<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, 1999
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.
$202,675,885.41 as of February 1, 2000.
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 22,438,667 shares
Class B Common 667,814 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Corporation's 1999 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 Aerospace segment serves commercial, U.S. defense and foreign
government markets. Its principal programs consist of its SH-2G
maritime helicopter, K-MAX (Registered Trademark) "aerial truck"
helicopter, subcontract work involving aircraft structures and the
manufacture of 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 replacement parts 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.
On August 2, 1999, Paul R. Kuhn joined Kaman Corporation as
President, Chief Executive Officer, and a member of the Board of
Directors. Prior to that, Mr. Kuhn was senior vice president of the
aerospace engine business for Coltec Industries, Inc. which had
merged with BF Goodrich Co. Mr. Charles H. Kaman, founder of Kaman
Corporation, will continue in his role as Chairman of the Board.
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, and
Kamatics Corporation. Kaman Electromagnetics Corporation and Kaman
Instrumentation Corporation, two of the smaller subsidiaries in
this group, were merged with Kaman Aerospace Corporation during
1999.
The segment's largest current program is the SH-2G Super Seasprite
helicopter, an advanced, intermediate weight, multi-mission,
maritime aircraft that increases a ship's effectiveness by
expanding its surveillance capability, providing over-the-horizon
warning and targeting of potential threats, and contributing to the
ship's combat capabilities. At present the 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 currently has commercial contracts with the
Commonwealth of Australia and the Government of New Zealand for the
supply of SH-2G helicopters. The aircraft is also in service with
the Egyptian Air Force and the U.S. Navy Reserve. The program for
New Zealand involves five (5) SH-2G(NZ) aircraft, and support, for
New Zealand defense forces. The contract has an anticipated value
of $175.4 million (US). Work is proceeding on this program and
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deliveries are scheduled to begin in late 2000. The program for
Australia involves eleven (11) SH-2G(A) aircraft with support,
including a support services facility, for the Royal Australian
Navy. The total contract has an anticipated value of about $675
million (US) and the helicopter production portion of the work is
valued at $557 million (US). The Australian SH-2G(A) will contain
an integrated cockpit and weapons system known as ITAS (Integrated
Tactical Avionics System) that builds on developments in avionics,
sensors, navigation, communication and weaponry to enable a two-man
crew to fly the helicopter and maintain "total sea control" over a
large area of ocean. Initial flight testing of the production
prototype SH-2G(A) began in October of 1999 and deliveries are
scheduled to begin in early 2001. The corporation is actively
monitoring the work of its subcontractors and in certain cases
(specifically, Litton Guidance and Control Systems which is
responsible for a variety of integration software) has established
a resident manager at the subcontractor site. During 1999, the
corporation continued to provide on-site support services to the
Egyptian Air Force following completion of delivery of ten (10)
aircraft to the Republic of Egypt in 1998. The SH-2 is an aircraft
that was originally manufactured for the U.S. Navy and although
no longer being produced for the U.S. Navy, twelve (12) aircraft
are maintained in the U.S. Navy Reserve's active fleet. While these
aircraft remain in service, the corporation will continue providing
logistics and spare parts support for the aircraft. The corporation
has made an agreement with the appropriate federal agencies to take
a consignment of the U.S. Navy's inventory of SH-2 spare parts; the
initial agreement has been extended beyond the scheduled September
1999 expiration date in the expectation that the parties will
eventually reach agreement on a longer term arrangement. The
overall objective is for the corporation to provide further support
of U.S. Naval Reserve requirements while having the ability to
utilize certain inventory for support of the corporation's other
SH-2 programs. The corporation continues efforts to build and
further enhance familiarization with the SH-2's capabilities among
various foreign governments. This market is highly competitive and
is also influenced by economic and political conditions. The
corporation continues to pursue this business, including possible
further orders from current customers.
The corporation also manufactures the K-MAX medium to heavy lift
"aerial truck" helicopter which has a variety of potential
applications, including logging, oil and gas exploration, power
line and other utility construction, fire fighting, movement of
equipment and high altitude projects. K-MAX, now in its sixth year
of commercial operation, 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 spare parts
inventory requirements, resulting in a cost-effective tool for
industries requiring medium to heavy repetitive lift capabilities.
The corporation has been conservative in its production of this
aircraft since inception, however the program continues to
experience market difficulties due in significant part to
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conditions in the U.S. and Canadian logging industries, the
aircraft's "launch" application and principal market to date.
During the past two years, significant weakness in the logging
industry has adversely affected certain current customers as well
as potential customers and curtailed sales of the aircraft. The
corporation's commercial efforts have been refocused on further
development of the aircraft's other applications. These efforts are
ongoing, however, successful sales development in these markets and
profitability for the program will take some time to achieve. In
addition, K-MAX has shown its capabilities in the noncombat role of
vertical replenishment for the military through two successful
demonstrations for the U.S. Navy Military Sealift Command; during
1999, the corporation bid on a three year charter/lease project
involving two aircraft and was notified during the fourth quarter
of the year that a helicopter operator had been awarded the
contract.
The corporation is a subcontractor on a number of commercial and
defense aviation programs, including production of wing structures
and other components for virtually all Boeing commercial aircraft
as well as components for the McDonnell Douglas C-17 transport, the
Comanche helicopter and the F-14 and F-22 fighters. The corporation
also manufactures self-lubricating bearings for use principally in
aircraft flight controls, turbine engines and landing gear, which
are used extensively in today's commercial airliners, as well as
driveline couplings for use principally in helicopters. During
1999, the corporation experienced some softness in these businesses
due to a slowdown of growth trends in the commercial aviation
industry and the efforts of major manufacturers, particularly
Boeing (which is a long standing and important customer of the
segment) to increase efficiency within their own operations by
implementing new inventory and procurement practices.
Among its smaller programs, the corporation develops and
manufactures high reliability memory systems that are used in over
120 airborne, shipboard and ground based programs. The corporation
also designs and manufactures fuzing and safing devices used in a
wide range of missiles and manufactures high precision non-contact
measuring systems and high performance microwave cable assemblies
for commercial, industrial and military applications.
INDUSTRIAL DISTRIBUTION
The Industrial Distribution segment consists of Kaman Industrial
Technologies Corporation and its Canadian subsidiary, Kaman
Industrial Technologies, Ltd.
This segment is the third largest distributor of industrial
parts in North America, serving the electrical/mechanical power
transmission and bearing, fluid power, motion control and materials
handling segment of the overall industrial distribution industry
through its computer linked network of branches and distribution
centers across the U.S. and in British Columbia, Canada. The
company supplies nearly every sector of manufacturing and
processing industry in North America, offering more than one
million individual items in various product groups representing
more than one thousand manufacturers. The segment's product
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offerings range from virtually every type of bearing made, from
simple nylon sleeve bearings to super-precision ceramic hybrids;
and include hydraulic and pneumatic products and services; power
transmission components and materials handling equipment;
electrical products and components, including AC/DC electric
motors, and AC/DC adjustable speed drives, controls and sensors;
linear motion components and subsystems, including linear bearings,
bushings, shafts, rails and ball screws; accessories and
maintenance items such as lubricants, adhesives, sealants,
chemicals, specialty tools, and other products. The products that
the segment purchases for distribution are for the most part
derived from traditional technologies, although the segment is
increasingly selling products with the higher technological content
required to support automated production processes. In addition to
providing products, the segment can also monitor processes for
efficiency and improvement opportunity, and provide inventory
management, just-in-time delivery, and cost savings analysis
(called Documented Savings (Trade Mark)). In addition, the
segment's state-of-the-art computer system provides electronic data
interchange and direct links to customers' and suppliers'
purchasing departments, handling the process from invoice creation
and proposal requests to purchase orders. During 1999, the segment
continued to experience pressure on operating margins due to the
depressed market for a number of key customer industries, chiefly,
mining, primary metals, paper and chemicals where low capacity
utilization adversely affected demand for products distributed by
the segment. In addition, while the distribution business has
traditionally been very competitive, increasing consolidation in
the industry has resulted in even more intense competition. To
address these conditions and bolster its competitive position, the
segment undertook several initiatives in late 1999, including a
reorganization of its sales, marketing, and field management
structure, a consolidation of certain branches and closure of
others and an extensive program to remove obsolete or excess
inventory to the ongoing organization.
MUSIC DISTRIBUTION
The Music Distribution segment consists of Kaman Music Corporation,
KMI Europe, Inc., and a Canadian subsidiary, B&J Music Ltd.
This segment is the largest independent distributor of music
instruments and accessories in the U.S., offering more than 10,000
music instruments and accessories to over 65 countries out of seven
facilities in the United States and Canada. Products range from
the segment's proprietary products, including Ovation (Registered
Trademark) and Hamer (Registered Trademark) guitars, to
distribution of the Takamine (Registered Trademark) guitar line, as
well as percussion instruments such as the Toca (Registered
Trademark) line of Latin-style percussion instruments and Gibraltar
(Registered Trademark) percussion hardware, to instructional
instruments such as violins, violas, horns, drums and other
percussion products and accessories. During 1999, the segment
implemented a state-of-the-art supply chain management software
system that enables it to offer customers such services as
inventory management, just-in-time delivery, Internet access, and
electronic data interchange.
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FINANCIAL INFORMATION
Information concerning each segment's performance for the
last three fiscal years appears in the corporation's 1999 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
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Aerospace 27.6% 38.1% 37.8%
Scientific Services (1) 13.9% ---- ----
Industrial Distribution 45.9% 50.1% 50.3%
Music Distribution 12.6% 11.8% 11.9%
------ ------ ------
Total 100.0% 100.0% 100.0%
(1) The Scientific Services segment, which consisted of
Kaman Sciences Corporation, the corporation's defense
information technology business, was sold on
December 30, 1997.
</TABLE>
RESEARCH AND DEVELOPMENT EXPENDITURES
Government sponsored research expenditures by the
Aerospace and Scientific Services segments were $11.3
million in 1999, $13.2 million in 1998, and $75.7 million in
1997. Independent research and development expenditures were
$4.9 million in 1999, $8.5 million in 1998, and $6.9 million
in 1997. The Scientific Services segment which conducted
significant government sponsored research in 1997 was sold on
December 30, 1997.
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BACKLOG
Program backlog of the Aerospace segment was approximately
$580.1 million at December 31, 1999, $757.1 million at December 31,
1998, and (together with the Scientific Services segment which was
sold on December 30, 1997) $935.2 million at December 31, 1997.
The corporation anticipates that approximately 56% of its backlog
at the end of 1999 will be performed in 2000. Approximately 8.8%
of the backlog at the end of 1999 is related to U.S. 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 1999, approximately 84.4% 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 has
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. The
corporation's FAA certified K-MAX helicopters compete with military
surplus helicopters and other commercial 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 and specialty aircraft component
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; 5) the timing, degree and scope of market
acceptance for products such as a repetitive lift helicopter; 6)
U.S. industrial production levels; 7)achievement and continuation
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, 1999, the Corporation employed 4,025
individuals throughout its industry segments and corporate
headquarters as follows:
<TABLE>
<S> <C>
Aerospace 2,023
Industrial Distribution 1,532
Music Distribution 395
Corporate Headquarters 75
-----
4,025
</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 2020.
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 77 4 55 10
Industrial Distribution 0 0 0 0
Music Distribution 9 0 4 0
-- -- -- --
86 4 59 10
</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-Six and Three Tenths percent (26.3%) of the sales of
the corporation made in 1999 were to customers located outside the
United States. In 1999, the corporation continued its efforts to
develop international markets for its products and foreign sales
(including sales for export); and during 1999 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 late 2000/early 2001 time frame.
Additional information required by this item appears in the
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corporation's 1999 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 1999, 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. The corporation did not experience any
adverse impact upon its business operations with the arrival of the
year 2000, however the program managers from each of the operating
subsidiaries as well as the oversight committee at corporate
headquarters (both groups being part of the compliance program
described in the corporation's SEC reports during 1999) will
continue to monitor this item for several months. Additional
information concerning this item appears in the corporation's 1999
Annual Report to Shareholders and is included in Exhibit 13 to this
Form 10-K, and is incorporated herein by reference.
ITEM 2. PROPERTIES
The corporation occupies approximately 3.27 million square
feet of space throughout the United States, Canada and Australia,
distributed as follows:
<TABLE>
SEGMENT SQUARE FEET
(in thousands as of 12/31/99)
<S> <C>
Aerospace 1,641
Industrial Distribution 1,185
Music Distribution 399
Corporate Headquarters 40
-----
Total 3,265
</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. 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 corporation also
occupies a facility in Nowra, New South Wales, Australia under a
contract providing for a ten (10) year term expiring June, 2010.
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, branches 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 1999.
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
1999 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
1999
First $16.13 $11.56 $12.81 $.11
Second 16.00 10.75 15.69 .11
Third 16.00 12.31 12.75 .11
Fourth 13.13 10.06 12.88 .11
- -----------------------------------------------------------------
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
- -----------------------------------------------------------------
QUARTERLY DEBENTURE INFORMATION (6% Conv. Subordinated)
- -----------------------------------------------------------------
High Low Close
- -----------------------------------------------------------------
<S> <C> <C> <C>
1999
First $ 99.88 $94.00 $ 97.00
Second 103.00 96.00 100.00
Third 100.00 94.00 97.50
Fourth 97.50 91.00 97.00
- -----------------------------------------------------------------
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
- -----------------------------------------------------------------
</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 11, 2000 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 it is expected that 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 1999 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
1999 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
1999 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, 56, 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.
Page 13
<PAGE>
T. Jack Cahill Mr. Cahill, 51, 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, 52, has been a Director
since 1995. He is President of The
Callaway Advanced Technology Corporation.
Frank C. Carlucci Mr. Carlucci, 69, has been a Director
since 1989. Prior to that he served as
U.S. Secretary of Defense. He is Chairman
of The Carlyle Group, merchant bankers,
and Chairman of Nortel Networks
Corporation (formerly Northern Telecon).
Mr. Carlucci is also a director of
Ashland, Inc., Neurogen Corporation,
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, 46, has been a Director
since 1996. He is Owner-Manager
of Edison Chouest Offshore, Inc.
