<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
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.)
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: None
Securities registered pursuant to Section 12(g) of the Act:
-Class A Common Stock, Par Value $1.00
-6% Convertible Subordinated Debentures Due 2012
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 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 by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ X ].
State the aggregate market value of the voting and non-voting
stock held by non-affiliates of the registrant. The aggregate
market value shall be computed by reference to the price at which
the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of
filing.
$322,401,359.00 as of February 1, 1999.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock as of the latest practicable
date.
Class A Common 22,971,946 shares
Class B Common 667,814 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Corporation's 1998 Annual Report to Shareholders
are incorporated by reference and filed as Exhibit 13 to this
Report.
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PART I
ITEM 1. BUSINESS
Kaman Corporation, incorporated in 1945, reports information
for itself and its subsidiaries (collectively, the "corporation")
in the following business segments: Aerospace, Industrial
Distribution, and Music Distribution. The corporation has
reorganized its business segment reporting in accordance with
new financial accounting standards applicable to the corporation
for calendar year 1998. Another segment identified as Scientific
Services was sold on December 30, 1997.
The Aerospace segment (formerly part of the Diversified
Technologies segment) serves commercial, U.S. defense and foreign
government markets with principal programs consisting of its SH-2G
maritime helicopter, K-MAX (Registered Trademark) "aerial truck"
helicopter, subcontract work involving airframe structures and the
manufacture of niche market products such as self-lubricating
bearings and driveline couplings for aircraft applications. The
Industrial Distribution segment serves nearly every sector of U.S.
industry with industrial repair and OEM products as well as
support services. The Music Distribution segment serves
domestic and foreign markets with a wide variety of music
instruments and accessories and manufactures guitars and other
music products for professional and amateur musicians. The
Scientific Services segment consisted of Kaman Sciences
Corporation, the corporation's defense information technology
business and was formerly part of the Diversified Technologies
segment.
In December of 1998, the Board of Directors of the corporation
established a committee of its members to conduct a search for a
new chief executive officer, at the recommendation of Charles H.
Kaman, the founder, chairman, chief executive officer and president
of the corporation. The search is in progress with the goal that
the corporation continue to be led in the cultural tradition that
has sustained it for more than 50 years. In August of 1998, Mr.
Kaman suffered a mild stroke following successful knee replacement
surgery. He has made excellent progress and resumed his role as
Chairman of the Board in January, 1999. Until his return to work,
the board of directors has designated Robert M. Garneau, the
corporation's executive vice president and chief financial officer,
to have the duties and responsibilities of the corporation's chief
executive officer. Mr. Garneau has held various corporate
financial officer positions since joining the corporation in 1981.
AEROSPACE
The Aerospace segment consists of several operating
subsidiaries of Kaman Aerospace Group, Inc., including Kaman
Aerospace Corporation, Kaman Aerospace International Corporation,
K-MAX Corporation, Kamatics Corporation, Kaman Electromagnetics
Corporation and Kaman Instrumentation Corporation.
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The SH-2G helicopter currently represents the Aerospace
segment's largest program and generally involves retrofit of the
corporation's SH-2F helicopters, previously manufactured for the
U.S. Navy (and currently in desert storage), to the "G"
configuration. The SH-2G aircraft is well suited to the smaller,
more powerful ships that several foreign navies are utilizing and
the corporation is currently performing work for the Governments of
Egypt, Australia, and New Zealand.
During 1998, the corporation completed delivery of ten (10)
SH-2G(E) helicopters to the Republic of Egypt under that country's
foreign military sale agreement with the U.S. Navy. This program
has a value of about $150 million. The corporation is now
conducting pilot training and providing on site support services.
Under its commercial sale contract with the Commonwealth of
Australia, the corporation will provide eleven (11) retrofit
SH-2G(A) aircraft and support, including a support services
facility, for the Royal Australian Navy. This contract was entered
into in 1997 and has an anticipated value of nearly $600 million.
The Australian SH-2G will incorporate an integrated weapons system,
advanced sensors, a state-of-the-art cockpit, long range Penguin
missiles, and composite rotor blades. Under its commercial sale
contract with the Government of New Zealand, the corporation will
provide four (4) SH-2G(NZ) aircraft and support, for New Zealand
defense forces. These aircraft will be manufactured with new
airframes and remanufactured dynamic components from the stored
SH-2F aircraft. This contract was entered into in 1997 and has an
anticipated value of nearly $170 million. During 1998, work
proceeded on both the Australia and New Zealand programs with
deliveries scheduled to begin in the 2000 - 2001 time frame.
During 1998, the corporation continued to pursue other potential
SH-2 business (including possible further orders from current
customers) as various countries develop their naval helicopter
requirements. This market is highly competitive and naturally
influenced by global economic and political conditions. Management
believes that conditions currently prevailing in some areas, most
notably economic difficulties in Asia, have slowed the prospects
for potential sales. While the corporation no longer manufactures
the SH-2 for the United States Navy, the U.S. Naval Reserves has
twelve (12) SH-2G aircraft active in its fleet. It is anticipated
that at some point, such aircraft will be retired from this type of
service. In the meantime, the corporation expects to continue
providing logistics and spare parts support for the aircraft in the
Reserves.
The corporation also produces the K-MAX (Registered Trademark)
medium to heavy lift "aerial truck" helicopter which has a variety
of potential applications, including logging, oil and gas
exploration, power line construction, and fire fighting.
The K-MAX, which received its Federal Aviation Administration
certification in August, 1994, is based on the corporation's
intermeshing rotor technology with servo-flap control. Constructed
with fewer components and less airframe weight, the K-MAX has
increased payload capacity and lower manpower, maintenance and
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spare parts inventory requirements, making it a generally cost
effective tool for industries requiring medium to heavy repetitive
lift capabilities. The corporation has been conservative in its
production of this aircraft (generally, six (6) aircraft per year)
since its introduction because it has been anticipated that it
would take some time to develop markets for a new aircraft and thus
achieve sales and profitability. There are currently fifteen (15)
aircraft in operations located in six (6) countries. The principal
application for the K-MAX to date has been in the commercial
logging industry, a market that has weakened significantly in the
past two years, particularly in the U.S. Pacific Northwest and
Canada, due in part to the effect of economic conditions in Asia
upon export sales. These circumstances appear to be affecting
certain current customers as well as potential sales of the K-MAX
and production has been further adjusted to address these
circumstances. The corporation has been working to further develop
other potential uses for the K-MAX. The K-MAX also has a potential
non-combat role for the military in the task of vertical
replenishment ("VERTREP"). As the federal government has explored
the concept of outsourcing this role to commercial providers, the
U.S. Navy Military Sealift Command has awarded K-MAX two separate
demonstration projects using charter/lease arrangements. Although
there were no developments in this arena during 1998, it appears
that the federal government is continuing to consider the
commercial outsourcing alternative.
The corporation also performs subcontract work for certain
airframe manufacturing programs and manufactures various niche
market products, including self-lubricating bearings for use
principally in aircraft flight controls, turbine engines and
landing gear, as well as driveline couplings for use principally in
helicopters. The corporation provides aircraft structures and
components for most commercial jetliners made today, including all
Boeing 700 series aircraft and most commuter and executive jets.
The corporation also supplies parts for a variety of U.S. military
aircraft, including the C-17 transport, F-22 fighter, E2-C airborne
early warning aircraft and the Comanche helicopter. These
operations have benefitted in the past few years from growth in the
aviation industry, a trend which appears to be leveling off.
Boeing, for example, is an important and long standing customer for
the corporation's airframe subcontract work and certain niche
market products and, while it is believed that the corporation is
well positioned to maintain its level of business with this
customer, pricing pressure is expected to intensify.
Among its smaller programs, the corporation also produces
computer memory systems for a variety of military aircraft,
including the F-16 fighter and the C-130J transport; fuzing and
safety devices for missiles, including the Tomahawk and AMRAAM; and
photonic and optical systems such as Magic Lantern (Registered
Trademark) a laser-based mine detection system.
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INDUSTRIAL DISTRIBUTION
The Industrial Distribution segment (formerly part of the
Distribution segment) consists of Kaman Industrial Technologies
Corporation and its Canadian subsidiary, Kaman Industrial
Technologies, Ltd.
Operating from 190 locations in thirty-six (36) states and
British Columbia, this segment's business is one of the nation's
leading distributors of industrial products, including bearings,
power transmission, electrical, motion control, material-handling
components and other equipment and services needed to maintain
various manufacturing processes. Its customers constitute
virtually every segment of U.S. industry, including agriculture,
automotive, bottling, chemical processing, construction, consumer
goods, entertainment, food processing, general manufacturing, heavy
equipment, logging, materials conveyance, mining, oil refining,
paper, petrochemical, pharmaceutical, power generation,
semiconductors, steel, and transportation. The corporation's
computer-linked distribution centers are strategically located to
position the segment to more efficiently serve its customers.
During 1998, an additional distribution center was opened in
Louisville, KY. The products that the corporation purchases for
distribution are for the most part derived from traditional
technologies, although the corporation is increasingly selling
products with the higher technological content required to support
automated production processes. The corporation also offers
additional support service capabilities, including asset
management, value-added engineering and systems/fabrication
capabilities, just-in-time delivery, cost savings analysis (called
Documented Savings (trademark)), inventory management services, and
a direct link between its state-of-the-art computer system and
customers' and suppliers' purchasing departments in order to
streamline order processing and improve transaction time. Given
the spectrum of industry that the corporation serves, its business
tends to be influenced by industrial production levels. During
1998, export demand in certain industries such as lumber,
chemicals, paper, and semiconductors was adversely affected by
economic difficulties in Asia, which resulted in increased price
pressures on this segment. In this environment, the corporation is
working to focus sales efforts in the markets that offer the best
opportunities and to carry out initiatives to enhance operating
efficiencies, including consolidation and centralization of various
organizational support functions.
MUSIC DISTRIBUTION
The Music Distribution segment (formerly part of the
Distribution segment) consists of Kaman Music Corporation, KMI
Europe Inc., and its Canadian subsidiary, B&J Music Ltd.
This segment is one of the largest distributors of music
instruments and accessories in the United States, providing product
principally to retailers in the United States and Canada as well as
to certain international distributors. Among its offerings are
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more than 13,000 items, including guitars, violins, horns, drums
and other percussion products, electronic tuners and metronomes and
music instrument accessories. This segment also provides a variety
of proprietary products, including Ovation (Registered Trademark)
and Hamer (Registered Trademark) guitars. During 1998, this
segment continued its initiatives to improve operating efficiency,
including consolidation of warehouse facilities and introduction of
a new warehouse facility in Nashville, Tennessee, as well as
consolidation of certain organizational support functions.
Operations are currently conducted through seven (7) distribution
centers in the United States and Canada, and an international sales
division and a manufacturing facility, both of which are located in
the United States.
FINANCIAL INFORMATION
Information concerning each segment's performance for the
last three fiscal years appears in the corporation's 1998 Annual
Report to Shareholders and is included in Exhibit 13 to this Form
10-K, and is incorporated by reference.
PRINCIPAL PRODUCTS AND SERVICES
Following is information for the three preceding fiscal
years concerning the percentage contribution of the corporation's
classes of products and services to the corporation's
consolidated net sales:
<TABLE>
Years Ended December 31
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Aerospace 23.7% 27.6% 38.1%
Scientific Services (1) 13.2% 13.9% --
Industrial Distribution 47.3% 45.9% 50.1%
Music Distribution 15.8% 12.6% 11.8%
----- ----- -----
Total 100.0% 100.0% 100.0%
(1) The Scientific Services segment, which consisted of Kaman
Sciences Corporation, was sold on December 30, 1997.
</TABLE>
RESEARCH AND DEVELOPMENT EXPENDITURES
Government sponsored research expenditures by the
Aerospace and Scientific Services segments were $13.2 million in
1998, $75.7 million in 1997, and $68.8 million in 1996. Independent
research and development expenditures were $8.5 million in 1998,
$6.9 million in 1997, and $8.0 million in 1996. The Scientific
Services segment which conducted significant government sponsored
research in 1996 and 1997 was sold on December 30, 1997.
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BACKLOG
Program backlog of the Aerospace and Scientific Services
segments was approximately $757.1 million at December 31, 1998,
$935.2 million at December 31, 1997, and $267 million at December
31, 1996. The corporation anticipates that approximately 44% of
its backlog at the end of 1998 will be performed in 1999.
Approximately 7.7% of the backlog at the end of 1998 is related to
government contracts or subcontracts which are included in backlog
to the extent that funding has been appropriated by Congress and
allocated to the particular contract by the relevant procurement
agency. Certain of these government contracts, less than 1% of the
backlog, have been funded but not signed.
GOVERNMENT CONTRACTS
During 1998, approximately 81.7% of the work performed by
the corporation directly or indirectly for the United States
government 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.
The corporation's United States government contracts and
subcontracts contain the usual required provisions permitting
termination at any time for the convenience of the government
with payment for work completed and associated profit at the time
of termination.
COMPETITION
The Aerospace segment operates in a highly competitive
environment with many other organizations which are
substantially larger and have greater financial and other
resources. The corporation competes with other helicopter
manufacturers on the basis of price, performance, and mission
capabilities; and also on the basis of its experience as a
manufacturer of helicopters, the quality of its products and
services, and the availability of facilities, equipment and
personnel to perform contracts. Consolidation in the industry, the
change in defense program emphasis and constraints in the defense
budgets of various countries have increased the level of
international competition for helicopter programs. The corporation
is also affected by the political and economic circumstances of its
potential foreign customers, such as the current economic crisis in
certain Asian markets. The corporation's FAA certified K-MAX
helicopters compete with military surplus helicopters and other
helicopters used for lifting, as well as with alternative methods
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of meeting lifting requirements. The corporation competes for its
subcontract aircraft structure, specialty aircraft component, and
advanced technology products business on the basis of price and
quality; product endurance and special performance characteristics;
proprietary knowledge; and the reputation of the corporation.
Industrial distribution operations are subject to a high
degree of competition from several other national distributors, two
of which are substantially larger than the corporation; and from
many regional and local firms. Competitive forces are intensifying
as the major competitors grow through consolidation.
Music distribution operations compete with domestic and
foreign distributors. Certain musical instrument products
manufactured by the corporation are subject to competition from
U.S. and foreign manufacturers as well. The corporation competes
in these markets on the basis of service, price, performance, and
inventory variety and availability. The corporation also competes
on the basis of quality and market recognition of its music
products and has established certain trademarks and trade names
under which certain of its music products are produced, as well as
under private label manufacturing in a number of foreign countries.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking information relating to
the corporation's business and prospects, including the SH-2G and
K-MAX helicopter programs, specialty self-lubricating bearings
and couplings, the industrial and music distribution businesses,
and other matters that involve a number of uncertainties that may
cause actual results to differ materially from expectations. Those
uncertainties include, but are not limited to: 1) the successful
conclusion of contract negotiations with government authorities,
including foreign governments; 2) political developments in
countries where the corporation intends to do business; 3) standard
government contract provisions permitting renegotiation of terms
and termination for the convenience of the government; 4) economic
and competitive conditions in markets served by the corporation
including industry consolidation in the United States and global
economic conditions (most notably in Asia); 5) the degree of
acceptance of new products in the marketplace; 6) U.S. industrial
production levels; 7) achievement of Year 2000 compliance by the
corporation, its customers, suppliers and service providers,
including various federal, state and foreign governments and
agencies thereof; 8) currency exchange rates, taxes, laws and
regulations, inflation rates, general business conditions and other
factors. Any forward-looking information should be considered with
these factors in mind.
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EMPLOYEES
As of December 31, 1998, the Corporation employed 4,276
individuals throughout its industry segments and corporate
headquarters as follows:
<TABLE>
<S> <C>
Aerospace 2,101
Industrial Distribution 1,691
Music Distribution 405
Corporate Headquarters 79
-----
4,276
</TABLE>
PATENTS AND TRADEMARKS
The corporation holds patents reflecting scientific and
technical accomplishments in a wide range of areas covering both
basic production of certain products, including aerospace
products and musical instruments, as well as highly specialized
devices and advanced technology products in defense related
and commercial fields.
Although the corporation's patents enhance its competitive
position, management believes that none of such patents or patent
applications is singularly or as a group essential to its
business as a whole. The corporation holds or has applied for
U.S. and foreign patents with expiration dates that range through
the year 2019.
These patents are allocated among the corporation's industry
segments as follows:
<TABLE>
U.S. PATENTS FOREIGN PATENTS
Segment Issued Pending Issued Pending
<S> <C> <C> <C> <C>
Aerospace 81 28 57 15
Industrial Distribution 0 0 0 0
Music Distribution 15 3 8 4
-- -- -- --
96 31 65 19
</TABLE>
Trademarks of Kaman Corporation include Adamas, Applause,
Hamer, KAflex, KAron, K-MAX, Magic Lantern, and Ovation. In all,
the corporation maintains 213 U.S. and foreign trademarks with 14
applications pending, most of which relate to music products in
the Music Distribution segment.
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COMPLIANCE WITH ENVIRONMENTAL PROTECTION LAWS
In the opinion of management, based on the corporation's
knowledge and analysis of relevant facts and circumstances,
compliance with any environmental protection laws is not likely to
have a material adverse effect upon the capital expenditures,
earnings or competitive position of the corporation or any of its
subsidiaries.
The corporation is subject to the usual reviews, inspections
and enforcement actions by various federal and state environmental
and enforcement agencies and has entered into agreements and
consent decrees at various times in connection with such reviews.
Also on occasion the corporation has been identified as a
potentially responsible party ("PRP") by the U.S. Environmental
Protection Agency ("EPA") in connection with the EPA's investigation
of certain third party facilities. In each instance, the
corporation has provided appropriate responses to all requests for
information that it has received, and the matters have been
resolved either through de minimis settlements, consent agreements,
or through no further action being taken by the EPA or the
applicable state agency with respect to the corporation. With
respect to any such matters which may currently be pending, the
corporation has been able to determine, based on its current
knowledge, that resolution of such matters is not likely to have a
material adverse effect on the future financial condition of the
corporation.
In arriving at this conclusion, the corporation has taken
into consideration site-specific information available regarding
total costs of any work to be performed, and the extent of work
previously performed. Where the corporation has been identified
as a PRP at a particular site, the corporation, using information
available to it, also has reviewed and considered 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 policies issued during the
periods applicable to each site.
