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Saturday, January 1, 2005

Rotorcraft Report: Whither MD Helicopters?

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Whither MD Helicopters?

As we went to press, speculation was rampant of a deal for Sikorsky Aircraft Corp. to acquire MD Helicopters, Inc. Individuals inside and outside the companies said they were on the brink of announcing an agreement in early December. Shortly thereafter came talk that the talks had collapsed. Still, some senior industry folks close to the companies were optimistic that a deal would be done.

MD Helicopters' fortunes are mixed, to say the least. West Virginia's state legislature recently approved funding for the state police to acquire a new MD902 Explorer, which would be slated for delivery late this year. The state police currently operate two Vietnam-era OH-6s. Another law enforcement agency in the region also is seeking approval of funding for a new MD902 acquisition.

Back in November, however, Kaman Corp. wrote down its investment in its contracts to build fuselages for MD500s and MD600s and composite rotor blades for the Explorer. The charge of $20.1 million was largely responsible for Kaman's posted 2004 third-quarter loss of $11.9 million. The company earned $1.2 million in the same quarter in 2003. Kaman has multi-year contracts to produce fuselages for MD. It had stopped work on those contracts in 2003 "because of unresolved payment issues" with MD. In explaining the decision to take the charge now, Kaman's chairman, president and CEO, Paul R. Kuhn, said, "It had been our expectation that MD Helicopters would be successful in executing its strategy to improve current financial and operational circumstances." MD's management "has not been able to resolve the situation thus far."

He added: "We intend to maintain a business relationship" with the company "should it be successful in improving its financial and operational situation."

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