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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
- - --- SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 1994.
------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
- - --- SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
___________ TO ______________
Commission File No. 0-1093
KAMAN CORPORATION
(Exact Name of Registrant)
Connecticut 06-0613548
(State of Incorporation) (I.R.S. Employer Identification No.)
Blue Hills Avenue
Bloomfield, Connecticut 06002
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (203) 243-7100
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of April 30, 1994:
Class A Common 17,513,994
Class B Common 667,814
Page 1 of 12 Pages
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KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets(In thousands)
<TABLE>
March 31, December 31,
Assets 1994 1993
------ ----------------- -----------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 2,863 $ 3,845
Accounts receivable (net of
allowance for doubtful
accounts of $1,681 in
1994, $1,576 in 1993) 162,505 165,615
Inventories:
Raw materials $ 10,937 $ 10,715
Work-in-process 42,816 28,241
Finished goods 1,283 1,131
Merchandise for resale 96,545 151,581 90,364 130,451
------ ------
Other current assets 16,851 16,690
------- -------
Total current assets 333,800 316,601
Property, plant & equip., at cost 177,922 175,770
Less accumulated depreciation
and amortization 96,841 94,059
------ -------
Net property, plant & equipment 81,081 81,711
Other assets 42,207 41,884
------- --------
$457,088 $440,196
======== ========
Liabilities and Shareholders' Equity
------------------------------------
<S> <C> <C> <C> <C>
Current liabilities:
Notes payable $ 27,358 $ 31,865
Accounts payable 52,025 51,246
Accrued liabilities 30,984 28,586
Other current liabilities 71,194 55,068
------ -------
Total current liabilities 181,561 166,765
Deferred credits 7,293 7,141
Long-term debt, excl. current portion 38,164 37,977
Shareholders' equity:
Series 2 preferred stock $ 57,167 $ 57,167
Other shareholders' equity 172,903 230,070 171,146 228,313
-------- ------- -------- -------
$457,088 $440,196
======== ========
</TABLE>
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KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Condensed Consolidated Statements of Earnings
(In thousands except per share amounts)
<TABLE>
For the Three Months
Ended March 31,
--------------------
1994 1993
---- ----
<S> <C> <C>
Revenues $ 197,980 $ 197,903
Costs and expenses:
Cost of sales 145,629 144,297
Selling, general and
administrative expense 44,238 44,966
Interest expense 870 1,853
Other expense 104 35
-------- --------
190,841 191,151
-------- --------
Earnings before
income taxes 7,139 6,752
Income taxes 2,899 2,740
-------- -------
Net earnings $ 4,240 $ 4,012
======== =======
Preferred stock dividend
requirement $ (929) $ -
======== =======
Earnings applicable to
common stock $ 3,311 $ 4,012
======== =======
Net earnings per common share:
Primary $ .18 $ .22
Fully diluted $ .18 $ .22
======== =======
Dividends declared per share:
Series 2 preferred stock $ 3.25 $ -
Common stock $ .11 $ .11
======== =======
</TABLE>
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KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Condensed Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
For the Three Months
Ended March 31,
-------------------
1994 1993
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 4,240 $ 4,012
Depreciation and amortization 3,138 3,353
Changes in current assets and liabilities 1,122 (23,086)
Other, net 240 163
-------- --------
Cash provided by (used in) operating
activities 8,740 (15,558)
-------- --------
Cash flows from investing activities:
Expenditures for property, plant & equipment (2,267) (2,645)
Other, net (746) (157)
------- --------
Cash provided by (used in) investing
activities (3,013) (2,802)
------- --------
Cash flows from financing activities:
Additions(reductions)to notes payable (4,507) 21,264
Dividends paid (2,926) (1,984)
Other, net 724 (1,470)
--------- --------
Cash provided by (used in) financing
activities (6,709) 17,810
--------- --------
Net increase (decrease) in cash and
cash equivalents (982) (550)
Cash and cash equivalents at beginning
of period 3,845 2,455
--------- --------
Cash and cash equivalents at end of period $ 2,863 $ 1,905
========== ========
</TABLE>
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KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Notes to Condensed Consolidated Financial Statements
(In Thousands)
Basis of Presentation
- - ----------------------
The December 31, 1993 condensed consolidated balance sheet
amounts have been derived from the previously audited consolidated
balance sheet of Kaman Corporation and subsidiaries.