Candace A. Clark Ms. Clark, 45, has been Senior Vice
President and Chief Legal Officer and
Secretary 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, 67, 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.
Ronald M. Galla Mr. Galla, 49, 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.
Page 14
<PAGE>
Robert M. Garneau Mr. Garneau, 56, 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.), 71,
President of Kaman Aerospace
International Corporation, a
subsidiary of the corporation, since
1995, retired from employment with
that company effective March 1, 2000.
He has been a Director since 1991
and will continue in that capacity.
In addition, he will be a consultant
to the corporation for a period of
two years. 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, 80, has been Chairman of the
Board of Directors since 1945. Until
1999 he was also President and Chief
Executive Officer of the corporation.
C. William Kaman II Mr. Kaman, 48, 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 of the Board
of Directors of the corporation.
Walter R. Kozlow Mr. Kozlow, 64, has been President of
Kaman Aerospace Corporation, a subsidiary
of the corporation, since 1986, and has
held various positions with Kaman
Aerospace Corporation since 1960.
Page 15
<PAGE>
Eileen S. Kraus Ms. Kraus, 61, has been a Director since
1995. She is Chairman (Connecticut) of
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, Bestfoods Corporation, ConnectiCare
Holding Co., Inc. and ConnectiCare, Inc.
Paul R. Kuhn Mr. Kuhn, 57, was appointed President and
Chief Executive Officer of the corporation
and was elected a Director in 1999. From
1998 to 1999 he was Senior Vice President,
Operations, Aerospace Engine Business,
for Coltec Industries, Inc. Prior to that
he was Group Vice President, Coltec
Industries, Inc. and President of its
Chandler Evans division.
Hartzel Z. Lebed Mr. Lebed, 72, has been a Director since
1982, and served as Vice Chairman of the
Board of Directors from January, 1999 to
September, 1999. He is the retired
President of CIGNA Corporation.
Walter H. Monteith, Jr. Mr. Monteith, 69, has been a Director
since 1987. He is the retired Chairman
of Southern New England Telecommuni-
cations Corporation.
Wanda L. Rogers Mrs. Rogers, 67, 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.
Robert H. Saunders, Jr. Mr. Saunders, 59, 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.
Page 16
<PAGE>
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 11, 2000.
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 1999.
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 1999 850,000 200,000 363,229 ------- ------- --- 140,000
Chairman
1998 850,000 408,000 116,201 ------- 0/ --- 64,120
125,000
1997 750,000 400,000 ------- ------- ------ --- 56,793
P. R. Kuhn 1999 250,000(4) 360,000 ------- 706,250 100,000/--- 3,661
President 180,000
and Chief 1998 ------- ------- ------- ------- ------- --- ------
Executive
Officer 1997 ------- ------- ------- ------- ------- --- ------
R.M.Garneau 1999 400,000 175,000 ------- 43,500 9,000/--- 12,329
Executive 30,000
Vice Pres- 1998 375,000 175,000 ------- 127,500 7,500/--- 12,418
ident and 12,500
Chief 1997 340,000 185,000 ------- 99,375 10,000/--- 10,896
Financial 100,000
Officer
W.R.Kozlow 1999 275,000 140,000 ------- 36,250 7,500/ --- 18,150
President 20,000
Kaman 1998 255,000 100,000 ------- 85,000 7,500/ --- 13,170
Aerospace 10,000
Corporation 1997 240,000 100,000 ------- 79,500 9,000/ --- 13,588
50,000
T.J. Cahill 1999 255,000 51,000 ------- 36,250 7,500/ --- 7,449
President, 15,000
Kaman 1998 245,000 80,000 ------- 85,000 7,500/ --- 7,397
Industrial 7,500
Technologies 1997 230,000 90,000 ------- 79,500 9,000/ --- 7,754
Corporation 50,000
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: $152,788 on
behalf of C.H. Kaman in 1999 and $91,060 on behalf of C. H. Kaman
in 1998. In addition, domestic services were provided to C.H. Kaman
in the amount of $98,807 in 1999.
2. As of December 31, 1999, aggregate restricted stock holdings
and their year end value were: C.H. Kaman, none; P.R. Kuhn,
50,000 shares valued at $643,750; R.M. Garneau, 17,500 shares
valued at $225,313; W.R. Kozlow, 13,500 shares valued at $173,813;
and T.J. Cahill, 13,500 shares valued at $173,813. Restrictions
lapse at the rate of 20% per year for all awards, beginning one
year after the grant date provided recipient remains an employee of
the corporation or a subsidiary. Awards reported in this column
are as follows: P. R. Kuhn, 50,000 shares in 1999; R. M. Garneau,
3,000 shares in 1999, 7,500 shares in 1998, and 7,500 shares in
1997; W.R. Kozlow, 2,500 shares in 1999, 5,000 shares in 1998, and
6,000 shares in 1997; and T.J. Cahill, 2,500 shares in 1999, 5,000
shares in 1998, and 6,000 shares in 1997. Dividends are paid on
the restricted stock.
3. Amounts reported in this column consist of: C.H. Kaman,
$53,000 - Officer 162 Insurance Program, $87,000 - medical expense
reimbursement program ("MERP") plus amounts attributable to the
corporation's direct medical expense reimbursement to Mr. Kaman;
P.R. Kuhn, $1,566 - Senior executive life insurance program
("Executive Life"), $2,000 - employer matching contributions to the
Kaman Corporation Thrift and Retirement Plan (the "Thrift Plan
employer match"); $95 - MERP; R.M. Garneau, $3,701- Executive Life,
$851 - Officer 162 Insurance Program, $2,000 - Thrift Plan employer
match, $590 - MERP, $5,187 - all supplemental employer
contributions under the Kaman Corporation Deferred Compensation
Plan ("supplemental employer contributions"); W.R. Kozlow, $7,963
- - Executive Life, $2,000 - Thrift Plan employer match, $5,000 -
MERP, $3,187 - supplemental employer contributions; and T.J.
Cahill, $2,296- Executive Life, $2,000 - Thrift Plan employer
match, $1,328 - MERP, $1,825- supplemental employer contributions.
4. P.R. Kuhn joined the corporation on August 2, 1999 as President
and Chief Executive Officer.
</FN>
</TABLE>
Page 19
<PAGE>
C) OPTION/SAR GRANTS IN THE LAST FISCAL YEAR:
<TABLE>
- ----------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term*
- ----------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
% of Total
Options/
SARs**
Options/ Granted to
SARs** Employees Exercise or
Granted in Fiscal Base Price Expiration
Name (#) Year ($/Sh) Date 5%($) 10%($)
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
C. H. Kaman 0/ 0/ ----- ------- --------- ---------
0 0
P. R. Kuhn 100,000/ 31.97/ 14.125 8/02/09 2,487,278 6,303,251
180,000 66.67
R. M. Garneau 9,000/ 2.88/ 14.50 2/09/09 355,640 901,261
30,000 11.11
W. R. Kozlow 7,500/ 2.40/ 14.50 2/09/09 250,772 635,505
20,000 7.41
T. J. Cahill 7,500/ 2.40/ 14.50 2/09/09 205,177 519,958
15,000 5.56
*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*
Options at FY-end (#) at FY-end ($)
acquired on Value exercisable/ exercisable/
Name Exercise(#) realized unexercisable unexercisable
(a) (b) (c) (d) (e)
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
C. H. Kaman none none 20,000/0 102,500/0
P. R. Kuhn " " 0/100,000 0/0
R. M. Garneau " " 32,500/26,500 85,125/12,250
W. R. Kozlow " " 31,500/24,000 83,625/11,250
T. J. Cahill " " 26,000/24,000 58,063/11,250
</TABLE>
<TABLE>
Value of
Number of Unexercised
Unexercised in-the-money
SARs SARs*
SARs at FY-end (#) at FY-end ($)
acquired on Value exercisable/ exercisable/
Name Exercise(#) realized unexercisable unexercisable
(a) (b) (c) (d) (e)
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
C. H. Kaman none none 25,000/100,000 0/0
P. R. Kuhn " " 0/180,000 0/0
R. M. Garneau " " 42,500/100,000 0/0
W. R. Kozlow " " 22,000/58,000 0/0
T. J. Cahill " " 21,500/51,000 0/0
*Difference between the 12/31/99 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:
<TABLE>
PENSION PLAN TABLE
Years of Service
Remuneration* 15 20 25 30 35
- -----------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
125,000 33,381 44,731 55,412 66,762 66,762
150,000 40,881 54,781 67,862 81,762 81,762
175,000 48,381 64,831 80,312 96,762 96,762
200,000 55,881 74,881 92,762 111,762 111,762
225,000 63,381 84,931 105,212 126,762 126,762
250,000 70,881 94,981 117,662 141,762 141,762
300,000 85,881 115,081 142,562 171,762 171,762
350,000 100,881 135,181 167,462 201,762 201,762
400,000 115,881 155,281 192,362 231,762 231,762
450,000 130,881 175,381 217,262 261,762 261,762
500,000 145,881 195,481 242,162 291,762 291,762
750,000 220,881 295,981 366,662 441,762 441,762
1,000,000 295,881 396,481 491,162 591,762 591,762
1,250,000 370,881 496,981 615,662 741,762 741,762
1,500,000 445,881 597,481 740,162 891,762 891,762
1,750,000 520,881 697,981 864,662 1,041,762 1,041,762
2,000,000 595,881 798,481 989,162 1,191,762 1,191,762
*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 1999 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.
Page 22
<PAGE>
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, $1,258,000; Mr. Garneau,
$662,709; Mr. Cahill, $404,937.
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.
The Executive Officers named in Item 11(b) are participants
in the plan and as of December 31, 1999, had the number of years of
credited service indicated: Mr. Kaman - 54.1 years; Mr. Kuhn -
2.0; Mr. Garneau - 18.48 years; Mr. Kozlow - 39.7 years; Mr. Cahill
- - 24.7 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. 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 2000 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. In addition, the corporation has entered into certain
Employment Agreements and Change in Control Agreements with certain
Executive Officers, copies of which were filed as exhibits to the
corporation's report on Form 10-Q (Document 54381-99-14) filed with
the Securities and Exchange Commission on November 12, 1999. The
Employment Agreement and Change in Control Agreement for Mr. P. R.
Kuhn were amended and restated as of November 16, 1999, and are
attached as Exhibit 10c(I) and 10c(II), respectively, to this Form
10-K.
Page 23
<PAGE>
<PAGE>
The corporation has also entered into an agreement with
Admiral Hardisty providing him with a separation payment in the
amount of $370,000 and retaining him as a consultant for a period
of two years following his retirement from regular employment
effective March 1, 2000 at a per diem rate of $1,000.00. A copy of
such agreement is attached as Exhibit 10d to this Form 10-K.
In addition, the corporation has an agreement with Mr. C. William
Kaman, retaining him as a Senior Executive Advisor through December
31, 2001 at the annual rate of $245,000. A copy of such agreement
appears as Exhibit 10(c) to the corporation's 1998 Form 10-K
(Document 54381-99-3) filed with the Securities and Exchange
Commission on March 16, 1999.
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 other 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.
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,
Eileen S. Kraus, and Walter H. Monteith, Jr.
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.
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 24
<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, 2000 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 51,177(3) 7.66%
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 39,696 shares held by a partnership controlled by
Mr. Moses.
</FN>
</TABLE>
Page 25
<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, 2000 of Class
- --------------------------------------------------------------------
<S> <C> <C> <C>
Brian E. Barents Class A 1,500 *
T. Jack Cahill Class A 70,830(1) *
E. Reeves Callaway Class A 1,500 *
Frank C. Carlucci Class A 4,500(2) *
Laney J. Chouest Class A 6,831 *
John A. DiBiaggio Class A 1,500 *
Robert M. Garneau Class A 71,995(3) *
Class B 23,236 3.48%
Huntington Hardisty Class A 36,600(4) *
Charles H. Kaman Class A 160,004(5) *
Class B 258,375(6) 38.69%
C. William Kaman, II Class A 88,288(7) *
Class B 64,446(8) 9.65%
Walter R. Kozlow Class A 93,175(9) *
Class B 296 *
Paul R. Kuhn Class A 50,000 *
Eileen S. Kraus Class A 2,129 *
Hartzel Z. Lebed Class A 17,642(10) *
Walter H. Monteith, Jr. Class A 1,700 *
Wanda L. Rogers Class A 1,500 *
All Directors and
Executive Officers Class A 674,475(11) 2.98%
as a group ** Class B 348,235 52.14%
* 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) Includes 34,100 shares subject to the exercisable portion of
stock options.
(2) Includes 3,500 shares held jointly with Mrs. Carlucci.
(3) Includes 41,300 shares subject to the exercisable portion
of stock options.
(4) Includes 17,100 shares subject to the exercisable portion
of stock options.
Page 26
<PAGE>
(5) Excludes the following: 23,132 shares held by Mrs. Kaman;
8,010 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; 127,034 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 70,500 shares held by the Charles H.
Kaman Charitable Foundation, a private charitable foundation.
Includes 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) Includes 25,300 shares subject to exercisable portion of
stock options; and excludes 87,582 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) Includes 39,600 shares subject to exercisable portion of
stock options.
(10)Includes shares held jointly with Mrs. Lebed, and
8,000 shares held in an Individual Retirement Account,
excludes 480 shares held by Mrs. Lebed.
(11)Includes 212,000 shares subject to exercisable portion of
stock options.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1999, the corporation obtained legal services from the
Hartford, Connecticut law firm of Murtha, Cullina, Richter and
Pinney LLP of which Mr. John S. Murtha, who served as a Director of
the corporation through April, 1999, is of counsel. The corporation
also obtained video production services in the amount of $103,642
from Polykonn Corporation, a corporation controlled by Mr. Steven
Kaman, son of Charles H. Kaman, Chairman of the corporation.
Page 27
<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 report on Form 8-K was filed during the
fourth quarter of 1999.
Date Filed Item No. Accession Number
----------------------------------------------------
December 21, 1999 5, 7 54381-99-17
Page 28
<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 20th day of March, 2000.
