders.

The revolving credit facility permits the Company to pay cash dividends. The Lenders have been granted a security interest in
substantially all of the Company’s and its domestic subsidiaries’ personal property and other assets (including intellectual
property but excluding real estate), including a pledge of 66% of the Company’s equity interest in certain foreign subsidiaries
and 100% of the Company’s equity interest in its domestic subsidiaries, as collateral for the Company’s obligations under the
Credit Agreement.

The following table shows the amounts available for borrowing under the Company's revolving credit facility:

In thousands
Total facility...............................................................................................................................
Amounts outstanding, excluding letters of credit......................................................................
Amounts available for borrowing, excluding letters of credit...................................................
Letters of credit under the credit facility ...................................................................................
Amounts available for borrowing..............................................................................................

Amounts available for borrowing subject to EBITDA..............................................................

At December 31,

2016

2015

600,000

212,605

387,395

5,655

381,740

209,467

600,000

233,513

366,487

5,900

360,587

259,883

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

11. DEBT (CONTINUED)

Revolving Credit and Term Loan Agreements - continued

Interest rates on amounts outstanding under the Credit Agreement are variable, and are determined based on the Consolidated
Senior Secured Leverage Ratio, as defined in the Credit Agreement. In addition, the Company is required to pay a quarterly
commitment fee on the unused revolving loan commitment amount at a rate ranging from 0.175% to 0.300% per annum, based
on the Consolidated Senior Secured Leverage Ratio. Fees for outstanding letters of credit range from 1.25% to 2.00%, based on
the Consolidated Senior Secured Leverage Ratio.

The interest rate for the outstanding amounts on both the revolving credit facility and term loan commitment are as follows:

At December 31,

2016

2015

Interest rate ................................................................................................................................

2.19%

1.67%

The financial covenants associated with the Credit Agreement include a requirement that (i) the Consolidated Senior Secured
Leverage Ratio cannot be greater than 3.50 to 1.00, with an election to increase the maximum to 3.75 to 1.00 for four
consecutive quarters, in connection with a Permitted Acquisition with consideration in excess of $125.0 million; (ii) the
Consolidated Total Leverage Ratio, as defined in the Credit Agreement, cannot be greater than 4.00 to 1.00, with an election to
increase the maximum to 4.25 to 1.00 for four consecutive quarters, in connection with a Permitted Acquisition with
consideration in excess of $125.0 million; (iii) the Consolidated Interest Coverage Ratio cannot be less than 4.00 to 1.00; and
(iv) Liquidity: (a) as of the last day of the fiscal quarter of the Company ending two full fiscal quarters prior to the stated
maturity of the Specified Convertible Notes, cannot be less than an amount equal to 50% of the outstanding principal amount of
the Specified Convertible Notes, and (b) as of the last day of each fiscal quarter of the Company ending thereafter, cannot be
less than an amount equal to the outstanding principal amount of the Specified Convertible Notes as of such day. The Company
was in compliance with those financial covenants as of and for the quarter ended December 31, 2016, and management does
not anticipate noncompliance in the foreseeable future.

Convertible Notes

In November 2010, the Company issued convertible unsecured notes due on November 15, 2017, in the aggregate principal
amount of $115.0 million in a private placement offering (the "Convertible Notes"). These notes bear 3.25% interest per annum
on the principal amount, payable semiannually in arrears on May 15 and November 15 of each year, beginning on May 15,
2011. Proceeds from the offering were $111.0 million, net of fees and expenses which were capitalized. The proceeds were used
to repay $62.2 million of borrowings outstanding on the Company’s former Revolving Credit Agreement, make a $25.0 million
voluntary contribution to the Qualified Pension Plan and pay $13.2 million for the purchase of call options related to the
convertible note offering. See below for further discussion of the call options.

At December 31, 2016, the market value of the Company's Common Stock exceeded 130% of the conversion price for the notes
for 20 or more of the last 30 consecutive trading days preceding the quarter end. As a result, the Convertible Notes are
convertible at the option of the noteholders and will continue to be convertible through April 3, 2017. The carrying amount of
the Convertible Notes was reclassified to current liabilities and a portion of the equity component, representing the unamortized
debt discount, was reclassified to temporary equity on the Company's Consolidated Balance Sheet as of December 31, 2016.
Upon closure of the conversion period, the Notes will remain in current liabilities due to their scheduled maturity and the
temporary equity will be reclassified into permanent equity.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

11. DEBT (CONTINUED)

Convertible Notes - continued

The following table illustrates the conversion rate at each date:

December 31, 2016

December 31, 2015

29.9134

33.4298

43.46

29.8059

33.5504

43.62

3,440,045

3,427,679
(1) Represents the number of shares of Common Stock hypothetically issuable per $1,000 principal amount of Notes,
subject to adjustments per the Convertible Note Indenture dated November 19, 2010. At the date the Company issued
the Convertible Notes, the conversion rate initially equaled 29.4499 shares of common stock per $1,000 principal
amount of notes (which is equivalent to an initial conversion price of approximately $33.96 per share of common
stock). The conversion rate is subject to adjustment upon the occurrence of certain specified events, such as an
increase in the dividend paid to shareholders.
(2) Represents $1,000 divided by the conversion rate as of such date. The conversion price reflects the strike price of
the embedded option within the Convertible Note. Were the Company's share price to exceed the conversion price at
conversion the noteholders would be entitled to receive additional consideration either in cash, shares or a combination
thereof, the form of which is at the sole discretion of the Company.
(3) Prior to May 15, 2017, the notes are convertible only in the following circumstances: (1) during any fiscal quarter
commencing after April 1, 2011, and only during any such fiscal quarter, if the last reported sale price of our common
stock was greater than or equal to 130% of the applicable conversion price for at least 20 trading days (whether or not
consecutive) during the 30 consecutive trading days ending on the last trading day of the previous fiscal quarter, (2)
upon the occurrence of specified corporate transactions, or (3) during the five consecutive business-day period
following any five consecutive trading-day period in which, for each day of that period, the trading price for the notes
was less than 98% of the product of the last reported sale price of our common stock and the applicable conversion
rate on such trading day. On and after May 15, 2017, until the close of business on the second scheduled trading day
immediately preceding the maturity date, holders may convert their notes at any time, regardless of the foregoing
circumstances. Upon a change in control or termination of trading, holders of the notes may require us to repurchase
all or a portion of their notes for cash at a repurchase price equal to 100% of the principal amount, plus any accrued
and unpaid interest.
(4) This represents the number of shares hypothetically issuable upon conversion of the principal balance of the Convertible
Notes at each date; however, as the terms of the Convertible Notes require net share settlement, the aggregate principal
amount of the notes will be paid in cash. Amounts due in excess of the principal, if any, may be settled in cash, shares of
the Company's common stock or a combination of cash and shares of common stock, at the Company's election.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

11. DEBT (CONTINUED)

Convertible Notes - continued

The following table illustrates the warrant price at each date:

Warrants
Warrant Price..................................................................................................

43.72

43.87

December 31, 2016

December 31, 2015

ASC 815 provides that contracts are initially classified as equity if (1) the contract requires physical settlement or net-share
settlement, or (2) the contract gives the company a choice of net-cash settlement or settlement in its own shares (physical
settlement or net-share settlement). The settlement terms of our purchased call options and sold warrant contracts require net-
share settlement. Based on the guidance in ASC 815, the purchased call option contracts were recorded as a reduction of equity
and the warrants were recorded as an addition to equity as of the trade date. ASC 815 states that a reporting entity shall not
consider contracts to be derivative instruments if the contract issued or held by the reporting entity is both indexed to its own
stock and classified in shareholders' equity in its balance sheet. The Company concluded the purchased call option contracts and
the warrant contracts should be accounted for in shareholders' equity and are therefore not to be considered derivative
instruments.

ASC 470-20 "Debt with Conversion and Other Options" (“ASC 470-20”), clarifies the accounting for convertible debt
instruments that may be settled in cash upon conversion, including partial cash settlement. ASC 470-20 specifies that an issuer
of such instruments should separately account for the liability and equity components of the instruments in a manner that
reflects the issuer's non-convertible debt borrowing rate which interest costs are to be recognized in subsequent periods. The
note payable principal balance at the date of issuance of $115.0 million was bifurcated into the debt component of $101.7
million and the equity component of $13.3 million. The difference between the note payable principal balance and the value of
the debt component is being accreted to interest expense over the term of the notes. The debt component was recognized at the
present value of associated cash flows discounted using a 5.25% discount rate, the borrowing rate at the date of issuance for a
similar debt instrument without a conversion feature. The Company incurred $3.6 million of debt issuance costs in connection
with the sale of the Convertible Notes, of which $0.5 million was recorded as an offset to additional paid-in capital. The
balance, $3.1 million, is being amortized over the term of the notes. Total amortization expense for the years ended
December 31, 2016, 2015 and 2014 was $0.6 million, $0.5 million and $0.5 million.

The carrying amount of the equity component and the principal amount of the liability component, the unamortized discount and
the net carrying value of the liability are as follows:

In thousands
Principal amount of liability ........................................................................ $
Unamortized discount ..................................................................................

Carrying value of liability..................................................................... $

Equity component ........................................................................................ $

115,000

1,797

113,203

13,329

115,000

3,942

111,058

13,329

December 31, 2016

December 31, 2015

As of December 31, 2016, the "if converted value" exceeds the principal amount of the Convertible Notes by $45.0 million.

Interest expense associated with the Convertible Notes consisted of the following:

In thousands
Contractual coupon rate of interest ................................................... $
Accretion of convertible notes discount............................................

Interest expense - convertible notes........................................... $

3,738

2,144

5,882

3,738

2,035

5,773

3,738

1,931

5,669

For the year ended December 31,

2016

2015

2014

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

11. DEBT (CONTINUED)

Debt Issuance Costs

In 2015, the Company incurred $2.3 million in debt issuance costs in connection with the Credit Agreement. These costs have
been capitalized and will be amortized over the term of the agreement. Total amortization expense for the year ended
December 31, 2016, 2015 and 2014 was $1.0 million, 1.0 million and $1.1 million, respectively.

Interest Payments

Cash payments for interest were $14.3 million, $11.4 million and $11.9 million in 2016, 2015 and 2014, respectively.

12. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of accumulated other comprehensive income (loss) are shown below:

In thousands

Foreign currency translation:
Beginning balance.................................................................................................................
Net loss on foreign currency translation.............................................................................
Reclassification to net income ............................................................................................
Other comprehensive loss ................................................................................................
Ending balance ......................................................................................................................

Pension and other post-retirement benefits (a):
Beginning balance.................................................................................................................
Reclassification to net income ............................................................................................
Amortization of prior service cost, net of tax expense of $0 and $21, respectively ........
Amortization of net loss, net of tax expense of $4,849 and $3,823, respectively............
Change in net gain, net of tax benefit of $7,261 and $11,226, respectively ....................
Other comprehensive loss, net of tax benefit ...................................................................
Ending balance ......................................................................................................................

Derivative instruments (b):
Beginning balance.................................................................................................................
Net loss on derivative instruments, net of tax benefit of $354 and $66, respectively ........
Reclassification to net income, net of tax expense of $360 and $224, respectively...........
Other comprehensive income, net of tax..........................................................................
Ending balance ......................................................................................................................