FOREIGN SALES
Twenty-Two and Three Tenths percent (22.3%) of the sales of
the corporation made in 1998 were to customers located outside the
United States. In 1998, the corporation continued its efforts to
develop international markets for its products and foreign sales
(including sales for export); and during 1998 the corporation
continued to perform work under contracts with the Commonwealth of
Australia and the Government of New Zealand for the supply of
retrofit SH-2G helicopters with deliveries under both programs
expected to begin in the 2000-2001 time frame. Additional
information required by this item appears in the corporation's 1998
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Annual Report to Shareholders, and is included in Exhibit 13 to
this Form 10-K, and is incorporated herein by reference.
YEAR 2000 ("Y2K") COMPLIANCE
During 1998, the corporation utilized the services of KPMG LLP
as a consultant to assist in formalizing the corporation's Y2K
compliance program and to provide periodic assessment of the
corporation's progress. Each operating subsidiary designated a
program manager responsible for coordinating its activities and
developed a plan providing for assessment, problem solving and
compliance testing of Y2K related matters. The initial planning
and assessment phases were completed in 1998, and testing to
confirm compliance was also conducted. To date, compliance time
tables are being met with a target date to achieve overall Y2K
compliance, including compliance testing, as of June 30, 1999. In
addition, the corporation and each operating subsidiary are
currently working with suppliers, customers and service providers
to gauge their Y2K readiness and monitor their progress toward
compliance. An oversight committee reporting to the executive vice
president and chief financial officer, has been established at
corporate headquarters to monitor the progress of each subsidiary's
compliance work. Senior management provides progress reports to
the corporation's board of directors and audit committee on a
regular basis. The corporation separately identifies costs of Y2K
efforts as an internal management tool and based upon information
known to it at this time, management does not anticipate that the
costs of addressing Y2K issues will be material to the
corporation's financial position, results of operations, or cash
flows in future periods. Although the corporation does not
anticipate incurring significant costs to modify its computer
systems, there can be no assurance that significant costs will not
be incurred. Additional information concerning this item appears
in the corporation's 1998 Annual Report to Shareholders and is
included in Exhibit 13 to the form 10-K, and is incorporated herein
by reference.
ITEM 2. PROPERTIES
The corporation occupies approximately 3.39 million square
feet of space throughout the United States and Canada, distributed
as follows:
<TABLE>
SEGMENT SQUARE FEET
(in thousands as of 12/31/98)
<S> <C>
Aerospace 1,553
Industrial Distribution 1,396
Music Distribution 399
Corporate Headquarters 40
-----
Total 3,388
</TABLE>
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The Aerospace segment's principal facilities are located in
Arizona, Connecticut, and Massachusetts; other facilities including
offices and smaller manufacturing and assembly operations are
located in several other states, and the corporation also has an
office in Turner, Australia. These facilities are used for
manufacturing, research and development, engineering and office
purposes. The U.S. Government owns 154 thousand square feet of
the space occupied by Kaman Aerospace Corporation in Bloomfield,
Connecticut in accordance with a Facilities Lease Agreement with a
five (5) year term expiring in March 2003.
The Industrial Distribution segment's facilities are located
throughout the United States with principal facilities located in
California, Connecticut, New York, Kentucky and Utah. Additional
Industrial Distribution segment facilities are located in British
Columbia, Canada. These facilities consist principally of
regional distribution centers, service centers and office space
with a portion used for fabrication and assembly work.
The Music Distribution segment's facilities in the United
States are located in Connecticut, California, Georgia, Tennessee
and Texas. An additional Music Distribution facility is located in
Ontario, Canada. These facilities consist principally of regional
distribution centers, source centers and office space. Also
included are facilities used for manufacturing musical instruments.
The corporation occupies a 40 thousand square foot
Corporate headquarters building in Bloomfield, Connecticut.
The corporation's facilities are suitable and adequate to
serve its purposes and substantially all of such properties
are currently fully utilized. Many of the properties, especially
within the Industrial Distribution segment, are leased.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the
corporation or any of its subsidiaries is a party or to which any
of their property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security
holders during the fourth quarter of 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
CAPITAL STOCK AND PAID-IN CAPITAL
Information required by this item appears in the
corporation's 1998 Annual Report to Shareholders and is included
in Exhibit 13 to this Form 10-K, and is incorporated herein by
reference.
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INVESTOR SERVICES PROGRAM
Shareholders of Kaman Class A common stock are eligible to
participate in the ChaseMellon Investor Services Program
administered by Mellon Bank, N.A. which offers a variety of
services including dividend reinvestment. A booklet describing the
program may be obtained by writing to the program's Administrator,
Mellon Bank, N.A., P. O. Box 3338, South Hackensack, NJ 07606-1938.
<TABLE>
QUARTERLY CLASS A COMMON STOCK INFORMATION
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
High Low Close Dividend
1998
First $18.38 $15.75 $18.38 $.11
Second 20.38 17.63 19.03 .11
Third 19.38 13.00 17.13 .11
Fourth 17.13 14.50 16.06 .11
- -----------------------------------------------------------------
1997
First $14.75 $12.25 $ 13.50 $.11
Second 16.00 12.00 15.38 .11
Third 18.88 14.50 18.38 .11
Fourth 20.38 15.25 16.38 .11
- -----------------------------------------------------------------
QUARTERLY DEBENTURE INFORMATION (6% Conv. Subordinated)
- -----------------------------------------------------------------
High Low Close
- -----------------------------------------------------------------
<S> <C> <C> <C>
1998
First $101.00 $96.00 $100.00
Second 100.50 98.00 98.00
Third 100.63 96.00 96.50
Fourth 104.00 96.50 97.50
- -----------------------------------------------------------------
1997
First $ 92.00 $84.00 $92.00
Second 96.00 87.00 94.00
Third 100.00 94.00 96.00
Fourth 101.00 96.00 96.50
- -----------------------------------------------------------------
</TABLE>
NASDAQ market quotations reflect inter-dealer prices,
without retail mark-up, mark-down, or commission and may not
necessarily represent actual transactions.
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ANNUAL MEETING
The Annual Meeting of Shareholders of the Corporation will be
held on Tuesday, April 13, 1999 at 11:00 a.m. in the offices of the
corporation, 1332 Blue Hills Avenue, Bloomfield, Connecticut 06002.
Holders of all classes of Kaman securities are invited to attend,
however matters on the agenda for the meeting will require the vote
of Class B shareholders only.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this item appears in the
corporation's 1998 Annual Report to Shareholders and is included
in Exhibit 13 to this Form 10-K, and is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Information required by this item appears in the
corporation's 1998 Annual Report to Shareholders and is included
in Exhibit 13 to this Form 10-K, and is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item appears in the
corporation's 1998 Annual Report to Shareholders and is included
in Exhibit 13 to this Form 10-K, and is incorporated herein by
reference. Additional financial information is contained in the
Financial Data Schedule included as Exhibit 27 to this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Following is information concerning each Director and
Executive Officer of Kaman Corporation including name, age,
position with the corporation, and business experience during the
last five years:
Brian E. Barents Mr. Barents, 55, has been a Director
since 1996. He is President and
Chief Executive Officer of Galaxy
Aerospace Company L.P. Prior to that
he was President and Chief Executive
Officer of Learjet, Inc. He is a
director of Tri-Star Aerospace Corp.
Page 13
<PAGE>
<PAGE>
Fred A. Breidenbach Mr. Breidenbach, 52, was elected a
Director in February 1998. He is the
owner of F. A. Breidenbach & Associates,
LLC, and is the former President and
Chief Operating Officer of
Gulfstream Aerospace Corp. Prior to
that he held various positions with
General Electric Corporation. He is a
director of Sensormatic Electronics
Corporation.
T. Jack Cahill Mr. Cahill, 50, has held various
positions with Kaman Industrial
Technologies Corporation, a subsidiary
of the corporation, since 1975, and has
been President of that subsidiary since
1993.
E. Reeves Callaway, III Mr. Callaway, 51, has been a Director
since 1995. He is President of The
Callaway Advanced Technology Corporation.
Frank C. Carlucci Mr. Carlucci, 68, has been a Director
since 1989. He is Chairman of The
Carlyle Group, merchant bankers. Prior to
that he served as U.S. Secretary of
Defense. Mr. Carlucci is also a director
of Ashland, Inc., Neurogen Corporation,
Northern Telecom, Ltd., Pharmacia &
Upjohn, Inc., Quaker Oats Company, Sun
Resorts, Ltd., N.V., Texas
Biotechnology Corporation, and
IRI International Corporation.
Laney J. Chouest, M.D. Dr. Chouest, 45, has been a Director
since 1996. He is Senior Vice President
of Edison Chouest Offshore, Inc. and
Galliano Marine.
Candace A. Clark Ms. Clark, 44, has been Senior Vice
President and Chief Legal Officer since
1996. Prior to that she served as
Vice President and Counsel. Ms. Clark has
held various positions with the
corporation since 1985.
John A. DiBiaggio Dr. DiBiaggio, 66, has been a Director
since 1984. He is President and Chief
Executive Officer of Tufts University.
Prior to that he was President and Chief
Executive Officer of Michigan State
University.
Page 14
<PAGE>
<PAGE>
Edythe J. Gaines Dr. Gaines, 76, has been a Director
since 1982. She is a retired
Commissioner of the Public Utility
Control Authority of the State of
Connecticut.
Ronald M. Galla Mr. Galla, 48, has been Senior Vice
President and Chief Information Officer
since 1995. Prior to that he served as
Vice President and director of the
corporation's Management Information
Systems, a position which he held since
1990. Mr. Galla has been director of the
corporation's Management Information
Systems since 1984.
Robert M. Garneau Mr. Garneau, 55, has been Executive Vice
President and Chief Financial Officer
since 1995. Previously he served as
Senior Vice President, Chief Financial
Officer and Controller. Mr. Garneau has
held various positions with the
corporation since 1981.
Huntington Hardisty Admiral Hardisty (USN-Ret.), 70, has
been President of Kaman Aerospace
International Corporation, a
subsidiary of the corporation, since 1995
and he has been a Director since 1991.
He retired from the U.S. Navy in 1991
having served as Commander-in-Chief for
the U.S. Navy Pacific Command since
1988. He is also a director of
Contraves, Inc., MPR Inc., and
CNA Corporation.
Charles H. Kaman Mr. Kaman, 79, has been Chief Executive
Officer and Chairman of the Board of
Directors since 1945. He was also
appointed President in December, 1995,
a position he previously held from 1945
to 1990.
C. William Kaman II Mr. Kaman, 47, has been a Director
since 1992. He is Chairman and CEO of
AirKaman of Jacksonville, Inc., a former
subsidiary of the corporation which was
sold in 1997 and is no longer affiliated
with the corporation. Previously he was
Executive Vice President of the
corporation and was President of
Kaman Music Corporation, a subsidiary of
the corporation. Mr. Kaman is the son of
Charles H. Kaman, Chairman, President and
Chief Executive Officer of the
corporation.
Page 15
<PAGE>
<PAGE>
Walter R. Kozlow Mr. Kozlow, 63, has held various
positions with Kaman Aerospace
Corporation, a subsidiary of the
corporation, since 1960. He has been
President of Kaman Aerospace Corporation
since 1986.
Eileen S. Kraus Ms. Kraus, 60, has been a Director since
1995. She is Chairman of Connecticut
Fleet National Bank. Since 1979 she has
held various positions at Shawmut Bank
Connecticut and Shawmut National
Corporation, predecessors of Fleet Bank,
N.A. and its holding company, Fleet
Financial Group. She is a director of
Yankee Energy System, Inc., The Stanley
Works, and Bestfoods Corporation.
Hartzel Z. Lebed Mr. Lebed, 71, has been a Director since
1982, and became Vice Chairman of the
Board of Directors in January, 1999. He
is the retired President of CIGNA
Corporation.
Walter H. Monteith, Jr. Mr. Monteith, 68, has been a Director
since 1987. He is the retired Chairman
of Southern New England Telecommuni-
cations Corporation.
John S. Murtha Mr. Murtha, 85, has been a Director
since 1948. He is counsel to, and a
former senior partner of, the law firm of
Murtha, Cullina, Richter and Pinney LLP.
Patrick L. Renehan Mr. Renehan, 65, has been Senior
Vice President of Kaman Aerospace Group,
Inc. (formerly Kaman Diversified
Technologies Corporation), a subsidiary
of the corporation, since 1996. Prior
to that he served as Vice President of
that subsidiary. Mr. Renehan has held
various positions with the corporation
since 1983.
Wanda L. Rogers Mrs. Rogers, 66, has been a Director
since 1991. She is President and Chief
Executive Officer of Rogers Helicopters,
Inc. She is also a director of Clovis
Community Bank.
Page 16
<PAGE>
<PAGE>
Robert H. Saunders, Jr. Mr. Saunders, 58, became President of
Kaman Music Corporation, a subsidiary
of the corporation in 1998. Previously
he served as Senior Vice President of
the corporation since 1995 and also held
the position of Senior Executive Vice
President of Kaman Music Corporation
during a portion of that period. Prior
to that he was Vice President and Chief
Financial Officer of the University of
Hartford.
Each Director and Executive Officer has been elected for a
term of one year and until his or her successor is elected.
The terms of all Directors and Executive Officers are expected to
expire as of the Annual Meeting of the Shareholders and Directors
of the corporation to be held on April 13, 1999.
Based upon information provided to the corporation by persons
required to file reports under Section 16(a) of the Securities
Exchange Act of 1934, no Section 16(a) Reporting delinquencies
occurred in 1998.
ITEM 11. EXECUTIVE COMPENSATION
A) GENERAL. The following tables provide certain information
relating to the compensation of the Corporation's Chief Executive
Officer, its four other most highly compensated executive
officers and its directors.
Page 17
<PAGE>
<PAGE>
B) SUMMARY COMPENSATION TABLE.
<TABLE>
Annual Compensation Long Term Compensation
------------------- ----------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
All
Name and Other AWARDS Other
Principal Salary Bonus Annual RSA Options/SARs LTIP Comp.
Position Year ($) ($) Comp.(1)($)(2) (#Shares) Payments ($)(3)
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C. H. Kaman 1998 850,000 408,000 116,201 ------- 0/ --- 64,120
Chairman and 125,000
Chief 1997 750,000 400,000 ------- ------- ------ --- 56,793
Executive 1996 725,000 340,000 56,252 ------- ------ --- 58,412
Officer
R.M.Garneau 1998 375,000 175,000 ------- 127,500 7,500/ --- 12,418
Executive 12,500
Vice Pres- 1997 340,000 185,000 ------- 99,375 10,000/ --- 10,896
ident and 100,000
Chief 1996 240,000 82,000 ------- 77,812 10,000/ --- 7,935
Financial 0
Officer
W.R.Kozlow 1998 255,000 100,000 ------- 85,000 7,500/ --- 13,170
President 10,000
Kaman 1997 240,000 100,000 ------- 79,500 9,000/ --- 13,588
Aerospace 50,000
Corporation 1996 233,000 65,000 ------- 62,250 9,000/ --- 10,881
0
T.J. Cahill 1998 245,000 80,000 ------- 85,000 7,500/ --- 7,397
President, 7,500
Kaman 1997 230,000 90,000 ------- 79,500 9,000/ --- 7,754
Industrial 50,000
Technologies 1996 210,000 70,000 ------- 62,250 9,000/ --- 7,952
Corporation 0
H. Hardisty 1998 225,000 90,000 ------- 85,000 7,500/ --- 20,141
President 10,000
Kaman 1997 215,000 90,000 ------- 79,500 9,000/ --- 13,012
Aerospace 50,000
Interna- 1996 200,000 55,000 ------- 62,250 9,000/ --- 9,198
tional 0
Corporation
Page 18
<PAGE>
<PAGE>
<FN>
1. The corporation maintains a program pursuant to which it pays
for tax and estate planning services provided to executive officers
by third parties, up to certain limits. Amounts reported in this
column include payments for such services as follows: $91,060 on
behalf of C.H. Kaman in 1998 and $45,314 on behalf of C. H. Kaman
in 1996.
2. As of December 31, 1998, aggregate restricted stock holdings
and their year end value were: C.H. Kaman, none; R.M. Garneau,
20,000 shares valued at $321,250; W.R. Kozlow, 15,400 shares
valued at $247,363; T.J. Cahill, 15,400 shares valued at $247,363;
and H. Hardisty, 13,400 shares valued at $215,238. Restrictions
lapse at the rate of 20% per year for all awards, beginning one
year after the grant date. Awards reported in this column are
as follows: R.M. Garneau, 7,500 shares in 1998, 7,500 shares in
1997, and 7,500 shares in 1996; W.R. Kozlow, 5,000 shares in 1998,
6,000 shares in 1997, and 6,000 shares in 1996; T.J. Cahill, 5,000
shares in 1998, 6,000 shares in 1997, and 6,000 shares in 1996; H.
Hardisty, 5,000 shares in 1998, 6,000 shares in 1997 and 6,000
shares in 1996. Dividends are paid on the restricted stock.
3. Amounts reported in this column consist of: C.H. Kaman,
$53,000 - Officer 162 Insurance Program, $11,120 - medical expense
reimbursement program ("MERP"); R.M. Garneau, $3,352 - Senior
executive life insurance program ("Executive Life"), $851 - Officer
162 Insurance Program, $2,000 - employer matching contributions to
the Kaman Corporation Thrift and Retirement Plan (the "Thrift Plan
employer match"), $1,340 - MERP, $4,875 - all supplemental employer
contributions under the Kaman Corporation Deferred Compensation
Plan ("supplemental employer contributions"); W.R. Kozlow, $6,375
- - Executive Life, $2,000 - Thrift Plan employer match, $2,358 -
MERP, $2,437 - supplemental employer contributions; T.J. Cahill,
$1,770 - Executive Life, $2,000 - Thrift Plan employer match,
$1,564 - MERP, $2,063 - supplemental employer contributions; H.
Hardisty, $20,141 - supplemental employer contributions.
</FN>
</TABLE>
Page 19
<PAGE>
<PAGE>
C) OPTION/SAR GRANTS IN THE LAST FISCAL YEAR:
<TABLE>
- ----------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term*
- ----------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
% of Total
Options/
SARs**
Options/ Granted to
SARs** Employees Exercise or
Granted in Fiscal Base Price Expiration
Name (#) Year ($/Sh) Date 5%($) 10%($)
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
C. H. Kaman 0/ 0.00/ 17.00 2/10/08 1,336,401 3,386,703
125,000 75.76
R. M. Garneau 7,500/ 3.66/ 17.00 2/10/08 213,824 541,872
12,500 7.58
W. R. Kozlow 7,500/ 3.66/ 17.00 2/10/08 187,096 474,138
10,000 6.06
T. J. Cahill 7,500/ 3.66/ 17.00 2/10/08 160,368 406,404
7,500 4.55
H. Hardisty 7,500/ 3.66/ 17.00 2/10/08 187,096 474,138
10,000 6.06
*The information provided herein is required by Securities and Exchange
Commission rules and is not intended to be a projection of future common
stock prices.