KAMAN CORPORATION
(Registrant)
By Paul R. Kuhn, 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:
- -------------------------------------------------------------------
Paul R. Kuhn President, Chief Executive March 20, 2000
Officer and Director
Robert M. Garneau Executive Vice President March 20, 2000
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
Paul R. Kuhn March 20, 2000
Attorney-in-Fact for:
Brian E. Barents Director
E. Reeves Callaway, III Director
Frank C. Carlucci Director
Laney J. Chouest Director
John A. DiBiaggio Director
Huntington Hardisty Director
Charles H. Kaman Director
C. William Kaman, II Director
Eileen S. Kraus Director
Hartzel Z. Lebed Director
Walter H. Monteith, Jr. Director
Wanda L. Rogers Director
Page 29
<PAGE>
KAMAN CORPORATION AND SUBSIDIARIES
Index to Financial Statement Schedules
Report of Independent Auditors
Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts
Page 30
<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 24, 2000, we reported on the consolidated
balance sheets of Kaman Corporation and subsidiaries as of
December 31, 1999 and 1998 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, 1999, as contained in the 1999 annual report to
shareholders. These consolidated financial statements and our
report thereon are included in the annual report on Form 10-K for
1999. 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 17, 2000
Page 31
<PAGE>
<PAGE>
KAMAN CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
<TABLE>
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
====== ====== ====== ====== ======
YEAR ENDED DECEMBER 31, 1999
Additions
<S> <C> <C> <C> <C> <C>
BALANCE CHARGED TO BALANCE
JANUARY 1, COSTS AND DECEMBER 31,
DESCRIPTION 1999 EXPENSES OTHERS DEDUCTIONS 1999
Allowance for
doubtful
accounts $4,047 $1,355 $----- $ 883(A) $4,519
====== ====== ====== ====== ======
Accumulated
amortization
of goodwill $1,488 $ 110 $----- $----- $1,598
====== ====== ====== ====== ======
<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 32
<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 by reference
as amended on February 9, 1999
has been filed with the Securities
and Exchange Commission on Form
10-K on March 16, 1999, as
Document No. 99-03.
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.
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<PAGE>
<PAGE>
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.
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(I) Employment Agreement between Kaman Attached
Corporation and Paul R. Kuhn dated
November 16, 1999.
Exhibit 10c(II) Change of Control Agreement between Attached
Kaman Corporation and Paul R. Kuhn
dated November 16, 1999
Exhibit 10d Agreement between Kaman Corporation Attached
and Huntington Hardisty dated
February 24, 2000.
Exhibit 11 Statement regarding computation Attached
of per share earnings.
Exhibit 13 Portions of the Corporation's Attached
1999 Annual Report to
Shareholders as required by
Item 8.
Exhibit 21 Subsidiaries. Attached
Exhibit 23 Consent of Independent Auditors. Attached
Page 34
<PAGE>
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>
EXHIBIT 10c(I)
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Agreement is made as of November 16, 1999 (the "Effective
Date") by and between Paul R. Kuhn ("I" , "me", or "my") and Kaman
Corporation ("Kaman" or "the Company").
WITNESSETH:
WHEREAS, the Company and I have executed an employment agreement
dated August 2, 1999; and
WHEREAS, the parties now desire to amend and restate that agreement
in its entirety;
NOW THEREFORE, in consideration of the mutual promises contained in
this Agreement, the Company and I agree as follows:
I. (a) I will abide by all of Kaman's rules and regulations now
or hereafter established and agree that the posting of any such
rules or regulations on the bulletin boards of the various
departments and/or as listed in any employee handbooks will
constitute personal notice thereof to me. I understand that no
statements made in any such publications or elsewhere shall operate
to change the terms and conditions of my employment as described in
this Agreement.
(b) I understand and agree that I may become aware of certain
secret and/or confidential information during the course of my
employment and such information includes, but is not limited to,
that pertaining to methods, processes, designs, equipment,
catalogues, computer disks, customer lists, inventions, sales and
operating procedures. I agree that all tangible confidential
information such as computer disks, reports, customer lists, etc.
are the sole property of Kaman and I agree that upon termination of
employment with Kaman, I will return, on demand, any and all
confidential information in my possession. During and after my
employment, I will disclose to Kaman and will not divulge or
appropriate to my own use or to the use of others, including any
other employer, any such confidential information or knowledge
obtained by me during such employment, whether in tangible or
intangible form, including, but not limited to data, plans,
decisions, methods, processes, designs, equipment, catalogues,
customer lists, inventions, and sales and operating procedures.
(c) Recognizing that, by virtue of my employment, I may learn
information, not generally available, concerning business methods,
customer lists or other trade secrets, I agree that during my
employment I will not, directly or indirectly, become connected
with, promote the interest of, or engage in any other business or
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<PAGE>
activity competing with the business to which my employment relates
within the geographical area in which the business of the Company
is conducted. I further agree that if any court or arbitrator
should find this covenant and agreement against competition not to
be reasonable as to the scope of prohibited activities, then such
portion of this covenant and agreement held to be unreasonable
shall be regarded as severable and stricken from this Agreement,
and such covenant and agreement shall be of full force and effect
for the activities which are determined not to be unreasonable.
(d) I will treat as for Kaman's sole benefit, and fully and
promptly disclose and assign to Kaman without additional
compensation, all ideas, discoveries, inventions and improvements,
patentable or not, which, while I am employed, are made, conceived
or reduced to practice by me, alone or with others, during or after
usual working hours either on or off my job, and which are related
directly or indirectly to Kaman's business or interest or which
result from tasks assigned to me by Kaman.
(e) I agree, at Kaman's expense, at any time during or after
my employment, to sign all papers and do such other acts reasonably
required of me to protect Kaman's rights to said ideas,
discoveries, inventions and improvements, including applying for,
obtaining and enforcing patents on said discoveries, inventions,
improvements in any and all countries.
(f) I represent that there are no agreements, understandings
or legal requirements applicable to me which prohibit the execution
of this Agreement or prohibit or otherwise limit the performance of
my obligations hereunder or my duties as an employee of the Company
nor will the execution of this Agreement and the performance of my
obligations or duties result in a conflict of interest between me and
any other party.
II. I understand that, as an employee of Kaman, I owe a duty of
loyalty to Kaman. As part of this duty of loyalty, I will:
(a) avoid personal investment, interests or associations
which might interfere with the independent exercise of my judgment on
business related matters;
(b) not, directly or through a member of my immediate family
or otherwise, accept any gratuitous payment, loan, service, or
other consideration of value from any party doing or seeking to do
business with Kaman;
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<PAGE>
(c) fully disclose all facts concerning services that I, or
any other person of whom I have knowledge, may have rendered to any
party competing, dealing, or seeking to deal with Kaman, if it is
required to determine if a conflict of interest exists; and
(d) not buy or sell Kaman Corporation stock if I have
information about Kaman Corporation or any of its subsidiaries that
is not already available to the public nor will I tell other people
about any information of that kind. I understand and acknowledge
that Kaman's policies prohibit such behavior and in many cases, it
will be in violation of the securities laws.
III. I understand and agree that my employment with Kaman is an "at
will" relationship and such employment and compensation can be
terminated, with or without cause, and with or without notice, at any
time, at the option of Kaman or me. I understand that this
Agreement can be changed only by a written document signed by me
and the President or other designated officer of Kaman. No
application, brochure, policy statement, procedure, benefit plan,
summary, work rules, employee handbook, or any other written or
oral communication between the Company and its employees is
intended to create an employment contract. I understand and agree
that as a condition of my "at will" employment, if any disputes
arise out of my termination of employment with the Company that I
will first seek to resolve all such disputes by engaging in good
faith discussions with appropriate managerial personnel of the
Company.
IV. (a) I understand that if my employment ends under any
circumstances (other than due to my willful refusal to perform
proper responsibilities of my position or a violation of law on my
part) after my Date of Hire (being August 2, 1999) and the Change
in Control Agreement dated August 2, 1999, as amended, between
Kaman and me is not applicable, that on my last day of employment
(the "Termination Date"), the Company will provide me with:
1) a lump sum cash payment equal to two (2) times my
then current base annual salary rate (which rate cannot be less than
the salary rate for the most recently completed calendar year prior
to the Termination Date or the salary rate in effect as of the
Effective Date, whichever is higher);
Page 3
<PAGE>
2) a lump sum cash payment equal to two (2) times my
most recent cash bonus payment; and the bonus for which I am
eligible due to my employment during the calendar year in which the
Termination Date occurs, with such bonus to be pro rated and
calculated in accordance with the Kaman Corporation Cash Bonus
Plan;
3) i. if my employment ends within less than one
(1) year from my Date of Hire, vesting of the stock option award and
stock appreciation rights (payable only in cash) award approved by
the Company's Board of Directors on July 20, 1999, in an amount
equal to twenty percent (20%) of each such award, exercisable in
accordance with the terms of the company's 1993 Stock Incentive
Plan together with a lapsing of the restrictions on the restricted
stock award approved by the Board of Directors on July 20, 1999, in
an amount equal to twenty percent (20%) of such award; and
ii. if my employment ends within two (2) years
from my Date of Hire and subsection IV(a)(3)(i) is not applicable,
vesting of the stock option award and stock appreciation rights
(payable only in cash) award approved by the Company's Board of
Directors on July 20, 1999, in an amount equal to forty percent
(40%) of each such award, exercisable in accordance with the terms
of the company's 1993 Stock Incentive Plan together with a lapsing
of the restrictions on the restricted stock award approved by the
Board of Directors on July 20, 1999, in an amount equal to forty
percent (40%) of such award;
4) if my employment ends within two (2) years from my
Date of Hire, vesting credit under the Supplemental Employees
Retirement Plan (SERP) to achieve a total of eight (8) years of
Continuous and Credited Service (as defined in the Kaman
Corporation Employees' Pension Plan (the "Plan") to which the SERP
is supplemental) at that date which would have been my normal
retirement date (generally, attainment of age 65) had my employment
not ended. I understand that my benefit from the plan will be due
and payable at that normal retirement date;
5) my Company automobile. The book value then
attributed to it by the leasing company will be considered a fringe
benefit income and that amount will be subject to tax during the
calendar year in which the Termination Date occurs;
6) reimbursement for COBRA premium payments for
applicable group medical/dental benefits until I accept employment
elsewhere, but in any event for not more than eighteen (18) months;
and
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<PAGE>
7) premium payments for one (1) year with regard to
the Mass Mutual group universal life insurance policy issued in my
name.
(b) In the event that the items described in Section IV (a)
are provided to me pursuant to this Agreement, I agree that for a
period of two (2) years following the Termination Date, I will not,
directly or indirectly, become connected with, promote the interest
of, or engage in any other business or activity competing with the
business of the Company within the geographical area in which the
business of the Company is conducted.
(c) Unless required otherwise by law or government
regulation, the parties will maintain the terms and conditions of
this Agreement in confidence.
V. This Agreement supersedes any previous agreements or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof which may exist between the
parties, except that both parties acknowledge the validity of that
certain Change in Control Agreement dated August 2, 1999, as
amended, between the parties. The validity, interpretation,
construction and performance of this Agreement shall be governed by
the laws of Connecticut. Any payments provided for hereunder shall
be paid net of any applicable withholding required under federal,
state or local law and any additional withholding to which I have
agreed.
In Witness Whereof, the parties have executed, or caused this
Agreement to be executed, on his or its behalf.
/s/ Paul R. Kuhn
Signature of Employee
Date 1/27/00
Paul R. Kuhn
Employee's Typed Name
Acknowledged and Agreed this 27th day of Jan. 2000.
Kaman Corporation
/s/ Robert M. Garneau
Its Executive Vice President and CFO
Page 5
<PAGE>
<PAGE>
EXHIBIT 10c(II)
AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT, is made as of November 16, 1999, by and
between Kaman Corporation, a Connecticut corporation (the "Company"),
and Paul R. Kuhn (the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its shareholders to foster the continued employment of
key management personnel; and
WHEREAS, the Board recognizes that the possibility of a Change
in Control exists and that such possibility, which will not be
addressed by an Employment Agreement, and the uncertainty and
questions which it may raise among management, may result in the
departure or distraction of management personnel to the detriment
of the Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention
and dedication of members of the Company's management, including
the Executive, to their assigned duties without the potential
distractions arising from the possibility of a Change in Control;
and
WHEREAS, the Company and the Executive have executed a Change
in Control Agreement dated August 2, 1999 and an Employment
Agreement of the same date (which Employment Agreement was amended
and restated in its entirety as of November 16, 1999); and
WHEREAS, the parties desire to amend and restate the Change in
Control Agreement in its entirety;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the Company and the Executive
hereby agree as follows:
1. Defined Terms. The definitions of capitalized terms used
in this Agreement are provided in the last Section of this
Agreement.
2. Term. [Intentionally Omitted]
3. Company's Covenants Summarized. In order to induce the
Executive to remain in the employ of the Company and in
consideration of the Executive's continued employment, the Company
agrees, under the conditions described herein, to pay the Executive
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<PAGE>
the Severance Payments and the other payments and benefits
described in this Agreement. Except as provided in Section 8.1 of
this Agreement, no Severance Payments shall be payable under this
Agreement unless there shall have been (or, under the terms of the
second sentence of Section 5.1, there shall be deemed to have been)
a termination of the Executive's employment with the Company
following a Change in Control. This Agreement shall not be
construed as creating an express or implied contract of employment
and, except as otherwise agreed in writing between the Executive
and the Company, the Executive shall not have any right to be
retained in the employ of the Company.
4. Compensation Other Than Severance Payments.
4.1 If the Executive's employment shall be terminated for any
reason following a Change in Control, the Company shall pay the
Executive's full salary to the Executive through the Date of
Termination at the rate in effect immediately prior to the Date of
Termination or, if Section 15 (o)(II) is applicable as an event or
circumstance constituting Good Reason, the rate in effect
immediately prior to such event or circumstance, together with all
compensation and benefits payable to the Executive through the Date
of Termination under the terms of the Company's compensation and
benefit plans, programs or arrangements as in effect immediately
prior to the Date of Termination (or, if more favorable to the
Executive, as in effect immediately prior to the first occurrence
of an event or circumstance constituting Good Reason), including,
but not limited to, the bonus for which the Executive is eligible
due to his or her employment during the calendar year in which the
Date of Termination occurs, with such bonus to be pro rated and
calculated in accordance with the Kaman Corporation Cash Bonus
Plan.