The balance of the condensed financial information reflects all
adjustments which are, in the opinion of management, necessary for
a fair presentation of the financial position, results of
operations and cash flows for the interim periods presented and
are of a normal recurring nature unless otherwise disclosed in
this report.
The statements should be read in conjunction with the notes to
the consolidated financial statements included in Kaman
Corporation's 1993 Annual Report.
Earnings Per Common Share Calculations
- - --------------------------------------
The primary net earnings per common share computation is based on net
earnings less the preferred stock dividend requirement (in 1994) divided by
the weighted average number of shares of common stock outstanding which
includes the common stock equivalency of options granted under the
1983 and 1993 stock incentive plans.
The fully diluted net earnings per common share computation assumes,
in addition to the above, that the 6% convertible subordinated
debentures and Series 2 preferred stock (in 1994) were converted into
common stock at the beginning of each period. The resultant reduction
in interest costs net of tax and the preferred stock dividend requirement
(in 1994) are added back to net earnings.
Cash Flow Items
- - ---------------
Cash payments for interest were $1,424 and $3,314 for the three
months ended March 31, 1994 and 1993, respectively. Cash
payments for income taxes for the comparable periods were $1,555
and $1,462, respectively.
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KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
- - ---------------------
Consolidated revenues for the three month period ended March 31,
1994 were level with the same period of 1993. While Distribution
segment sales increased for the period, the increase was offset
by lower sales in the Diversified Technologies segment.
Diversified Technologies revenues for the first quarter of 1994
were down 11.8% from the comparable period of 1993, reflecting
the adverse influence of conditions in the defense market and the
commercial aircraft industry.
For some time now, defense expenditures have been declining as
changes in U.S. defense planning and spending priorities continue
to evolve. These circumstances, coupled with ongoing political
pressures upon the federal budget, suggest that reductions in
defense expenditures are likely to continue in future periods.
Military hardware programs, in particular, are increasingly
subject to risks of one form or another, whether it be lack of
funding, contract cancellation, or simply the ending of a
program. The corporation is feeling the effects of these risks,
principally with respect to its SH-2 helicopter. The corporation
expects to finish its contract to retrofit certain SH-2Fs to the
SH-2G configuration sometime this year. Management does not
believe that the U.S. government will have further requirements
for retrofits of this helicopter because the Navy is reducing the
size of its fleet. And, as fleet size decreases, so does the
number of our helicopters remaining in service. The corporation
will continue to provide logistics and spare parts support for
the SH-2, but at lower levels than in the past.
As the federal government responds to the fact that the form of
military threat throughout the world has changed and that the
American public has grown more intolerant of the loss of lives in
military conflict, defense planning and spending priorities are
shifting toward greater emphasis on more cost effective advanced
technology "smart" weapons which are intended to limit loss of
life and unnecessary destruction of property. The corporation
has significant expertise in this area, having performed a
multitude of government contracts for advanced technology
programs over the years. Management believes that the
corporation is particularly well positioned to compete in a
defense environment that emphasizes advanced technology products
and systems, as well as advanced technology services such as
computer software development, intelligence analysis, and
research and development.
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KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations, continued
The Diversified Technologies segment continues to perform work on
a number of commercial airframe manufacturing programs, although
reductions in commercial air travel and consolidation in the
domestic aircraft industry have caused a slowdown in aircraft
production rates, which has in turn affected the segment's
subcontract work.
An important aspect of the Diversified Technologies segment
commercial diversification efforts is the K-MAX helicopter
program. The K-MAX is a medium to heavy lift 'aerial truck'
helicopter with special operating characteristics that
distinguish it from other helicopters for use in logging, fire
fighting, and other utility applications. The program is
proceeding according to plan, with receipt of Federal Aviation
Administration certification anticipated by mid 1994. The
production phase for the first five (5) helicopters has begun and
units are expected to be delivered to initial customers shortly
after certification is received. The corporation intends to
lease the first group under a special lease program in order to
maintain active involvement in the product's introduction to the
marketplace. Although management believes that this program is
an important part of the corporation's defense conversion effort,
in the shorter term the program is not expected to materially
offset the effects of reduced defense spending.