**Stock Appreciation Rights (SARs) payable in cash only, not in shares of
common stock.
</TABLE>
Page 20
<PAGE>
<PAGE>
D) AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR, AND
FISCAL YEAR-END OPTION/SAR VALUES.
<TABLE>
Value of
Number of Unexercised
Unexercised in-the-money
options options*
Shares at FY-end (#) at FY-end ($)
acquired on Value exercisable/ exercisable/
Name Exercise(#) realized unexercisable unexercisable
(a) (b) (c) (d) (e)
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
C. H. Kaman none ------- 20,000/0 166,250/0
R. M. Garneau 2,000 15,875 25,500/24,500 158,406/70,688
W. R. Kozlow 3,000 21,750 24,900/23,100 155,569/65,025
T. J. Cahill 1,000 8,000 19,400/23,100 112,475/65,025
H. Hardisty none ------ 5,400/20,100 25,538/50,963
</TABLE>
<TABLE>
Value of
Number of Unexercised
Unexercised in-the-money
SARs SARs*
Shares at FY-end (#) at FY-end ($)
acquired on Value exercisable/ exercisable/
Name Exercise(#) realized unexercisable unexercisable
(a) (b) (c) (d) (e)
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
C. H. Kaman N/A N/A 0/125,000 0/0
R. M. Garneau " " 20,000/92,500 56,250/225,000
W. R. Kozlow " " 10/000/50,000 28,150/112,500
T. J. Cahill " " 10,000/47,500 28,125/112,500
H. Hardisty " " 10,000/50,000 28,125/112,500
*Difference between the 12/31/98 FMV and the exercise price(s).
</TABLE>
E) LONG TERM INCENTIVE PLAN AWARDS: Except as described above, no
long term incentive plan awards were made to any named executive
officer in the last fiscal year.
Page 21
<PAGE>
<PAGE>
F) PENSION AND OTHER DEFINED BENEFIT DISCLOSURE. The following
table shows estimated annual benefits payable at normal
retirement age to participants in the Corporation's Pension Plan
at various compensation and years of service levels using the
benefit formula applicable to Kaman Corporation. Pension
benefits are calculated based on 60 percent of the average of the
highest five consecutive years of "covered compensation" out of
the final ten years of employment less 50 percent of the primary
social security benefit, reduced proportionately for years of
service less than 30 years:
Page 22
<PAGE>
<PAGE>
<TABLE>
PENSION PLAN TABLE
Years of Service
Remuneration* 15 20 25 30 35
- -----------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
125,000 33,471 44,851 55,562 66,942 66,942
150,000 40,971 54,901 68,012 81,942 81,942
175,000 48,471 64,951 80,462 96,942 96,942
200,000 55,971 75,001 92,912 111,942 111,942
225,000 63,471 85,015 105,362 126,942 126,942
250,000 70,971 95,101 117,812 141,942 141,942
300,000 85,971 115,201 142,712 171,942 171,942
350,000 100,971 135,301 167,612 201,942 201,942
400,000 115,971 155,401 192,512 231,942 231,942
450,000 130,971 175,501 217,412 261,942 261,942
500,000 145,971 195,601 242,312 291,942 291,942
750,000 220,971 296,101 366,812 441,942 441,942
1,000,000 295,971 396,601 491,312 591,942 591,942
1,250,000 370,971 497,101 615,812 741,942 741,942
1,500,000 445,971 597,601 740,312 891,942 891,942
1,750,000 520,971 698,101 864,812 1,041,942 1,041,942
2,000,000 595,971 798,601 989,312 1,191,942 1,191,942
*Remuneration: Average of the highest five consecutive years of
"Covered Compensation" out of the final ten years of service.
</TABLE>
"Covered Compensation" means "W-2 earnings" or "base
earnings", if greater, as defined in the Pension Plan. W-2
earnings for pension purposes consist of salary (including 401(k)
and Section 125/129 Plan contributions but not deferrals under a
non-qualified Deferred Compensation Plan), bonus and taxable
income attributable to restricted stock awards and the cash out
of employee stock options. Salary and bonus amounts for the named
Executive Officers for 1998 are as shown on the Summary
Compensation Table. Compensation deferred under the
Corporation's non-qualified deferred compensation plan is
included in Covered Compensation here because it is covered by
the Corporation's unfunded supplemental employees' retirement
plan for the participants in that plan.
Current Compensation covered by the Pension Plan for any
named executive whose Covered Compensation differs by more than
10% from the compensation disclosed for that executive in the
Summary Compensation Table: Mr. Kaman, $1,250,000; Mr. Hardisty,
$361,410.
Federal law imposes certain limitations on annual pension
benefits under the Pension Plan. For the named executive
officers who are participants, the excess will be paid under the
Corporation's unfunded supplemental employees' retirement plan.
Page 23
<PAGE>
<PAGE>
The Executive Officers named in Item 11(b) are participants
in the plan and as of December 31, 1998, had the number of years of
credited service indicated: Mr. Kaman - 53.1 years; Mr. Garneau -
17.48 years; Mr. Kozlow - 38.7 years; Mr. Cahill - 23.7 years;
Mr. Hardisty - 3.45 years.
Benefits are computed generally in accordance with the
benefit formula described above.
G) COMPENSATION OF DIRECTORS. In general, non-employee members of
the Board of Directors of the corporation receive an annual
retainer of $20,000 and a fee of $1,000 for attending each meeting
of the Board and each meeting of a Committee of the Board, except
that the Chairman of the Audit Committee receives a fee of $1,250
for attending each meeting of that Committee. Notwithstanding the
foregoing, (1) effective in January 1999, the position of Vice
Chairman of the Board was created with a retainer of $40,000 per
year and a fee of $2,000 for attending each meeting of the Board;
and (2) effective in September 1998, the Acting Chairman of the
Board received a monthly retainer of $8,000 (this position was
ended in February 1999) and a fee of $2,000 for attending each
meeting of the Board and each meeting of the Special Committee of
the Board. Such fees may be received on a deferred basis. In
addition, each non-employee director will receive a Restricted
Stock Award for 500 shares (issued pursuant to the corporation's
Stock Incentive Plan), providing for immediate vesting upon
election as a director at the corporation's 1999 Annual Meeting of
Shareholders.
H) EMPLOYMENT CONTRACTS AND TERMINATION, SEVERANCE AND CHANGE
OF CONTROL ARRANGEMENTS. The corporation has entered an
arrangement with Mr. C. H. Kaman that (1) in the event he retires
or dies during active employment with the corporation, he and/or
Mrs. Kaman will be provided with medical/dental benefits for the
remainder of their lives; and (2) in the event he becomes disabled
during active employment, he will be assured of receiving an amount
equal to his then current annual base salary for the remainder of
his life. Except as disclosed in Item 13, and except as described
above and in connection with the corporation's Pension Plan and the
corporation's non-qualified Deferred Compensation Plan, the
corporation has no employment contract, plan or arrangement with
respect to any named executive which relates to employment
termination for any reason, including resignation, retirement or
otherwise, or a change in control of the corporation or a change in
any such executive officer's responsibilities following a change of
control, which exceeds or could exceed $100,000.
I) Not Applicable.
Page 24
<PAGE>
<PAGE>
J) COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISIONS.
1) The following persons served as members of the Personnel
and Compensation Committee of the Corporation's Board of Directors
during the last fiscal year: Frank C. Carlucci, Brian E. Barents,
Edythe J. Gaines, Walter H. Monteith, Jr. and John S. Murtha.
None of these individuals was an officer or employee of the
corporation or any of its subsidiaries during either the last
fiscal year or any portion thereof in which he or she served as a
member of the Personnel and Compensation Committee. Mr. Murtha's
relationship with the corporation is further disclosed in Item 13
of this report.
2) During the last fiscal year no executive officer of the
corporation served as a director of or as a member of the
compensation committee (or other board committee performing
equivalent functions) of another entity, one of whose executive
officers served as a director of, or on the Personnel and
Compensation Committee of the corporation.
K) Not Applicable.
L) Not Applicable.
Page 25
<PAGE>
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
Following is information about persons known to the
corporation to be beneficial owners of more than five percent (5%)
of the Corporation's voting securities. Ownership is direct unless
otherwise noted.
<TABLE>
- -----------------------------------------------------------------
Class of Number of Shares
Common Name and Address Owned as of Percentage
Stock Beneficial Owner February 1, 1999 of Class
- -----------------------------------------------------------------
<S> <C> <C> <C>
Class B Charles H. Kaman 258,375(1) 38.69%
Kaman Corporation
Blue Hills Avenue
Bloomfield, CT 06002
Class B Newgate Associates 199,802 29.91%
Limited Partnership
c/o Murtha, Cullina,
Richter and Pinney LLP
CityPlace I
185 Asylum Street
Hartford, CT 06103
Class B C. William Kaman, II 64,446(2) 9.65%
c/o AirKaman of
Jacksonville, Inc.
Jacksonville International
Airport
14700 Yonge Drive
Jacksonville, FL 32218
Class B Robert D. Moses 48,729(3) 7.30%
Farmington Woods
Avon, CT 06001
<FN>
(1) Excludes 1,471 shares held by Mrs. Kaman. Excludes
199,802 shares reported separately above and held by
Newgate Associates Limited Partnership, a limited
partnership in which Mr. Kaman serves as general
partner.
(2) Excludes 4,800 shares held as trustee for the benefit of
certain family members.
(3) Includes 39,896 shares held by a partnership controlled by
Mr. Moses.
</FN>
</TABLE>
Page 26
<PAGE>
<PAGE>
(b) SECURITY OWNERSHIP OF MANAGEMENT. The following is
information concerning beneficial ownership of the Corporation's
stock by each Director of the corporation, each Executive Officer
of the corporation named in the Summary Compensation Table, and all
Directors and Executive Officers of the corporation as a group.
Ownership is direct unless otherwise noted.
<TABLE>
Class of Number of Shares Owned Percentage
Name Common Stock as of February 1, 1999 of Class
- --------------------------------------------------------------------
<S> <C> <C> <C>
Brian E. Barents Class A 1,000 *
Fred A. Breidenbach Class A 4,500 *
T. Jack Cahill Class A 34,230(1) *
E. Reeves Callaway Class A 1,000 *
Frank C. Carlucci Class A 4,000(2) *
Laney J. Chouest Class A 6,331 *
John A. DiBiaggio Class A 1,000 *
Edythe J. Gaines Class A 3,269 *
Robert M. Garneau Class A 30,133(3) *
Class B 20,512 3.07%
Huntington Hardisty Class A 17,000(4) *
Charles H. Kaman Class A 217,884(5) *
Class B 258,375(6) 38.69%
C. William Kaman, II Class A 64,488(7) *
Class B 64,446(8) 9.65%
Walter R. Kozlow Class A 50,412(9) *
Class B 296 *
Eileen S. Kraus Class A 1,563 *
Hartzel Z. Lebed Class A 17,067(10) *
Walter H. Monteith, Jr. Class A 1,200 *
John S. Murtha Class A 52,948(11) *
Class B 432 *
Wanda L. Rogers Class A 1,000 *
All Directors and
Executive Officers Class A 573,757(12) 2.5%
as a group ** Class B 345,799 51.8%
* Less than one percent.
** Excludes 23,612 Class A shares and 1,471 Class B shares held
by spouses of certain Directors and Executive Officers.
<FN>
(1) Excludes 19,400 shares subject to the exercisable portion of
stock options.
(2) Includes 3,500 shares held jointly with Mrs. Carlucci.
(3) Excludes 25,500 shares subject to the exercisable portion
of stock options.
Page 27
<PAGE>
<PAGE>
(4) Excludes 5,400 shares subject to the exercisable portion of
stock options.
(5) Excludes the following: 23,132 shares held by Mrs. Kaman;
7,952 shares held by Fidelco Guide Dog Foundation, Inc., a
charitable foundation of which Mr. Kaman is President and
Director, in which shares Mr. Kaman disclaims beneficial
ownership; 184,434 shares held by Newgate Associates
Limited Partnership, a limited partnership of which Mr.
Kaman is the general partner; 21,816 shares held by Oldgate
Limited Partnership ("Oldgate") a limited partnership of which
Mr. Kaman is the general partner; 125,034 shares held by
Oldgate and as to which shares Mr. Kaman disclaims beneficial
interest, such portion of Oldgate having been placed in an
irrevocable trust; and 72,500 shares held by the Charles H.
Kaman Charitable Foundation, a private charitable foundation.
Included are 20,000 shares subject to exercisable portion of
stock options.
(6) Excludes the following: 1,471 shares held by Mrs. Kaman and
199,802 shares held by Newgate Associates Limited Partnership,
a limited partnership of which Mr. Kaman is the general
partner.
(7) Excludes 12,300 shares subject to exercisable portion of
stock options; and excludes 84,516 shares held by Mr. Kaman
as Trustee, in which shares Mr. Kaman disclaims any
beneficial ownership.
(8) Excludes 4,800 shares held by Mr. Kaman as Trustee in which
shares Mr. Kaman disclaims any beneficial ownership.
(9) Excludes 24,900 shares subject to exercisable portion of
stock options.
(10)Includes shares held jointly with Mrs. Lebed, excludes
8,000 shares held in an Individual Retirement Account and
480 shares held by Mrs. Lebed.
(11)Held by Fleet National Bank pursuant to a revocable trust.
Includes 7,980 shares held by Fleet National Bank pursuant
to a revocable trust for the benefit of Mrs. Murtha.
(12)Includes 142,800 shares subject to exercisable portion of
stock options.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1998, the corporation obtained legal services from the
Hartford, Connecticut law firm of Murtha, Cullina, Richter and
Pinney LLP of which Mr. Murtha, a Director of the corporation, is
of counsel. The corporation also obtained video production services
in the amount of $134,218 from Polykonn Corporation, a
corporation controlled by Mr. Steven Kaman, son of Charles H.
Kaman, Chairman and Chief Executive Officer of the corporation. In
addition, the corporation entered into an agreement with Mr. C.
William Kaman, II, a Director and former Executive Vice President
of the corporation, confirming his resignation from active
employment with the corporation and retaining him as Senior
Executive Advisor through December 31, 2001 at the annual rate of
$245,000. A copy of such agreement is attached hereto as Exhibit
10c. In arriving at the terms of such agreement the corporation
obtained the advice of an independent professional consultant.
Page 28
<PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a)(1) FINANCIAL STATEMENTS.
See Item 8 concerning financial statements appearing as
Exhibit 13 to this Report and concerning the Financial
Data Schedule appearing as Exhibit 27 to this Report.
(a)(2) FINANCIAL STATEMENT SCHEDULES.
An index to the financial statement schedules immediately
precedes such schedules.
(a)(3) EXHIBITS.
An index to the exhibits filed or incorporated by
reference immediately precedes such exhibits.
(b) REPORTS ON FORM 8-K.
The following reports on Form 8-K were filed since the
filing of the Corporation's 1997 Annual Report on
Form 10-K.
Date Filed Accession Number
------------------ ----------------
December 17, 1998 54381-98-30
Page 29
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the Town of Bloomfield, State of
Connecticut, on this 16th day of March, 1999.
KAMAN CORPORATION
(Registrant)
By Charles H. Kaman, Chairman, President
and Chief Executive Officer
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:
- -------------------------------------------------------------------
Charles H. Kaman Chairman, President, Chief March 16, 1999
Executive Officer and Director
(Chief Executive Officer)
Robert M. Garneau Executive Vice President March 16, 1999
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
Robert M. Garneau March 16, 1999
Attorney-in-Fact for:
Brian E. Barents Director
Fred A. Breidenbach Director
E. Reeves Callaway, III Director
Frank C. Carlucci Director
Laney J. Chouest Director
John A. DiBiaggio Director
Edythe J. Gaines Director
Huntington Hardisty Director
C. William Kaman, II Director
Eileen S. Kraus Director
Hartzel Z. Lebed Director
Walter H. Monteith, Jr. Director
John S. Murtha Director
Wanda L. Rogers Director
Page 30
<PAGE>
<PAGE>
KAMAN CORPORATION AND SUBSIDIARIES
Index to Financial Statement Schedules
Report of Independent Auditors
Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts
Page 31
<PAGE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
KPMG LLP
Certified Public Accountants
CityPlace II
Hartford, Connecticut 06103
The Board of Directors and Shareholders
Kaman Corporation:
Under date of January 27, 1999, we reported on the consolidated
balance sheets of Kaman Corporation and subsidiaries as of
December 31, 1998 and 1997 and the related consolidated
statements of operations, changes in shareholders' equity and cash
flows for each of the years in the three-year period ended
December 31, 1998, as contained in the 1998 annual report to
shareholders. These consolidated financial statements and our
report thereon are included in the annual report on Form 10-K for
1998. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related
consolidated financial statement schedule as listed in the
accompanying index. This financial statement schedule is the
responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such schedule, when considered in relation to
the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set
forth therein.
/s/ KPMG LLP
Hartford, Connecticut
March 16, 1999
Page 32
<PAGE>
<PAGE>
KAMAN CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
<TABLE>
YEAR ENDED DECEMBER 31, 1996
Additions
<S> <C> <C> <C> <C> <C>
BALANCE CHARGED TO BALANCE
JANUARY 1, COSTS AND DECEMBER 31,
DESCRIPTION 1996 EXPENSES OTHERS DEDUCTIONS 1996
Allowance for
doubtful
accounts $2,289 $1,288 $----- $1,003(A) $2,574
====== ====== ====== ====== ======
Accumulated
amortization
of goodwill $3,899 $ 365 $----- $ 397(B) $3,867
====== ====== ====== ====== ======
YEAR ENDED DECEMBER 31, 1997
Additions
<S> <C> <C> <C> <C> <C>
BALANCE CHARGED TO BALANCE
JANUARY 1, COSTS AND DECEMBER 31,
DESCRIPTION 1997 EXPENSES OTHERS DEDUCTIONS 1997
Allowance for
doubtful
accounts $2,574 $2,950 $----- $1,697(A) $3,827
====== ====== ====== ====== ======
Accumulated
amortization
of goodwill $3,867 $ 345 $----- $2,834(B) $1,378
====== ====== ====== ====== ======
YEAR ENDED DECEMBER 31, 1998
Additions
<S> <C> <C> <C> <C> <C>
BALANCE CHARGED TO BALANCE
JANUARY 1, COSTS AND DECEMBER 31,
DESCRIPTION 1998 EXPENSES OTHERS DEDUCTIONS 1998
Allowance for
doubtful
accounts $3,827 $1,058 $----- $ 838(A) $4,047
====== ====== ====== ====== ======
Accumulated
amortization
of goodwill $1,378 $ 110 $----- $----- $1,488
====== ====== ====== ====== ======
<FN>
(A) Write-off of bad debts, net of recoveries
(B) Write-off of accumulated amortization of goodwill related to
the sale of a subsidiary or division.