2016

2015

(22,625) $
(12,271)
—
(12,271)
(34,896) $

(20,676)
(1,949)
—
(1,949)
(22,625)

(117,455) $

(105,264)

—

8,027
(12,020)
(3,993)
(121,448) $

6,315
(18,542)
(12,191)
(117,455)

(58) $
(587)
596

9
(49) $

(321)
(108)
371

263
(58)

Total accumulated other comprehensive income (loss) ........................................................
(a) These accumulated other comprehensive income components are included in the computation of net periodic pension cost

(156,393) $

(140,138)

(see Note 14, Pension Plans for additional information)

(b) See Note 6, Derivative Financial Instruments, for additional information regarding our derivative instruments.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

13. INCOME TAXES

The components of income tax expense (benefit) associated with continuing operations are as follows:

For the year ended December 31,
2014
2015
2016

In thousands
Current:

Federal...............................................................................................................
State...................................................................................................................
Foreign ..............................................................................................................

Deferred:

Total..........................................................................................................................

20,405
2,312
738
23,455

10,133
(1,023)
(1,715)
7,395
30,850

25,170
349
931
26,450

5,474
(2,682)
(1,691)
1,101
27,551

26,296
(796)
905
26,405

5,256
(380)
(559)
4,317
30,722

The tax effects of temporary differences that give rise to deferred tax assets and liabilities are presented below:

In thousands
Deferred tax assets:

Deferred employee benefits ......................................................................................................
Inventories.................................................................................................................................
Tax loss and credit carryforwards .............................................................................................
Accrued liabilities and other items............................................................................................
Total deferred tax assets.....................................................................................................

Deferred tax liabilities:

Property, plant and equipment...................................................................................................
Intangibles .................................................................................................................................
Other items ................................................................................................................................
Total deferred tax liabilities ...............................................................................................
Net deferred tax assets before valuation allowance ..................................................................
Valuation allowance..................................................................................................................
Net deferred tax assets after valuation allowance .....................................................................

At December 31,
2015
2016

82,836
9,694
19,216
12,433
124,179

(15,653)
(48,785)
(3,100)
(67,538)
56,641
(4,143)
52,498

83,390
9,410
19,529
12,491
124,820

(17,178)
(42,717)
(2,195)
(62,090)
62,730
(11,122)
51,608

The $7.0 million change in the valuation allowance from December 31, 2015 to December 31, 2016, primarily relates to tax
attributes acquired with GRW which the Company has determined are more likely than not to be realized, partially offset by the
establishment of valuation allowances relating to certain state and foreign loss carryforwards. Valuation allowances reduced the
deferred tax asset attributable to these state and foreign loss and credit carryforwards to an amount that, based upon all available
information, is more likely than not to be realized. Reversal of the valuation allowance is contingent upon the recognition of
future taxable income in the respective jurisdictions or changes in circumstances which cause the realization of the benefits of
carryforwards to become more likely than not.

A portion of the net deferred tax assets, $2.7 million, is related to a capital loss recorded on the disposition of the Company's
Distribution segment’s Mexico operations. The realization of these benefits is dependent in part on future taxable capital gains.

Pre-tax loss from foreign operations amounted to $5.0 million, $4.3 million and $2.3 million in 2016, 2015 and 2014,
respectively. U.S. income taxes have not been provided on $29.9 million of undistributed earnings of foreign subsidiaries since
it is the Company’s intention to permanently reinvest such earnings or to distribute them only when it is tax efficient to do so. It
is impracticable to estimate the total tax liability, if any, that would be created by the future distribution of these earnings.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

13. INCOME TAXES (CONTINUED)

The provision for income taxes associated with continuing operations differs from that computed at the federal statutory
corporate tax rate as follows:

For the year ended December 31,
2014
2015
2016

In thousands
Federal tax at 35% statutory rate..............................................................................
State income taxes, net of federal benefit ................................................................
Tax effect of:

Section 199 Manufacturing deduction ..............................................................
Other, net...........................................................................................................
Income tax expense ..................................................................................................

31,396
999

(2,153)
608
30,850

30,796
(1,517)

33,776
(765)

(2,275)
547
27,551

(2,000)
(289)
30,722

During the fourth quarter of 2016, the Company elected to early adopt ASU 2016-09, "Compensation - Stock Compensation
(Topic 718) - Improvements to Employee Share-Based Payment Accounting". The objective of this standard update is to
simplify several aspects of the accounting for share-based payment transactions, including, but not limited to, income tax
consequences. The standard update was effective for fiscal years, and interim periods within those years, beginning after
December 31, 2016. The Company's early adoption resulted in a tax benefit of $0.5 million for 2016.

The Company records a benefit for uncertain tax positions in the financial statements only when it determines it is more likely
than not that such a position will be sustained upon examination by taxing authorities. Unrecognized tax benefits represent the
difference between the position taken and the benefit reflected in the financial statements. On December 31, 2016, 2015 and
2014, the total liability for unrecognized tax benefits was $2.8 million, $3.0 million and $2.4 million, respectively (including
interest and penalties of $0.2 million in 2016, $0.5 million in 2015 and $0.3 million in 2014). The change in the liability for
2016, 2015 and 2014 is explained as follows:

In thousands
Balance at January 1.................................................................................................
Additions based on current year tax positions ..................................................
Changes for tax positions of prior years ...........................................................
Settlements ........................................................................................................
Additions due to acquired business...................................................................
Reductions due to lapses in statutes of limitation .............................................
Balance at December 31...........................................................................................

2016

2015

2014

2,996
211
(96)
(155)
—
(124)
2,832

2,441
117
(160)
19
954
(375)
2,996

2,302
512
33
(165)
—
(241)
2,441

Included in unrecognized tax benefits at December 31, 2016, were items approximating $2.2 million that, if recognized, would
favorably affect the Company’s effective tax rate in future periods. 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 2012. During 2016,
2015 and 2014, $0.1 million or less of interest and penalties was recognized each year as a component of income tax expense. It
is the Company’s policy to record interest and penalties on unrecognized tax benefits as income taxes.

Cash payments for income taxes, net of refunds, were $24.8 million, $35.7 million and $22.8 million in 2016, 2015 and 2014,
respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

14. PENSION PLANS

The Company has a non-contributory qualified defined benefit pension plan (the “Qualified Pension Plan”). On February 23,
2010, the Company’s Board of Directors approved an amendment to the Qualified Pension Plan that, among other things,
closed the Qualified Pension Plan to all new hires on or after March 1, 2010, and stipulated that years of service would continue
to be added for purposes of the benefit calculations only through December 31, 2015, with no further accrual of benefits for
service thereafter. Given that effective December 31, 2015, the qualified pension plan was frozen with respect to future benefit
accruals, under U.S. Government Cost Accounting Standard (“CAS”) 413 the Company must determine the USG’s share of any
pension curtailment adjustment calculated in accordance with CAS. During the fourth quarter of 2016, the Company accrued a
$0.3 million liability representing our estimate of the amount due to the USG based on our pension curtailment adjustment
calculation, which was submitted to the USG for review in December. There can be no assurance that the ultimate resolution of
this matter will not have a material adverse effect on our results of operations, financial position and cash flows.

The Company also has a Supplemental Employees’ Retirement Plan (“SERP”), which is considered a non-qualified pension
plan. The SERP provides certain key executives, whose compensation is in excess of the limitations imposed by federal law on
the qualified defined benefit pension plan, with supplemental benefits based upon eligible earnings, years of service and age at
retirement. During 2010, the Company's Board of Directors also approved an amendment to the SERP that made changes
consistent with the pension plan amendment. The Board's Personnel & Compensation Committee and the Board have not
approved any new participants to the SERP since February 28, 2010, and do not intend to do so at any time in the future. The
measurement date for both these plans is December 31.

Obligations and Funded Status

The changes in the actuarial present value of the projected benefit obligation and fair value of plan assets are as follows:

For the year ended December 31,

Qualified Pension Plan

SERP

2016

2015

2016

2015

—

4,596

10,184

14,131

10,349

24,488

738,279

712,842

In thousands
Projected benefit obligation at beginning of year ............................
Service cost ......................................................................................
Interest cost ......................................................................................
Actuarial liability (gain) loss (a) ........................................................
Benefit payments..............................................................................
Projected benefit obligation at end of year ....................................
Fair value of plan assets at beginning of year ..................................
Actual return on plan assets .............................................................
534
Employer contributions ....................................................................
(534)
Benefit payments..............................................................................
—
Fair value of plan assets at end of year ..........................................
(10,184)
Funded status at end of year...........................................................
10,184
Accumulated benefit obligation .......................................................
(a) The actuarial liability (gain)/loss amount for the qualified pension plan for 2016 and 2015 is principally due to the effect of

$
$
$
$ (156,427) $ (158,984) $
$
$
$

596,733
(22,038)
10,000
(30,837)
553,858

27,514
(36,245)
(30,837)
712,842

— $
(10,059) $
$
10,059

318
(155)
(534)
10,184

20,588
(33,913)
728,601

10,000
(33,913)
572,174

155
(534)
10,059

534
(534)

553,858

712,842

728,601

42,229

— $

254

206

—

changes in the discount rate.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

14. PENSION PLANS (CONTINUED)

Obligations and Funded Status - continued

The Company has recorded liabilities related to our qualified pension plan and SERP as follows:

At December 31,

Qualified Pension Plan

SERP

2016

2015

2016

2015

In thousands
Current liabilities (a) ..........................................................................
Noncurrent liabilities........................................................................
Total..................................................................................................

— $

(156,427)

(158,984)

$ (156,427) $ (158,984) $

(3,061) $
(6,998)
(10,059) $

(530)
(9,654)
(10,184)

(a) The current liabilities are included in other accruals and payables on the Consolidated Balance Sheets.

The following table presents amounts included in accumulated other comprehensive income on the Consolidated Balance
Sheets that will be recognized as components of pension cost in future periods.

At December 31,

Qualified Pension Plan

SERP

2016

2015

2016

2015

In thousands
Unrecognized (gain) or loss .............................................................
Amount included in accumulated other comprehensive income .....

193,764

187,331

1,209

1,236

The amount of unrecognized loss for the qualified pension plan and the SERP, respectively, that will be amortized from
accumulated other comprehensive income into net periodic benefit cost over the next year is estimated to be $13.4 million and
$0.2 million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

14. PENSION PLANS (CONTINUED)

Obligations and Funded Status - continued

The pension plan net periodic benefit costs on the Consolidated Statements of Operations and other amounts recognized in
other comprehensive income (loss) on the Consolidated Statements of Comprehensive Income and Consolidated Statements of
Shareholders’ Equity were computed using the projected unit credit actuarial cost method and included the following
components:

For the year ended December 31,

Qualified Pension Plan
2015

2016

2014

2016

SERP
2015

2014

In thousands

Service cost for benefits earned
during the year..................................
Interest cost on projected benefit
obligation..........................................
Expected return on plan assets .........
Amortization of prior service cost....
Recognized net loss ..........................
Net pension benefit cost.................
Change in net gain or loss ................
Amortization of prior service cost....
Amortization of net loss ...................