4.2 If the Executive's employment shall be terminated for any
reason following a Change in Control, the Company shall pay to the
Executive the Executive's normal post-termination compensation and
benefits as such payments become due. Such post-termination
compensation and benefits shall be determined under, and paid in
accordance with, the Company's retirement, insurance and other
compensation or benefit plans, programs and arrangements as in
effect immediately prior to the Date of Termination or, if more
favorable to the Executive, as in effect immediately prior to the
occurrence of the first event or circumstance constituting Good
Reason.
5. Severance Payments.
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<PAGE>
5.1 If the Executive's employment is terminated following a
Change in Control, other than (A) by the Company for Cause, (B) by
reason of death or Disability, or (C) by the Executive without Good
Reason, then the Company shall pay the Executive the amounts, and
provide the Executive the benefits described in this Section 5
("Severance Payments") in addition to any payments and benefits to
which the Executive is entitled under Section 4 of this Agreement.
For purposes of this Agreement, the Executive's employment shall be
deemed to have been terminated by the Company following a Change in
Control, without Cause or by the Executive with Good Reason, if (i)
the Executive's employment is terminated by the Company without
Cause prior to a Change in Control and such termination was at the
request or direction of a Person who has entered into an agreement
with the Company the consummation of which would constitute a
Change in Control, (ii) the Executive terminates his employment for
Good Reason prior to a Change in Control and the circumstance or
event which constitutes Good Reason occurs at the request or
direction of such Person, or (iii) the Executive's employment is
terminated by the Company without Cause or by the Executive for
Good Reason and such termination or the circumstance or event which
constitutes Good Reason is otherwise in connection with or in
anticipation of a Change in Control. For purposes of any
determination regarding the applicability of the immediately
preceding sentence, any position taken by the Executive shall be
presumed to be correct unless the Company establishes to the Board
by clear and convincing evidence that such position is not correct.
(a) In lieu of any further salary payments to the Executive
for periods subsequent to the Date of Termination and in lieu of
any severance benefit otherwise payable to the Executive, the
Company shall pay to the Executive a lump sum severance payment, in
cash, equal to the sum of (i) three (3) times the Executive's base
salary as in effect immediately prior to the Date of Termination
or, if Section 15 (o)(II) is applicable as an event or circumstance
constituting Good Reason, the rate in effect immediately prior to
such event or circumstance, and (ii) three (3) times the annual
bonus actually paid for the fiscal year ending immediately prior to
the fiscal year in which occurs the Date of Termination, pursuant
to any annual bonus or incentive plan maintained by the Company.
(b) For the thirty-six (36) month period immediately
following the Date of Termination, the Company shall arrange to
provide the Executive and his dependents medical, dental, and
accidental death and disability benefits substantially similar to
those provided to the Executive and his dependents immediately
prior to the Date of Termination or, if more favorable to the
Executive, those provided to the Executive and his dependents
immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, at no greater cost to the
Executive than the cost to the Executive immediately prior to such
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<PAGE>
date or occurrence. Benefits otherwise receivable by the Executive
pursuant to this Section 5.1(b) shall be reduced to the extent
benefits of the same type are received by or made available to the
Executive during the thirty-six (36) month period following the
Date of Termination (and any such benefits received by or made
available to the Executive shall be reported to the Company by the
Executive); provided, however, that the Company shall reimburse the
Executive for the excess, if any, of the cost of such benefits to
the Executive over such cost immediately prior to the Date of
Termination or, if more favorable to the Executive, the first
occurrence of an event or circumstance constituting Good Reason.
(c) Notwithstanding any provision to the contrary in any plan
or agreement maintained by the Company pursuant to which the
Executive has been granted restricted stock, stock options or stock
appreciation rights, effective on the Date of Termination, (i) all
restrictions with respect to any restricted stock shall lapse, and
(ii) all stock appreciation rights and stock options shall become
fully vested and then canceled in exchange for a cash payment equal
to the excess of the fair market value of the shares of Company
stock subject to the stock appreciation right or stock option on
the date of the Change in Control, over the exercise price(s) of
such stock appreciation rights or stock options.
(d) In addition to the retirement benefits to which the
Executive is entitled under any tax-qualified, supplemental or
excess benefit pension plan maintained by the Company and any other
plan or agreement entered into between the Executive and the
Company which is designed to provide the Executive supplemental
retirement benefits (the "Pension Plans") or any successor plan
thereto, effective upon the Date of Termination, the Executive
shall receive vesting credit under the Kaman Corporation
Supplemental Employees Retirement Plan ("SERP") equal to five years
of Continuous and Credited Service (as defined in the Kaman
Corporation Employees' Pension Plan to which the SERP is
supplemental).
(e) If the Executive would have become entitled to benefits
under the Company's post-retirement health care plans, as in effect
immediately prior to the Date of Termination or, if more favorable
to the Executive, as in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason,
had the Executive's employment terminated at any time during the
period of thirty-six (36) months after the Date of Termination, the
Company shall provide such post-retirement health care benefits to
the Executive and the Executive's dependents commencing on the
later of (i) the date on which such coverage would have first
become available and (ii) the date on which benefits described in
this Section 5.1 (e) terminate.
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<PAGE>
(f) The Company shall (i) either prepay all remaining
premiums, or establish an irrevocable grantor trust holding an
amount of assets sufficient to pay all such remaining premiums
(which trust shall be required to pay such premiums), under any
insurance policy maintained by the Company insuring the life of the
Executive, that is in effect; and (ii) shall transfer to the
Executive any and all rights and incidents of ownership in such
arrangements at no cost to the Executive.
(g) The Company shall provide the Executive with
reimbursement for outplacement services received by the Executive
for up to Thirty Thousand Dollars ($30,000), but only until the
first acceptance by the Executive of an offer of employment.
(h) The Company shall provide the Executive with his Company
automobile. The book value then attributed to it by the leasing
company will be considered "fringe benefit" income and that amount
will be subject to tax during the calendar year in which the Date
of Termination occurs.
5.2 (A) Whether or not the Executive becomes entitled to the
Severance Payments, if any of the payments or benefits received or
to be received by the Executive in connection with a Change in
Control or the Executive's termination of employment (whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any Person whose actions
result in a Change in Control or any Person affiliated with the
Company or such Person) (such payments or benefits, excluding the
Gross-Up Payment, being hereinafter referred to as the "Total
Payments") will be subject to the Excise Tax, the Company shall pay
to the Executive an additional amount (the "Gross-Up Payment") such
that the net amount retained by the Executive, after deduction of
any Excise Tax on the Total Payments and any federal, state and
local income and employment taxes and Excise Tax upon the Gross-Up
Payment, shall be equal to the Total Payments.
(B) For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) all of the Total Payments shall be treated as
"parachute payments" (within the meaning of Section 280G(b)(2) of
the Code) unless, in the opinion of tax counsel ("Tax Counsel")
reasonably acceptable to the Executive and selected by the
accounting firm which was, immediately prior to the Change in
Control, the Company's independent auditor (the "Auditor"), such
payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of Section 280G(b)(4)(A) of
the Code, (ii) all "excess parachute payments" within the meaning
of Section 280G(b)(l) of the Code shall be treated as subject to
the Excise Tax unless, in the opinion of Tax Counsel, such excess
parachute payments (in whole or in part) represent reasonable
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compensation for services actually rendered (within the meaning of
Section 280G(b)(4)(B) of the Code) in excess of the Base Amount
allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax, and (iii) the value of any noncash
benefits or any deferred payment or benefit shall be determined by
the Auditor in accordance with the principles of Sections
280G(d)(3) and (4) of the Code. For purposes of determining the
amount of the Gross-Up Payment, the Executive shall be deemed to
pay federal income tax at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment
is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the
Executive's residence on the Date of Termination (or if there is no
Date of Termination, then the date on which the Gross-Up Payment is
calculated for purposes of this Section 5.2), net of the maximum
reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.
(C) In the event that the Excise Tax is finally determined to
be less than the amount taken into account hereunder in calculating
the Gross-Up Payment, the Executive shall repay to the Company,
within thirty (30) days following the time that the amount of such
reduction in the Excise Tax is finally determined, the portion of
the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and
federal, state and local income and employment taxes imposed on the
Gross-Up Payment being repaid by the Executive), to the extent that
such repayment results in a reduction in the Excise Tax and a
dollar-for-dollar reduction in the Executive's taxable income and
wages for purposes of federal, state and local income and
employment taxes, plus interest on the amount of such repayment at
120% of the rate provided in Section 1274(b)(2)(B) of the Code. In
the event that the Excise Tax is determined to exceed the amount
taken into account hereunder in calculating the Gross-Up Payment
(including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by
the Executive with respect to such excess) within thirty (30) days
following the time that the amount of such excess is finally
determined. The Executive and the Company shall each reasonably
cooperate with the other in connection with any administrative or
judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Total Payments.
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5.3 The Company also shall reimburse the Executive for legal
fees and expenses incurred by the Executive in disputing in good
faith any issue hereunder relating to the termination of the
Executive's employment or in seeking in good faith to obtain or
enforce any benefit or right provided by this Agreement. Such
payments shall be made within ten (10) business days after delivery
of the Executive's written request for payment accompanied with
such evidence of fees and expenses incurred as the Company
reasonably may require.
5.4 The payments provided in subsections (a) and (c) of
Section 5.1 shall be made on the last day of the Executive's
employment. The payments provided in Section 5.2 of this Agreement
shall be made as soon as practicable following the Date of
Termination, but in no event later than thirty (30) days following
the Date of Termination. If payments are not made in the time
frame required by this subsection, interest on the unpaid amounts
will accrue at 120% of the rate provided in Section 1274(b)(2)(B)
of the Code until the date such payments are actually made. At the
time that payments are made under this Agreement, the Company shall
provide the Executive with a written statement setting forth the
manner in which such payments were calculated and the basis for
such calculations including, without limitation, any opinions or
other advice the Company has received from Tax Counsel, the Auditor
or other advisors or consultants (and any such opinions or advice
which are in writing shall be attached to the statement).
6. Termination Procedures and Compensation During Dispute.
6.1 Notice of Termination. After a Change in Control, any
purported termination of the Executive's employment (other than by
reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in
accordance with Section 9 of this Agreement. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated. Further,
a Notice of Termination for Cause is required to include a copy of
a resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board which was called and held for the purpose of
considering such termination (after reasonable notice to the
Executive and an opportunity for the Executive, together with the
Executive's counsel, to be heard before the Board) finding that, in
the good faith opinion of the Board, the Executive was guilty of
conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail.
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6.2 Date of Termination. "Date of Termination," with respect
to any purported termination of the Executive's employment after a
Change in Control, shall mean (i) if the Executive's employment is
terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have
returned to the full-time performance of the Executive's duties
during such thirty (30) day period), and (ii) if the Executive's
employment is terminated for any other reason, the date specified
in the Notice of Termination (which, in the case of a termination
by the Company, shall not be less than thirty (30) days (except in
the case of a termination for Cause) and, in the case of a
termination by the Executive, shall not be less than fifteen (15)
days nor more than sixty (60) days, respectively, from the date
such Notice of Termination is given).
6.3 Dispute Concerning Termination. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior
to the Date of Termination (as determined without regard to this
Section 6.3), the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be extended until the
date on which the dispute is finally resolved, either by mutual
written agreement of the parties or by a final judgment, order or
decree of an arbitrator or a court of competent jurisdiction (which
is not appealable or with respect to which the time for appeal
therefrom has expired and no appeal has been perfected); provided,
however, that the Date of Termination shall be extended by a notice
of dispute given by the Executive only if such notice is given in
good faith and the Executive pursues the resolution of such dispute
with reasonable diligence.
6.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and the Date of Termination is
extended in accordance with Section 6.3 of this Agreement, the
Company shall continue to pay the Executive the full compensation
in effect when the notice giving rise to the dispute was given
(including, but not limited to, salary) and continue the Executive
as a participant in all compensation, benefit and insurance plans
in which the Executive was participating when the notice giving
rise to the dispute was given, until the Date of Termination, as
determined in accordance with Section 6.3 of this Agreement.
Amounts paid under this Section 6.4 are in addition to all other
amounts due under this Agreement (other than those due under
Section 4.1 of this Agreement) and shall not be offset against or
reduce any other amounts due under this Agreement.
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7. No Mitigation. The Company agrees that under this
Agreement, if the Executive's employment with the Company
terminates, the Executive is not required to seek other employment
or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Section 5 of this Agreement or
Section 6.4 of this Agreement. Further, the amount of any payment
or benefit provided for in this Agreement (other than as
specifically provided in Section 5.1(b) of this Agreement) shall
not be reduced by any compensation earned by the Executive as the
result of employment by another employer, by retirement benefits,
by offset against any amount claimed to be owed by the Executive to
the Company, or otherwise.
8. Successors; Binding Agreement.
8.1 In addition to any obligations imposed by law upon any
successor to the Company, the Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform this
Agreement in accordance with its terms. Failure of the Company to
obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle
the Executive to compensation from the Company in the same amount
and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control, except that,
for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of
Termination.
8.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount
would still be payable to the Executive hereunder (other than
amounts which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the executors,
personal representatives or administrators of the Executive's
estate.
9. Notices. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered
or mailed by United States registered mail, return receipt
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requested, postage prepaid, addressed, if to the Executive, to the
address inserted below the Executive's signature on the final page
hereof and, if to the Company, to the address set forth below, or
to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of
change of address shall be effective only upon actual receipt:
To the Company:
Kaman Corporation
1332 Blue Hills Ave., P.O. Box 1
Bloomfield, CT 06002
Attention: Candace A. Clark, Secretary
10. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing and signed by the Executive and
an authorized officer of the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or
of any lack of compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. This Agreement supersedes
any other agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof which have
been made by either party. The validity, interpretation,
construction and performance of this Agreement shall be governed by
the laws of Connecticut. Any payments provided for hereunder shall
be paid net of any applicable withholding required under federal,
state or local law and any additional withholding to which the
Executive has agreed. The obligations of the Company and the
Executive under this Agreement which by their nature may require
either partial or total performance after its expiration shall
survive any such expiration.