</FN>
</TABLE>
Page 33
<PAGE>
<PAGE>
KAMAN CORPORATION
INDEX TO EXHIBITS
Exhibit 3a The Amended and Restated by reference
Certificate of Incorporation
of the corporation, as amended,
has been filed with the Securities
and Exchange Commission on form
S-8POS on May 11, 1994, as
Document No. 94-20.
Exhibit 3b The By-Laws of the corporation attached
as amended on February 9, 1999.
Exhibit 4a Indenture between the corporation by reference
and Manufacturers Hanover Trust
Company, as Indenture Trustee,
with respect to the
Corporation's 6% Convertible
Subordinated Debentures, has
been filed as Exhibit 4.1 to
Registration Statement No. 33 -
11599 on Form S-2 of the
corporation filed with the
Securities and Exchange
Commission on January 29, 1987
and is incorporated in this
report by reference.
Exhibit 4b The Amended and Restated by reference
Revolving Credit Agreement
between the corporation and The
Bank of Nova Scotia and Fleet National
Bank of Connecticut, as
Co-Administrative Agents, dated
as of July 3, 1997 has been filed
as an exhibit to the Corporation's
Form 10-Q Document No. 54381-97-16
filed with the Securities and
Exchange Commission on August 15, 1997
and is incorporated in this report
by reference.
Exhibit 4c The corporation is party to certain by reference
long-term debt obligations, such
as real estate mortgages, copies
of which it agrees to furnish to
the Commission upon request.
Page 34
<PAGE>
<PAGE>
Exhibit 10a The Kaman Corporation 1993 Stock by reference
Incentive Plan as amended effective
November 18, 1997 has been filed
as an exhibit to the Corporation's
Form 10-K Document No. 54381-98-09
filed with the Securities and
Exchange Commission on March 16, 1998
(as amended by Document No. 54381-98-13
on March 27, 1998) and is incorporated
in this report by reference.
Exhibit 10b The Kaman Corporation Employees by reference
Stock Purchase Plan as amended
effective November 19, 1997 has been filed
as an exhibit to the Corporation's
Form 10-K Document No. 54381-98-09
filed with the Securities and
Exchange Commission on March 16, 1998
(as amended by Document No. 54381-98-13
on March 27, 1998) and is incorporated
in this report by reference.
Exhibit 10c Agreement dated August 10, 1998 Attached
between the corporation and
C. William Kaman, II.
Exhibit 11 Statement regarding computation Attached
of per share earnings.
Exhibit 13 Portions of the Corporation's Attached
1998 Annual Report to
Shareholders as required by
Item 8.
Exhibit 21 Subsidiaries. Attached
Exhibit 23 Consent of Independent Auditors. Attached
Exhibit 24 Power of attorney under which Attached
this report has been signed on
behalf of certain directors.
Exhibit 27 Financial Data Schedule Attached
Page 35
<PAGE>
<PAGE>
<PAGE>
EXHIBIT 3B
KAMAN CORPORATION
BY-LAWS
ARTICLE I
Offices
1. The principal office of this corporation shall be at such
place in the Town of Bloomfield in the State of Connecticut as the
Directors shall from time to time designate. The corporation may
have such other offices within or without the State of Connecticut
as the Directors may from time to time determine.
ARTICLE II
Meeting of Stockholders
1. PLACE OF MEETINGS. All meetings of the stockholders shall be
held at the principal office or place of business of the
corporation, or at such place within or without the State of
Connecticut as from time to time may be designated by resolution of
the Board of Directors.
2. ANNUAL MEETINGS. The annual meetings of the stockholders
shall be held on such day, other than a legal holiday, in the month
of March or April of each year and at such time and place as may be
designated by the Board of Directors. The purpose of such meeting
shall be the election of a Board of Directors by ballot and the
transaction of such other business as may properly come before such
meeting. If the annual meeting of the stockholders be not held as
herein prescribed, the election of directors may be held at any
meeting thereafter called pursuant to these by-laws or otherwise
lawfully held.
3. NOTICE OF ANNUAL MEETING. A notice setting out the day, hour
and place of such annual meeting shall be mailed, postage prepaid,
to each stockholder of record at his address as the same appears on
the stock book of the corporation, or if no such address appears,
at his last known address, not less than seven (7) days nor more
than fifty (50) days before such annual meeting. Such notice shall
also state any proposed amendment or repeal of the by-laws of the
corporation and any other proposed matter other than the election
of directors which, under the Connecticut Stock Corporation Law,
expressly requires the vote of stockholders.
4. ADJOURNMENT OF STOCKHOLDERS' MEETING. If a quorum is not
present at any meeting of the stockholders, the stockholders
present, in person or by proxy, may adjourn such meeting to such
future time as shall be agreed upon by them, and notice of such
adjournment shall be given to the stockholders not present or
represented at the meeting; but if a quorum be present, the
stockholders present may adjourn from day to day as they see fit,
and no notice of such adjournment need be given.
1
<PAGE>
<PAGE>
5. SPECIAL MEETINGS. Special Meetings of the stockholders may be
called at any time by the President or by resolution of the Board
of Directors. A special meeting of the stockholders shall be
called by the President upon the request of any two (2) directors
or upon the written request of one (l) or more stockholders holding
in the aggregate at least one-tenth (1/10) of the total number of
shares entitled to vote at such meeting. The Secretary shall mail
a notice of such meeting to each stockholder of record not less
than seven (7) days nor more than fifty (50) days before such
meeting, and such notice shall state the day, hour and place of
such meeting and the purpose thereof.
6. WAIVER OF NOTICE. Notice of any stockholders' meeting may be
waived in writing by all the stockholders, and if any stockholder
present at a stockholders' meeting does not protest the lack of
proper notice prior to or at the commencement of the meeting, he
shall be deemed to have waived notice of such meeting.
7. SHAREHOLDERS' CONSENT. Any resolution in writing approved and
signed by all the stockholders or their proxies or attorneys shall
have the same force and effect as if it were a vote passed by all
the stockholders at a meeting duly called and held for that
purpose. In addition, actions taken at any meeting of stockholders
however called and with whatever notice given, if any, shall be as
valid as though taken at a meeting duly called and held on notice,
if:
(l) All stockholders entitled to vote were present in person
or by proxy and no objection to holding the meeting was made by any
stockholder; or
(2) A quorum was present, either in person or by proxy, and no
objection to holding the meeting was made by any stockholder
entitled to vote so present, and if, either before or after the
meeting, each of the persons entitled to vote not present in person
or by proxy signs a written waiver of notice, or a consent to the
holding of the meeting or an approval of the action. The Secretary
shall record all such resolutions, waivers, consents and approvals
in the minute book of the corporation.
8. QUORUM. A majority of the stock issued and outstanding,
either in person or by proxy, shall constitute a quorum for the
transaction of business at any meeting of the stockholders; except
that if no quorum be present, a majority of the stockholders
present in person or by proxy may adjourn the meeting to such time
as they may determine. Notice of any such adjournment shall be
given to the stockholders not present or represented at such
meeting.
9. PROXIES. At all meetings of the stockholders any stockholder
entitled to vote may vote either in person or by proxy. Such proxy
shall be in writing, but need not be sealed, witnessed or
acknowledged, and shall be filed with the Secretary before the
meeting or before being voted.
2
<PAGE>
<PAGE>
10. NUMBER OF VOTES OF EACH STOCKHOLDER. Each stockholder,
whether represented in person or by proxy, shall be entitled to one
(l) vote for each share of stock standing in his own name on the
books of this corporation on the record date.
11. VOTING. In the election of directors and in voting on any
question on which a vote by ballot is required by law or is
demanded by any stockholder, the voting shall be by ballot; on all
other questions it may be viva voce.
12. RECORD DATE. For the purpose of determining which
stockholders are entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or which stockholders are
entitled to receive payment of any dividend or for any other proper
purpose, the Board of Directors, and in the absence of their action
the Secretary of the corporation or any other person lawfully
acting, shall set a record date which shall not be any earlier than
the date on which the Board of Directors, the Secretary or such
other authorized party acts to set such record date, no more than
seventy (70) nor less than ten (10) days before the particular
event requiring such determination of stockholders is to occur.
ARTICLE III
Directors
1. NUMBER, ELECTION AND TERM OF OFFICE. The property, business
and affairs of the corporation shall be managed by a Board of
Directors composed of not less than three nor more than fifteen
directorships in number, which directorships need not be filled by
persons who are stockholders. The actual number of directorships
shall be fixed by the incorporators and subscribers at their first
meeting, and thereafter as the Board of Directors may determine.
The first Board of Directors shall be elected at the organizational
meeting of the corporation. Thereafter the directors shall be
elected by ballot by the stockholders at their annual meeting and
shall hold office until the next annual meeting and until their
successors shall be chosen and qualified in their stead. (Amended
Effective 4/18/94)
2. VACANCIES. Any vacancy in the Board of Directors by reason of
death, resignation or other cause may be filled for the unexpired
portion of the term by a concurring vote of a majority of the
remaining directors in office, or by action of the sole remaining
director in office, though such remaining directors are less than a
quorum, though the number of directors at the meeting to fill such
vacancy are less than a quorum and though such majority is less
than a quorum.
3. POWERS OF DIRECTORS. The directors shall have the general
management and control of the property, business and affairs of
this corporation and shall exercise all the powers that may be
exercised or performed by this corporation under the statutes, its
Certificate of Incorporation, and these By-laws.
3
<PAGE>
<PAGE>
4. PLACE OF MEETINGS. The directors may hold their meetings at
such place or places within or without the State of Connecticut as
the Board may from time to time determine.
5. REGULAR MEETINGS. A meeting of the directors for the election
of officers and the transaction of any other business that may come
before such meeting shall be held without other notice immediately
following the organization meeting of the corporation and each
annual meeting of the stockholders at the place designated
therefor.
6. OTHER MEETINGS. Other meetings of the directors may be held
whenever the President or a majority of the directors may deem it
advisable, notice thereof to be mailed or given orally to each
director at lease two (2) days prior to such meeting. (Amended
Effective 4/26/88).
7. WAIVER OF NOTICE. Notice of any directors' meeting may be
waived in writing by all the directors and, if any director present
at a directors' meeting does not protest prior to or at the
commencement of the meeting the lack of proper notice, he shall be
deemed to have waived notice of such meeting.
8. DIRECTORS' CONSENT. Any resolution in writing, approved and
signed by all the directors, shall have the same force and effect
as if the same were a vote passed by all the directors at a meeting
duly called and held for that purpose, and such resolution shall be
recorded by the Secretary in the minute book of the corporation.
9. QUORUM. A majority of the directorships shall constitute a
quorum for the transaction of business at all meetings of the Board
of Directors, but any number less than a quorum may adjourn such
meeting to a specified date. The act of a majority of the
directors present at a meeting at which a quorum is present at the
time of the act shall be the act of the Board of Directors.
10. COMPENSATION OF DIRECTORS. Directors as such shall not
receive any stated compensation or salary for their services but,
by resolution of the Board, a fixed sum and expenses of attendance
may be allowed for attendance at each regular or special meeting of
the Board, provided, however, that nothing herein contained shall
be construed to preclude any director from serving the corporation
in any other capacity and receiving compensation therefor.
11. COMMITTEES. The Board of Directors may, by resolution adopted
by the affirmative vote of directors holding a majority of the
directorships, create one or more committees, such as an Executive
Committee, comprising in each case two or more directors, which
committee or committees shall have and may exercise all such
authority of the Board of Directors as may be delegated to it in
such resolution or thereafter by similar resolution.
4
<PAGE>
<PAGE>
12. DIRECTOR EMERITUS. The Board of Directors may, from time
to time, appoint any former director of the corporation who shall
have retired from the board for reasons of age, health or similar
reasons, as Director Emeritus of the corporation. A Director
Emeritus shall be entitled to attend such meetings of the directors
and be compensated therefor as the board may determine.
13. VICE CHAIRMAN. The Board of Directors may, from time to time,
appoint a Vice Chairman of the Board of Directors from among the
then serving members of the board who, in the absence or incapacity
of the Chairman, shall have the powers and responsibilities of the
Chairman with respect to meetings of the Board of Directors and of
the Shareholders and shall also assist the Chairman with respect to
meetings of the Board of Directors and of the Shareholders as the
Chairman may request. The position of Vice Chairman shall not be a
corporate office or carry with it any of the powers or
responsibilities of any corporate office of the corporation,
however, the same individual may simultaneously serve as Vice
Chairman and as a corporate officer of the corporation. The Vice
Chairman shall serve for a term of one year and until his successor
is duly appointed and qualified but may be removed by the Board of
Directors at any time with or without cause and with or without
notice or hearing. The Vice Chairman may be compensated for his
services as such as the board may determine. (Added Effective
February 9, 1999)
ARTICLE IV
(Amended in its entirety effective 4/24/90)
Officers
1. The directors shall elect a Chairman, a President, one or more
Vice Presidents, a Treasurer and a Secretary, and may from time to
time appoint such other officers as they, the directors, deem
expedient. Any two or more offices may be held by the same person
except the offices of President and Secretary. The duties of
officers of the corporation shall be such as are prescribed by
these By-laws and as may be prescribed by the directors.
2. CHAIRMAN. The Chairman shall preside at all meetings of the
directors and of the stockholders and unless the directors
otherwise determine, he shall be the chief executive officer of the
corporation. As Chief Executive Officer, he shall have general
control and management of the corporation's business and affairs,
subject to the direction of the Board of Directors. He shall
consult with and advise the President concerning the operations of
the corporation. The Chairman shall perform such additional duties
as may be assigned to him from time to time by the Board of
Directors.
5
<PAGE>
<PAGE>
3. PRESIDENT. The President shall perform all duties incident to
the office of President and shall have full authority and
responsibility for the operation of the business of the
corporation, subject to the direction of the Board of Directors and
the Chief Executive Officer. In the event of the absence or
disability of the Chairman, the President shall perform the duties
and have the power of the Chairman. The President shall perform
such additional duties as may be assigned to him from time to time
by the Board of Directors or the Chief Executive Officer.
4. VICE PRESIDENT. Any Vice President shall have the powers
and perform such duties as may be assigned to him by the Board of
Directors or the Chief Executive Officer.
5. SECRETARY. The Secretary shall keep a record of the minutes
of the proceedings of all meetings of stockholders and directors
and shall issue all notices required by law or by these By-laws,
and he shall discharge all other duties required of such officer by
law or designated from time to time by the Board of Directors or by
the Chief Executive Officer or as are incident to the office of
Secretary. He shall have the custody of the seal of this
corporation and all books, records and papers of this corporation,
except such as shall be in the charge of the Treasurer or of some
other person authorized to have custody and possession thereof by a
resolution of the Board of Directors.
6. TREASURER. The Treasurer shall have charge and custody of and
be responsible for all funds and securities of the corporation,
keep full and accurate accounts of receipts and disbursements and
books belonging to the corporation, deposit all moneys and valuable
effects in the name and to the credit of the corporation in
depositories designated by the Board of Directors, and, in general,
perform such other duties as may from time to time be assigned to
him by the Board of Directors or by the Chief Executive Officer or
as are incident to the office of Treasurer.
7. TERM OF OFFICE. Each of such officers shall serve for the
term of one year and until his successor is duly appointed and
qualified, but any officer may be removed by the Board of Directors
at any time with or without cause and with or without notice of
hearing. Vacancies among the officers by reason of death,
resignation or other causes shall be filled by the Board of
Directors.
8. COMPENSATION. The compensation of all officers shall be fixed
by the Board of Directors, and may be changed from time to time by
a majority vote of the board.
6
<PAGE>
<PAGE>
ARTICLE V
Issue and Transfer of Stock
1. CERTIFICATES. Certificates of stock shall be in form
authorized or adopted by the Board of Directors and shall be
consecutively numbered, provided that each certificate shall set
forth upon its face as at the time of issue: the name of this
corporation, a statement that this corporation is organized under
the laws of the State of Connecticut, the name of the person to
whom issued, the number of shares represented thereby and the par
value of each such share; and provided that each certificate shall
be signed by the President or a Vice President and by the Secretary
or an Assistant Secretary or the Treasurer or an Assistant
Treasurer, and shall be sealed with the seal of this corporation.
2. TRANSFER. The stock of the corporation shall be transferred
only upon the books of the corporation either by the stockholder in
person, or by power of attorney executed by him for that purpose,
upon the surrender for cancellation of the old stock certificate.
Prior to due presentment for registration of transfer of a
security, the corporation shall treat the registered owner of a
security as the person exclusively entitled to vote, receive
notifications and dividends, and otherwise to exercise all the
rights and powers of the shares represented by such security.
The form of transfer shall be as follows:
For value received________________________hereby sell, assign
and transfer unto
____________ ______shares of the capital stock represented by the
within certificate and do
hereby irrevocably constitute and appoint _______________to
transfer the said stock on the
books of the within named corporation with full power of
substitution in the premises.
Dated_________________________, 19_____.
In the presence
of:________________________________________________________________
New certificates shall thereupon be issued to the purchaser or
assignee.
7
<PAGE>
<PAGE>
ARTICLE VI
Seal
1. The seal of this corporation shall have inscribed thereon the
name of this corporation, the word "Seal" and the word
"Connecticut", and shall be in the custody of the Secretary.
ARTICLE VII
Fiscal Year
1. The fiscal year of the corporation shall commence on
January 1.
ARTICLE VIII
Amendments
1. The by-laws of the corporation may be adopted, amended or
repealed at any validly called and convened meeting of the Board of
Directors by the affirmative vote of Directors holding a majority
of the number of directorships at the time or by the unanimous
written consent of the Board of Directors as provided in Article
III, Section 8 of these by-laws. Any notice of a meeting of the
Board of Directors at which by-laws are to be adopted, amended or
repealed shall include notice of such proposed action. (Amended
Effective 4/18/94).
