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TheStreet Open House

Kaman Announces Change In Pension Accounting

Kaman Corporation (NYSE: KAMN) today announced that it is changing its policy for recognizing pension expense.

Previously, for its non-contributory qualified defined benefit pension plan (“Qualified Pension Plan”), the Company used a market-related value of plan assets reflecting changes in the fair value of plan assets amortized over a four-year period. Under the new accounting method, the market-related value of plan assets reflects the actual change in the fair value of the plan assets for the year. While the historical policy of recognizing pension expense is acceptable, the Company believes that the new policy is preferable as it eliminates the delay in recognition of the change in fair value of plan assets for the calculation of the market-related value of plan assets.

“The new method, adopted in the fourth quarter of 2011, will provide greater transparency to the Company’s underlying operating results,” commented William Denninger, Senior Vice President and CFO. “This change will have no impact on the Company’s cash flow or pension benefits for employees and retirees.”

The change in accounting has been applied retrospectively to prior periods. The new accounting policy has reduced net income previously reported for 2010 by approximately $2.7 million (or $0.11 per diluted share) and reported net income in 2009 by approximately $7.7 million (or $0.30 per diluted share). The impact on the three quarters already reported in 2011 has been an increase to net income of $1.8 million (or $0.07 per diluted share). The table below illustrates the quarterly effect on previously reported earnings per share for 2010 and 2011.

  2010   2011
Q1   Q2   Q3   Q4   Full Yr. Q1   Q2   Q3
Diluted EPS Impact
Diluted EPS -Previously Reported $ 0.07 $ 0.23 $ 0.61 $ 0.56 $ 1.47 $ 0.52 $ 0.50 $ 0.47
Pension Change Adjustment   -0.03   -0.02   -0.03   -0.03   -0.11   0.02   0.03   0.02
Diluted EPS - Revised $ 0.04 $ 0.21 $ 0.58 $ 0.53 $ 1.36 $ 0.54 $ 0.53 $ 0.49

As a result of this accounting change full year 2011 pension expense is now expected to be $3.9 million lower, on a pre-tax basis, than previous expectations. This will result in an anticipated increase to full year 2011 net earnings of $2.4 million (or $0.09 per diluted share).

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