4,596

14,131

11,759

— $

206

24,488

(40,767)

—

12,694

27,514
(44,130)
57

9,920

28,835
(41,047)
98

4,106

1,011

7,492

3,751

19,126

—

(12,694)

29,923
(57)
(9,920)

66,165
(98)
(4,106)

254

—

182

436

155

—
(182)

318

—

218

742
(155)
—
(218)

256

342

—

689

660

—
(91)

Total recognized in other
comprehensive income (loss).........
Total recognized in net periodic
benefit cost and other
comprehensive income (loss).........

6,432

19,946

61,961

(27) $

(373) $

569

7,443

27,438

65,712

409

369

1,258

The following tables show the amount of the contributions made to the Qualified Pension Plan and SERP during each period
and the amount of contributions the Company expects to make during 2017:

In thousands
Contributions..............................................................

10,000

534

Qualified Pension Plan

SERP

2016

2015

2016

2015

Qualified Pension Plan (a)

SERP

In thousands
Expected contributions during 2017 ..........................
(a) The Company contributed $10.0 million to the qualified pension plan in January 2017 and does not intend to make any

10,000

3,061

further contributions to the qualified pension plan in 2017.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

14. PENSION PLANS (CONTINUED)

Obligations and Funded Status - continued

Expected future benefit payments, which reflect expected future service, are as follows:

In thousands
2017......................................................................................................................................
2018......................................................................................................................................
2019......................................................................................................................................
2020......................................................................................................................................
2021......................................................................................................................................
2022-2026.............................................................................................................................

33,480
35,021
36,948
38,533
39,770
218,335

3,061
519
506
492
2,145
2,423

Qualified
Pension Plan

SERP

In 2014, the Society of Actuaries finalized a new set of mortality tables. Mortality is a key assumption in developing actuarial
estimates, and therefore could significantly impact the valuation of the Company's obligations under the qualified pension plan
and SERP. The Company reviewed the mortality data and based on the size and demographics of the plan's participant
population, the Company determined the RP-2000 Scale AA Generational based mortality table was the most appropriate
assumption.

Since 2014, the Company has been using the Citigroup Above Median Double-A Curve, as it is deemed to be the most
appropriate basis for generating the Company's discount rate assumption, as the future cash flows of the plan are most closely
aligned to the Above Median Double-A Curve. The discount rates used in determining benefit obligations of the pension plans
are as follows:

At December 31,

Qualified Pension Plan

SERP

2016

2015

2016

2015

Discount rate ....................................................................................

3.98%

4.17%

3.43%

3.47%

The actuarial assumptions used in determining the net periodic benefit cost of the pension plans are as follows:

For the year ended December 31,
SERP

Qualified Pension Plan

2016

2015

2016

2015

Discount rate ....................................................................................
Expected return on plan assets .........................................................
Average rate of increase in compensation levels..............................

4.17%
7.50%
N/A

3.80%
7.50%
N/A

3.47%
N/A
N/A

3.15%
N/A
N/A

Other

In 2015 and prior, we used a single-weighted average discount rate to calculate interest and service cost associated with our
defined benefit pension plans. In 2016 we utilized a "spot rate approach" in the calculation of interest and service cost for these
plans. The spot rate approach applies separate discount rates for each projected benefit payment in the calculation of pension
interest and service cost. This calculation change is considered a change in accounting estimate and is being applied
prospectively beginning in 2016. The use of the spot rate approach had a favorable impact on pension expense in 2016 of $4.7
million relative to what pension expense would have been had we not changed our approach.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

14. PENSION PLANS (CONTINUED)

Qualified Pension Plan Assets

The expected return on plan assets rate was determined based upon historical returns adjusted for estimated future market
fluctuations. For 2016 and 2015, the expected rate of return on plan assets was 7.5%. During 2016, the actual return on pension
plan assets, net of expenses, was 7.5%.

Plan assets are invested in a diversified portfolio consisting of equity and fixed income securities. The investment goals for
pension plan assets are to improve and/or maintain the Plan’s funded status by generating long-term asset returns that exceed
the rate of growth of the Plan’s liabilities. The Plan invests assets in a manner that seeks to (a) maximize return within
reasonable and prudent levels of risk of loss of funded status; and (b) maintain sufficient liquidity to meet benefit payment
obligations and other periodic cash flow requirements on a timely basis. The return generation/liability matching asset
allocation ratio is currently 55.6%/44.4%. As the plan’s funded status changes, the pension plan’s Administrative Committee
(the management committee that is responsible for plan administration) will act through an immediate or gradual process, as
appropriate, to reallocate assets.

Under the current investment policy, no Investment Manager may invest in investments deemed illiquid by the Investment
Manager at the time of purchase, development programs, real estate, mortgages or private equities or securities of Kaman
Corporation without prior written authorization from the Finance Committee of the Board of Directors. In addition, with the
exception of USG securities, managers’ holdings in the securities of any one issuer, at the time of purchase, may not exceed
7.5% of the total market value of that manager’s account.

The pension plan assets are valued at fair value. The following is a description of the valuation methodologies used for the
investments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy.

Short-term Investments – This investment category consists of cash and cash equivalents and futures and options contracts.
Cash and cash equivalents are comprised of investments with maturities of three months or less when purchased, including
certain short-term fixed-income securities, and are classified as Level 1 investments. Futures contracts and options contracts
requiring the investment managers to receive from or pay to the broker an amount of cash equal to daily fluctuations are
included in short-term investments and are classified as Level 2 investments.

Corporate Stock – This investment category consists primarily of domestic common stock issued by U.S. corporations.
Common shares are traded actively on exchanges and price quotes for these shares are readily available. Holdings of corporate
stock are classified as Level 1 investments.

Mutual Funds –Mutual funds are traded actively on public exchanges. The share prices for these mutual funds are published at
the close of each business day. Holdings of mutual funds are classified as Level 1 investments.

Common Trust Funds – Common trust funds are comprised of shares or units in commingled funds that are not publicly
traded. The values of the commingled funds are not publicly quoted and must trade through a broker. For equity and fixed-
income commingled funds traded through a broker, the fund administrator values the fund using the net asset value (“NAV”)
per fund share, derived from the value of the underlying assets. The underlying assets in these funds (equity securities, fixed
income securities, and commodity-related securities) are publicly traded on exchanges and price quotes for the assets held by
these funds are readily available. Holdings of common trust funds are not subject to leveling.

Fixed Income Securities - For fixed income securities, multiple prices and price types are obtained from pricing vendors
whenever possible, which enables cross-provider validations. A primary price source is identified based on asset type, class or
issue for each security. The fair values of fixed income securities are based on evaluated prices that reflect observable market
information, such as actual trade information of similar securities, adjusted for observable differences, and are categorized as
Level 2. These securities are primarily investment grade securities.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

14. PENSION PLANS (CONTINUED)

Qualified Pension Plan Assets - continued

The fair values of the Company’s qualified pension plan assets at December 31, 2016 and 2015, are as follows:

Total Carrying
Value at
December 31,
2016

Quoted prices
in
active markets
(Level 1)

Significant
other
observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)

Not subject to
leveling

21,537

— $

(1,346)
127,857
131,897
216,354
74,348
570,647
1,527
572,174

—
—
131,897
—
74,348
227,782
133
227,915

(1,346)
127,857
—
—
—
126,511
1,394
127,905

— $

—
—
—
—
—
— $
—
— $

—

—
—
—
216,354
—
216,354
—
216,354

In thousands
Short-term investments:

Cash and cash equivalents..........
Futures contracts - assets/
(liabilities) ..................................
Fixed income securities ................
Mutual funds.................................
Common trust funds1 ....................
Corporate stock.............................
Subtotal .........................................
Accrued income/expense ..............
Total..............................................

Total Carrying
Value at
December 31,
2015

Quoted prices
in
active markets
(Level 1)

Significant
other
observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)

Not subject to
leveling

— $

In thousands
Short term investments:
Cash and cash equivalents ..........
Fixed income securities ................
Mutual funds.................................
Common trust funds1 ....................
Corporate stock.............................
Subtotal .........................................
Accrued income/expense ..............
Total..............................................
1 In accordance with ASU 2015-07, Fair Value Measurement (Topic 820), certain investments that are measured at fair value
using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The
fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts
presented for the total pension plan assets.

—
—
—
196,570
—
196,570
—
196,570

10,201
—
119,312
—
51,153
180,666
73
180,739

10,201
174,636
119,312
196,570
51,153
551,872
1,986
553,858

174,636
—
—
—
174,636
1,913
176,549

— $
—
—
—
—
— $
—
— $

Derivatives are primarily used to manage risk and gain asset class exposure while still maintaining liquidity. Derivative
instruments mainly consist of equity futures and interest rate futures.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

14. PENSION PLANS (CONTINUED)

Other Plans

The Company also maintains a Defined Contribution Plan that has been adopted by most of its U.S. subsidiaries. Employees of
the adopting employers who meet the eligibility requirements of the plan may participate. Employer matching contributions are
made to the plan based on a percentage of each participant’s pre-tax contribution. For each dollar that a participant contributes,
up to 5% of compensation, participating subsidiaries make employer contributions of one dollar. Employer contributions to the
plan totaled $11.9 million, $11.9 million and $11.2 million in 2016, 2015 and 2014, respectively.

One of the Company’s acquired U.S. subsidiaries maintains a separate defined contribution plan for its eligible employees.
Employer matching contributions are made on a discretionary basis. Additionally, one of our foreign subsidiaries maintains a
defined benefit plan of its own for its local employees. The net pension liability associated with these plans as of December 31,
2016 and 2015, of $0.1 million is included in Other current liabilities on the Consolidated Balance Sheet.

15. OTHER LONG-TERM LIABILITIES

Other long-term liabilities consist of the following:

In thousands
Supplemental employees' retirement plan ("SERP") .......................................................................
Deferred compensation ....................................................................................................................
Long-term incentive plan .................................................................................................................
Noncurrent income taxes payable ....................................................................................................
Environmental remediation liability.................................................................................................
Other.................................................................................................................................................
Total ...............................................................................................................................................

At December 31,
2015
2016

6,998
15,238
8,346
2,903
3,763
7,668
44,916

9,654
16,244
7,973
2,672
9,307
5,577
51,427

The Company maintains a non-qualified deferred compensation plan for certain of its employees as well as a non-qualified
deferred compensation plan for its Board of Directors. Generally, participants in these plans have the ability to defer a certain
amount of their compensation, as defined in the agreement. The deferred compensation liability will be paid out either upon
retirement or as requested based upon certain terms in the agreements and in accordance with Internal Revenue Code Section
409A.

Disclosures regarding the assumptions used in the determination of the SERP liabilities are included in Note 14, Pension Plans.
Discussions of our environmental remediation liabilities are in Note 10, Environmental Costs, and Note 16, Commitments and
Contingencies.