11. Validity; Counterparts. The invalidity or
unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of
this Agreement, which shall remain in full force and effect.
This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together
will constitute one and the same instrument.
12. Confidentiality. Unless required otherwise by law or
government regulation, the parties will maintain the terms and
conditions of this Agreement in confidence.
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13. Settlement of Disputes. All claims by the Executive for
benefits under this Agreement shall be directed to and determined
by the Board and shall be in writing. Any denial by the Board of a
claim for benefits under this Agreement shall be delivered to the
Executive in writing and shall set forth the specific reasons for
the denial and the specific provisions of this Agreement relied
upon. The Board shall afford a reasonable opportunity to the
Executive for a review of the decision denying a claim and shall
further allow the Executive to appeal to the Board a decision of
the Board within sixty (60) days after notification by the Board
that the Executive's claim has been denied.
14. Arbitration. Any further dispute or controversy arising
under or in connection with this Agreement shall be settled
exclusively by arbitration in Hartford, Connecticut, in accordance
with the rules of the American Arbitration Association then in
effect; provided, however, that the evidentiary standards set forth
in this Agreement shall apply. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
Notwithstanding any provision of this Agreement to the contrary,
the Executive shall be entitled to seek specific performance of the
Executive's right to be paid until the Date of Termination during
the pendency of any dispute or controversy arising under or in
connection with this Agreement.
15. Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated below:
(a) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
(b) "Auditor" shall have the meaning set forth in Section 5.2
of this Agreement.
(c) "Base Amount" shall have the meaning set forth in Section
280G(b)(3) of the Code.
(d) "Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.
(e) "Board" shall mean the Board of Directors of the Company.
(f) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the
Executive to substantially perform the Executive's duties with the
Company (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness or any such actual or
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anticipated failure after the issuance of a Notice of Termination
for Good Reason by the Executive pursuant to Section 6.1 of this
Agreement) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand specifically
identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties,
or (ii) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise. For purposes of clauses (i)
and (ii) of this definition, (x) no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted
to be done, by the Executive not in good faith and without
reasonable belief that the Executive's act, or failure to act, was
in the best interest of the Company and (y) in the event of a
dispute concerning the application of this provision, no claim by
the Company that Cause exists shall be given effect unless the
Company establishes to the Board by clear and convincing evidence
that Cause exists.
(g) The first to occur of any one of the following events
shall constitute the occurrence of a "Change in Control" for
purposes of this Agreement:
(I) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing
35% or more of the then outstanding securities of the Company
generally entitled to vote in the election of directors of the
Company, excluding any Person who becomes such a Beneficial Owner
in connection with a transaction described in clause (i) of
paragraph (III) below; or
(II) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the date of this Agreement, constitute the
Board and any new director (other than a director whose initial
assumption of office is a result of an actual or threatened
election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company
and whose appointment or election was not approved by at least
two-thirds (2/3) of the directors of the Company in office
immediately prior to any such contest) whose appointment or
election by the Board or nomination for election by the Company's
stockholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then in office; or
(III) there is consummated a merger or consolidation of
the Company with any other business entity, other than (i) a merger
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<PAGE>
or consolidation which would result in the securities of the
Company generally entitled to vote in the election of directors of
the Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into such securities of the
surviving entity or any parent thereof), in combination with the
ownership of any trustee or other fiduciary holding such securities
under an employee benefit plan of the Company or any Subsidiary of
the Company, at least 65% of the securities of the Company or such
surviving entity or any parent thereof outstanding immediately
after such merger or consolidation and generally entitled to vote
in the election of directors of the Company or such surviving
entity or any parent thereof, or (ii) a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing
35% or more of the then outstanding securities of the Company
generally entitled to vote in the election of directors of the
Company; or
(IV) (i) the stockholders of the Company approve a plan
of complete liquidation or dissolution of the Company or there is
consummated the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity where the outstanding securities
generally entitled to vote in the election of directors of the
Company immediately prior to the sale continue to represent (either
by remaining outstanding or by being converted into such securities
of the surviving entity or any parent thereof) 65% or more of the
outstanding securities of such entity generally entitled to vote in
the election of directors immediately after such sale , or (ii) a
disposition or divestiture by the Company or any Subsidiary of the
Company to any Person of either Kaman Aerospace Corporation or
Kaman Industrial Technologies Corporation, including, without
intending to limit the foregoing, any such disposition or
divestiture effected by (a) a sale of all or substantially all of
the securities or all or substantially all of the assets of either
Kaman Aerospace Corporation or Kaman Industrial Technologies
Corporation, (b) the merger or consolidation of either Kaman
Aerospace Corporation or Kaman Industrial Technologies Corporation
with or into any Person, other than a merger or consolidation which
would result in the voting securities of the merged or consolidated
Subsidiary outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity or any parent thereof) at least 65% of the
securities of such Subsidiary or such surviving entity or any
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parent thereof outstanding immediately after such merger or
consolidation and generally entitled to vote in the election of
directors of the Subsidiary or such surviving entity or parent
thereof, or (c) a spin off, dividend or other distribution of all
or substantially all of the securities or all or substantially all
of the assets (or of the stock of a business entity owning such
securities or assets) of either Kaman Aerospace Corporation or
Kaman Industrial Technologies Corporation to the Company's
stockholders.
Within five (5) days after a Change in Control has occurred,
the Company shall deliver to the Executive a written statement
memorializing the date that the Change in Control occurred.
(h) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(i) "Company" shall mean Kaman Corporation and, except in
determining under Section 15(g) hereof whether or not any Change in
Control of the Company has occurred, shall include any successor to
its business and/or assets.
(j) "Date of Termination" shall have the meaning set forth in
Section 6.2 of this Agreement.
(k) "Disability" shall be deemed the reason for the
termination by the Company of the Executive's employment, if, as a
result of the Executive's incapacity due to physical or mental
illness, the Executive shall have been absent from the full-time
performance of the Executive's duties with the Company for a period
of six (6) consecutive months, the Company shall have given the
Executive a Notice of Termination for Disability, and, within
thirty (30) days after such Notice of Termination is given, the
Executive shall not have returned to the full-time performance of
the Executive's duties.
(l) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(m) "Excise Tax" shall mean any excise tax imposed under
Section 4999 of the Code.
(n) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(o) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the
Executive's express written consent) after any Change in Control,
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of any one of the following acts by the Company, or failures by the
Company to act, unless, in the case of any act or failure to act
described in paragraph (I), (V), (VI), or (VII) below, such act or
failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(I) the assignment to the Executive of any duties
inconsistent with the Executive's status as President and Chief
Executive Officer of the Company or a substantial diminution in the
nature or status of the Executive's responsibilities from those in
effect immediately prior to the Change in Control;
(II) a reduction by the Company in the Executive's
annual base salary as in effect on the date of this Agreement or as
the same may be increased from time to time;
(III) the relocation of the Executive's principal place
of employment to a location more than 50 miles from the Executive's
principal place of employment immediately prior to the Change in
Control or the Company's requiring the Executive to be based
anywhere other than such principal place of employment (or
permitted relocation thereof) except for required travel on the
Company's business to an extent substantially consistent with the
Executive's business travel obligations immediately prior to the
Change in Control;
(IV) the failure by the Company to pay to the Executive
any portion of the Executive's current compensation, or to pay to
the Executive any portion of an installment of deferred
compensation under any deferred compensation program of the
Company, within thirty (30) days of the date such compensation is
due;
(V) the failure by the Company to continue in effect any
compensation plan in which the Executive participates immediately
prior to the Change in Control which is material to the Executive's
total compensation (including, but not limited to, the Kaman
Corporation Compensation Administration Plan, Kaman Corporation
Cash Bonus Plan, and Kaman Corporation 1993 Stock Incentive Plan),
unless an equitable arrangement (embodied in an ongoing substitute
or alternative plan) has been made with respect to such plan, or
the failure by the Company to continue the Executive's
participation therein (or in such substitute or alternative plan)
on a basis not materially less favorable, both in terms of the
amount or timing of payment of benefits provided and the level of
the Executive's participation relative to other participants, as
existed immediately prior to the Change in Control;
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(VI) the failure by the Company to continue to provide
the Executive with benefits substantially similar to those enjoyed
by the Executive under any of the Company's life insurance, health
and accident, or disability plans in which the Executive was
participating immediately prior to the Change in Control, the
taking of any other action by the Company which would directly or
indirectly materially reduce any of such benefits or deprive the
Executive of any material fringe benefit enjoyed by the Executive
at the time of the Change in Control, or the failure by the Company
to provide the Executive with the number of paid vacation days to
which the Executive is entitled on the basis of years of service
with the Company in accordance with the Company's normal vacation
policy in effect at the time of the Change in Control, provided,
however, that this paragraph shall not be construed to require the
Company to provide the Executive with a defined benefit pension
plan if no such plan is provided to similarly situated executive
officers of the Company or its Affiliates; or
(VII) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 6.1 of this
Agreement; for purposes of this Agreement, no such purported
termination shall be effective.
The Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's incapacity
due to physical or mental illness. The Executive's continued
employment shall not constitute consent to, or a waiver of rights
with respect to, any act or failure to act constituting Good Reason
hereunder.
For purposes of any determination regarding the existence of
Good Reason, any claim by the Executive that Good Reason exists
shall be presumed to be correct unless the Company establishes to
the Board by clear and convincing evidence that Good Reason does
not exist.
(p) "Gross-Up Payment" shall have the meaning set forth in
Section 5.2 of this Agreement.
(q) "Notice of Termination" shall have the meaning set forth
in Section 6.1 of this Agreement.
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(r) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange Act, as modified and used in Sections 13(d) and
14(d) thereof, except that such term shall not include (i) the
Company or any of its direct or indirect Subsidiaries, (ii) a
trustee or other fiduciary holding securities under an employee
benefit plan of the Company, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, (iv)
a corporation owned, directly or indirectly, by the stockholders of
the Company in substantially the same proportions and with
substantially the same voting rights as their ownership and voting
rights with respect to the Company, or (v) Charles H. Kaman or any
entity created or controlled by him, provided that he possesses and
exercises, in person or by proxy solicited by the Board, the right
to vote all securities of the Company generally entitled to vote in
the election of directors of the Company, of which he or any such
entity is the Beneficial Owner.
(s) "Severance Payments" shall have the meaning set forth in
Section 5.1 of this Agreement.
(t) "Subsidiary" shall mean any corporation of which the
Company owns, directly or indirectly, a majority of securities
entitled to vote in the election of directors.
(u) "Tax Counsel" shall have the meaning set forth in
Section 5.2 of this Agreement.
(v) "Term" shall mean the period of time described in
Section 2 of this Agreement.
(w) "Total Payments" shall mean those payments so described
in Section 5.2 of this Agreement.
IN WITNESS WHEREOF, the parties have executed this agreement
as of the date and year first above written.
Kaman Corporation
/s/ Robert M. Garneau
/s/Paul R. Kuhn Name: Robert M. Garneau
Title: Executive Vice
President and CFO
Address:
3 Bedford Court
Farmington, CT 06032
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EXHIBIT 10d
February 24, 2000
By Hand Delivery
Admiral Huntington Hardisty
45 Bloomfield Ave.
Hartford, CT 06105
Dear Hunt:
This letter is to summarize our agreement regarding your
decision to discontinue management responsibilities at Kaman
Aerospace International. We are all very grateful that you are
regaining your health and look forward to the continuing
relationship between us, as described below.
1. Separation Payment. We have agreed that you will end your
employment with Kaman Aerospace International Corporation on
March 1, 2000 and your signature to this letter will constitute
your resignation of your officer and director positions at that
subsidiary. On that date, Kaman will make a lump sum payment to
you in the amount of Three Hundred Seventy Thousand Dollars
($370,000). This payment will be subject to tax and any applicable
employee benefit withholdings.
2. Restricted Stock Awards. As of March 1, 2000, you will have a
total of Ten Thousand Six Hundred (10,600) Class A shares remaining
subject to restriction pursuant to all of your restricted stock
awards. As of that date, we will cause the restrictions to lapse
and will deliver the share certificates to you. These shares will
be valued at March 1, based on the closing price of the stock on
that date, and the total value will be added to your taxable income
for 2000.
3. Consultant's Agreement. Effective March 2, 2000, Kaman
Aerospace Corporation will retain you as a consultant for a term of
two (2) years at a per diem rate of One Thousand Dollars ($1,000)
for each day that services are provided under the agreement. You
will be guaranteed payment for a minimum of one hundred (100) days
per year during the term of the agreement. This arrangement will
be memorialized in a mutually satisfactory agreement that Kaman
Aerospace will prepare.
4. Board of Directors, Kaman Corporation. We appreciate that you
have agreed to continue serving as a member of the Board of
Directors of the Corporation, subject of course to necessary
shareholder approvals.
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5. Employee Benefit Matters. We will be in contact with you
regarding any other matters that are customarily associated with
separation from employment, including confirmation of your account
balance under the Corporation's Deferred Compensation Plan (in your
case, the supplemental deferred compensation contributions that
have been made by the Corporation) and information regarding the
form of distribution that you have already chosen.
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
payments described in paragraphs 1 and 2, this letter and your
signature to the attached General Release and Agreement will also
constitute your general release of Kaman from any matters other
than those described here.
Hunt, it has been a privilege to work with you and we will
appreciate your continuing advice and counsel as we move forward.
Sincerely,
/s/Paul R. Kuhn
Accepted and Agreed this 24th
day of February, 20000.