Distribution segment revenues for the three month period ended
March 31, 1994 increased 9.0% over the same period a year ago.
These results are primarily attributable to the industrial
technologies business (which comprises about 75% of the
Distribution segment) and reflect improving economic conditions
in North America as well as, to some extent, the effects of
certain marketing and other internal company initiatives.
Although total segment revenues remained level, total operating
profits for the segments of the corporation were down slightly
for the first quarter of 1994 compared to the same period of
1993. In part, these results are attributable to reductions in
the higher profit margin Diversified Technologies' hardware
programs and increases in lower profit margin Distribution
revenues. Specifically, Diversified Technologies operating
profits were down 13.4%, for several reasons, including program
reductions due to lower defense spending; increased competition
for the awarding of defense contracts which has resulted in
downward pressures on margins; ongoing research and development
costs for defense conversion programs, notably the K-MAX
helicopter; and a continuing shift in business mix from hardware
programs to research and development type products and services
with somewhat lower profit margins. Distribution segment
operating profits were up 24.6% for the first quarter of 1994
compared to the same period a year ago. These results are
primarily attributable to the industrial technologies business
and reflect improvements in the domestic economy.
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KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations, continued
Interest expense for the first three months of 1994 declined 53%
from the same period a year ago. This reduction is primarily a
result of the corporation's exchange of $61.8 million of its 6%
convertible subordinated debentures for $57.2 million of its
preferred stock during the fourth quarter of 1993.
The consolidated effective income tax rate for the three month
period was 40.6% in both 1994 and 1993.
Net earnings were $4.2 million for the first quarter of 1994,
compared to $4.0 million for the same period of 1993. After
giving effect to the preferred stock dividend requirements,
earnings available to common shareholders were $3.3 million,
compared to $4.0 million in 1993.
Liquidity and Capital Resources
- - -------------------------------
The corporation's cash flow from operations has generally been
sufficient to finance a significant portion of its working
capital and other capital requirements.
For general borrowing purposes, the corporation has revolving
credit agreements involving several banks located in the U.S.,
Canada, and Europe. These agreements currently provide unsecured
lines of credit totaling $145 million and contain various
covenants, including working capital and tangible net worth
requirements. Eighty million dollars of the total revolving
credit commitment is scheduled to end in January, 1996, with the
balance expiring in September, 1996, at which times borrowings
may be converted to term loans. There were no borrowings under
these agreements during the first three months of 1994 or the
same period of 1993.
The corporation also maintains other short-term credit
arrangements with various banks. As of March 31, 1994, these
borrowings were at $26.7 million. For the first quarter of 1994,
average bank borrowings against these short-term lines were
approximately $30.7 million, compared to $32.3 million for the
same period of 1993.
As of March 31, 1994, the corporation had repurchased 653,000
Class A shares under its stock repurchase program (which was
renewed in 1992 with an authorization to purchase up to 700,000
Class A shares). The purpose of the program is to meet the needs
of the Employees Stock Purchase Plan and Stock Incentive Plan.
Management believes that the corporation's cash flow from
operations and available unused bank lines of credit under its
revolving credit agreements will be sufficient to finance working
capital and other capital requirements for the foreseeable
future.
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KAMAN CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders
The annual meeting of the shareholders of the corporation
was held at the offices of the corporation on April 18, 1994.
Following is a brief description of each matter voted upon at the
meeting:
1. Election of Directors
---------------------
The following twelve (12) individuals were elected directors
of the corporation to serve until the next annual meeting and
until their successors have been elected:
Frank C. Carlucci Hartzel Z. Lebed
John A. DiBiaggio Harvey S. Levenson
Edythe J. Gaines Walter H. Monteith, Jr.
Huntington Hardisty John S. Murtha
Charles H. Kaman Robert L. Newell
C. William Kaman II Wanda Lee Rogers
For each director, the Class B shareholders voted 634,934
shares in favor; 14 shares against; no abstentions; and no broker
non-votes.