16. COMMITMENTS AND CONTINGENCIES

Asset Retirement Obligations

The Company has unrecorded Asset Retirement Obligation’s (“AROs”) that are conditional upon certain events. These AROs
generally include the removal and disposition of non-friable asbestos. The Company has not recorded a liability for these
conditional AROs at December 31, 2016, because the Company does not currently believe there is a reasonable basis for
estimating a date or range of dates for major renovation or demolition of these facilities. In reaching this conclusion, the
Company considered the historical performance of each facility and has taken into account factors such as planned
maintenance, asset replacements and upgrades, which, if conducted as in the past, can extend the physical lives of the facilities
indefinitely. The Company also considered the possibility of changes in technology and risk of obsolescence in arriving at its
conclusion.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

16. COMMITMENTS AND CONTINGENCIES (CONTINUED)

Asset Retirement Obligations - continued

The Company currently leases various properties under leases that give the lessor the right to make the determination as to
whether the lessee must return the premises to their original condition, except for normal wear and tear. The Company does not
normally make substantial modifications to leased property, and many of the Company's leases either require lessor approval of
planned improvements or transfer ownership of such improvements to the lessor at the termination of the lease. Historically we
have not incurred significant costs to return leased premises to their original condition.

Operating Leases

Rent commitments under various leases for office space, warehouses, land and buildings expire at varying dates from January
2017 to December 2026. The terms of most of these leases are in the range of 3 to 5 years. Some of the Company’s leases have
rent escalations, rent holidays or contingent rent that are recognized on a straight-line basis over the entire lease term. Material
leasehold improvements and other landlord incentives are amortized over the shorter of their economic lives or the lease term,
including renewal periods, if reasonably assured. Certain annual rentals are subject to renegotiation, with certain leases
renewable for varying periods.

Lease periods for machinery and equipment range from 1 to 5 years.

Substantially all real estate taxes, insurance and maintenance expenses associated with leased facilities are obligations of the
Company. It is expected that in the normal course of business leases that expire will be renewed or replaced by leases on other
similar property.

The following minimum future rental payments are required under operating leases that have initial or remaining non-
cancellable lease terms in excess of one year as of December 31, 2016:

In thousands
2017........................................................................................................................................................................ $
2018........................................................................................................................................................................
2019........................................................................................................................................................................
2020........................................................................................................................................................................
2021........................................................................................................................................................................
Thereafter ...............................................................................................................................................................

Total ..................................................................................................................................................................... $

25,347
20,444
13,693
9,192
6,401
12,739
87,816

Lease expense for all operating leases, including leases with terms of less than one year, amounted to $27.3 million, $26.4
million and $25.0 million for 2016, 2015 and 2014, respectively.

Capital Leases

During 2014, the Company entered into a master leasing agreement with PNC Equipment Finance for financing the purchases
of equipment, with total capacity of $5.0 million. Such leases are classified as capital for accounting purposes and are recorded
at the present value of the future minimum lease payments at the inception of the lease. Amounts due under capital leases are
recorded as liabilities, and assets acquired under capital leases are recorded as equipment. Amortization of assets recorded
under capital leases is included in depreciation and amortization expense.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

16. COMMITMENTS AND CONTINGENCIES (CONTINUED)

Capital Leases - continued

The following minimum payments are required under capital leases that have initial or remaining non-cancellable lease terms
in excess of one year as of December 31, 2016:

In thousands
2017 ....................................................................................................................................................................... $
2018 .......................................................................................................................................................................
2019 .......................................................................................................................................................................
2020 .......................................................................................................................................................................
2021 .......................................................................................................................................................................
Thereafter ..............................................................................................................................................................

Total..................................................................................................................................................................... $

504
718
718
507
380
222
3,049

Interest expense related to capital leases was immaterial in 2016 and 2015. There was no interest expense associated with
capital leases in 2014. See Note 8, Property, Plant and Equipment, Net, for additional information regarding our capital leases.

Other Matters

Pension Freeze

Effective December 31, 2015, the Company's qualified pension plan was frozen with respect to future benefit accruals. Under
USG Cost Accounting Standard (“CAS”) 413 the Company must determine the USG’s share of any pension curtailment
adjustment calculated in accordance with CAS. Such adjustments can result in an amount due to the USG for pension plans that
are in a surplus position or an amount due to the contractor for plans that are in a deficit position. During the fourth quarter of
2016, the Company accrued a $0.3 million liability representing our estimate of the amount due to the USG based on our
pension curtailment adjustment calculation, which was submitted to the USG for review in December. Through the date of this
filing there has been no response from the USG on this matter. There can be no assurance that the ultimate resolution of this
matter will not have a material adverse effect on the Company's results of operations, financial position and cash flows.

AH-1Z Program

In February 2016, the Company reached an agreement with our customer that modified the scope of the AH-1Z contract and
which, among other things, resolved outstanding claims associated with this program. The Company agreed to pay its customer
$4.0 million, all of which was accrued at the end of 2015 and paid in 2016, and the customer agreed to pay the Company $4.3
million which was received in the third quarter of 2016. Given the current volume of firm orders, the Company estimates the
contract to be a zero margin program, taking into consideration the $1.4 million of G&A costs capitalized in inventory
associated with this contract. As of December 31, 2016 and 2015, our backlog for this program was $45.4 million and $10.2
million, respectively.

Aerospace Claim Matter

On June 29, 2016, the Company received notification from a customer of their intent to file a claim for recovery of costs and
expenses related to rework on certain aerostructures components previously delivered by the Company to the customer. The
notification did not indicate the extent of the rework undertaken by the customer, the cost or expenses incurred by the customer,
or the time frame in which the customer anticipated filing its formal claim. Based on initial discussions with the customer, the
Company believes the customer is seeking recovery of $12.4 million representing the cost of rework associated with these
components and related costs incurred by the customer. The Company is currently discussing this matter with its customer in
order to reach a mutually acceptable resolution and estimates the cost to rework the aerostructure components delivered to the
customer over the time period in question is approximately $0.2 million. Based on this analysis, the Company has accrued $0.2
million, the estimated cost to rework the aerostructure components, as of December 31, 2016.

100

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

16. COMMITMENTS AND CONTINGENCIES (CONTINUED)

Other Matters - continued

New Hartford

In connection with sale of the Company’s Music segment in 2007, the Company assumed responsibility for meeting certain
requirements of the Transfer Act that applied to our transfer of the New Hartford, Connecticut, facility leased by that segment
for guitar manufacturing purposes (“Ovation”). Under the Transfer Act, those responsibilities essentially consist of assessing
the site's environmental conditions and remediating environmental impairments, if any, caused by Ovation's operations prior to
the sale. The site is a multi-tenant industrial park, in which Ovation and other unrelated entities lease space. The environmental
assessment, which began in 2008, has been completed and site remediation is in process.

The Company's estimate of its portion of the cost to assess the environmental conditions and remediate this site is $2.3 million,
all of which has been accrued. The total amount paid to date in connection with these environmental remediation activities is
$1.6 million. A portion ($0.1 million) of the accrual related to this property is included in other accruals and payables and the
balance is included in other long-term liabilities. The remaining balance of the accrual reflects the total anticipated cost of
completing these environmental remediation activities. Although it is reasonably possible that additional costs will be paid in
connection with the resolution of this matter, the Company is unable to estimate the amount of such additional costs, if any, at
this time.

Bloomfield

In connection with the Company’s 2008 purchase of the portion of the Bloomfield campus that Kaman Aerospace Corporation
had leased from NAVAIR, the Company assumed responsibility for environmental remediation at the facility as may be
required under the Transfer Act and continues the effort to define the scope of the remediation that will be required by the
Connecticut Department of Environmental Protection ("CTDEP"). The assumed environmental liability of $10.3 million was
determined by taking the undiscounted estimated remediation liability of $20.8 million and discounting it at a rate of 8%. This
remediation process will take many years to complete. The total amount paid to date in connection with these environmental
remediation activities is $11.9 million. At December 31, 2016, the Company had $3.1 million accrued for these environmental
remediation activities. A portion ($1.0 million) of the accrual related to this property is included in other accruals and payables,
and the balance is included in other long-term liabilities. Although it is reasonably possible that additional costs will be paid in
connection with the resolution of this matter, the Company is unable to estimate the amount of such additional costs, if any, at
this time.

Rimpar

In connection with the Company's purchase of GRW, the Company assumed responsibility for the environmental remediation at
the Rimpar, Germany facility. As part of the purchase price allocation, the Company initially accrued approximately $4.2
million during the year ended December 31, 2015. In 2016, the Company completed a Phase II assessment in order to better
understand the extent of the environmental effort necessary to remediate the facility. Based on this assessment, the Company
adjusted the accrual to $0.5 million, as results of the assessment indicate a lower level of remediation effort will be required.
The total amount paid to date in connection with these environmental remediation activities is $0.1 million. A portion ($0.1
million) of the accrual related to this property is included in other accruals and payables and the balance is included in long-
term liabilities.

101

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

17. COMPUTATION OF EARNINGS PER SHARE

The computation of basic earnings per share is based on net earnings divided by the weighted average number of shares of
common stock outstanding for each year. The computation of diluted earnings per share includes the common stock
equivalency of dilutive options granted to employees under the Company's stock incentive plan and shares issuable on
redemption of its Convertible Notes.

For the Year Ended December 31,

2016

2015

2014

In thousands, except per share amounts

Earnings from continuing operations.....................................................................
Loss from discontinued operations, net of tax .......................................................
Loss on disposal of discontinued operations, net of tax ........................................
Net earnings ...........................................................................................................

58,854

60,438

—

58,854

60,438

65,780
(2,924)
(4,984)
57,872

Basic:

Weighted average number of shares outstanding...................................................

27,107

27,177

27,053

Earnings per share from continuing operations .....................................................
Loss per share from discontinued operations.........................................................
Loss per share from disposal of discontinued operations ......................................
Basic earnings per share.........................................................................................

Diluted:

Weighted average number of shares outstanding...................................................
Weighted average shares issuable on exercise of dilutive stock options...............
Weighted average shares issuable on exercise of convertible notes......................
Weighted average shares issuable on exercise of warrants....................................
Total................................................................................................................

Earnings per share from continuing operations .....................................................
Loss per share from discontinued operations.........................................................
Loss per share from disposal of discontinued operations ......................................
Diluted earnings per share .....................................................................................

2.17

2.22

—

2.17

2.22

2.43
(0.11)
(0.18)
2.14

27,107

27,177

27,053

141

773

133

558

—

147

577

—

28,072

27,868

27,777

2.10

2.17

—

2.10

2.17

2.37
(0.11)
(0.18)
2.08

Equity awards

Excluded from the diluted earnings per share calculation for the years ended December 31, 2016, 2015 and 2014, respectively,
are 472,328, 487,071 and 342,994 shares associated with equity awards granted to employees that are anti-dilutive based on the
average stock price.

Convertible Notes

For the years ended December 31, 2016, 2015 and 2014, shares issuable under the Convertible Notes that were dilutive during
the period were included in the calculation of earnings per share as the conversion price for the Convertible Notes was less than
the average share price of the Company's stock.

Warrants

Excluded from the diluted earnings per share calculation for the years ended December 31, 2016, 2015 and 2014, respectively
were 3,383,826, 3,422,477, and 3,411,539 shares, issuable under the warrants sold in connection with the Company’s
Convertible Note offering as they would be anti-dilutive. For further information on the Convertible Notes, see Note 11, Debt.

102

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

18. SHARE-BASED ARRANGEMENTS

General

The Company accounts for stock options, restricted stock awards, restricted stock units and performance shares as equity
awards and measures the cost of all share-based payments, including stock options, at fair value on the grant date and
recognizes this cost in the statement of operations. The Company also has an employee stock purchase plan which is accounted
for as a liability award.