/s/ Huntington Hardisty
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GENERAL RELEASE AND AGREEMENT
"Company": Kaman Aerospace International Corporation
Consideration : Separation Payments as per attached
letter dated February 24, 2000
Date of Termination: March 1, 2000
In consideration of the above I hereby release the Company, its
affiliated companies, and its and their officers and employees,
from any and all matters or claims relating to or which could arise
from my employment or my separation from employment, whether in
contract, express or implied, or in tort, including but not limited
to, any claims of tortious or wrongful discharge from employment,
and also including but not limited to, specifically any claims
under Title VII of the Civil Rights Acts as amended, 42 U.S.C.
Section 1981-86 and Section 2000e et seq., the Rehabilitation Act
of 1973, as amended, 29 U.S.C. 701 et seq., the Americans With
Disabilities Act, the Age Discrimination in Employment Act of 1967,
29 U.S.C. 621 et seq. This release of all claims specifically
includes any and all claims for attorney's fees.
The Company has advised and hereby advises me to consult with an
attorney prior to executing this agreement. I have been given a
period of twenty-one (21) days to consider this agreement, and I
have the right to accept the agreement at any time within that
twenty-one (21) day period. I have the right to revoke this
agreement for a period of seven (7) days following my execution of
this agreement, and this agreement shall not become effective or
enforceable until the execution of that seven day period. The
Company shall not be obligated to pay me the consideration set
forth above until after the expiration of the seven (7) day
revocation period.
This release is not a release of any retirement or other benefits
for which I may be otherwise eligible under the written Kaman
Corporation Thrift and Retirement Plan or the Kaman Corporation
Employees Pension Plans, and this release does not waive any rights
or claims which may arise in the future.
I represent and warrant that I have suffered no work-related injury
during my employment with the Company and have no intention of
filing a claim for worker's compensation benefits arising from any
incident occurring during my employment with the Company.
I agree to keep in confidence and not use or disclose to any other
person or entity any company confidential information, including
but not limited to customer lists, pricing information, and company
know-how and methods of doing business
Page 3
<PAGE>
I acknowledge that I am entering into this release freely and
voluntarily. I further acknowledge that I have not been coerced in
any way. I agree that the consideration offered above is something
to which I would not otherwise be entitled.
/s/ Huntington Hardisty
Subscribed and sworn to this
24th day of February, 2000
before me.
/s/ Kristine L. Bickford
Commissioner/ Notary Public
My Commission Expires: 12/31/2001
Page 4
<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>
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
On August 2, 1999, Paul R. Kuhn joined Kaman Corporation as
President, Chief Executive Officer, and a member of the Board of
Directors. Prior to that, Mr. Kuhn was senior vice president of the
aerospace engine business for Coltec Industries, Inc. which has
merged with BF Goodrich. Mr. Charles H. Kaman, founder of Kaman
Corporation, will continue in his role as Chairman of the Board.
Consolidated revenues were $984.2 million for 1999 compared to
$1 billion in 1998. Results for 1999 reflect the Aerospace
segment's ongoing performance of SH-2G contracts with the
governments of Australia and New Zealand, offset by lower revenues
in the aerospace structures and components business and in the
K-MAX(R) helicopter program. Results for 1998 reflected increased
revenue in the Aerospace segment primarily due to the
aforementioned SH-2G contracts.
Aerospace segment net sales decreased 2.9% in 1999 compared to
increases of almost 33% in 1998 and 28% in 1997. The Aerospace
segment's principal programs include the SH-2G multi-mission naval
helicopter, the K-MAX repetitive lift helicopter, subcontract work
involving aerospace structures, and the manufacture of components
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
under commercial contracts with the governments of Australia and
New Zealand. The program 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. The total contract has an anticipated
value of about $675 million (US). The helicopter production portion
of the work is valued at $557 million, and 53% of that amount has
now been recorded as revenue. The program for New Zealand involves
five (5) aircraft, and support, for New Zealand defense forces. The
contract has an anticipated value of $175.4 million (US), of which
55% has now been recorded as revenue. Work is proceeding on both
programs; deliveries to New Zealand are scheduled to begin in late
2000 while deliveries to Australia are scheduled to begin in early
2001. The segment is actively monitoring the work of its major
subcontractors and in certain cases (specifically, Litton Guidance
and Control Systems which is responsible for a variety of
integration software) has established a resident manager at the
subcontractor site.
KAMAN CORPORATION AND SUBSIDIARIES Page 1
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The corporation continues to provide on-site support in the
Republic of Egypt for ten (10) SH-2G helicopters that were
delivered in 1998 under that country's foreign military sale
agreement with the U.S. Navy.
The corporation continues efforts to build and further enhance
familiarization with the SH-2's capabilities among various foreign
governments. This market is highly competitive and is also
influenced by economic and political conditions. The corporation
continues to pursue this business, including possible further
orders from current customers.
The SH-2 is an aircraft that was originally manufactured for
the U.S. Navy. This is no longer done; however, the U.S. Naval
Reserve maintains twelve (12) SH-2G aircraft active in its fleet.
While these aircraft remain in service, the corporation will
continue providing logistics and spare parts support for the
aircraft. The corporation has made an agreement with the
appropriate federal agencies to take a consignment of the U.S.
Navy's inventory of SH-2 spare parts; the initial agreement has
been extended beyond the scheduled September 1999 expiration date
in the expectation that the parties will eventually reach
agreement on a longer term arrangement. The overall objective is
for the corporation to provide further support of U.S. Naval
Reserve requirements while having the ability to utilize certain
inventory for support of the corporation's other SH-2 programs.
The corporation's K-MAX medium to heavy lift "aerial truck"
helicopter program continues to experience market difficulties, due
in significant part to conditions in the U.S. and Canadian
commercial logging industries, the aircraft's "launch" application
and principal market to date. During the past two years,
substantial weakness in the logging industry has adversely affected
certain current customers as well as potential customers and
curtailed sales of the aircraft. The corporation's commercial sales
efforts have been refocused on further development of markets for
the aircraft's other applications, which include oil and gas
exploration, power line and other utility construction, fire
fighting, and movement of equipment. These efforts are ongoing;
however, successful sales development in these markets as well as
profitability for the entire program will take some time to
achieve.
The Aerospace segment also performs subcontract work for
certain aerospace manufacturing programs and manufactures various
components, including self-lubricating bearings for use principally
in aircraft. During 1999, the segment experienced some softness in
these businesses due to a slowdown of growth trends in the
commercial aviation industry and the efforts of major
manufacturers, particularly Boeing (which is a long-standing and
important customer of the segment) to increase efficiency within
their own operations by implementing new inventory and procurement
practices.
KAMAN CORPORATION AND SUBSIDIARIES Page 2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
In this environment, the Aerospace segment is working to
enhance operating efficiency and reduce costs by implementing "lean
thinking" strategies throughout the organization.
Industrial Distribution net sales decreased 1.9% for 1999,
compared to increases of 5% in 1998 and 7% in 1997. During 1999,
the Industrial Distribution business, which serves nearly every
sector of U.S. industry, continued to experience pressure on
operating margins due to the depressed market for a number of key
industries, principally mining, primary metals, paper and
chemicals, where low capacity utilization adversely affected demand
for products distributed by the segment. Additionally, while the
industrial distribution business has traditionally been very
competitive, increasing consolidation in the industry has resulted
in even more intense competition. To address these conditions and
bolster its competitive position, the segment undertook several
initiatives in December of 1999, including a reorganization of its
sales, marketing and field management structure, a consolidation of
certain branch locations and closure of others and an extensive
program to remove obsolete or excess inventory to the ongoing
organization. Management believes that these steps will provide a
better opportunity to become more efficient, more responsive to
customers, and better focused on the products that its customers
are seeking as they look for ways to improve their own businesses.
Music Distribution net sales were down by 1.2% for 1999, 10%
for 1998 and 13% for 1997. During 1999, the domestic market
remained stable; however, the segment continued to be affected by
weakness in international markets.
With regard to 1997 results, the corporation sold its
Scientific Services segment (consisting of Kaman Sciences
Corporation) 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. The segment's net sales for 1997 increased 16% to
approximately $145 million. In addition, during 1997, the Music
Distribution segment sold its amplifier manufacturing operation
located in Great Britain; a pre-tax loss of $10.4 million was taken
on the transaction which was not included in the operating profit
figure for the Distribution segment for 1997. During that year, a
charge was taken to cover costs associated with receivable and
inventory carrying values and steps taken to make the music
operation more efficient.
KAMAN CORPORATION AND SUBSIDIARIES Page 3
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For 1999, all the segments' total operating profit was down
21.8% compared to 1998, due primarily to the pre-tax charge
described below associated with the Industrial Distribution
segment. Operating profit for the Aerospace segment increased 1.7%
for 1999, primarily due to its SH-2G helicopter programs and the
aircraft structures and components business. This performance was
offset by losses in the K-MAX program which continued to require
investment for technical work and market development and by
continuing difficulties in the segment's electromagnetics business
in developing new markets for niche market products (this operation
was merged with Kaman Aerospace Corporation during 1999). Also
included in operating profit for 1999 was a second quarter reversal
of a reserve in the amount of $2.5 million that had been
established in 1994 associated with Raymond Engineering, now part
of Kaman Aerospace. Operating profit for the Industrial
Distribution segment was down 84.3% for 1999, primarily due to a
pre-tax charge of $12.4 million taken in December; approximately
$4.1 million of the charge represented costs associated with the
reorganization of operations and the closure of branches and other
facilities while approximately $8.3 million represented a write-off
of inventory that was determined to be excess or obsolete to the
ongoing business. Approximately $1.3 million of the reorganization
charge relates to severance costs for approximately 65 branch
operations and regional management employees that the segment plans
to separate from service in 2000; the balance relates to costs to
close ten branches and three other facilities in 2000. Operating
profit for the Industrial Distribution segment was also adversely
affected by weakness in certain customer industries which lowered
demand for the segment's offerings. Operating profit for the Music
Distribution segment was up 5.9% for 1999 primarily due to the
domestic market, which is the larger market for this business.
Net earnings for 1999 were $25.1 million compared to $30.0
million in 1998. Net earnings per common share for 1999 were $1.05
on a diluted basis compared to $1.23 for 1998. Net earnings for
1999 were negatively impacted by 32 cents per share due to the
charge in the Industrial Distribution segment, and positively
impacted by 6 cents per share, due to the reserve reversal in the
Aerospace segment, both of which are described in the previous
paragraph. Excluding these adjustments, net earnings per common
share increased to $1.31 on a diluted basis compared to $1.23 in
1998.
The segments' total operating profit for 1998 increased by
almost 6% compared to 1997 (including the Scientific Services
segment in 1997). Operating profit 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
KAMAN CORPORATION AND SUBSIDIARIES Page 4
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
developing new markets for niche market products and transitioning
from defense to commercial business. Operating profit 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 segment's customers. Operating profit for
the Music Distribution segment was 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
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.
For the year ended December 31, 1999, interest income earned
from investment of surplus cash more than offset interest expense.
For 1998, interest expense decreased almost 68% compared to 1997,
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.
The consolidated effective income tax rate was 38.1% for 1999,
40.4% for 1998, and 41.4% for 1997.
The corporation did not experience any adverse impact upon its
business operations with the arrival of the year 2000. However, the
program managers from each of the operating subsidiaries as well as
the oversight committee at corporate headquarters (both groups
being part of the compliance program described in the corporation's
reports during 1999) will continue to monitor this item for several
months.
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.
KAMAN CORPORATION AND SUBSIDIARIES Page 5
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For calendar year 1999, operating activities provided cash in
the amount of $42.5 million. In the Aerospace segment this is
primarily a result of earnings from operations together with the
receipt of additional payments on accounts receivable, offset to
some extent by growth in K-MAX inventories, payments on
accounts payable, and ongoing reductions in the advances on the
SH-2G contracts. In the Industrial Distribution segment, this
result largely reflects reductions in inventories. For 1999, cash
used in investing activities was primarily for the acquisition of
machinery and computer equipment used in manufacturing and
distribution. In addition, cash used by financing activities was
primarily attributable to 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 and general corporate purposes.
The corporation had approximately $73.3 million in surplus
cash at December 31, 1999 with an average balance of $77.8 million
for the year. These funds have been invested in high quality,
short-term instruments.
For calendar year 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 and general
corporate purposes.
At December 31, 1999, the corporation had $28.2 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.
KAMAN CORPORATION AND SUBSIDIARIES Page 6
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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. 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, 1999, the corporation had no outstanding
borrowings under this agreement. In due course, the corporation
will plan to replace the expiring agreement with another
arrangement that meets its financing requirements.
Letters of credit are generally considered borrowings for
purposes of the revolving credit agreement. The governments of
Australia and New Zealand made advance payments of $104.3 million
in connection with their SH-2G contracts in 1997 and those payments
were fully secured by the corporation through the issuance of
irrevocable letters of credit. At present, the face amount of these
letters of credit has been reduced to $47.2 million in accordance
with the terms of the relevant contracts. Further reductions are
anticipated as certain contract milestones are achieved.
For 1999, average bank borrowings were $3.3 million, compared
to $3.3 million for 1998, and $84.8 million for 1997. Substantially
all of the advance payments from the SH-2G contracts 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.
KAMAN CORPORATION AND SUBSIDIARIES Page 7
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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; 5) the timing, degree and scope of market
acceptance for products such as a repetitive lift helicopter; 6)
U.S. industrial production levels; 7) achievement and continuation
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 8
<PAGE>
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA
KAMAN CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
(In thousands except per share amounts)
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES:
1999 $249,433 $246,300 $242,016 $244,711 $ 982,460
1998 238,780 247,106 249,184 269,471 1,004,541
GROSS PROFIT:
1999 $ 64,719 $ 63,651 $ 62,933 $ 55,175 $ 246,478
1998 63,073 65,179 64,310 70,260 262,822
NET EARNINGS:
1999 $ 7,273 $ 8,031 $ 8,197 $ 1,572 $ 25,073
1998 6,976 7,617 7,600 7,815 30,008
PER COMMON SHARE - BASIC:
1999 $ .31 $ .34 $ .35 $ .07 $ 1.07
1998 .31 .32 .32 .33 1.28
PER COMMON SHARE - DILUTED:
1999 $ .30 $ .33 $ .34 $ .07 $ 1.05
1998 .29 .31 .31 .32 1.23
- -----------------------------------------------------------------------------
</TABLE>
The quarterly per common share-diluted amounts for 1999 do not
equal the "Total Year" figure due to the calculation being
anti-dilutive in the fourth quarter.