8
(2/9/99)
<PAGE>
<PAGE>
<PAGE>
EXHIBIT 10C
August 10, 1998
Mr. C. William Kaman II
221 Newgate Road
East Granby, CT 06026
Dear Bill:
This letter is to summarize our discussions as a result of
your decision to resign all officer and director positions with
Kaman Corporation and its subsidiaries, with the exception of your
position as a member of the Board of Directors of Kaman
Corporation, effective August 11, 1998. In order to provide for
your availability after that date and to enhance your retirement
benefits, we have agreed as follows:
1. EMPLOYMENT AS SENIOR EXECUTIVE ADVISOR. Beginning August ll,
1998 and ending on December 31, 2001 (the "Advisor Period"), Kaman
Corporation (sometimes referred to as "we" or "the Corporation"in
this Agreement) will retain you in full time employee status,
holding the position of Senior Executive Advisor. During the
Advisor Period, you will receive monthly salary payments at the
annual rate Two Hundred Forty Five Thousand Dollars ($245,000),
which payments will be subject to tax and employee benefit
withholdings. In this position, you will be eligible for all the
usual employee benefits available to other senior executive Kaman
Corporation employees.
This arrangement is not intended to restrict your pursuit of
other business interests. However, it is recognized that your
position and length of experience at Kaman Music Corporation
("Music") provide you with a unique professional perspective.
Therefore, for a period of one year beginning August 11, 1998, you
will provide professional guidance to Music management from time to
time. Appropriate office facilities will be made available to you
for the occasions upon which you visit Music. Should Music
management request you to attend trade shows, events, or special
calls, and if you agree to attend same, you will be reimbursed for
the travel expenses you incur, including lodging, transportation
and meals.
2. STOCK APPRECIATION RIGHTS, RESTRICTED STOCK AWARDS AND STOCK
OPTIONS. At December 31, 2001, we will cause the remaining
restrictions on your existing restricted stock awards to lapse as
of that date and will pay you an amount equal to the fair market
value of the shares on that date. In addition, at December 31,
2001, for all your existing stock options and stock appreciation
rights then outstanding (whether exercisable or non-exercisable),
we will pay you the difference between their exercise prices and
the fair market value of the shares at that date. Fair market
value will be determined by the closing price of the Class A common
stock on December 31, 2001.
<PAGE>
<PAGE>
Mr. C. William Kaman 11
August 10, 1998
Page 2
3. ELIGIBILITY FOR GROUP MEDICAL COVERAGE AT END OF ADVISOR
PERIOD. At the end of the Advisor Period, you, Loraine, Kathryn
and Tyson will also be considered eligible for the Connecticut
General group medical insurance program on the same basis as other
members of the Kaman family. Please note that Jill and Laurel are
currently included in the "other members of the Kaman family" group
and John has coverage as an employee of Kamatics.
4. EARLY TERMINATION OF THE ADVISOR PERIOD. Notwithstanding any
other provision of Agreement, you may end this Agreement at any
time prior to December 31, 2001. You shall exercise this right on
the date you wish to terminate the Agreement by providing written
notification to the office of the President, Kaman Corporation on
that date (the "Early Termination Date"). As of the Early
Termination Date, we will pay you a lump sum equal to the total of
unpaid monthly salary payments that would otherwise have been paid
through December, 2001. In addition, as of the Early Termination
Date, for all your existing restricted stock awards then remaining
subject to restrictions, we will pay you the fair market value of
the shares on that date, and for all your existing stock options
and stock appreciation rights outstanding at the Early Termination
Date (whether exercisable or non-exercisable), we will pay you the
difference between their exercise prices and the fair market value
of the shares at the Early Termination Date. Fair market value
will be determined by the closing price of the Class A common stock
on the Early Termination Date. At the Early Termination Date, you,
Loraine, Kathryn and Tyson will also be considered eligible for the
Connecticut General group medical insurance program on the same
basis as other members of the Kaman family.
If the Early Termination Date occurs before December 31, 1999,
we will pay the premium for your existing group universal life
insurance policy through December 31, 1999 and will provide you
with estate and tax planning services reimbursement under the Kaman
Corporation program, through December 31,1999.
5. AUTOMOBILE. At August 11, 1998, we will give you the 1995 Saab
9000 company automobile that you now have. The value then
attributed to it by the leasing company (i.e., the remaining lease
payments) will be considered "fringe benefit" income to you and
that amount will be subject to tax in 1998.
6. PAYMENTS UPON YOUR DEATH. In the event of your death during
the term of your employment as Senior Executive Advisor, such date
will automatically be considered the Early Termination Date and the
payments described in Section 4 shall be made to your estate.
<PAGE>
<PAGE>
Mr. C. William Kaman 11
August 10, 1998
Page 3
If the foregoing accurately reflects your understanding of our
agreement, please sign and date this letter in the space provided.
When fully signed, this letter will constitute our entire agreement
regarding this matter. As additional consideration for the three
and one half year employment agreement, this letter and your
signature to the attached General Release and Agreement will also
constitute your general release of Kaman Corporation and its
subsidiaries from any matters other than those described in this
letter.
Sincerely,
Charles H. Kaman, President
Accepted and Agreed to this 10th
day of August, 1998.
C. William Kaman II
<PAGE>
<PAGE>
<PAGE>
EXHIBIT 11
KAMAN CORPORATION AND SUBSIDIARIES
EARNINGS PER COMMON SHARE COMPUTATION
The computations and information required to be furnished in this Exhibit
appear in the Corporation's Annual Report to Shareholders, which is filed
herein as Exhibit 13 to this report, and is incorporated herein by
reference.
<PAGE>
<PAGE>
<PAGE>
EXHIBIT 13, PORTIONS OF THE CORPORATION'S ANNUAL REPORT TO
SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
In response to a recommendation made by Charles H. Kaman, the
corporation's founder, chairman, chief executive officer and
president, the board of directors established a committee in
December, 1998, to conduct a search for a new chief executive
officer. Mr. Kaman will continue as chief executive officer in the
interim and will remain as Chairman of the Board of Directors once
a successor is named. In announcing the decision, Mr. Kaman
emphasized that the goal is for the corporation to continue to be
led in the cultural tradition that has sustained it for more than
50 years. The search is in progress.
Mr. Kaman continues to make an excellent recovery from a mild
stroke suffered in August of last year. Until his return to the
office, ongoing business activities will continue to be coordinated
through Robert M. Garneau, the corporation's executive vice
president and chief financial officer.
Effective with calendar year 1998, the corporation has
reorganized its business segment reporting in accordance with the
criteria of Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related
Information." The corporation now reports information in
the following segments: Aerospace, Industrial Distribution and
Music Distribution. Prior periods have been restated to reflect
these segments and an additional segment identified as Scientific
Services, representing operations at Kaman Sciences Corporation, a
subsidiary that was sold on December 30, 1997.
Consolidated revenues were $1.0 billion for 1998 and 1997,
compared to $953.7 million for 1996. Results for 1998 reflect
increased revenue in the Aerospace segment that, to a large extent,
offset the loss of revenue that had been contributed by the
Scientific Services segment. The 1997 increase of almost 10% was
due to results in the Aerospace, Scientific Services and Industrial
Distribution segments.
Aerospace segment net sales increased almost 33% in 1998, 28%
in 1997, and 8% in 1996. The Aerospace segment's principal programs
include the SH-2G multi-mission naval helicopter, the K-MAX
(Registered Trademark) helicopter, subcontract work involving
airframe structures, and the manufacture of niche market products
such as self-lubricating bearings and driveline couplings for
aircraft applications.
The SH-2G helicopter program generally involves retrofit of
the corporation's SH-2F helicopters, previously manufactured for
the U.S. Navy (and currently in desert storage), to the SH-2G
configuration. The corporation is currently performing this work
KAMAN CORPORATION AND SUBSIDIARIES Page 1
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
under three contracts with foreign governments. Specifically, the
corporation has completed delivery of ten (10) SH-2G helicopters to
the Republic of Egypt under that country's foreign military sale
agreement with the U.S. Navy. This work has a value of about $150
million, virtually all of which has been recorded as sales. The
corporation is currently conducting pilot training and providing
support for program start-up issues.
The corporation also has commercial sale contracts with the
Commonwealth of Australia and the Government of New Zealand for the
supply of retrofit SH-2G aircraft. The work for Australia involves
eleven (11) helicopters (incorporating a new cockpit and new
weapons and sensors) with support, including a support services
facility, for the Royal Australian Navy. This contract has an
anticipated value of nearly $600 million, of which about 26% has
been recorded as sales. The work for New Zealand involves four (4)
aircraft, and support, for New Zealand defense forces. This
contract has an anticipated value of nearly $170 million, of which
about 24% has been recorded as sales. Work is proceeding on both
programs, and deliveries are expected to begin in the 2000 - 2001
time frame.
The corporation is pursuing other potential SH-2 business
(including possible further orders from current customers) as
various countries develop their naval helicopter requirements. This
market is highly competitive and naturally influenced by global
economic and political conditions. Management believes that
conditions currently prevailing in some areas have slowed the
prospects for potential sales, a prime example being economic
difficulties in Asia.
The SH-2 is an aircraft that was originally manufactured for
the United States Navy. This is no longer the case, however, the
U.S. Naval Reserves has twelve (12) SH-2G aircraft active in its
fleet. Management anticipates that at some point, the aircraft will
be retired from this type of service as well. In the meantime, the
corporation expects to continue providing logistics and spare
parts support for the aircraft.
Since the K-MAX helicopter received its certification in
August of 1994, the corporation has been conservative in its
production of this medium to heavy lift 'aerial truck' which has a
variety of potential applications, including logging, oil and gas
exploration, power line construction and fire fighting. Having
operated in the aviation industry for more than fifty years,
management has anticipated that it would take some time to develop
markets for a new aircraft and thus achieve sales and
profitability. The principal application for the K-MAX to date has
been in the commercial logging industry. During the past two years,
this market has weakened significantly, particularly in the U.S.
Pacific Northwest and Canada, due in part to the effect of economic
conditions in Asia upon export sales. These circumstances appear to
KAMAN CORPORATION AND SUBSIDIARIES Page 2
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
be affecting certain current customers as well as potential sales
of the K-MAX. Production of the aircraft has been adjusted
accordingly. The K-MAX also has a potential non-combat role for the
military in the task of vertical replenishment ("VERTREP"). As the
federal government has explored the concept of outsourcing this
role to commercial providers, the U.S. Navy Military Sealift
Command has awarded K-MAX two separate demonstration projects using
charter/lease arrangements. Although there was no activity in this
arena during 1998, management believes that the federal government
is continuing to consider the commercial outsourcing alternative.
As reported previously, the market for this new aircraft also has
been affected by the existence of military surplus aircraft that
have been (and may be in the future) released to the public at
lower cost than new aircraft.
The corporation also performs subcontract work for certain
airframe manufacturing programs and manufactures various niche
market products, including self-lubricating bearings for use
principally in aircraft; and driveline couplings for use in
helicopters. These businesses have benefitted from growth
in the commercial aviation industry, although management believes
that this growth trend is beginning to level off. Boeing, for
example, is an important and long-standing customer for our
airframe subcontract work and certain niche market products; while
management believes that the corporation is well positioned to
maintain its level of business with this customer, pricing
pressure is expected to intensify.
As to the Scientific Services segment, the corporation sold
Kaman Sciences to ITT Industries, Inc. on December 30, 1997 for
$135 million in cash. There was a pre-tax gain on the sale of
approximately $90 million, which is not included in the operating
profits for the Scientific Services segment. In the third
quarter of 1998, the corporation received an additional $5.4
million in cash, determined in accordance with the Stock Purchase
Agreement for the sale. This segment's net sales increased 16% for
1997 to approximately $145 million, and 9.6% for 1996 to
approximately $125 million. Management's decision to sell the
operation was based upon its assessment of trends in the defense
sciences industry, including increasing consolidation and a
tendency for defense sciences contracts to become larger in size
and longer in duration in relation to the corporation's
determination to focus capital investment in its aerospace and
industrial distribution businesses.
Industrial Distribution segment net sales increased 5% in
1998, 7% in 1997, and 4% in 1996. Increased net sales for this
segment are due in part to its expansion of branch locations in the
past few years and to its ongoing efforts to differentiate the
business by offering a product mix which incorporates more
value-added high technology and providing certain technical
KAMAN CORPORATION AND SUBSIDIARIES Page 3
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
services to support customer needs. However, the Industrial
Distribution segment serves nearly every sector of U.S. industry
and so tends to be influenced by industrial production levels.
Export demand in certain industries has been adversely affected by
economic difficulties in Asia, including the lumber, chemicals,
paper products and semiconductor industries, which has resulted in
increased competition and price pressure on the Industrial
Distribution segment's operations. Moreover, while industrial
distribution has traditionally been a very competitive business,
increasing consolidation in the industry appears to be resulting in
even more intense competition. In this environment, the company is
working to focus sales efforts in the markets that offer the best
opportunities and to carry out initiatives to enhance operating
efficiencies, including consolidation and centralization of various
support functions.
Music Distribution segment net sales decreased by 10% in 1998
and by 13% in 1997, while increasing by 4% in 1996. The decrease in
segment net sales for 1998 is largely due to loss of sales
associated with the European amplifier manufacturing business that
was sold during 1997 and to continuing weakness in international
markets brought on by the economic difficulties in Asia.
Management continues implementation of initiatives to improve
operating efficiency while reorienting its product offerings to
adapt to shifts in musical tastes and buying habits as well as
changes in the nature of its customer base.
Total operating profits for the segments in 1998 increased by
almost 6% compared to 1997 (including the Scientific Services
segment in 1997). Operating profits for the Aerospace segment
increased 38% for 1998 compared to the prior year, primarily due to
the SH-2G program and demand for its specialty bearings, offset to
some degree by costs associated with the K-MAX program and
difficulties experienced by the electromagnetics business in
developing new markets for niche market products and transitioning
from defense to commercial business. Operating profits for the
Industrial Distribution segment decreased 7% for 1998 compared to
1997, due primarily to the effects of the economic difficulties in
Asia upon certain of the company's customers. Operating profits
for the Music Distribution segment were up substantially in 1998
compared to the prior year, due primarily to the loss resulting
from charges taken in this segment during 1997.
Net earnings for 1998 were $30.0 million, compared to $70.5
million in 1997. Results for 1997 include a post-tax gain of
approximately $53.5 million on the sale of the Scientific Services
segment and a post-tax loss of $6.1 million on the sale of the
Music Distribution segment's European amplifier manufacturing
business. Net earnings per common share basic in 1998 were $1.28
($1.23 per common share diluted) compared to $3.53 per common share
basic ($2.86 per common share diluted) in 1997. The sale of the
KAMAN CORPORATION AND SUBSIDIARIES Page 4
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Scientific Services segment resulted in a post-tax gain of
approximately $2.80 per common share basic in 1997 while the
sale of the amplifier business in the Music Distribution segment
resulted in a post-tax loss of 32 cents per common share basic in
1997.
Total operating profits for the segments for 1997 increased
by 2% compared to 1996. Operating profits for the Aerospace segment
increased 19% for 1997 compared to the prior year, primarily due to
the SH-2G program and demand for specialty bearings, offset to some
extent by the aforementioned difficulties in the electromagnetics
business. Operating profits for the Scientific Services segment in
1997 were level with 1996. Operating profits for the Industrial
Distribution segment increased 8% in 1997 compared to 1996, due
primarily to growth in new branch locations. Operating profits for
the Music Distribution segment were down substantially in
1997, principally due to the charge taken and loss of amplifier
sales in the segment.
Net earnings for 1997 were $70.5 million compared to $23.6
million in 1996. Excluding all special items for each year,
earnings available to common shareholders increased more than 11%
to $19.5 million in 1997 from $17.5 million in 1996. Net earnings
for 1997 include a post-tax gain of approximately $53.5
million, or $2.80 per common share basic, on the sale of the
Scientific Services segment and a post-tax loss of $6.1 million, or
32 cents per common share basic, on the sale of the European
amplifier manufacturing business. Net earnings for 1996 include a
post-tax gain of $2.3 million, or 12 cents per common share
basic, on the sale of real estate within the Scientific Services
segment. Earnings available to common shareholders for 1997,
including special items, were $66.8 million, or $3.53 per common
share basic, $2.86 per common share diluted, compared to $19.9
million, or $1.07 per common share basic, $1.00 per common share
diluted in 1996.
Interest expense decreased almost 68% for the year ended
December 31, 1998 compared to the prior year, primarily due to the
application of a substantial portion of advance payments received
from the governments of Australia and New Zealand and a portion of
the proceeds from the sale of the Scientific Services segment to
pay down bank debt. For the year, interest expense attributable to
the corporation's debentures was more than offset by interest
income earned from investment of surplus cash. Interest expense
decreased 21% in 1997 compared to 1996. The reduction was primarily
due to the application of a substantial portion of advance payments
received from the governments of Australia and New Zealand to pay
down bank debt.
The consolidated effective income tax rate was 40.4% for
1998, 41.4% for 1997, and 42.0% for 1996.
KAMAN CORPORATION AND SUBSIDIARIES Page 5
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Effective January 1, 1998, the corporation adopted: (1) Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income." The Statement requires the corporation to report
"comprehensive income" as defined therein. Please refer to the
Notes to Consolidated Financial Statements for more information;
(2) Statement of Financial Accounting Standards No. 131,
"Disclosure about Segments of an Enterprise and Related
Information." The Statement changes the criteria used to determine
the segments for which the corporation must report information.
This item is discussed herein; please also see the Notes to
Consolidated Financial Statements for more information; and (3)
Statement of Financial Accounting Standards No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits." The
Statement requires additional disclosures on changes in the benefit
obligations and fair values of plan assets during the year. Please
refer to the Notes to Consolidated Financial Statements for more
information.