Compensation expense for stock options, restricted stock awards and restricted stock units is recognized on a straight-line basis
over the vesting period of the awards. Share-based compensation expense recorded for the years ended December 31, 2016,
2015 and 2014 was $5.7 million, $6.4 million and $5.4 million, respectively.

Stock Incentive Plan

On April 17, 2013, the shareholders of the Company approved the 2013 Management Incentive Plan (the "2013 Plan"), which
replaced the 2003 Stock Incentive Plan. The 2013 Plan provides the Company with the ability to use equity-based awards of up
to 2,250,000 authorized shares and is designed as a flexible share authorization plan, such that the Company's share
authorization is based on the least costly type of award (stock options). Shares issued pursuant to “Full Value Awards” as
defined in the 2013 Plan (awards other than stock options or stock appreciation rights which are settled by the issuance of
shares, e.g., restricted stock, restricted stock units, performance shares, performance units if settled with stock, or other stock-
based awards) count against the 2013 Plan's share authorization at a rate of 3 to 1, while shares issued upon exercise of stock
options or stock appreciation rights count against the share authorization at a rate of 1 to 1. This means that every time an
option is granted, the authorized pool of shares is reduced by one (1) share and every time a Full Value Award is granted, the
authorized pool of shares is reduced by 3 shares. In deriving the valuation ratio used in the 2013 Plan, the Company used the
Black Scholes Fair Value model as the basis for determining the approximate value of an option as compared to a "full value
share." As of December 31, 2016, there were 867,569 shares available for grant under the plan.

LTIP awards provide certain senior executives an opportunity to receive award payments in either stock or cash as determined
by the Personnel and Compensation Committee of the Board of Directors in accordance with the Plan, at the end of each
performance cycle. For the performance cycle, the Company’s financial results are compared to the Russell 2000 indices for the
same periods based upon the following: (a) average return on total capital, (b) earnings per share growth and (c) total return to
shareholders. No awards will be payable if the Company’s performance is in the bottom quartile of the designated indices. The
maximum award is payable if performance reaches the 75th percentile of the designated indices. Awards are paid out at 100% at
the 50th percentile. Awards for performance between the 25th and 75th percentiles are determined by straight-line interpolation
between 0% and 200%. Generally, LTIP awards are paid in cash.

Stock options are granted with an exercise price equal to the average market price of our stock at the date of grant. Stock
options and Stock Appreciation Rights ("SARs") granted under the plan generally expire ten years from the date of grant and
vest 20% each year over a 5-year period on each of the first five anniversaries of the date of grant. Restricted Stock Awards
("RSAs") are generally granted with restrictions that lapse at the rate of 20% per year over a 5-year period on each of the first
five anniversaries of the date of grant. Generally, these awards are subject to forfeiture if a recipient separates from service with
the Company.

During the first quarter of 2016, the Company issued additional stock awards with market and performance based conditions,
bringing the total of these shares to 8,979, assuming a 100% achievement level. The Company measures the cost of these
awards based on their grant date fair value to the extent of the probable number of shares to be earned upon vesting.
Amortization of this cost will be recorded on a straight-line basis over the requisite service period. Throughout the course of the
requisite service period, the Company will monitor the level of achievement compared to the target and adjust the number of
shares expected to be earned, and the related compensation expense recorded thereafter, to reflect the updated most probable
outcome. Compensation expense for these awards for the years ended December 31, 2016 and 2015 was not material.

103

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

18. SHARE-BASED ARRANGEMENTS (CONTINUED)

Stock Incentive Plan - continued

Stock option activity is as follows:

Options outstanding at December 31, 2015...................................................................
Granted ...................................................................................................................
Exercised.................................................................................................................
Forfeited or expired ................................................................................................
Options outstanding at December 31, 2016...................................................................

1,040,036
230,197
(272,411)
(39,143)
958,679

33.22
42.86
30.04
39.32
36.18

Options

Weighted average-
exercise price

The following table presents information regarding options outstanding as of December 31, 2016:

Weighted-average remaining contractual term - options outstanding (years) ...........................................................
Aggregate intrinsic value - options outstanding (in thousands)................................................................................. $
Weighted-average exercise price - options outstanding............................................................................................. $
Options exercisable....................................................................................................................................................
Weighted-average remaining contractual term - options exercisable (years)............................................................
Aggregate intrinsic value - options exercisable (in thousands) ................................................................................. $
Weighted-average exercise price - options exercisable ............................................................................................. $

6.2
12,219
36.18
425,307
4.2
7,587
31.09

The intrinsic value represents the amount by which the market price of the stock on the measurement date exceeds the exercise
price of the option. The intrinsic value of options exercised in 2016, 2015 and 2014 was $3.9 million, $1.0 million and $2.9
million, respectively. The Company currently has an open stock repurchase plan, which would enable the Company to
repurchase shares as needed. Since 2008 the Company has generally issued shares related to option exercises and RSAs from
its authorized but unissued common stock.

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:

Expected option term (years) ...................................................................................
Expected volatility....................................................................................................
Risk-free interest rate ...............................................................................................
Expected dividend yield ...........................................................................................
Per share fair value of options granted.....................................................................

5.2
26.0%
1.2%
1.8%
8.63

5.1
29.0%
1.6%
1.6%
9.28

5.1
37.5%
1.5%
1.7%

11.60

2016

2015

2014

The expected term of options granted represents the period of time option grants are expected to be outstanding based upon
historical exercise patterns. Forfeitures of options are estimated based upon historical data and are adjusted based upon actual
occurrences. The cumulative effect of stock award forfeitures was immaterial. The volatility assumption is based on the
historical daily price data of the Company’s stock over a period equivalent to the weighted-average expected term of the
options. Management evaluated whether there were factors during that period that were unusual and would distort the volatility
figure if used to estimate future volatility and concluded that there were no such factors. The Company relies only on historical
volatility since future volatility is expected to be consistent with historical volatility.

The risk-free interest rate assumption is based upon the interpolation of various U.S. Treasury rates determined at the date of
option grant. Expected dividends are based upon a historical analysis of our dividend yield over the past year.

104

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

18. SHARE-BASED ARRANGEMENTS (CONTINUED)

Stock Incentive Plan - continued

Restricted Stock Award and Restricted Stock Unit activity is as follows:

Restricted Stock outstanding at December 31, 2015 .............................................
Granted ...........................................................................................................
Vested..............................................................................................................
Forfeited or expired ........................................................................................
Restricted Stock outstanding at December 31, 2016 .............................................

Restricted Stock
Awards

Weighted-
average grant
date fair value

183,543
82,519
(87,424)
(10,964)
167,674

37.80
42.73
37.94
39.71
40.27

The grant date fair value for restricted stock is the average market price of the unrestricted shares on the date of grant. The total
fair value of restricted stock awards vested during 2016, 2015 and 2014 was $4.3 million, $3.8 million and $4.5 million,
respectively.

We record a tax benefit and associated deferred tax asset for compensation expense recognized on non-qualified stock options
and restricted stock for which we are allowed a tax deduction. For 2016, 2015 and 2014, respectively, we recorded a tax benefit
of $2.0 million, $2.2 million and $1.9 million for these two types of compensation expense.

The windfall tax benefit is the tax benefit realized on the exercise of non-qualified stock options and disqualifying dispositions
of stock acquired by exercise of incentive stock options and Employee Stock Purchase Plan stock purchases in excess of the
deferred tax asset originally recorded. During the fourth quarter of 2016, the Company early adopted ASU 2016-09,
"Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting". Prior to
the adoption of this standard update, windfall tax benefits were recorded in equity. With the adoption of this standard update, all
of the tax effects related to share-based payments at settlement or expiration now flow through the income statement.
Accordingly, there was no windfall tax benefit realized in 2016. The total windfall tax benefit realized in 2015 and 2014 was
$0.3 million and $0.8 million, respectively.

As of December 31, 2016, future compensation costs related to non-vested stock options and restricted stock grants is $7.4
million. The Company anticipates that this cost will be recognized over a weighted-average period of 2.9 years.

Employees Stock Purchase Plan

The Kaman Corporation Employees Stock Purchase Plan (“ESPP”) allows employees to purchase common stock of the
Company, through payroll deductions, at 85% of the market value of shares at the time of purchase. The plan provides for the
grant of rights to employees to purchase a maximum of 1,500,000 shares of common stock.

During 2016, 74,273 shares were issued to employees at prices ranging from $32.95 to $42.40. During 2015, 79,294 shares
were issued to employees at prices ranging from $31.64 to $36.46. During 2014, 76,805 shares were issued to employees at
prices ranging from $32.48 to $36.42. At December 31, 2016, there were 235,065 shares available for purchase under the plan.

19. SEGMENT AND GEOGRAPHIC INFORMATION

The Company is organized based upon the nature of its products and services, and is composed of two operating segments each
overseen by a segment manager. These segments are reflective of how the Company’s Chief Executive Officer, who is its Chief
Operating Decision Maker (“CODM”), reviews operating results for the purposes of allocating resources and assessing
performance. The Company has not aggregated operating segments for purposes of identifying reportable segments.

The Distribution segment is a leading power transmission, motion control, and fluid power industrial distributor with
operations throughout the United States. Distribution conducts business in the mechanical power transmission and bearings,
electrical, automation and control, and fluid power product platforms and provides total solutions from system design and
integration to machine parts and value-added services to the national manufacturing industry.

105

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

19. SEGMENT AND GEOGRAPHIC INFORMATION (CONTINUED)

The Aerospace segment 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; and safe and arming solutions for missile and bomb systems for the U.S. and allied militaries. The segment also
markets the design and supply of aftermarket parts to businesses performing MRO in aerospace markets; performs helicopter
subcontract work; restores, modifies and supports the Company's SH-2G Super Seasprite maritime helicopters; manufactures
and supports the Company's K-MAX® manned and unmanned medium-to-heavy lift helicopters; and provides engineering
design, analysis and certification services.

Summarized financial information by business segment is as follows:

For the year ended December 31,
2014
2015
2016

In thousands
Net sales from continuing operations:

Distribution .......................................................................................................
Aerospace (a) ......................................................................................................
Net sales ...................................................................................................................
Operating income:

Distribution .......................................................................................................
Aerospace..........................................................................................................
Net gain (loss) on sale of assets ........................................................................
Corporate expense.............................................................................................
Operating income from continuing operations.........................................................
Interest expense, net .................................................................................................
Other expense, net ....................................................................................................
Earnings before income taxes from continuing operations ......................................
Income tax expense ..................................................................................................
Earnings from continuing operations .......................................................................

$ 1,106,322
702,054
$ 1,808,376

$ 1,177,539
597,586
$ 1,775,125

$ 1,161,992
632,970
$ 1,794,962

41,859
115,005
(11)
(50,930)
105,923
15,747
472
89,704
30,850
58,854

49,441
110,328
328
(55,578)
104,519
13,144
3,386
87,989
27,551
60,438

56,765
108,697
(233)
(54,722)
110,507
13,382
623
96,502
30,722
65,780

(a) Net sales by the Aerospace segment under contracts with USG agencies (including sales to foreign governments through

foreign military sales contracts with USG agencies) totaled $244.4 million, $211.4 million and $271.7 million in 2016, 2015
and 2014, respectively, and represent direct and indirect sales to the USG and related agencies.