2. Authorization to Elect One Additional Director
----------------------------------------------
A proposal to authorize the Board of Directors to elect one
(1) additional director during the ensuing year was adopted by
the Class B shareholders who voted 634,948 shares in favor; none
against; no abstentions; and no broker non-votes.
3. Approval of 1993 Stock Incentive Plan
-------------------------------------
A proposal to approve the corporation's 1993 Stock Incentive
Plan (which plan is basically an extension of the corporation's
1983 Stock Incentive Plan which expired on October 31, 1993) was
adopted by the Class A and Class B shareholders. The Class A
shareholders voted 9,403,897 shares in favor; 592,889 against;
496,261 in abstention; with 196,036 broker non-votes. The Class
B shareholders voted 601,474 shares in favor; none against; no
abstentions; and 33,474 broker non-votes.
4. Approval of Employees Stock Purchase Plan Amendment
---------------------------------------------------
A proposal to approve the amendment of the corporation's
Employees Stock Purchase Plan to replenish the authorized shares
under the plan to 1.5 million Class A shares was also adopted by
the Class A and Class B shareholders. The Class A shareholders
voted 9,731,526 shares in favor; 498,172 against; 459,385 in
abstention; and no broker non-votes. The Class B shareholders
voted 601,474 shares in favor; none against; no abstentions; and
33,474 broker non-votes.
- 9 -
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KAMAN CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
5. Approval of Amended and Restated Certificate of Incorporation
-------------------------------------------------------------
A proposal to amend and restate the corporation's
certificate of incorporation, essentially in order to consolidate
amendments which have been adopted during the last several years
was adopted by the Class B shareholders, who voted 601,474 shares
in favor; none against; no abstentions; and 33,474 broker non-
votes.
6. Appointment of KPMG Peat Marwick
--------------------------------
A proposal to appoint KPMG Peat Marwick as auditors for the
corporation during the ensuing year was adopted by the Class B
shareholders, who voted 634,948 shares in favor; none against; no
abstentions; and no broker non-votes.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
KAMAN CORPORATION
Registrant
Date: May 10, 1994 By Harvey S. Levenson /s/
---------------------------
Harvey S. Levenson
President
(Duly Authorized Officer)
Date: May 10, 1994 By Robert M. Garneau /s/
----------------------------
Robert M. Garneau
Senior Vice President and
Chief Financial Officer
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KAMAN CORPORATION AND SUBSIDIARIES
Index to Exhibits
Page in Sequentially
Numbered Copy
--------------------
Exhibit 11 Earnings Per Share Computation 12
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KAMAN CORPORATION AND SUBSIDIARIES
EXHIBIT 11 - EARNINGS PER COMMON SHARE COMPUTATION
(In thousands except per share amounts)
<TABLE>
For the Three Months
Ended March 31,
--------------------
1994 1993
---- ----
<S> <C> <C>
Primary:
Net earnings $ 4,240 $ 4,012
======== ========
Preferred stock dividend requirement $ (929) $ ---
======== ========
Net earnings applicable to common
stock $ 3,311 $ 4,012
======== ========
Weighted average number of common
shares outstanding 18,127 18,069
Weighted average shares issuable on
exercise of dilutive stock options 109 166
-------- --------
Total 18,236 18,235
======== ========
Net earnings per
common share - primary $ .18 $ .22
======== ========
Fully diluted:
Net earnings applicable to common stock $ 3,311 $ 4,012
Elimination of interest expense on 6%
subordinated convertible debentures
(net after taxes) * 847
Elimination of preferred stock dividend
requirement * ---
-------- --------
Net earnings(as adjusted) $ 3,311 $ 4,859
======== ========
Weighted average number of shares
outstanding including shares
issuable on stock option exercises 18,236 18,235
Shares issuable on conversion of 6%
subordinated convertible debentures * 4,067
Shares issuable on conversion of
Series 2 preferred stock * ---
Additional shares using ending market
price instead of average market on
treasury method use of stock option
proceeds --- 13
-------- --------
Total 18,236 22,315
======== ========
Net earnings per common share
- fully diluted $ .18 $ .22
======== ========
* Anti-dilutive and accordingly not included in the computation
</TABLE>
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