KAMAN CORPORATION AND SUBSIDIARIES Page 9
<PAGE>
<PAGE>
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
December 31 1999 1998
- -----------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 76,249 $ 65,130
Accounts receivable 156,173 213,128
Inventories 199,731 207,897
Deferred income taxes 21,100 20,900
Other current assets 6,858 9,449
- -----------------------------------------------------------------------------
Total current assets 460,111 516,504
- -----------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, NET 64,332 65,773
OTHER ASSETS 9,760 4,953
- -----------------------------------------------------------------------------
$ 534,203 $ 587,230
=============================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 2,854 $ 3,141
Current portion of long-term debt 1,660 1,660
Accounts payable - trade 48,760 51,571
Accrued salaries and wages 9,778 9,696
Accrued vacations 6,069 6,464
Advances on contracts 50,243 101,376
Other accruals and payables 45,073 49,138
Income taxes payable 3,937 5,929
- -----------------------------------------------------------------------------
Total current liabilities 168,374 228,975
- -----------------------------------------------------------------------------
DEFERRED CREDITS 22,906 20,555
LONG-TERM DEBT, EXCLUDING CURRENT PORTION 26,546 28,206
KAMAN CORPORATION AND SUBSIDIARIES Page 10
<PAGE>
<PAGE>
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
December 31 1999 1998
- -----------------------------------------------------------------------------
<S> <C> <C>
SHAREHOLDERS' EQUITY:
Capital stock, $1 par value per share:
Preferred stock, authorized 700,000 shares:
Series 2 preferred stock, 61/2% cumulative
convertible, authorized
500,000 shares, none outstanding -- --
Common stock:
Class A, authorized 48,500,000 shares,
nonvoting; $.10 per common share
dividend preference; issued
23,066,260 shares in 1999 and 1998 23,066 23,066
Class B, authorized 1,500,000 shares,
voting; issued 667,814 shares
in 1999 and 1998 668 668
Additional paid-in capital 78,422 78,899
Retained earnings 224,702 209,920
Unamortized restricted stock awards (1,944) (1,500)
Accumulated other comprehensive income (loss) (625) (774)
- -----------------------------------------------------------------------------
324,289 310,279
Less 608,858 shares and 51,171 shares of
Class A common stock in 1999 and 1998,
respectively, held in treasury, at cost (7,912) (785)
- -----------------------------------------------------------------------------
Total shareholders' equity 316,377 309,494
- -----------------------------------------------------------------------------
$ 534,203 $ 587,230
=============================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
KAMAN CORPORATION AND SUBSIDIARIES Page 11
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Year ended December 31 1999 1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Net sales $982,460 $1,004,541 $1,043,365
Other 1,773 1,465 1,450
- ---------------------------------------------------------------------------
984,233 1,006,006 1,044,815
- ---------------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of sales* 735,982 741,719 787,971
Selling, general & administrative expense 204,172 212,724 208,763
Restructuring costs 4,132 -- --
Net gain on sale of businesses -- -- (80,351)
Interest expense (income), net (1,614) (353) 7,894
Other expense 1,088 1,558 234
- ---------------------------------------------------------------------------
943,760 955,648 924,511
- ---------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 40,473 50,358 120,304
INCOME TAXES 15,400 20,350 49,800
- ---------------------------------------------------------------------------
NET EARNINGS $ 25,073 $ 30,008 $ 70,504
===========================================================================
PREFERRED STOCK DIVIDEND REQUIREMENT $ -- $ -- $ (3,716)
===========================================================================
EARNINGS APPLICABLE TO COMMON STOCK $ 25,073 $ 30,008 $ 66,788
===========================================================================
PER SHARE:
Net earnings per common share:
Basic $ 1.07 $ 1.28 $ 3.53
Diluted 1.05 1.23 2.86
Dividends declared:
Series 2 preferred stock -- -- 13.00
Common stock .44 .44 .44
===========================================================================
</TABLE>
*Cost of sales for 1999 includes the write-off of inventory of $8,250
associated with the charge taken in the Industrial Distribution segment.
See accompanying notes to consolidated financial statements.
KAMAN CORPORATION AND SUBSIDIARIES Page 12
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
Year ended December 31 1999 1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
SERIES 2 PREFERRED STOCK:
Balance - beginning of year $ -- $ 37,691 $ 57,167
Shares converted -- (37,691) (19,451)
Shares redeemed -- -- (25)
- -----------------------------------------------------------------------------
Balance - end of year -- -- 37,691
- -----------------------------------------------------------------------------
CLASS A COMMON STOCK:
Balance - beginning of year 23,066 19,936 18,075
Shares issued upon conversion -- 3,000 1,548
Shares issued - other -- 130 313
- -----------------------------------------------------------------------------
Balance - end of year 23,066 23,066 19,936
- -----------------------------------------------------------------------------
CLASS B COMMON STOCK 668 668 668
- -----------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL:
Balance - beginning of year 78,899 42,876 21,696
Conversion of Series 2 preferred stock -- 34,691 17,903
Employee stock plans (463) 318 2,506
Restricted stock awards (14) 1,014 771
- -----------------------------------------------------------------------------
Balance - end of year 78,422 78,899 42,876
- -----------------------------------------------------------------------------
RETAINED EARNINGS:
Balance - beginning of year 209,920 190,336 132,058
Net earnings 25,073 30,008 70,504
Dividends declared:
Preferred stock -- -- (3,716)
Common stock (10,291) (10,424) (8,510)
- -----------------------------------------------------------------------------
Balance - end of year 224,702 209,920 190,336
- -----------------------------------------------------------------------------
UNAMORTIZED RESTRICTED STOCK AWARDS:
Balance - beginning of year (1,500) (1,147) (818)
Stock awards issued (1,288) (949) (804)
Amortization of stock awards 844 596 475
- -----------------------------------------------------------------------------
Balance - end of year (1,944) (1,500) (1,147)
- -----------------------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
Balance - beginning of year (774) (320) (612)
Foreign currency translation adjustment* 149 (220) (157)
Reclassification adjustment -- (234) 449
- -----------------------------------------------------------------------------
Balance - end of year (625) (774) (320)
- -----------------------------------------------------------------------------
KAMAN CORPORATION AND SUBSIDIARIES Page 13
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
Year ended December 31 1999 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
TREASURY STOCK:
Balance - beginning of year (785) (30) (104)
Shares acquired in 1999
- 802,721; 1998 - 131,462; 1997 - 259 (10,596) (2,212) (5)
Shares reissued under various stock plans 3,469 1,457 79
- -----------------------------------------------------------------------------
Balance - end of year (7,912) (785) (30)
- -----------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY $ 316,377 $ 309,494 $ 290,010
=============================================================================
</TABLE>
*Comprehensive income is $25,222, $29,788 and $70,347 for 1999,
1998, and 1997, respectively.
See accompanying notes to consolidated financial statements.
KAMAN CORPORATION AND SUBSIDIARIES Page 14
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
Year ended December 31 1999 1998 1997
- --------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 25,073 $ 30,008 $ 70,504
Adjustments to reconcile net earnings to cash
provided by(used in)operating activities:
Depreciation and amortization 11,998 11,068 12,223
Net gain on sale of businesses -- -- (80,351)
Restructuring costs 4,132 -- --
Deferred income taxes (800) 200 3,718
Other, net 3,690 2,805 673
Changes in current assets and liabilities,
net of effects of businesses sold:
Accounts receivable 52,077 (21,974) (30,321)
Inventories* 8,166 (8,412) 6,241
Other current assets 2,591 768 (7,218)
Accounts payable - trade (2,811) 6,307 (13,720)
Advances on contracts (51,133) (3,347) 104,723
Accrued expenses and payables (8,449) (3,054) (8,555)
Income taxes payable (1,992) (30,799) 37,591
- --------------------------------------------------------------------------
Cash provided by (used in)
operating activities 42,542 (16,430) 95,508
- --------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of businesses
and other assets 538 5,642 139,580
Expenditures for property, plant & equipment (10,964) (19,184) (13,690)
Other, net 194 (478) 559
- --------------------------------------------------------------------------
Cash provided by (used in)
investing activities (10,232) (14,020) 126,449
- --------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in notes payable (287) (2,406) (55,290)
Changes in current portion of long-term debt -- -- (250)
Reduction of long-term debt (1,660) (1,661) (52,564)
Proceeds from exercise of employee stock plans 1,704 1,970 2,907
Purchases of treasury stock (10,596) (2,212) (5)
Dividends paid - Series 2 preferred stock -- -- (3,716)
Dividends paid - common stock (10,352) (10,085) (8,510)
- --------------------------------------------------------------------------
Cash provided by (used in)
financing activities (21,191) (14,394)(117,428)
- --------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 11,119 (44,844) 104,529
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 65,130 109,974 5,445
- --------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 76,249 $ 65,130 $109,974
==========================================================================
</TABLE>
KAMAN CORPORATION AND SUBSIDIARIES Page 15
<PAGE>
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.
*The change in inventories for 1999 includes the write-off of
inventory of $8,250 associated with the charge taken in the
Industrial Distribution segment.
See accompanying notes to consolidated financial statements.
KAMAN CORPORATION AND SUBSIDIARIES Page 16
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(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 17
<PAGE>
<PAGE>
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 $4,877 in 1999, $8,534 in 1998 and
$6,889 in 1997.
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.
RESTRUCTURING COSTS
The corporation's Industrial Distribution segment has undertaken
initiatives to streamline its operational structure and increase
efficiency. As a result, the segment took a pre-tax charge of
$12,382 ($7,670 after taxes or $.32 per share diluted) in the
fourth quarter of 1999. The costs associated with the
reorganization of operations, consolidation of branches and the
closure of other facilities totaled $4,132. The write-off of
inventory that was considered obsolete or excess to the ongoing
organization totaled $8,250 and is included in cost of sales.
Of the total restructuring charge, approximately $1,300
relates to severance costs for approximately 65 branch operations
and regional management employees that the segment expects to
separate from service in 2000. The remaining balance of the
restructuring charge relates to costs to close down 10 branches and
three other facilities in 2000. As of December 31, 1999, no
significant restructuring costs were paid.
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 18
<PAGE>
ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
December 31 1999 1998
- ------------------------------------------------------------------
<S> <C> <C>
Trade receivables, net of allowance
for doubtful accounts of $4,519
in 1999, $4,047 in 1998 $ 75,377 $ 79,215
U.S. Government contracts:
Billed 9,938 20,011
Recoverable costs and accrued
profit - not billed 24,611 30,181
Commercial and other government contracts:
Billed 20,419 48,914
Recoverable costs and accrued
profit - not billed 25,828 34,807
- -------------------------------------------------------------------
Total $156,173 $213,128
===================================================================
</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 $6,650 of such costs and accrued
profits at December 31, 1999 will be collected after one year.
INVENTORIES
Inventories are comprised as follows:
<TABLE>
<CAPTION>
December 31 1999 1998
- -------------------------------------------------------------------
<S> <C> <C>
Merchandise for resale $ 89,184 $108,833
Contracts in process:
U.S. Government 4,951 4,035
Commercial 7,844 12,168
Other work in process (including certain
general stock materials) 39,192 45,001
Finished goods 58,560 37,860
- -------------------------------------------------------------------
Total $199,731 $207,897
===================================================================
</TABLE>
Included above in other work in process and finished goods at
December 31, 1999 and 1998 is K-MAX inventory of $87,384 and
$73,249, respectively.
KAMAN CORPORATION AND SUBSIDIARIES Page 19
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
The aggregate amounts of general and administrative costs
allocated to contracts in process during 1999, 1998 and 1997 were
$49,752, $55,178 and $57,474, respectively.
The estimated amounts of general and administrative costs
remaining in contracts in process at December 31, 1999 and 1998
amount to $1,138 and $2,003, 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>
<CAPTION>
December 31 1999 1998
- ------------------------------------------------------------------
<S> <C> <C>
Land $ 6,212 $ 6,310
Buildings 34,640 34,612
Leasehold improvements 13,605 12,725
Machinery, office furniture
and equipment 112,297 114,140
- ------------------------------------------------------------------
Total 166,754 167,787
Less accumulated depreciation
and amortization 102,422 102,014
- ------------------------------------------------------------------
Property, plant and equipment, net $ 64,332 $ 65,773
==================================================================
</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 January 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. In due course, the corporation will plan to replace the
expiring agreement with another arrangement that meets its
financing requirements.
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.
KAMAN CORPORATION AND SUBSIDIARIES Page 20
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
Short-term borrowings outstanding are as follows:
<TABLE>
<CAPTION>
December 31 1999 1998
- ------------------------------------------------------
<S> <C> <C>
Revolving credit agreement $ -- $ --
Other credit arrangements 2,854 3,141
- ------------------------------------------------------
Total $2,854 $3,141
======================================================
</TABLE>
Long-Term Debt - The corporation has long-term debt as follows:
<TABLE>
<CAPTION>
December 31 1999 1998
- -----------------------------------------------------------------
<S> <C> <C>
Revolving credit agreement $ -- $ --
Convertible subordinated debentures 28,206 29,866
- -----------------------------------------------------------------
Total 28,206 29,866
Less current portion 1,660 1,660
- -----------------------------------------------------------------
Total excluding current portion $26,546 $28,206
=================================================================
</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 $47,208 and $53,944 at December 31, 1999 and 1998,
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
KAMAN CORPORATION AND SUBSIDIARIES Page 21
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
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 $27,360 at December 31, 1999 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 $2,426, $2,565
and $8,695 for 1999, 1998 and 1997, 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. Virtually all of the customer advances
continue to be 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.