106

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

19. SEGMENT AND GEOGRAPHIC INFORMATION (CONTINUED)

In thousands
Identifiable assets (a):

At December 31,
2015

2014

2016

540,900

558,630

547,350

720,823

164,563

738,426

142,555

531,868

120,063

Total assets

Capital expenditures:

$ 1,426,286

$ 1,439,611

$ 1,199,281

9,016

10,685

17,935

2,826

13,378

5,869

12,205

12,044

4,034

29,777

29,932

28,283

44,929

23,584

37,729

16,107

16,368

16,275

5,238

5,086

14,461

16,039

5,709

36,209

deferred income tax assets, cash surrender value of life insurance policies and fixed assets.

The following table summarizes total sales of the Company, which are principally derived from the sale of products:

For the year ended December 31,

2016

2015

2014

in thousands
Bearings and Power Transmission (a)......................................................
Automation, Control and Energy............................................................
Fluid Power.............................................................................................
Military and Defense, other than fuzes...................................................
Missile and Bomb Fuzes(b)......................................................................
Commercial Aerospace and Other..........................................................
Total sales (c) ...........................................................................................

548,736

594,511

337,428

220,158

205,812

164,187

332,055

354,771

228,257

242,112

120,755

234,719

630,557

300,861

230,574

265,096

126,436

241,438

1,808,376

1,775,125

1,794,962

(a) Aerospace bearings are not included in this caption, as they are reported in either the "Military and Defense" or

"Commercial Aerospace and Other" categories.

(b) Sales of missile and bomb fuzes are to the USG and Foreign Militaries and were previously included in the Military and

Defense line item.

107

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 2016, 2015 and 2014

19. SEGMENT AND GEOGRAPHIC INFORMATION (CONTINUED)

Sales are attributed to geographic regions based on the location to which the product is shipped. Geographic distribution of
sales recorded by continuing operations is as follows:

For the year ended December 31,
2015

2014

2016

In thousands
North America..............................................................................................
Europe ..........................................................................................................
Middle East ..................................................................................................
Asia...............................................................................................................
Oceania.........................................................................................................
Other.............................................................................................................
Total..............................................................................................................

1,514,595
168,456
61,409
46,805
13,385
3,726
1,808,376

Geographic distribution of long-lived assets is as follows:

In thousands
United States ............................................................................................................................
Germany ...................................................................................................................................
United Kingdom.......................................................................................................................
Czech Republic ........................................................................................................................
Mexico......................................................................................................................................
Total..........................................................................................................................................

1,518,416
112,057
65,740
33,020
37,959
7,933
1,775,125

1,576,041
117,686
4,378
29,115
65,122
2,620
1,794,962

At December 31,

2016

2015

465,906
151,336
44,702
4,766
1,650
668,360

466,626
168,182
55,627
4,389
1,937
696,761

The decreases in long-lived assets in Germany and the United Kingdom are primarily related to changes in foreign currency
rates. For the purpose of this disclosure the Company excluded deferred tax assets of $59.4 million and $66.8 million as of
December 31, 2016 and 2015, respectively.

20. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the issuance date of these financial statements. No material subsequent
events were identified that require disclosure.

108

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

ITEM 9.

None.

ITEM 9A.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company has carried out an evaluation, under the supervision and with the participation of our management, including the
Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s
disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer
have concluded that, as of December 31, 2016, the Company's disclosure controls and procedures were effective.

Management’s Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting.
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally
accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Management has assessed the effectiveness of the Company’s internal control over financial reporting as
of December 31, 2016.

In making its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31,
2016, management utilized the criteria set forth by the Committee of Sponsoring Organizations ("COSO") of the Treadway
Commission in Internal Control—Integrated Framework (2013). Management concluded that based on its assessment the
Company’s internal control over financial reporting was effective as of December 31, 2016. The effectiveness of internal
control over financial reporting as of December 31, 2016, has been audited by PricewaterhouseCoopers LLP, an independent
registered public accounting firm, as stated in their report, which is included in Item 8 of this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

Management of the Company has evaluated, with the participation of the Company’s Chief Executive Officer and Chief
Financial Officer, changes in the Company’s internal controls over financial reporting during 2016.

During the fourth quarter ended December 31, 2016, management made no changes to internal control over financial reporting
that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations of Controls

The Company’s evaluation described in this Item was undertaken acknowledging that there are inherent limitations to the
effectiveness of any system of controls, including the possibility of human error and the circumvention or overriding of the
controls and procedures. Accordingly, even effective controls can only provide reasonable assurance of achieving their control
objectives.

ITEM 9B.

OTHER INFORMATION

None.

109

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Other than the list of executive officers of the Company set forth in Item 1, Executive Officers of the Registrant, all information
under this caption may be found in the Company’s proxy statement to be delivered to stockholders in connection with the
Annual Meeting of Shareholders, which is scheduled for April 19, 2017, (the “Proxy Statement”) in the following sections:
“Class 3 Director Nominees for Election at the 2017 Annual Meeting,” “Continuing Directors,” “Section 16(a) Beneficial
Ownership Reporting Compliance,” “Director Nominees,” and “Audit Committee.” Those portions of the Proxy Statement are
incorporated by reference into this Item 10.

ITEM 11.

EXECUTIVE COMPENSATION

Information about the compensation of Kaman’s named executive officers appears under the captions "Compensation
Discussion and Analysis" and "Summary Compensation Table" in the Proxy Statement. Information about the compensation of
Kaman’s directors appears under "Non-Employee Director Compensation" in the Proxy Statement. Those portions of the Proxy
Statement are incorporated by reference into this Item 11.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

Information about security ownership of certain beneficial owners and management appears under "Security Ownership of
Certain Beneficial Owners and Management" in the Proxy Statement. That portion of the Proxy Statement is incorporated by
reference into this Item 12.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The following table provides information as of December 31, 2016, concerning Common Stock issuable under the Company’s
equity compensation plans.

(a)
Number of
securities to be issued
upon exercise of
outstanding
options, warrants and
rights

(b)
Weighted-
average exercise price
of outstanding
options, warrants
and rights

(c)
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column
(a))

413,311
545,368
—

—
958,679

30.12
40.78
—

—
36.18

—
867,569
235,065

—
1,102,634

Plan Category
Equity compensation plans approved by
security holders:

2003 Stock Incentive Plan ..........................
2013 Management Incentive Plan ..............
Employees Stock Purchase Plan.................

Equity compensation plans not approved by
security holders ..................................................
Total ...................................................................

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

Information about certain relationships and related transactions appears under “Transactions With Related Persons” and “Board
and Committee Independence Requirements” in the Proxy Statement. Those portions of the Proxy Statement are incorporated
by reference into this Item 13.

110

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

Information regarding audit fees and all other fees, in addition to the Audit Committee’s pre-approval policies and procedures
appears under “Principal Accounting Fees and Services” in the Proxy Statement. That portion of the Proxy Statement is
incorporated by reference into this Item 14.

111

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

PART IV

(a)(1)

FINANCIAL STATEMENTS.

See Item 8 of this Form 10-K setting forth our Consolidated Financial Statements.

(a)(2)

FINANCIAL STATEMENT SCHEDULES.

An index to the financial statement schedule immediately precedes such schedule.

(a)(3)

EXHIBITS.
An index to the exhibits filed or incorporated by reference immediately precedes such exhibits.

ITEM 16.

FORM 10-K SUMMARY

None.

112

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the Town of Bloomfield, State of Connecticut,
on this 28th day of February 2017.

SIGNATURES

KAMAN CORPORATION
(Registrant)

By:

/s/ Neal J. Keating
Neal J. Keating
Chairman, President,
Chief Executive Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title:

Date:

/s/ Neal J. Keating

Neal J. Keating

/s/ Robert D. Starr

Robert D. Starr

/s/ John J. Tedone

John J. Tedone

/s/ Neal J. Keating

Neal J. Keating

Attorney-in-Fact for:

Brian E. Barents

E. Reeves Callaway III

Karen M. Garrison

A. William Higgins

Scott E. Kuechle

George E. Minnich

Jennifer M. Pollino

Thomas W. Rabaut

Richard J. Swift

Chairman, President,

February 28, 2017

Chief Executive Officer and Director

(Principal Executive Officer)

Executive Vice President

February 28, 2017

and Chief Financial Officer
(Principal Financial Officer)

Vice President – Finance and

February 28, 2017

Chief Accounting Officer

(Principal Accounting Officer)

February 28, 2017

Director

113

KAMAN CORPORATION AND SUBSIDIARIES

Index to Financial Statement Schedule

Report of Independent Registered Public Accounting Firm

Financial Statement Schedule:

Schedule II - Valuation and Qualifying Accounts

114

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL STATEMENT
SCHEDULE

To the Board of Directors
of Kaman Corporation:

Our audits of the consolidated financial statements and of the effectiveness of internal control over financial reporting referred
to in our report dated February 28, 2017 included under Item 8 in this Annual Report on Form 10-K also included an audit of
the financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated
financial statements.

/s/ PricewaterhouseCoopers LLP

Hartford, Connecticut
February 28, 2017

115

KAMAN CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(Dollars in Thousands)

DESCRIPTION

Additions

Balance
Beginning of
Period

Charged to
Costs and
Expenses

Others (A)

Deductions
(B)

Balance End
of
Period

2016
Allowance for doubtful accounts........................
2015
Allowance for doubtful accounts........................
2014
Allowance for doubtful accounts........................

2,989

3,208

3,827

2,635

1,694

1,171

148

1,520

2,009

1,938

4,123

2,989

3,208

(A) Additions to allowance for doubtful accounts attributable to acquisitions.
(B) Recoveries and write-off of bad debts.

DESCRIPTION

2016
Valuation allowance on deferred tax assets............................
2015
Valuation allowance on deferred tax assets............................
2014
Valuation allowance on deferred tax assets............................

Additions (Reductions)

Balance
Beginning of
Period

Current Year
Provision
(Benefit)

Others

Balance End
of Period

11,122

4,694

4,657

269

281

363

(7,248) $

4,143

6,147

11,122

(326) $

4,694

116

Exhibit 3.1

Exhibit 3.2

Exhibit 4.1

Exhibit 10.1

Exhibit 10.2

Exhibit 10.3

Exhibit 10.4

Exhibit 10.5

Exhibit 10.6

Exhibit 10.7

Exhibit 10.8

Exhibit 10.9

KAMAN CORPORATION
INDEX TO EXHIBITS

Amended and Restated Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to the Company's Current Report on Form 8-K dated November
4, 2005, File No. 333-66179).

Previously
Filed

Amended and Restated Bylaws of the Company, (incorporated by reference to Exhibit
3.1 to the Company's Current Report on Form 8-K dated February 28, 2008, File No.
000-01093).

Amended and Restated Indenture, dated as of February 23, 2011, by and between the
Company and The Bank of New York Mellon Trust Company, as Trustee (incorporated
by reference to Exhibit 4.1 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2010, File No. 000-01093).