As to Year 2000 (Y2K) compliance, management began
discussions on this subject with its board of directors and the
board's audit committee in early 1997. During the fourth quarter of
that year, KPMG LLP was retained as a consultant to assist in
formalizing the Y2K compliance program and to provide periodic
assessment of the corporation's progress. During the first quarter
of 1998, each operating subsidiary designated a program manager
responsible for coordinating its activities and developed a plan
providing for inventory assessment of all Y2K related matters
(including hardware, software, networks, facilities systems and
embedded systems in product deliverables) as well as the status of
suppliers and service providers; conversion, upgrade or replacement
of applications, as needed; and compliance testing and problem
solving, all to be accomplished within timetables established under
the plan. Planning and assessment phases have been completed with
all matters that are not satisfactory "as is" to be remediated
either with a vendor upgrade or replacement. Activities in the
fourth quarter of 1998 focused principally on testing to confirm
compliance. To date, compliance timetables are being met, such that
the corporation is on schedule to achieve overall Y2K compliance,
including testing, by June 30, 1999. Contingency plans will be
established in the event they become appropriate at that time. In
addition, the corporation and each operating subsidiary are
currently working with suppliers, customers and service providers
to gauge their Y2K readiness and monitor their progress toward
compliance. An oversight committee reporting to the executive vice
president and chief financial officer, has been established at
corporate headquarters to monitor the progress of each subsidiary's
compliance work. Senior management provides progress reports to the
corporation's board of directors and audit committee on a regular
basis. The corporation separately identifies costs of Y2K efforts
as an internal management tool and based upon information known to
it at this time, management does not anticipate that the costs of
addressing Y2K issues will be material to the corporation's
KAMAN CORPORATION AND SUBSIDIARIES Page 6
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
financial position, results of operations, or cash flows in future
periods. Naturally, there can be no assurance that third parties'
systems, upon which the corporation and its subsidiaries may rely,
will become Y2K compliant in a timely manner. The corporation
cannot foresee the eventual outcome associated with the arrival of
the millennium and the impact that potential computer failures
within the corporation or among significant customers, suppliers or
service providers might have on the corporation's operations. It is
conceivable that if such failures occur, there could be an adverse
impact upon the corporation's operations.
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. In 1997, additional cash was
provided by the sale of the Scientific Services segment and the
advance payments made by the governments of Australia and New
Zealand relative to their SH-2G orders.
During 1998, operating activities used cash, principally due
to increases in accounts receivable and inventories in the
Aerospace segment, and payment of taxes due on the Kaman Sciences
transaction, offset by increases in accounts payable in the
Aerospace segment. During the year, cash used in investing
activities was for items such as acquisition of machinery and
computer equipment used in manufacturing and distribution, while
cash provided by investing activities consisted principally of a
post closing adjustment to the purchase price of the Scientific
Services segment. Cash used by financing activities was primarily
attributable to the repayment of debt, the payment of dividends to
common shareholders, and repurchase of Class A common stock
pursuant to a repurchase program for use in connection with
administration of the corporation's stock plans.
The corporation had approximately $59.6 million in surplus
cash at December 31, 1998, with an average of $55.3 million for the
year. These funds have been invested in high quality, short-term
instruments.
For 1997, operating activities generated cash, principally
due to advance payments from the governments of Australia and New
Zealand under their SH-2G programs (which payments are discussed
further below). This result was partially offset by working capital
requirements, primarily due to increases in accounts receivable for
the SH-2G programs for Egypt, Australia and New Zealand. For 1996,
operating activities required additional cash due principally to
growth in accounts receivable and inventories. Accounts receivable
increased in 1996 due to the SH-2G program for Egypt. Increases in
inventory levels have been primarily attributable to the K-MAX
helicopter program. Inventories at December 31, 1996 include K-MAX
aircraft that were principally being used in various applications
KAMAN CORPORATION AND SUBSIDIARIES Page 7
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
under shorter-term lease or charter/lease arrangements. Inventory
growth in the Industrial Distribution segment was in line with
increased business. Cash used in investing activities has
traditionally been for the acquisition of machinery and computer
equipment used in manufacturing and distribution. During 1997,
these customary requirements were more than offset by proceeds from
the sale of businesses and other assets, principally the
disposition of the Scientific Services segment. For 1996, proceeds
from the sale of property, plant and equipment increased, primarily
due to the sale of certain real estate associated with Scientific
Services segment. During 1997, cash used by financing activities
was primarily attributable to payments made to reduce bank debt and
the payment of dividends. Cash provided by financing activities
during 1996, after payment of dividends, was used primarily to
support the increase in working capital requirements previously
described.
At December 31, 1998, the corporation had approximately $30
million of its 6% convertible subordinated debentures outstanding.
The debentures are convertible into shares of Class A common stock
at any time on or before March 15, 2012 at a conversion price of
$23.36 per share, generally at the option of the holder. Pursuant
to a sinking fund requirement that began March 15, 1997, the
corporation redeems approximately $1.7 million of the outstanding
principal of the debentures each year.
For borrowing purposes, the corporation maintains a revolving
credit agreement involving a group of domestic and foreign banks.
This facility provides a maximum unsecured line of credit of $250
million. The agreement has a term of five years ending in January
2001, and contains various covenants, including debt to
capitalization, consolidated net worth requirements, and
limitations on other loan indebtedness that the corporation may
incur. The agreement was amended and restated during 1997 to
specifically address the issuance of certain letters of credit,
which are considered borrowings under the agreement.
During 1997, the governments of Australia and New Zealand
made advance payments of $104.3 million in connection with their
SH-2G contracts, which were fully secured by the corporation
through the issuance of irrevocable letters of credit. As of
December 31, 1998, the face amount of these letters of credit has
been reduced to about $54 million, in accordance with the terms of
the relevant contracts. Further reductions are anticipated as
certain contract milestones are achieved.
KAMAN CORPORATION AND SUBSIDIARIES Page 8
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Under the revolving credit agreement, the corporation has the
ability to borrow funds on both a short-term and long-term basis.
As of December 31, 1998, the corporation had virtually no
outstanding borrowings. Average borrowings were $3.3 million
compared to $84.8 million for 1997 and $125 million for 1996.
Substantially all of the advance payments described above and
certain of the proceeds from the sale of the Scientific Services
segment were used to pay down bank debt in 1997.
As of December 23, 1997, 95,106 shares of the corporation's
Series 2 preferred stock were converted to Class A common stock
pursuant to a call for partial redemption issued on November 20,
1997. During the first quarter of 1998, pursuant to another
redemption call, the corporation completed the process of
converting virtually all of its Series 2 preferred stock to Class A
common stock with an immaterial number of Series 2 preferred shares
being redeemed by the corporation and settled in cash.
Management believes that the corporation's cash flow from
operations and available unused bank lines of credit under its
revolving credit agreement will be sufficient to finance its
working capital and other capital requirements for the foreseeable
future.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking information relating to the
corporation's business and prospects, including the SH-2G and K-MAX
helicopter programs, specialty self-lubricating bearings and
couplings, the industrial and music distribution businesses, and
other matters that involve a number of uncertainties that may cause
actual results to differ materially from expectations. Those
uncertainties include, but are not limited to: 1) the successful
conclusion of contract negotiations with government authorities,
including foreign governments; 2) political developments in
countries where the corporation intends to do business; 3) standard
government contract provisions permitting renegotiation of terms
and termination for the convenience of the government; 4) economic
and competitive conditions in markets served by the corporation,
including industry consolidation in the United States and global
economic conditions (most notably, in Asia); 5) the degree of
acceptance of new products in the marketplace; 6) U.S. industrial
production levels; 7) achievement of Year 2000 compliance by the
corporation, its customers, suppliers and service providers,
including various federal, state and foreign governments and
agencies thereof; 8) currency exchange rates, taxes, laws and
regulations, inflation rates, general business conditions and other
factors. Any forward-looking information should be considered with
these factors in mind.
KAMAN CORPORATION AND SUBSIDIARIES Page 9
<PAGE>
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
(In thousands except per share amounts)
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES:
1998 $ 238,780 $ 247,106 $ 249,184 $ 269,471 $1,004,541
1997 251,794 249,920 269,852 271,799 1,043,365
GROSS PROFIT:
1998 $ 63,073 $ 65,179 $ 64,310 $ 70,260 $ 262,822
1997 62,726 61,475 63,574 67,619 255,394
NET EARNINGS (LOSS):
1998 $ 6,976 $ 7,617 $ 7,600 $ 7,815 $ 30,008
1997 (4,407) 6,710 7,097 61,104 70,504
PER COMMON SHARE - BASIC:
1998 $ .31 $ .32 $ .32 $ .33 $ 1.28
1997 (.28) .31 .33 3.15 3.53
PER COMMON SHARE - DILUTED:
1998 $ .29 $ .31 $ .31 $ .32 $ 1.23
1997 (.28) .28 .29 2.43 2.86
- ---------------------------------------------------------------------
</TABLE>
Due to the loss in the first quarter of 1997, the quarterly per
common share amounts for 1997 do not equal the "Total Year" figure.
KAMAN CORPORATION AND SUBSIDIARIES Page 10
<PAGE>
<PAGE>
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share amounts)
<TABLE>
December 31 1998 1997
- -----------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 65,130 $ 109,974
Accounts receivable 213,128 191,154
Inventories 207,897 199,485
Deferred income taxes 20,900 21,475
Other current assets 9,449 13,216
- -----------------------------------------------------------------
Total current assets 516,504 535,304
- -----------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, NET 65,773 57,625
OTHER ASSETS 4,953 5,232
- -----------------------------------------------------------------
$ 587,230 $ 598,161
=================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 3,141 $ 5,547
Current portion of long-term debt 1,660 1,660
Accounts payable - trade 51,571 45,264
Accrued salaries and wages 9,696 10,254
Accrued vacations 6,464 5,575
Advances on contracts 101,376 104,723
Other accruals and payables 49,138 49,774
Income taxes payable 5,929 36,728
- -----------------------------------------------------------------
Total current liabilities 228,975 259,525
- -----------------------------------------------------------------
DEFERRED CREDITS 20,555 18,759
LONG-TERM DEBT, EXCLUDING CURRENT PORTION 28,206 29,867
KAMAN CORPORATION AND SUBSIDIARIES Page 11
<PAGE>
<PAGE>
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share amounts)
December 31 1998 1997
- ---------------------------------------------------------------------
<S> <C> <C>
SHAREHOLDERS' EQUITY:
Capital stock, $1 par value per share:
Preferred stock, authorized 700,000 shares:
Series 2 preferred stock, 6 1/2%
cumulative convertible (stated at
liquidation preference of $200 per share)
authorized 500,000 shares,
issued 188,456 shares in 1997 -- 37,691
Common stock:
Class A, authorized 48,500,000 shares,
nonvoting; $.10 per common share
dividend preference; issued
23,066,260 shares in 1998 and
19,936,385 shares in 1997 23,066 19,936
Class B, authorized 1,500,000 shares,
voting; issued 667,814 shares
in 1998 and 1997 668 668
Additional paid-in capital 78,899 42,876
Retained earnings 209,920 190,336
Unamortized restricted stock awards (1,500) (1,147)
Accumulated other comprehensive income (loss) (774) (320)
- --------------------------------------------------------------------
310,279 290,040
Less 51,171 shares and 2,929 shares of
Class A common stock in 1998 and 1997,
respectively, held in treasury, at cost (785) (30)
- --------------------------------------------------------------------
Total shareholders' equity 309,494 290,010
- --------------------------------------------------------------------
$ 587,230 $ 598,161
====================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
KAMAN CORPORATION AND SUBSIDIARIES Page 12
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
<TABLE>
Year ended December 31 1998 1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Net sales $1,004,541 $1,043,365 $ 948,106
Other 1,465 1,450 5,548
- ----------------------------------------------------------------------------
1,006,006 1,044,815 953,654
- ----------------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of sales 741,719 787,971 708,505
Selling, general & administrative expense 212,724 208,763 193,747
Net gain on sale of businesses -- (80,351) --
Interest expense (income), net (353) 7,894 10,023
Other expense 1,558 234 702
- -----------------------------------------------------------------------------
955,648 924,511 912,977
- -----------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 50,358 120,304 40,677
INCOME TAXES 20,350 49,800 17,100
- -----------------------------------------------------------------------------
NET EARNINGS $ 30,008 $ 70,504 $ 23,577
=============================================================================
PREFERRED STOCK DIVIDEND REQUIREMENT $ -- $ (3,716) $ (3,716)
=============================================================================
EARNINGS APPLICABLE TO COMMON STOCK $ 30,008 $ 66,788 $ 19,861
=============================================================================
PER SHARE:
Net earnings per common share:
Basic $ 1.28 $ 3.53 $ 1.07
Diluted 1.23 2.86 1.00
Dividends declared:
Series 2 preferred stock -- 13.00 13.00
Common stock .44 .44 .44
=============================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
KAMAN CORPORATION AND SUBSIDIARIES Page 13
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands except share amounts)
<TABLE>
Year ended December 31 1998 1997 1996
- -------------------------------------------------------------------------
<S> <C> <C> <C>
SERIES 2 PREFERRED STOCK:
Balance - beginning of year $ 37,691 $ 57,167 $ 57,167
Shares converted (37,691) (19,451) --
Shares redeemed -- (25) --
- -------------------------------------------------------------------------
Balance - end of year -- 37,691 57,167
- -------------------------------------------------------------------------
CLASS A COMMON STOCK:
Balance - beginning of year 19,936 18,075 17,788
Shares issued upon conversion 3,000 1,548 --
Shares issued - other 130 313 287
- -------------------------------------------------------------------------
Balance - end of year 23,066 19,936 18,075
- -------------------------------------------------------------------------
CLASS B COMMON STOCK 668 668 668
- -------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL:
Balance - beginning of year 42,876 21,696 19,319
Conversion of Series 2 preferred stock 34,691 17,903 --
Employee stock plans 318 2,506 1,871
Restricted stock awards 1,014 771 506
- -------------------------------------------------------------------------
Balance - end of year 78,899 42,876 21,696
- -------------------------------------------------------------------------
RETAINED EARNINGS:
Balance - beginning of year 190,336 132,058 120,399
Net earnings 30,008 70,504 23,577
Dividends declared:
Preferred stock -- (3,716) (3,716)
Common stock (10,424) (8,510) (8,202)
- -------------------------------------------------------------------------
Balance - end of year 209,920 190,336 132,058
- -------------------------------------------------------------------------
UNAMORTIZED RESTRICTED STOCK AWARDS:
Balance - beginning of year (1,147) (818) (609)
Stock awards issued (949) (804) (517)
Amortization of stock awards 596 475 308
- -------------------------------------------------------------------------
Balance - end of year (1,500) (1,147) (818)
- -------------------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
Balance - beginning of year (320) (612) (280)
Foreign currency translation adjustment* (220) (157) (332)
Reclassification adjustment (234) 449 --
- -------------------------------------------------------------------------
Balance - end of year (774) (320) (612)
- -------------------------------------------------------------------------
KAMAN CORPORATION AND SUBSIDIARIES Page 14
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands except share amounts)
Year ended December 31 1998 1997 1996
- -------------------------------------------------------------------------
<S> <C> <C> <C>
TREASURY STOCK:
Balance - beginning of year (30) (104) (169)
Shares acquired in 1998
- 131,462; 1997 - 259; 1996 - 501 (2,212) (5) (5)
Shares reissued under
various stock plans 1,457 79 70
- -------------------------------------------------------------------------
Balance - end of year (785) (30) (104)
- -------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY $309,494 $290,010 $228,130
=========================================================================
</TABLE>
[FN]
*Pursuant to the adoption of Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," the above
foreign currency translation adjustment would be deducted from net
earnings for each of the years to arrive at comprehensive income of
$29,788, $70,347, and $23,245 for 1998, 1997, and 1996,
respectively.
</FN>
See accompanying notes to consolidated financial statements.
KAMAN CORPORATION AND SUBSIDIARIES Page 15
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands except share amounts)
<TABLE>
Year ended December 31 1998 1997 1996
- --------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 30,008 $ 70,504 $ 23,577
Adjustments to reconcile net earnings to cash
provided by (used in)operating activities:
Depreciation and amortization 11,068 12,223 12,358
Net gain on sale of businesses -- (80,351) --
Net gain on sale of assets (36) (859) (4,094)
Deferred income taxes 200 3,718 (1,298)
Other, net 2,841 1,532 1,785
Changes in current assets and liabilities,
net of effects of businesses sold:
Accounts receivable (21,974) (30,321) (7,638)
Inventories (8,412) 6,241 (20,734)
Other current assets 768 (7,218) 1,614
Accounts payable - trade 6,307 (13,720) (395)
Advances on contracts (3,347) 104,723 --
Accrued expenses and payables (3,054) (8,555) (9,744)
Income taxes payable (30,799) 37,591 --
- --------------------------------------------------------------------------
Cash provided by(used in)
operating activities (16,430) 95,508 (4,569)
- --------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of
businesses and other assets 5,642 139,580 6,883
Expenditures for property, plant and equipment (19,184) (13,690) (7,966)
Other, net (478) 559 (333)
- ---------------------------------------------------------------------------
Cash provided by(used in)
investing activities (14,020) 126,449 (1,416)
- ---------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in notes payable (2,406) (55,290) (2,014)
Changes in current portion of long-term debt -- (250) 1,518
Additions to long-term debt -- -- 20,000
Reduction of long-term debt (1,661) (52,564) (2,446)
Proceeds from exercise of employee stock plans 1,970 2,907 2,217
Purchases of treasury stock (2,212) (5) (5)
Dividends paid-Series 2 preferred stock -- (3,716) (3,716)
Dividends paid - common stock (10,085) (8,510) (8,202)
- --------------------------------------------------------------------------
Cash provided by (used in)
financing activities (14,394)(117,428) 7,352
- --------------------------------------------------------------------------
NET INCREASE(DECREASE)IN CASH AND
CASH EQUIVALENTS (44,844) 104,529 1,367
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 109,974 5,445 4,078
- --------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 65,130 $109,974 $ 5,445
==========================================================================
</TABLE>
KAMAN CORPORATION AND SUBSIDIARIES Page 16
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands except share amounts)
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
During 1998 and 1997, holders of the corporation's Series 2
preferred stock converted 188,456 and 97,254 shares into 3,000,174
and 1,548,242 shares of Class A common stock, respectively.
See accompanying notes to consolidated financial statements.
KAMAN CORPORATION AND SUBSIDIARIES Page 17
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997
and 1996 (In thousands except share and per share amounts)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The accompanying consolidated
financial statements include the accounts of the parent corporation
and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents - Surplus funds are invested in cash
equivalents which consist of highly liquid investments with
original maturities of three months or less.
Long-Term Contracts - Revenue Recognition - Sales and estimated
profits under long-term contracts are principally recognized on the
percentage-of-completion method of accounting. This method uses 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. Sales and estimated
profits on other contracts are recorded as products are shipped or
services are performed. Reviews of contracts are made periodically
throughout their lives and revisions in profit estimates are
recorded in the accounting period in which the revisions are made.
Any anticipated contract losses are charged to operations when
first indicated.
Inventories - Inventory of merchandise for resale is stated at cost
(using the average costing method) or market, whichever is lower.
Contracts and work in process and finished goods are valued at
production cost represented by material, labor and overhead,
including general and administrative expenses where applicable.