Previously
Filed

Kaman Corporation 2013 Management Incentive Plan (incorporated by reference to
Annex A to the Company's Definitive Proxy Statement on Schedule 14A filed with the
Securities and Exchange Commission on March 1, 2013, File No. 001-35419).*

Previously
Filed

First Amendment to the Kaman Corporation 2013 Management Incentive Plan
(incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-
K dated February 23, 2015, File No. 001-35419).*

Previously
Filed

Form of Nonqualified Stock Option Agreement under the Kaman Corporation 2013
Management Incentive Plan (incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K dated February 24, 2014, File No.
001-35419).*

Form of Restricted Share Agreement under the Kaman Corporation 2013 Management
Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company's Current
Report on Form 8-K dated February 24, 2014, File No. 001-35419).*

Form of Restricted Stock Unit Agreement under the Kaman Corporation 2013
Management Incentive Plan (incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K dated June 6, 2014, File No 001-35419).*

Form of Long-Term Performance Award Agreement (Payable in Cash) under the Kaman
Corporation 2013 Management Incentive Plan (incorporated by reference to Exhibit
10.3 to the Company's Current Report on Form 8-K dated February 24, 2014, File No.
001-35419).*

Form of Long-Term Performance Award Agreement (Payable in Shares) granted under
the Kaman Corporation 2013 Management Incentive Plan (incorporated by reference to
Exhibit 10.4 to the Company's Current Report on Form 8-K dated February 24, 2014,
File No. 001-35419).*

Form of Award Agreement for Non-Employee Directors under the Kaman Corporation
2013 Management Incentive Plan.(incorporated by reference to Exhibit 10.6 to the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014,
File No. 001-35419).*

Kaman Corporation 2003 Stock Incentive Plan (incorporated by reference to Exhibit 10
(a)(i) to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
October 2, 2009, File No. 000-01093), as amended by amendments thereto filed with
the SEC on April 7, 2010 (incorporated by reference to Exhibit 99.1 to the Company's
Current Report on Form 8-K dated April 7, 2010, File No. 000-01093) and November 1,
2010 (incorporated by reference to Exhibit 10(b) to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended October 1, 2010, File No. 000-01093), and
February 22, 2012 (incorporated by reference to Exhibit 99.2 to the Company's Current
Report on Form 8-K, dated February 22, 2012, File No. 000-01093).*

Previously
Filed

117

Exhibit 10.10

Exhibit 10.11

Exhibit 10.12

Exhibit 10.13

Exhibit 10.14

Exhibit 10.15

Exhibit 10.16

Exhibit 10.17

Exhibit 10.18

Form of Incentive Stock Option Agreement under the Kaman Corporation 2003 Stock
Incentive Plan (incorporated by reference to Exhibit 10h(i) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2008, File No.
000-01093).*

Form of Non-Statutory Stock Option Agreement under the Kaman Corporation 2003
Stock Incentive Plan (incorporated by reference to Exhibit 10h(ii) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2008, File No.
000-01093).*

Form of Stock Appreciation Rights Agreement under the Kaman Corporation 2003
Stock Incentive Plan (incorporated by reference to Exhibit 10h(iii) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2008, File No.
000-01093).*

Previously
Filed

Form of Restricted Stock Agreement under the Kaman Corporation 2003 Stock
Incentive Plan (incorporated by reference to Exhibit 10h(iv) to the Company's Form 10-
Q for the fiscal quarter ended June 27, 2007, File No. 000-01093).*

Previously
Filed

Form of Long Term Performance Award Agreement under the Kaman Corporation 2003
Stock Incentive Plan (incorporated by reference to Exhibit 10h(v) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2011, File No.
001-35419).*

Previously
Filed

Form of Restricted Stock Unit Agreement under the Kaman Corporation 2003 Stock
Incentive Plan (incorporated by reference to Exhibit 10h(vi) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2009, File No.
000-10093).*

Kaman Corporation Employees Stock Purchase Plan (incorporated by reference to
Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended October 1, 2010, File No. 000-01093), as amended by the First Amendment
thereto filed with the SEC on February 27, 2012 (incorporated by reference to Exhibit
10b to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2011, File No. 001-35419), the Second Amendment thereto filed with the SEC on
February 25, 2013 (incorporated by reference to Exhibit 10.3 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2012, File No. 001-35419)
and the Third Amendment thereto filed with the SEC on February 23, 2015 by reference
to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2014, File No. 001-35419).*

Kaman Corporation Supplemental Employees' Retirement Plan (incorporated by
reference to Exhibit 10c to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2000, File No. 333-66179), as amended by an amendment
thereto filed with the SEC on March 5, 2004 (incorporated by reference to Exhibit 10c
to the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2003, File No. 333-66179), and an amendment thereto filed with the SEC on February
26, 2007 (incorporated by reference to Exhibit 10.10 to the Company's Current Report
on Form 8-K, dated February 26, 2007, File No. 000-01093).*

Post-2004 Supplemental Employees' Retirement Plan (incorporated by reference to
Exhibit 10.11 to the Company's Current Report on Form 8-K, dated February 26, 2007,
File No. 000-01093), as amended by the First Amendment thereto filed with the SEC on
February 28, 2008 (incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K, dated February 28, 2008, File No. 000-01093) and the Second
Amendment thereto filed with the SEC on February 25, 2010 (incorporated by reference
to Exhibit 10(c)(iii) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2009, File No. 000-01093).*

Previously
Filed

118

Exhibit 10.19

Exhibit 10.20

Exhibit 10.21

Exhibit 10.22

Exhibit 10.23

Exhibit 10.24

Exhibit 10.25

Exhibit 10.26

Kaman Corporation Amended and Restated Deferred Compensation Plan (incorporated
by reference to Exhibit 10d to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2002, File No. 333-66179), as amended by an
amendment thereto filed with the SEC on March 5, 2004 (incorporated by reference to
Exhibit 10d to the Company's Annual report on Form 10-K for the fiscal year ended
December 31, 2003 File No. 333-66179), and an amendment thereto filed with the SEC
on August 3, 2004 (incorporated by reference to Exhibit 10(a) to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2004, File No.
333-66179).*

Kaman Corporation Post-2004 Deferred Compensation Plan (incorporated by reference
to Exhibit 10.2 to the Company's Current Report on Form 8-K, dated February 28, 2008,
File No. 000-01093), as amended by the First Amendment thereto filed with the SEC on
February 27, 2012 (incorporated by reference to Exhibit 10d(ii) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2011, File No.
001-35419), the Second Amendment thereto (incorporated by reference to Exhibit 10.20
to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2014, File No. 001-35419), the Third Amendment thereto (incorporated by reference to
Exhibit 10.2 to the Company’s Current Report on Form 8-K dated November 21, 2014,
File No. 001-35419) and the Fourth Amendment thereto (incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K dated June 13, 2016, File
No. 001-35419). *

Amended and Restated Executive Employment Agreement between Kaman Corporation
and Neal J. Keating, originally dated as of August 7, 2007 and amended and restated as
of November 11, 2008 (incorporated by reference to Exhibit 10g(xviii) to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2008,
File No. 000-01093), as amended by Amendment No. 1 thereto dated January 1, 2010
(incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-
K, dated February 23, 2010, File No. 000-01093), Amendment No. 2 thereto dated
September 17, 2010 (incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K, dated September 20, 2010, File No. 000-01093), and
Amendment No. 3 thereto dated November 18, 2014 (incorporated by reference to
Exhibit 10.3 to the Company's Current Report on Form 8-K, dated November 21, 2014,
File No. 000-01093).*

Executive Employment Agreement between Kaman Corporation and Robert D. Starr,
dated as of November 18, 2014 (incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K dated November 21, 2014, File No.
001-35419).*

Amended and Restated Executive Employment Agreement between Kaman Aerospace
Group, Inc. and Gregory L. Steiner, originally dated as of July 7, 2008 and amended and
restated as of November 11, 2008 (incorporated by reference to Exhibit 10g(xx) to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended April 3, 2009,
File No. 000-01093), as amended by Amendment No. 1 thereto, dated June 7, 2011
(incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-
K dated June 7, 2011, File No. 000-01093).*

Previously
Filed

Executive Employment Agreement between Kaman Industrial Technologies Corporation
and Steven J. Smidler dated as of September 1, 2010 (incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K dated September 10, 2010,
File No. 000-01093.)*

Previously
Filed

Form of Amended and Restated Change in Control Agreement (incorporated by
reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated April 22,
2016, File No. 001-35419).*

Previously
Filed

Purchase Agreement dated November 15, 2010, by and among Kaman Corporation,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, and RBS Securities Inc., as
representatives of the several Initial Purchasers (incorporated by reference to Exhibit
10.1 to the Company's Current Report on Form 8-K dated November 19, 2010, File No.
000-01093).

Previously
Filed

119

Exhibit 10.27

Exhibit 10.28

Exhibit 10.29

Exhibit 10.30

Exhibit 10.31

Exhibit 10.32

Exhibit 10.33

Exhibit 10.34

Exhibit 10.35

Exhibit 10.36

Exhibit 10.37

Exhibit 10.38

Base Convertible Bond Hedging Transaction Confirmation dated November 15, 2010,
by and between Kaman Corporation and The Royal Bank of Scotland plc, acting
through RBS Securities Inc., as its agent (incorporated by reference to Exhibit 10.2(a) to
the Company's Current Report on Form 8-K dated November 19, 2010, File No.
000-01093).

Base Convertible Bond Hedging Transaction Confirmation dated November 15, 2010,
by and between Kaman Corporation and Goldman, Sachs & Co. (incorporated by
reference to Exhibit 10.2(b) to the Company's Current Report on Form 8-K dated
November 19, 2010, File No. 000-01093).

Base Convertible Bond Hedging Transaction Confirmation dated November 15, 2010,
by and between Kaman Corporation and Bank of America, N.A. (incorporated by
reference to Exhibit 10.2(c) to the Company's Current Report on Form 8-K dated
November 19, 2010, File No. 000-01093).

Previously
Filed

Confirmation of Base Warrants dated November 15, 2010, by and between Kaman
Corporation and The Royal Bank of Scotland plc, acting through RBS Securities Inc., as
its agent (incorporated by reference to Exhibit 10.3(a) to the Company's Current Report
on Form 8-K dated November 19, 2010, File No. 000-01093).

Previously
Filed

Confirmation of Base Warrants dated November 15, 2010, by and between Kaman
Corporation and Goldman, Sachs & Co. (incorporated by reference to Exhibit 10.3(b) to
the Company's Current Report on Form 8-K dated November 19, 2010, File No.
000-01093).

Previously
Filed

Confirmation of Base Warrants dated November 15, 2010, by and between Kaman
Corporation and Bank of America, N.A., filed as (incorporated by reference to Exhibit
10.3(c) to the Company's Current Report on Form 8-K dated November 19, 2010, File
No. 000-01093).

Additional Convertible Bond Hedging Transaction Confirmation dated November 17,
2010, by and between Kaman Corporation and The Royal Bank of Scotland plc, acting
through RBS Securities Inc., as its agent, (incorporated by reference to Exhibit 10.4(a)
to the Company's Current Report on Form 8-K dated November 19, 2010, File No.
000-01093).

Additional Convertible Bond Hedging Transaction Confirmation dated November 17,
2010, by and between Kaman Corporation and Goldman, Sachs & Co. (incorporated by
reference to Exhibit 10.4(b) to the Company's Current Report on Form 8-K dated
November 19, 2010, File No. 000-01093).