Contracts and work in process and finished goods are not recorded
in excess of net realizable values.
Property, Plant and Equipment - Depreciation of property, plant and
equipment is computed primarily on a straight-line basis over the
estimated useful lives of the assets. 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 or
charged against income.
KAMAN CORPORATION AND SUBSIDIARIES Page 18
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997
and 1996 (In thousands except share and per share amounts)
Maintenance and repair items are charged against income as
incurred, whereas renewals and betterments are capitalized and
depreciated.
Research and Development - Research and development costs not
specifically covered by contracts are charged against income as
incurred. Such costs amounted to $8,534 in 1998, $6,889 in 1997 and
$8,036 in 1996.
Income Taxes - Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to temporary
differences between the financial statement carrying amounts of
assets and liabilities and their respective tax bases using enacted
tax rates expected to apply in the years in which temporary
differences are expected to be recovered or settled.
Comprehensive Income - In 1998, the corporation adopted Statement
of Financial Accounting Standards No. 130 (SFAS 130), "Reporting
Comprehensive Income." This statement establishes rules for the
reporting of comprehensive income and its components. The
corporation's comprehensive income consists of net earnings and
foreign currency translation adjustments and is presented in the
Consolidated Statements of Changes in Shareholders' Equity. The
adoption of SFAS 130 had no impact on net earnings or on total
shareholders' equity. Prior year financial statements have been
reclassified to conform to the SFAS 130 requirements.
SALE OF BUSINESSES
On December 30, 1997, the corporation sold Kaman Sciences
Corporation (a wholly owned subsidiary) for $135,000 in cash. The
sale resulted in a pre-tax gain of $90,751. Certain proceeds from
the sale were used to reduce borrowings under the revolving credit
agreement with the balance invested in cash equivalents. In the
third quarter of 1998, the corporation received an additional
$5,400 in cash determined in accordance with the Stock Purchase
Agreement for the sale. Kaman Sciences Corporation, an information
technology and services operation, contributed $145,000 to 1997
sales.
On June 27, 1997, the corporation sold Trace Elliot Limited
(a wholly owned subsidiary) to a Trace Elliot management group. As
a result of the sale, the corporation recorded a pre-tax charge of
$10,400. Trace Elliot, Kaman Music's amplifier manufacturing
business in Great Britain, contributed $4,200 to sales for the
first six months of 1997.
KAMAN CORPORATION AND SUBSIDIARIES Page 19
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997
and 1996 (In thousands except share and per share amounts)
ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
<TABLE>
December 31 1998 1997
- -------------------------------------------------------------------------
<S> <C> <C>
Trade receivables, net of allowance for doubtful
accounts of $4,047 in 1998, $3,827 in 1997 $ 79,215 $ 71,197
U.S. Government contracts:
Billed 20,011 15,467
Recoverable costs and accrued profit - not billed 30,181 60,329
Commercial and other government contracts:
Billed 48,914 18,950
Recoverable costs and accrued profit - not billed 34,807 25,211
- -------------------------------------------------------------------------
Total $213,128 $191,154
=========================================================================
</TABLE>
Recoverable costs and accrued profit - not billed represent costs
incurred on contracts which will become billable upon future
deliveries, achievement of specific contract milestones or
completion of engineering and service type contracts. Management
estimates that approximately $5,810 of such costs and accrued
profits at December 31, 1998 will be collected after one year.
INVENTORIES
Inventories are comprised as follows:
<TABLE>
December 31 1998 1997
- ---------------------------------------------------------------------
<S> <C> <C>
Merchandise for resale $108,833 $107,112
Contracts in process:
U.S. Government 4,035 7,757
Commercial 12,168 12,194
Other work in process (including certain
general stock materials) 45,001 41,088
Finished goods 37,860 31,334
- ---------------------------------------------------------------------
Total $207,897 $199,485
=====================================================================
</TABLE>
Included above in other work in process and finished goods at
December 31, 1998 and 1997 is K-MAX inventory of $73,249 and
$61,936, respectively.
The aggregate amounts of general and administrative costs
allocated to contracts in process during 1998, 1997 and 1996 were
$55,178, $57,474, and $47,985, respectively.
KAMAN CORPORATION AND SUBSIDIARIES Page 20
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997
and 1996 (In thousands except share and per share amounts)
The estimated amounts of general and administrative costs
remaining in contracts in process at December 31, 1998 and 1997
amount to $2,003 and $3,808, respectively, and are based on the
ratio of such allocated costs to total costs incurred.
PROPERTY, PLANT AND EQUIPMENT, NET - Property, plant and equipment
are recorded at cost and summarized as follows:
<TABLE>
December 31 1998 1997
- ------------------------------------------------------------------------
<S> <C> <C>
Land $ 6,310 $ 6,332
Buildings 34,612 32,552
Leasehold improvements 12,725 12,827
Machinery, office furniture and equipment 114,140 101,435
- ------------------------------------------------------------------------
Total 167,787 153,146
Less accumulated depreciation and amortization 102,014 95,521
- ------------------------------------------------------------------------
Property, plant and equipment, net $ 65,773 $ 57,625
========================================================================
</TABLE>
CREDIT ARRANGEMENTS - SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Revolving Credit Agreement - The corporation maintains a revolving
credit agreement involving several domestic and foreign lenders.
The agreement, which expires in 2001, provides for an aggregate
maximum commitment of $250,000 with interest payable at various
market rates. The agreement was amended in 1997 to specifically
address the issuance of irrevocable letters of credit which are
treated in the same manner as borrowings under the agreement.
Short-Term Borrowings - Under its revolving credit agreement, the
corporation has the ability to borrow funds on both a short-term
and long-term basis. The corporation also has arrangements with
other banks, generally to borrow funds on a short-term basis with
interest at current market rates.
Short-term borrowings outstanding are as follows:
<TABLE>
December 31 1998 1997
- --------------------------------------------------------------------
<S> <C> <C>
Revolving credit agreement $ -- $ --
Other credit arrangements 3,141 5,547
- --------------------------------------------------------------------
Total $3,141 $5,547
====================================================================
</TABLE>
KAMAN CORPORATION AND SUBSIDIARIES Page 21
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997 and 1996
(In thousands except share and per share amounts)
Long-Term Debt - The corporation has long-term debt as follows:
<TABLE>
December 31 1998 1997
- ---------------------------------------------------------------
<S> <C> <C>
Revolving credit agreement $ -- $ --
Convertible subordinated debentures 29,866 31,527
- ---------------------------------------------------------------
Total 29,866 31,527
Less current portion 1,660 1,660
- ---------------------------------------------------------------
Total excluding current portion $28,206 $29,867
===============================================================
</TABLE>
Restrictive Covenants - The most restrictive of the covenants
contained in the revolving credit agreement requires the
corporation to have operating income, as defined, at least equal to
275% of interest expense; consolidated total indebtedness to total
capitalization of not more than 55%; and consolidated net worth at
least equal to $200,000.
Certain Letters of Credit - The face amounts of irrevocable letters
of credit issued under the corporation's revolving credit agreement
totaled $53,944 and $104,300 at December 31, 1998 and 1997,
respectively.
Convertible Subordinated Debentures - The corporation issued its 6%
convertible subordinated debentures during 1987. The debentures are
convertible into shares of the Class A common stock of Kaman
Corporation at any time on or before March 15, 2012 at a conversion
price of $23.36 per share at the option of the holder unless
previously redeemed by the corporation. Pursuant to a sinking fund
requirement that began March 15, 1997, the corporation redeems
$1,660 of the outstanding principal amount of the debentures
annually. The debentures are subordinated to the claims of senior
debt holders and general creditors. These debentures have a fair
value of $29,119 at December 31, 1998 based upon current market
prices.
Long-Term Debt Annual Maturities - The aggregate amounts of annual
maturities of long-term debt for each of the next five years is
$1,660.
Interest Payments - Cash payments for interest were $2,565, $8,695
and $9,682 for 1998, 1997 and 1996, respectively.
ADVANCES ON CONTRACTS - Advances on contracts include customer
advances together with customer payments and billings associated
with the achievement of certain contract milestones in excess of
costs incurred for SH-2G helicopter contracts. A portion of the
customer advances are secured by letters of credit. It is
anticipated that the face amounts of these letters of credit will
be further reduced as various contract milestones are achieved.
KAMAN CORPORATION AND SUBSIDIARIES Page 22
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997
and 1996 (In thousands except share and per share amounts)
INCOME TAXES
The components of income taxes are as follows:
<TABLE>
1998 1997 1996
- ----------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 15,650 $ 36,532 $ 13,734
State 4,500 9,550 4,664
- ----------------------------------------------------------------
20,150 46,082 18,398
- ----------------------------------------------------------------
Deferred:
Federal 150 2,968 (434)
State 50 750 (864)
- ----------------------------------------------------------------
200 3,718 (1,298)
- ----------------------------------------------------------------
Total $ 20,350 $ 49,800 $ 17,100
================================================================
</TABLE>
The components of the deferred tax assets and deferred tax
liabilities are presented below:
<TABLE>
December 31 1998 1997
- --------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Long-term contracts $ 1,756 $ 4,178
Deferred employee benefits 15,961 12,268
Inventory 1,529 2,326
Accrued liabilities and other items 7,879 7,803
- --------------------------------------------------------------------
Total deferred tax assets 27,125 26,575
- --------------------------------------------------------------------
Deferred tax liabilities:
Depreciation and amortization (7,730) (6,551)
Other items (3,695) (4,124)
- --------------------------------------------------------------------
Total deferred tax liabilities (11,425) (10,675)
- --------------------------------------------------------------------
Net deferred tax asset $ 15,700 $ 15,900
====================================================================
</TABLE>
No valuation allowance has been recorded because the corporation
believes that these deferred tax assets will, more likely than not,
be realized. This determination is based largely upon the
corporation's historical earnings trend as well as its ability to
KAMAN CORPORATION AND SUBSIDIARIES Page 23
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997
and 1996 (In thousands except share and per share amounts)
carryback reversing items within two years to offset taxes paid. In
addition, the corporation has the ability to offset deferred tax
assets against deferred tax liabilities created for such items as
depreciation and amortization.
The provisions for federal income taxes approximate the
amounts computed by applying the U.S. federal income tax rate to
earnings before income taxes after giving effect to state income
taxes. Cash payments for income taxes were $51,590, $8,623 and
$15,823 in 1998, 1997 and 1996, respectively.
PENSION PLAN
Effective January 1, 1998, the corporation adopted Statement of
Financial Accounting Standards No. 132 (SFAS 132), "Employers'
Disclosures about Pensions and Other Postretirement Benefits,"
which requires additional disclosures on changes in the benefit
obligation and fair value of plan assets during the year.
All prior periods presented have been restated in accordance with
SFAS 132.
The corporation has a non-contributory defined benefit
pension plan covering all of its full-time employees. Benefits
under this plan are generally based upon an employee's years of
service and compensation levels during employment with an offset
provision for social security benefits. It is the corporation's
policy to fund pension costs accrued. Plan assets are invested in
a diversified portfolio consisting of equity and fixed income
securities (including $12,248 of Class A common stock of Kaman
Corporation at December 31, 1998).
The pension plan costs were computed using the projected unit
credit actuarial cost method and include the following components:
<TABLE>
1998 1997 1996
- --------------------------------------------------------------------
<S> <C> <C> <C>
Service cost for benefits earned
during the year $ 8,794 $ 10,424 $ 9,888
Interest cost on projected
benefit obligation 19,648 20,010 18,756
Expected return on plan assets (22,757) (22,277) (21,220)
Net amortization and deferral (1,909) (1,909) (1,904)
- --------------------------------------------------------------------
Net pension cost $ 3,776 $ 6,248 $ 5,520
====================================================================
</TABLE>
KAMAN CORPORATION AND SUBSIDIARIES Page 24
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997
and 1996 (In thousands except share and per share amounts)
The change in actuarial present value of the projected
benefit obligation is as follows:
<TABLE>
December 31 1998 1997
- --------------------------------------------------------------------
<S> <C> <C>
Projected benefit obligation at
beginning of year $ 261,127 $ 273,196
Service cost 8,794 10,424
Interest cost 19,648 20,010
Actuarial liability loss 22,387 1,196
Disposition of business units -- (30,271)
Benefit payments (14,440) (13,428)
- --------------------------------------------------------------------
Projected benefit obligation at
end of year $ 297,516 $ 261,127
====================================================================
</TABLE>
The actuarial liability loss of $22,387 for 1998 consists
predominantly of adjustments for changes in the discount
rate and mortality rate assumptions.
The change in fair value of plan assets is as follows:
<TABLE>
December 31 1998 1997
- ---------------------------------------------------------------------
<S> <C> <C>
Fair value of plan assets at
beginning of year $ 322,010 $ 307,796
Actual return on plan assets 50,991 51,708
Disposition of business units (337) (29,800)
Employer contribution 4,534 5,706
Benefit payments (14,440) (13,400)
- ---------------------------------------------------------------------
Fair value of plan assets at end of year $ 362,758 $ 322,010
=====================================================================
</TABLE>
<TABLE>
December 31 1998 1997
- ---------------------------------------------------------------------
<S> <C> <C>
Excess of assets over projected
benefit obligation $ 65,242 $ 60,883
Unrecognized prior service cost (400) (456)
Unrecognized net gain (60,291) (54,780)
Unrecognized net transition asset (5,561) (7,415)
- ---------------------------------------------------------------------
Accrued pension cost $ 1,010 $ 1,768
=====================================================================
</TABLE>
KAMAN CORPORATION AND SUBSIDIARIES Page 25
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997
and 1996 (In thousands except share and per share amounts)
The actuarial assumptions used in determining the funded
status of the pension plan are as follows:
<TABLE>
<CAPTION>
December 31 1998 1997
- ---------------------------------------------------------------
<S> <C> <C>
Discount rate 7% 7 1/2%
Expected return on plan assets 8 5/8% 8 5/8%
Average rate of increase in
compensation levels 4% 4 1/2%
===============================================================
</TABLE>
In connection with the sale of Kaman Sciences Corporation,
effective December 30, 1997, the corporation segregated
approximately $29,800 of its plan assets in anticipation of a
transfer of such assets to the buyer's pension plan to cover the
then estimated accrued benefit obligation for the Kaman Sciences
"active employee" group for which the buyer assumed responsibility.
The present value of the accrued benefit obligation was determined
using the December 1997 PBGC interest rates used to value
annuities: 5.6% for the 25 years immediately following the
valuation date and 5.0% thereafter, among other assumptions
including mortality and estimated retirement ages. In the second
quarter of 1998, the sum of $30,137 was transferred to the buyer's
pension trust.
The company also has a thrift and retirement plan in which
all employees meeting the eligibility requirements may participate.
Employer matching contributions are currently made to the plan with
respect to a percentage of each participant's pre-tax contribution.
Company contributions to the plan totaled $1,683, $2,612, and
$2,404 in 1998, 1997, and 1996, respectively.
COMMITMENTS AND CONTINGENCIES
Rent commitments under various leases for office space, warehouse,
land and buildings expire at varying dates from January 1999 to
December 2004. Certain annual rentals are subject to renegotiation,
with certain leases renewable for varying periods. Lease periods
for machinery and equipment vary from 1 to 5 years.
Substantially all real estate taxes, insurance and
maintenance expenses are obligations of the corporation. It is
expected that in the normal course of business, leases that expire
will be renewed or replaced by leases on other properties.
KAMAN CORPORATION AND SUBSIDIARIES Page 26
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997
and 1996 (In thousands except share and per share amounts)
The following future minimum rental payments are required
under operating leases that have initial or remaining noncancelable
lease terms in excess of one year as of December 31, 1998:
<TABLE>
<S> <C>
1999 $12,069
2000 5,347
2001 3,784
2002 2,677
2003 903
Thereafter 117
- ----------------------------------------------------------
Total $24,897
==========================================================
</TABLE>
Lease expense for all operating leases, including leases with terms
of less than one year, amounted to $14,683, $15,311 and $14,889 for
1998, 1997 and 1996, respectively.
From time to time, the corporation is subject to various
claims and suits arising out of the ordinary course of business,
including commercial, employment and environmental matters. While
the ultimate result of all such matters is not presently
determinable, based upon its current knowledge, management does not
expect that their resolution will have a material adverse effect on
the corporation's consolidated financial position.
COMPUTATION OF EARNINGS PER COMMON SHARE
The earnings per common share - basic computation is based on the
earnings applicable to common stock divided by the weighted average
number of shares of common stock outstanding for each year. In 1997
and 1996, the preferred stock dividend on the then outstanding
Series 2 preferred stock was deducted from net earnings to arrive
at earnings applicable to common stock.
The earnings per common share - diluted computation includes
the common stock equivalency of options granted to employees under
the Stock Incentive Plan. The earnings per common share - diluted
computation also assumes that at the beginning of the year the 6%
convertible subordinated debentures are converted into Class A
common stock with the resultant reduction in interest costs net of
tax. During 1997 and 1996, the then outstanding Series 2 preferred
stock is assumed converted into Class A common stock eliminating
the preferred stock dividend requirement. Excluded from the
earnings per common share - diluted calculation are options granted
to employees that are anti-dilutive based on the average stock
price for the year.
KAMAN CORPORATION AND SUBSIDIARIES Page 27
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997
and 1996 (In thousands except share and per share amounts)
<TABLE>
1998 1997 1996
- ------------------------------------------------------------------
<S> <C> <C> <C>
Earnings per common share-basic
Earnings applicable to common stock $30,008 $66,788 $19,861
===================================================================
Weighted average shares
outstanding (000) 23,407 18,941 18,607
===================================================================
Earnings per common share-basic $ 1.28 $ 3.53 $ 1.07
===================================================================
Earnings per common share - diluted
Earnings applicable to common stock $30,008 $66,788 $19,861
Plus: Dividends on
Series 2 preferred stock -- 3,716 3,716
After-tax interest savings on
convertible debentures 1,075 1,188 1,145
- -------------------------------------------------------------------
Earnings applicable to common
stock assuming conversion $31,083 $71,692 $24,722
===================================================================
Weighted average shares
outstanding (000) 23,407 18,941 18,607
Plus shares issuable on:
Conversion of Series 2
preferred stock 282 4,523 4,552
Conversion of 6% convertible
debentures 1,293 1,359 1,421
Exercise of dilutive options 253 285 129
- -------------------------------------------------------------------
Weighted average shares outstanding
assuming conversion (000) 25,235 25,108 24,709
===================================================================
Earnings per common share-diluted $ 1.23 $ 2.86 $ 1.00
===================================================================
</TABLE>
As of December 23, 1997, 95,106 shares of the corporation's Series
2 preferred stock were converted to Class A common stock pursuant
to a call for partial redemption issued on November 20, 1997.
Pursuant to a redemption call on January 8, 1998 for the balance of
the Series 2 preferred stock, the remaining shares were converted
into 3,000,174 shares of Class A common stock as of February 9,
1998. An immaterial amount of Series 2 preferred stock shares were
redeemed by the corporation and settled in cash.
KAMAN CORPORATION AND SUBSIDIARIES Page 28
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997
and 1996 (In thousands except share and per share amounts)
STOCK PLANS
Employees Stock Purchase Plan - The Kaman Corporation Employees
Stock Purchase Plan allows employees to purchase Class A common
stock of the corporation, 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 Class A common stock. There are no charges or
credits to income in connection with the plan. During 1998, 115,374
shares were issued to employees at prices ranging from $12.43 to
$16.47 per share. During 1997, 177,523 shares were issued to
employees at prices ranging from $10.84 to $16.79 per share. During
1996, 228,148 shares were issued to employees at prices ranging
from $8.82 to $11.21 per share. At December 31, 1998, there were
approximately 1,384,626 shares available for offering under the
plan.
Stock Incentive Plan - The corporation maintains a Stock Incentive
Plan which includes a continuation and extension of a predecessor
stock incentive program. The Stock Incentive Plan provides for the
grant of non-statutory stock options, incentive stock options,
restricted stock awards and stock appreciation rights primarily to
officers and other key employees. Effective November 18, 1997, the
number of shares of Class A common stock reserved for issuance
under this plan was increased by 1,250,000 shares to a total of
2,210,000 shares.
Stock options are generally granted at prices not less than
the fair market value at the date of grant. Options granted under
the plan generally expire ten years from the date of grant and are
exercisable on a cumulative basis with respect to 20% of the
optioned shares on each of the five anniversaries from the date of
grant. Restricted stock awards are generally granted with
restrictions that lapse at the rate of 20% per year and are
amortized accordingly. These awards are subject to forfeiture if a
recipient separates from service with the corporation. Stock
appreciation rights generally expire ten years from the date of
grant and are exercisable on a cumulative basis with respect to 20%
of the rights on each of the five anniversaries from the date of
grant.
Restricted stock awards were made for 62,500 shares at prices
ranging from $17.00 to $19.25 per share in 1998, 62,900 shares at
prices ranging from $12.13 to $14.63 per share in 1997 and 54,000
shares at $10.38 per share in 1996. At December 31, 1998, there
were 134,300 shares remaining subject to restrictions pursuant to
these awards. Stock appreciation rights were issued for 165,000
shares at $17.00 per share in 1998 and 350,000 shares at $13.25 per
share in 1997, to be settled only for cash. The corporation
recorded approximately $203 and $500 in expense in 1998 and 1997,
respectively, for these stock appreciation rights.
KAMAN CORPORATION AND SUBSIDIARIES Page 29
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997
and 1996 (In thousands except share and per share amounts)
Stock option activity is as follows:
<TABLE>
Weighted-
average
exercise
Stock options outstanding: Options price
- -------------------------------------------------------------------
<S> <C> <C>
Balance at January 1, 1996 677,047 $ 8.90
Options granted 169,100 10.38
Options exercised (55,102) 7.86
Options cancelled (26,065) 9.00
- -------------------------------------------------------------------
Balance at December 31, 1996 764,980 9.30
Options granted 193,700 13.41
Options exercised (147,720) 8.28
Options cancelled (19,880) 9.33
- -------------------------------------------------------------------
Balance at December 31, 1997 791,080 10.50
Options granted 205,000 17.00
Options exercised (79,845) 8.94
Options cancelled (121,415) 10.56
- -------------------------------------------------------------------
Balance at December 31, 1998 794,820 $ 12.32
===================================================================
Weighted average contractual life
remaining at December 31, 1998 6.8 years
===================================================================
Range of exercise prices for options $ 7.50- $ 12.26-
outstanding at December 31, 1998 $ 12.25 $ 17.06
- -------------------------------------------------------------------
Options outstanding 429,270 365,550
Options exercisable 317,940 32,010
Weighted average contractual remaining
life of options outstanding 5.3 years 8.7 years
Weighted average exercise price:
Options outstanding $ 9.70 $ 15.40
Options exercisable $ 9.42 $ 13.44
===================================================================
</TABLE>
As of December 31, 1997 and 1996, there were 378,300 and
437,000 options exercisable, respectively.
KAMAN CORPORATION AND SUBSIDIARIES Page 30
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997
and 1996 (In thousands except share and per share amounts)
As permitted by the Statement of Financial Accounting
Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation," the corporation has elected to continue following
the guidance of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," for measurement and
recognition of stock-based transactions with employees.
Accordingly, no compensation cost has been recognized for its stock
plans other than for the restricted stock awards and stock
appreciation rights. Under the disclosure alternative of SFAS 123,
the pro forma net earnings and earnings per common share
information presented below includes the compensation cost of stock
options issued to employees based on the fair value at the grant
date and includes compensation cost for the 15% discount offered to
participants in the employees stock purchase plan.
<TABLE>
1998 1997 1996
- -----------------------------------------------------------------
<S> <C> <C> <C>
Net earnings:
As reported $ 30,008 $ 70,504 $ 23,577
Pro forma 29,534 70,075 23,212
Earnings per common share - basic:
As reported 1.28 3.53 1.07
Pro forma 1.26 3.50 1.05
Earnings per common share - diluted:
As reported 1.23 2.86 1.00
Pro forma 1.22 2.86 .99
- -----------------------------------------------------------------
</TABLE>
The fair value of each option grant is estimated on the date of
grant by using the Black-Scholes option-pricing model. The
following weighted-average assumptions were used for grants in
1998, 1997, and 1996:
<TABLE>
1998 1997 1996
- ------------------------------------------------------------
<S> <C> <C> <C>
Expected dividend yield 2.6% 3.3% 4.2%
Expected volatility 31% 24% 25%
Risk-free interest rate 5.6% 6.4% 5.8%
Expected option lives 8 Years 8 years 8 years
Per share fair value of
options granted $ 5.78 $ 3.65 $ 2.38
============================================================
</TABLE>
KAMAN CORPORATION AND SUBSIDIARIES Page 31
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997
and 1996 (In thousands except share and per share amounts)
SEGMENT INFORMATION
Effective January 1, 1998, the corporation adopted Statement of
Financial Accounting Standards No. 131 (SFAS 131), "Disclosures
about Segments of an Enterprise and Related Information" which has
changed the method of reporting information about its businesses.
Based upon the criteria described in SFAS 131, the corporation now
reports three business segments - Aerospace, Industrial
Distribution and Music Distribution. All prior periods presented
have been restated in accordance with SFAS 131.
The Aerospace segment consists primarily of aerospace related
business for government and commercial markets, including the
retrofit of SH-2 helicopters from the SH-2F to the SH-2G
configuration as well as support services, logistics and spare
parts for that helicopter; manufacture of the K-MAX helicopter
together with spare parts and technical support; subcontract work
consisting of fabrication of airframe substructures; and production
of self-lubricating bearings and couplings for commercial aircraft
applications.
The Industrial Distribution segment provides replacement
parts, including bearings, power transmission, motion control and
materials handling components to nearly every sector of industry in
North America, along with industrial engineering support services.
Operations are conducted from 190 locations in 36 states and
British Columbia, Canada.
The Music Distribution segment consists of distribution of
music instruments and accessories in the U.S. and abroad through
offices in the U.S. and Canada. Music operations also include some
manufacture of guitars. On June 27, 1997, the corporation sold its
amplifier manufacturing business located in Great Britain.
The Scientific Services segment which consisted of Kaman
Sciences Corporation, an information technology and services
operation, was sold on December 30, 1997. The Scientific Services
segment operating profit for 1996 includes a gain of approximately
$4,000 on the sale of real estate.
KAMAN CORPORATION AND SUBSIDIARIES Page 32
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997
and 1996 (In thousands except share and per share amounts)
Summarized financial information by business segment is as follows:
<TABLE>
1998 1997 1996
- -------------------------------------------------------------------
<S> <C> <C> <C>
Net sales:
Aerospace $ 382,697 $ 288,407 $ 224,984
Scientific Services -- 145,086 125,098
Industrial Distribution 503,532 478,879 447,977
Music Distribution 118,312 130,993 150,047
- -------------------------------------------------------------------
$ 1,004,541 $ 1,043,365 $ 948,106
===================================================================
Operating profit:
Aerospace $ 43,304 $ 31,312 $ 26,256
Scientific Services -- 13,629 13,570
Industrial Distribution 18,550 20,017 18,526
Music Distribution 5,315 (1,279) 4,029
- -------------------------------------------------------------------
67,169 63,679 62,381
Net gain on sale of businesses -- 80,351 --
Interest, corporate and other
expense, net (16,811) (23,726) (21,704)
- --------------------------------------------------------------------
Earnings before income taxes $ 50,358 $ 120,304 $ 40,677
====================================================================
Identifiable assets:
Aerospace $ 294,566 $ 265,746 $ 235,314
Scientific Services -- -- 52,187
Industrial Distribution 160,873 156,816 147,071
Music Distribution 54,577 55,207 74,414
Corporate 77,214 120,392 12,750
- -------------------------------------------------------------------
$ 587,230 $ 598,161 $ 521,736
===================================================================
Capital expenditures:
Aerospace $ 11,369 $ 6,444 $ 2,755
Scientific Services -- 1,247 963
Industrial Distribution 3,568 3,682 2,234
Music Distribution 1,770 1,943 1,562
Corporate 2,477 374 452
- -------------------------------------------------------------------
$ 19,184 $ 13,690 $ 7,966
===================================================================
Depreciation and amortization:
Aerospace $ 5,586 $ 5,188 $ 5,549
Scientific Services -- 2,266 2,404
Industrial Distribution 3,077 2,676 2,161
Music Distribution 1,317 1,271 1,394
Corporate 1,088 822 850
- -------------------------------------------------------------------
$ 11,068 $ 12,223 $ 12,358
===================================================================
KAMAN CORPORATION AND SUBSIDIARIES Page 33
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998,
1997 and 1996 (In thousands except share and per share amounts)
1998 1997 1996
- -------------------------------------------------------------------
<S> <C> <C> <C>
Geographic information - sales:
United States $ 780,961 $ 926,495 $ 867,345
Australia/New Zealand 158,068 41,809 764
Canada 35,438 32,873 28,948
Europe 11,980 21,121 22,282
Japan 9,527 10,944 18,555
Other 8,567 10,123 10,212
- -------------------------------------------------------------------
$ 1,004,541 $ 1,043,365 $ 948,106
===================================================================
</TABLE>
Operating profit is total revenues less cost of sales and selling,
general and administrative expense other than general corporate
expense.
Identifiable assets are year-end assets at their respective
net carrying value segregated as to segment and corporate use.
Corporate assets are principally cash and cash equivalents and net
property, plant and equipment.
Net sales by the Aerospace and Scientific Services segments
made under contracts with U.S. Government agencies (including sales
to foreign governments through foreign military sales contracts
with U.S. Government agencies) account for $92,539 in 1998,
$262,405 in 1997 and $253,260 in 1996.
Sales made by the Aerospace segment under a contract with one
customer were $119,222 in 1998.
KAMAN CORPORATION AND SUBSIDIARIES Page 34
<PAGE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
KPMG LLP
Certified Public Accountants
CityPlace II
Hartford, Connecticut 06103
THE BOARD OF DIRECTORS AND SHAREHOLDERS
KAMAN CORPORATION:
We have audited the accompanying consolidated balance sheets
of Kaman Corporation and subsidiaries as of December 31, 1998 and
1997, and the related consolidated statements of operations,
changes in shareholders' equity and cash flows for each of the
years in the three year period ended December 31, 1998.
These consolidated financial statements are the responsibility of
the company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Kaman Corporation and subsidiaries at
December 31, 1998 and 1997 and the results of their operations and
their cash flows for each of the years in the three year
period ended December 31, 1998 in conformity with generally
accepted accounting principles.
KPMG LLP
January 27, 1999
KAMAN CORPORATION AND SUBSIDIARIES Page 35
<PAGE>
<PAGE>
FIVE-YEAR SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(In thousands except per share amounts, shareholders and employees)
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Revenues $1,006,006 $1,044,815 $953,654 $899,476 $820,774
Cost of sales 741,719 787,971 708,505 666,761 611,762
Selling, general and
administrative expense 212,724 208,763 193,747 190,604 173,853
Restructuring, impairment
and other costs -- -- -- -- 44,000
Operating income (loss) 51,563 48,081 51,402 42,111 (8,841)
Net gain on sale of businesses -- 80,351 -- -- --
Interest expense (income), net (353) 7,894 10,023 8,834 4,694
Other expense (income), net 1,558 234 702 546 646
Earnings (loss) before
income taxes 50,358 120,304 40,677 32,731 (14,181)
Income taxes (benefit) 20,350 49,800 17,100 13,129 (1,000)
Net earnings (loss) 30,008 70,504 23,577 19,602 (13,181)
FINANCIAL POSITION:
Current assets $516,504 $535,304 $434,131 $404,864 $339,012
Current liabilities 228,975 259,525 195,638 206,273 192,882
Working capital 287,529 275,779 238,493 198,591 146,130
Property, plant and
equipment, net 65,773 57,625 76,393 83,054 84,621
Total assets 587,230 598,161 521,736 500,069 442,949
Long-term debt 28,206 29,867 83,940 66,386 37,433
Shareholders' equity 309,494 290,010 228,130 214,283 203,754
PER SHARE AMOUNTS:
Net earnings (loss) per
common share - basic $1.28 $ 3.53 $ 1.07 $ .87 $ (.93)
Net earnings (loss)
per common share - diluted 1.23 2.86 1.00 .85 (.93)
Dividends declared -
Series 2 preferred stock -- 13.00 13.00 13.00 13.00
Dividends declared -
common stock .44 .44 .44 .44 .44
Shareholders' equity -
common stock 13.07 12.25 9.13 8.52 8.07
Market price range 20 3/8 20 3/8 13 3/8 13 3/8 11 1/8
13 12 9 3/8 10 8 1/2
GENERAL STATISTICS:
Shareholders 6,921 7,291 7,632 7,646 7,198
Employees 4,276 4,318 5,476 5,400 5,239
=============================================================================
</TABLE>
KAMAN CORPORATION AND SUBSIDIARIES Page 36
PAGE
<PAGE>
<PAGE>
EXHIBIT 21
KAMAN CORPORATION
SUBSIDIARIES
Following is a list of the Corporation's subsidiaries, each of
which is wholly owned by the Corporation either directly or through
another subsidiary. Second-tier subsidiaries are listed under the
name of the parent subsidiary.
Name State of Incorporation
- -----------------------------------------------------------------
Registrant: KAMAN CORPORATION Connecticut
Subsidiaries:
Kaman Aerospace Group, Inc. Connecticut
Kaman Aerospace Corporation Delaware
Kaman Aerospace International Corporation Connecticut
K-MAX Corporation Connecticut
Kaman X Corporation Connecticut
Kamatics Corporation Connecticut
Kaman Instrumentation Corporation Connecticut
Kaman Electromagnetics Corporation Massachusetts
Kaman Industrial Technologies Corporation Connecticut
Kaman Industrial Technologies, Ltd. Canada
Kaman Music Corporation Connecticut
KMI Europe, Inc. Delaware
B & J Music Ltd. Canada
Kaman Foreign Sales Corporation Barbados
<PAGE>
<PAGE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
KPMG LLP
Certified Public Accountants
CityPlace II
Hartford, Connecticut 06103
The Board of Directors and Shareholders
Kaman Corporation:
We consent to incorporation by reference in the Registration
Statements (Nos. 33-51483 and 33-51485) on Form S-8 of Kaman
Corporation of our reports dated January 27, 1999, relating to the
consolidated balance sheets of Kaman Corporation and subsidiaries
as of December 31, 1998 and 1997 and the related consolidated
statements of operations, changes in shareholders' equity and cash
flows for each of the years in the three-year period ended
December 31, 1998, and the related schedule, which reports appear
or are incorporated by reference in the December 31, 1998 annual
report on Form 10-K of Kaman Corporation.
/s/ KPMG LLP
Hartford, Connecticut
March 16, 1999
<PAGE>
<PAGE>
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned does
hereby appoint and constitute Charles H. Kaman and Robert M.
Garneau and each of them as his or her agent and attorney-in-fact
to execute in his or her name, place and stead (whether on behalf
of the undersigned individually or as an officer or director of
Kaman Corporation or otherwise) the Annual Report on Form 10-K of
Kaman Corporation respecting its fiscal year ended December 31,
1998 and any and all amendments thereto and to file such Form
10-K and any such amendment thereto with the Securities and
Exchange Commission. Each of the said attorneys shall have the
power to act hereunder with or without the other.
IN WITNESS WHEREOF, the undersigned have executed this
instrument this 16th day of March, 1999.
Brian E. Barents Huntington Hardisty
Fred A. Breidenbach C. William Kaman, II
E. Reeves Callaway, III Eileen S. Kraus
Frank C. Carlucci Hartzel Z. Lebed
Laney J. Chouest Walter H. Monteith, Jr.
John A. DiBiaggio John S. Murtha
Edythe J. Gaines Wanda L. Rogers
<PAGE>
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE COMPANY'S 1998 ANNUAL REPORT TO
SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000054381
<NAME> KAMAN CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 65,130
<SECURITIES> 0
<RECEIVABLES> 217,175
<ALLOWANCES> (4,047)
<INVENTORY> 207,897
<CURRENT-ASSETS> 516,504
<PP&E> 167,787
<DEPRECIATION> (102,014)
<TOTAL-ASSETS> 587,230
<CURRENT-LIABILITIES> 228,975
<BONDS> 28,206
0
0
<COMMON> 23,734
<OTHER-SE> 285,760
<TOTAL-LIABILITY-AND-EQUITY> 587,230
<SALES> 1,004,541
<TOTAL-REVENUES> 1,006,006
<CGS> 741,719
<TOTAL-COSTS> 954,443
<OTHER-EXPENSES> 1,558
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (353)
<INCOME-PRETAX> 50,358
<INCOME-TAX> 20,350
<INCOME-CONTINUING> 30,008
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,008
<EPS-PRIMARY> 1.28
<EPS-DILUTED> 1.23
<PAGE>
<PAGE>
</TABLE>