Additional Convertible Bond Hedging Transaction Confirmation dated November 17,
2010, by and between Kaman Corporation and Bank of America, N.A. (incorporated by
reference to Exhibit 10.4(c) to the Company's Current Report on Form 8-K dated
November 19, 2010, File No. 000-01093).

Previously
Filed

Confirmation of Additional Warrants dated November 17, 2010, by and between Kaman
Corporation and The Royal Bank of Scotland plc, acting through RBS Securities Inc., as
its agent (incorporated by reference to Exhibit 10.5(a) to the Company's Current Report
on Form 8-K dated November 19, 2010, File No. 000-01093).

Previously
Filed

Confirmation of Additional Warrants dated November 17, 2010, by and between Kaman
Corporation and Goldman, Sachs & Co. (incorporated by reference to Exhibit 10.5(b) to
the Company's Current Report on Form 8-K dated November 19, 2010, File No.
000-01093).

Previously
Filed

Confirmation of Additional Warrants dated November 17, 2010, by and between Kaman
Corporation and Bank of America, N.A. (incorporated by reference to Exhibit 10.5(c) to
the Company's Current Report on Form 8-K dated November 19, 2010, File No.
000-01093).

Previously
Filed

120

Exhibit 10.39

Exhibit 10.40

Exhibit 10.41

Credit Agreement dated as of November 20, 2012 among Kaman Corporation, RWG
Frankenjura-Industrie Flugwerklager GmbH and Kaman Composites-UK Holdings
Limited, as Borrowers, JPMorgan Chase Bank, N.A. as Co-Syndication Agents, and
Banc of America Securities LLC, RBS Citizens, N.A, as Administrative Agent, and RBS
Citizens, N.A. as Co-Syndication Agents, and J.P. Morgan Securities LLC, RBS
Citizens, N.A. as Co-Lead Arrangers and Book Managers, and various Lenders
signatory thereto (incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K dated November 21, 2012, File No. 001-35419.)

Security Agreement dated as of November 20, 2012 among Kaman Corporation,
JPMorgan Chase Bank, N.A., as Administrative Agent and the domestic subsidiary
guarantors signatory thereto (incorporated by reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K dated November 21, 2012, File No.
001-35419.)

Amendment and Restatement Agreement, dated as of May 6, 2015, by and among
Kaman Corporation, RWG Germany GmbH and Kaman Composites-UK Holdings
Limited, as Borrowers, JPMorgan Chase Bank, N.A., as Administrative Agent, and
Bank of America, N.A. and Citizens Bank, N.A. as Co-Syndication Agents, including,
attached as Exhibit A thereto, the Credit Agreement dated as of November 20, 2012, as
amended and restated as of May 6, 2015, among Kaman Corporation, RWG Germany
GmbH and Kaman Composites-UK Holdings Limited, as Borrowers, JPMorgan Chase
Bank, N.A., as Administrative Agent, Bank of America, N.A. and Citizens Bank, N.A.
as Co-Syndication Agents, Suntrust Bank, Keybank National Association, TD Bank,
N.A., Branch Banking & Trust Company and Fifth Third Bank, as Co-Documentation
Agents, and J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Citizens Bank, N.A., as Joint Bookrunners and Joint Lead Arrangers,
and various Lenders signatory thereto (incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K dated May 7, 2015, File No. 001-35419).

Previously
Filed

Exhibit 10.42

Share Purchase Agreement, signed on November 9, 2015, by and among Kaman
Aerospace Group, Inc., as Purchaser, and NIBC MBF Equity lB B.V., NIBC MBF
Mezzanine JR B.V., Michael Ludwig and Klaus Bonaventura, as Sellers (incorporated
by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K dated
December 2, 2015, File No. 00l35419).**

Previously
Filed

Exhibit 14

Kaman Corporation Code of Business Conduct and Ethics effective as of January 1,
2013 (incorporated by reference to Exhibit 14 to the Company's Current Report on Form
8-K dated November 9, 2012, File No. 001-35419).

Previously
Filed

Exhibit 21

List of Subsidiaries

Filed
Herewith

Exhibit 23

Consent of PricewaterhouseCoopers LLP, the Company’s current independent registered
public accounting firm.

Filed
Herewith

Exhibit 24

Power of attorney under which this report was signed on behalf of certain directors

Exhibit 31.1

Certification of Chief Executive Officer Pursuant to Rule 13a-14 under the Securities
and Exchange Act of 1934.

Filed
Herewith

Exhibit 31.2

Exhibit 32.1

Exhibit 32.2

Certification of Chief Financial Officer Pursuant to Rule 13a-14 under the Securities
and Exchange Act of 1934.

Filed
Herewith

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Filed
Herewith

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Filed
Herewith

101.INS

XBRL Instance Document

Filed
Herewith

121

101.SCH

XBRL Taxonomy Extension Schema

101.CAL

XBRL Taxonomy Extension Calculation Linkbase

101.DEF

XBRL Taxonomy Extension Definition Linkbase

101.LAB

XBRL Taxonomy Extension Label Linkbase

101.PRE

XBRL Taxonomy Extension Presentation Linkbase

Filed
Herewith

* Management contract or compensatory plan
** Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish
supplementally to the U.S. Securities and Exchange Commission a copy of any omitted schedule or exhibit upon request.

122

This page intentionally left blank.

LEADERSHIP
KAMAN CORPORATION AND SUBSIDIARIES

CORPORATE
LEADERSHIP

AEROSPACE
LEADERSHIP

DISTRIBUTION
LEADERSHIP

DIRECTORS

Neal J. Keating
Chairman, President and
Chief Executive Officer

Robert D. Starr
Executive Vice President and
Chief Financial Officer

Philip A. Goodrich
Senior Vice President –
Corporate Development

Shawn G. Lisle
Senior Vice President, General
Counsel and Assistant Secretary

Gregory T. Troy
Senior Vice President –
Human Resources and
Chief Human Resources Officer

Paul M. Villani
Senior Vice President and
Chief Information Officer

Jairaj Chetnani
Vice President and Treasurer

Richard C. Forsberg
Vice President –
Chief Ethics and Compliance
Officer and Vice President –
Contracts Management
Kaman Aerospace Group

Michael J. Lyon
Vice President – Tax

Michael J. Morneau
Vice President and Controller

Eric B. Remington
Vice President – Investor Relations

Richard S. Smith, Jr.
Vice President,
Deputy General Counsel
and Secretary

John J. Tedone
Vice President – Finance
Chief Accounting Officer

Gary L. Tong
Vice President –
Corporate Risk, Safety and
Environmental Management

James G. Coogan
Assistant Vice President –
SEC Compliance
and External Reporting

Amanda N. Balboni
Director, Internal Audit

Gregory L. Steiner
President – Kaman Aerospace Group
and Executive Vice President –
Kaman Corporation

Steven J. Smidler
President – Kaman Industrial
Technologies (KIT) and Executive
Vice President – Kaman Corporation

Neal J. Keating
Chairman, President and
Chief Executive Officer
Kaman Corporation

John K. Stockman
Senior Vice President – Finance
Kaman Aerospace Group

Alphonse J. Lariviere, Jr.
Senior Vice President –
Finance and Administration

James C. Larwood, Jr.
Division President –
Kaman Aerosystems

Nancy L‘Esperance
Vice President – Human Resources
Kaman Aerospace Group

Robert G. Paterson
President –
Kamatics Corporation

Gerald C. Ricketts
President – Precision
Products Division of
Kaman Aerospace Corporation

Patricia W. (Tribby) Warfield
Senior Vice President and General
Manager – Automation and
Fluid Power

Thomas A. Weihsmann
Senior Vice President and General
Manager – KIT

Joseph P. Bertalli
Vice President Finance and
Business Operations – Automation
and Fluid Power

Anthony L. Clark
Vice President – KIT South

Patrick J. Wheeler
Vice President – Strategic Initiatives
Kaman Aerospace Group

Samuel G. Cooper
Vice President – KIT North Central

Michael Wilhelm
Executive Managing Director
GRW Bearing GmbH

William H. Zmyndak
Vice President and General
Manager – Kaman Integrated
Structures & Metallics

Ryan Dismukes
Vice President – Strategy and
Continuous Improvement

Joe Dujka
Vice President – Finance and
Business Operations – KIT

Philip T. Golino
Vice President – Human Resources

Brian E. Barents 3,4
President and Chief Executive
Officer, Retired, Galaxy Aerospace
Company, LP

E. Reeves Callaway III 3,4
Founder and Chief Executive Officer
The Callaway Companies

Karen M. Garrison 1*,4
Lead Independent Director;
President – Business Services,
Retired, Pitney Bowes

A. William Higgins 1,4*
Chairman, President and
Chief Executive Officer, Retired,
CIRCOR International, Inc.

Scott E. Kuechle 1,2*
Executive Vice President and
Chief Financial Officer, Retired,
Goodrich Corporation

George E. Minnich 2,3
Senior Vice President and
Chief Financial Officer, Retired,
ITT Corporation

Jennifer M. Pollino 2,3
Executive Coach and Consultant, and
Executive Vice President – Human
Resources and Communications,
Retired, Goodrich Corporation

Tom R. Holtry
Vice President – KIT
Intermountain/Pacific Northwest

Thomas W. Rabaut 2,4
Operating Executive,
The Carlyle Group

Michael J. Kelly
Vice President –
National Accounts –KIT

David H. Mayer
Vice President – Marketing

J. Louis McCord
Vice President – Sales – Automation

Thomas J. McNerney
Vice President and Controller

Michael J. Pastore
Vice President – Operations and
Business Systems

Abraham D. Samaro
Vice President – KIT California

Peter N. Stollberger
Vice President – KIT Northeast

Richard J. Swift 1, 3*
Chairman, President and
Chief Executive Officer, Retired,
Foster Wheeler, Ltd. and former
Chairman, Financial Accounting
Standards Advisory Council

DIRECTORS
EMERITUS

Frank C. Carlucci
John A. DiBiaggio
Eileen S. Kraus

STANDING COMMITTEE
ASSIGNMENTS

1 Corporate Governance
2 Audit
3 Personnel and Compensation
4 Finance
* Denotes Chairmanship

CORPORATE AND
SHAREHOLDER INFORMATION
KAMAN CORPORATION AND SUBSIDIARIES

CORPORATE HEADQUARTERS

Kaman Corporation

1332 Blue Hills Avenue

Bloomfield, Connecticut 06002

(860) 243-7100

STOCK LISTING

Kaman Corporation’s common stock is traded on the

New York Stock Exchange under the symbol KAMN.

INVESTOR, MEDIA, AND PUBLIC RELATIONS

CONTACT

Eric B. Remington

Vice President, Investor Relations

(860) 243-6334

Eric.Remington@kaman.com

ANNUAL MEETING

The Annual Meeting of Shareholders is scheduled to

be held on Wednesday, April 19, 2017 at 9:00 am local

time at the offices of the Company, 1332 Blue Hills

Avenue, Bloomfield, Connecticut, 06002.

TRANSFER AGENT

Computershare

P.O. Box 30170

College Station, Texas 77842-3170

(866) 339-2742

www.computershare.com/investor

Overnight correspondence should be sent to:

Computershare

211 Quality Circle, Suite 210

College Station, Texas 77845

Bloomfi eld, Connecticut
(860) 243–7100
www.kaman.com

POWERING
THE FUTURE