INCOME TAXES
The components of income taxes are as follows:
<TABLE>
1999 1998 1997
- -----------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 13,824 $ 15,650 $ 36,532
State 2,376 4,500 9,550
- -----------------------------------------------------------
16,200 20,150 46,082
- -----------------------------------------------------------
Deferred:
Federal (650) 150 2,968
State (150) 50 750
- -----------------------------------------------------------
(800) 200 3,718
- -----------------------------------------------------------
Total $ 15,400 $ 20,350 $ 49,800
===========================================================
</TABLE>
KAMAN CORPORATION AND SUBSIDIARIES Page 22
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
The components of the deferred tax assets and deferred tax
liabilities are presented below:
<TABLE>
<CAPTION>
December 31 1999 1998
- ----------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Long-term contracts $ 1,474 $ 1,756
Deferred employee benefits 14,309 15,961
Inventory 4,619 1,529
Accrued liabilities and other items 7,698 7,879
- ----------------------------------------------------------------
Total deferred tax assets 28,100 27,125
- ----------------------------------------------------------------
Deferred tax liabilities:
Depreciation and amortization (7,834) (7,730)
Other items (3,766) (3,695)
- ----------------------------------------------------------------
Total deferred tax liabilities (11,600) (11,425)
- ----------------------------------------------------------------
Net deferred tax asset $ 16,500 $ 15,700
================================================================
</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
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. In 1999, the consolidated effective tax rate was lower due
to the reversal of prior years' tax accruals of $1,250. Cash
payments for income taxes were $18,204, $51,590 and $8,623 in 1999,
1998 and 1997, respectively.
PENSION PLAN
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
KAMAN CORPORATION AND SUBSIDIARIES Page 23
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
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 $9,818 of Class A common stock of Kaman Corporation at
December 31, 1999).
The pension plan costs were computed using the projected unit
credit actuarial cost method and include the following components:
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Service cost for benefits earned
during the year $ 9,837 $ 8,794 $ 10,424
Interest cost on projected
benefit obligation 20,348 19,648 20,010
Expected return on plan assets (25,998) (22,757) (22,277)
Net amortization and deferral (1,909) (1,909) (1,909)
- ----------------------------------------------------------------------
Net pension cost $ 2,278 $ 3,776 $ 6,248
======================================================================
</TABLE>
The change in actuarial present value of the projected benefit
obligation is as follows:
<TABLE>
December 31 1999 1998
- ---------------------------------------------------------------
<S> <C> <C>
Projected benefit obligation at
beginning of year $297,516 $261,127
Service cost 9,837 8,794
Interest cost 20,348 19,648
Actuarial liability (gain) loss (13,442) 22,387
Benefit payments (15,031) (14,440)
- ---------------------------------------------------------------
Projected benefit obligation at
end of year $299,228 $297,516
===============================================================
</TABLE>
The actuarial liability (gain) loss of $(13,442) for 1999 and
$22,387 for 1998 consist principally of adjustments for changes in
the discount rate, average rate of increase in compensation levels
and mortality rate assumptions.
KAMAN CORPORATION AND SUBSIDIARIES Page 24
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
The change in fair value of plan assets is as follows:
<TABLE>
December 31 1999 1998
- -------------------------------------------------------------------
<S> <C> <C>
Fair value of plan assets at
beginning of year $362,758 $322,010
Actual return on plan assets 65,252 50,991
Disposition of business units -- (337)
Employer contribution 2,379 4,534
Benefit payments (15,031) (14,440)
- -------------------------------------------------------------------
Fair value of plan assets at end of year $415,358 $362,758
===================================================================
</TABLE>
<TABLE>
December 31 1999 1998
- --------------------------------------------------------------------
<S> <C> <C>
Excess of assets over projected
benefit obligation $116,130 $ 65,242
Unrecognized prior service cost (345) (400)
Unrecognized net gain (112,987) (60,291)
Unrecognized net transition asset (3,707) (5,561)
- --------------------------------------------------------------------
Accrued pension cost $ 909 $ 1,010
====================================================================
</TABLE>
The actuarial assumptions used in determining the funded
status of the pension plan are as follows:
<TABLE>
December 31 1999 1998
- -------------------------------------------------------
<S> <C> <C>
Discount rate 7.5% 7%
Expected return on plan assets 8 5/8% 8 5/8%
Average rate of increase in
compensation levels 4.5% 4%
=======================================================
</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
KAMAN CORPORATION AND SUBSIDIARIES Page 25
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
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 $1,691, $1,683 and $2,612
in 1999, 1998, and 1997, respectively.
COMMITMENTS AND CONTINGENCIES
Rent commitments under various leases for office space, warehouse,
land and buildings expire at varying dates from January 2000 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.
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, 1999:
<TABLE>
<S> <C>
2000 $10,578
2001 5,539
2002 3,636
2003 1,172
2004 523
Thereafter --
- --------------------------------------------
Total $21,448
============================================
</TABLE>
Lease expense for all operating leases, including leases with
terms of less than one year, amounted to $15,413, $14,683 and
$15,311 for 1999, 1998 and 1997, respectively.
KAMAN CORPORATION AND SUBSIDIARIES Page 26
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
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, 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, 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>
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------
<S> <C> <C> <C>
Earnings per common share - basic
Earnings applicable to
common stock $25,073 $30,008 $66,788
====================================================================
Weighted average shares
outstanding (000) 23,468 23,407 18,941
====================================================================
Earnings per common
share - basic $ 1.07 $ 1.28 $ 3.53
====================================================================
Earnings per common share - diluted
Earnings applicable
to common stock $25,073 $30,008 $66,788
Plus: Dividends on
Series 2 preferred stock -- -- 3,716
After-tax interest savings on
convertible debentures 1,046 1,075 1,188
- --------------------------------------------------------------------
Earnings applicable to common
stock assuming conversion $26,119 $31,083 $71,692
====================================================================
Weighted average shares
outstanding (000) 23,468 23,407 18,941
Plus shares issuable on:
Conversion of Series 2
preferred stock -- 282 4,523
Conversion of 6% convertible
debentures 1,221 1,293 1,359
Exercise of dilutive options 121 253 285
- --------------------------------------------------------------------
Weighted average shares
outstanding assuming
conversion (000) 24,810 25,235 25,108
====================================================================
Earnings per common
share - diluted $ 1.05 $ 1.23 $ 2.86
====================================================================
</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>
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 1999, 140,620
shares were issued to employees at prices ranging from $9.03 to
$13.49 per share. 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. At December 31, 1999, there were
approximately 1,244,000 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 91,000 shares at prices
ranging from $11.81 to $14.50 per share in 1999, 62,500 shares at
prices ranging from $17.00 to $19.25 per share in 1998 and 62,900
shares at prices ranging from $12.13 to $14.63 per share in 1997.
At December 31, 1999, there were 168,500 shares remaining subject
to restrictions pursuant to these awards. Stock appreciation
rights were issued for 270,000 shares at prices ranging from $14.13
to $14.50 per share in 1999, 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 $203 and $500 in expense in
1998 and 1997, respectively, for these stock appreciation rights,
and $703 of income in 1999 due to the grant price being higher than
the market price at December 31, 1999.
KAMAN CORPORATION AND SUBSIDIARIES Page 29
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(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, 1997 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
Options granted 312,800 14.38
Options exercised (26,760) 9.56
Options cancelled (39,850) 14.25
- ---------------------------------------------------------------------
Balance at December 31, 1999 1,041,010 $ 12.94
=====================================================================
Weighted average contractual life
remaining at December 31, 1999 6.7 years
=====================================================================
Range of exercise prices for options $7.50- $12.26-
outstanding at December 31, 1999 $ 12.25 $ 17.06
- ---------------------------------------------------------------------
Options outstanding 395,380 645,630
Options exercisable 336,540 102,180
Weighted average contractual remaining
life of options outstanding 4.1 years 8.3 years
Weighted average exercise price:
Options outstanding $ 9.72 $ 14.91
Options exercisable $ 9.58 $ 14.79
=====================================================================
</TABLE>
As of December 31, 1998 and 1997, there were 349,950 and 378,300
options exercisable, respectively.
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
KAMAN CORPORATION AND SUBSIDIARIES Page 30
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
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>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings:
As reported $25,073 $30,008 $70,504
Pro forma 24,497 29,534 70,075
Earnings per common share - basic:
As reported 1.07 1.28 3.53
Pro forma 1.04 1.26 3.50
Earnings per common share - diluted:
As reported 1.05 1.23 2.86
Pro forma 1.03 1.22 2.86
- ------------------------------------------------------------------
</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 1999, 1998, and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------
<S> <C> <C> <C>
Expected dividend yield 3.1% 2.6% 3.3%%
Expected volatility 34% 31% 24%
Risk-free interest rate 5.3% 5.6%% 6.4%
Expected option lives 8 years 8 years 8 years
Per share fair value of
options granted $4.75 $5.78 $3.65
==================================================================
</TABLE>
KAMAN CORPORATION AND SUBSIDIARIES Page 31
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
SEGMENT INFORMATION
The corporation reports results in three business segments --
Aerospace, Industrial Distribution and Music Distribution.
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 many locations across the United
States and British Columbia, Canada. In 1999, the segment took
a pre-tax charge of $12,382 to write-off inventory and streamline
its operational structure and increase efficiency.
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.
Summarized financial information by business segment is as
follows:
KAMAN CORPORATION AND SUBSIDIARIES Page 32
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
1999 1998 1997
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales:
Aerospace $ 371,757 $ 382,697 $ 288,407
Scientific Services -- -- 145,086
Industrial Distribution 493,779 503,532 478,879
Music Distribution 116,924 118,312 130,993
- -------------------------------------------------------------------------
$ 982,460 $1,004,541 $1,043,365
=========================================================================
Operating profit:
Aerospace $ 44,023 $ 43,304 $ 31,312
Scientific Services -- -- 13,629
Industrial Distribution 2,908 18,550 20,017
Music Distribution 5,627 5,315 (1,279)
- -------------------------------------------------------------------------
52,558 67,169 63,679
Net gain on sale of businesses -- -- 80,351
Interest, corporate and other
expense, net 12,085 (16,811) (23,726)
- -------------------------------------------------------------------------
Earnings before income taxes $ 40,473 $ 50,358 $ 120,304
=========================================================================
Identifiable assets:
Aerospace $ 251,443 $ 294,566 $ 265,746
Scientific Services -- -- --
Industrial Distribution 141,913 160,873 156,816
Music Distribution 53,714 54,577 55,207
Corporate 87,133 77,214 120,392
- -------------------------------------------------------------------------
$ 534,203 $ 587,230 $ 598,161
=========================================================================
Capital expenditures:
Aerospace $ 6,631 $ 11,369 $ 6,444
Scientific Services -- -- 1,247
Industrial Distribution 2,398 3,568 3,682
Music Distribution 1,773 1,770 1,943
Corporate 162 2,477 374
- -------------------------------------------------------------------------
$ 10,964 $ 19,184 $ 13,690
=========================================================================
Depreciation and amortization:
Aerospace $ 5,963 $ 5,586 $ 5,188
Scientific Services -- -- 2,266
Industrial Distribution 3,395 3,077 2,676
Music Distribution 1,508 1,317 1,271
Corporate 1,132 1,088 822
- -------------------------------------------------------------------------
$ 11,998 $ 11,068 $ 12,223
=========================================================================
</TABLE>
KAMAN CORPORATION AND SUBSIDIARIES Page 33
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Geographic information - sales:
United States $ 724,079 $ 780,961 $ 926,495
Australia/New Zealand 200,796 158,068 41,809
Canada 28,724 35,438 32,873
Europe 11,590 11,980 21,121
Japan 10,172 9,527 10,944
Other 7,099 8,567 10,123
- ----------------------------------------------------------------------------
$ 982,460 $1,004,541 $1,043,365
============================================================================
</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 $72,285 in 1999, $92,539 in
1998 and $262,405 in 1997.
Sales made by the Aerospace segment under a contract with one
customer were $145,006 and $119,222 in 1999 and 1998, respectively.
KAMAN CORPORATION AND SUBSIDIARIES Page 34
<PAGE>
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, 1999 and
1998, 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, 1999.
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, 1999
and 1998 and the results of their operations and their cash flows
for each of the years in the three year period ended December 31,
1999 in conformity with generally accepted accounting principles.
KPMG LLP
January 24, 2000
KAMAN CORPORATION AND SUBSIDIARIES Page 35
<PAGE>
<PAGE>
FIVE-YEAR SELECTED FINANCIAL DATA
KAMAN CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
(In thousands except per share amounts, shareholders and employees)
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Revenues $984,233 $1,006,006 $1,044,815 $953,654 $899,476
Cost of sales 735,982* 741,719 787,971 708,505 666,761
Selling, general and
administrative expense 204,172 212,724 208,763 193,747 190,604
Restructuring, impairment
and other costs 4,132 -- -- -- --
Operating income (loss) 39,947 51,563 48,081 51,402 42,111
Net gain on sale of businesses -- -- 80,351 -- --
Interest expense(income),net (1,614) (353) 7,894 10,023 8,834
Other expense(income),net 1,088 1,558 234 702 546
Earnings(loss)before
income taxes 40,473 50,358 120,304 40,677 32,731
Income taxes (benefit) 15,400 20,350 49,800 17,100 13,129
Net earnings (loss) 25,073 30,008 70,504 23,577 19,602
FINANCIAL POSITION:
Current assets $460,111 $516,504 $535,304 $434,131 $404,864
Current liabilities 168,374 228,975 259,525 195,638 206,273
Working capital 291,737 287,529 275,779 238,493 198,591
Property, plant and
equipment, net 64,332 65,773 57,625 76,393 83,054
Total assets 534,203 587,230 598,161 521,736 500,069
Long-term debt 26,546 28,206 29,867 83,940 66,386
Shareholders' equity 316,377 309,494 290,010 228,130 214,283
PER SHARE AMOUNTS:
Net earnings(loss)per
common share - basic $ 1.07 $ 1.28 $ 3.53 $ 1.07 $ .87
Net earnings(loss)per
common share-diluted 1.05 1.23 2.86 1.00 .85
Dividends declared -
Series 2 preferred stock -- -- 13.00 13.00 13.00
Dividends declared -
common stock .44 .44 .44 .44 .44
Shareholders' equity -
common stock 13.68 13.07 12.25 9.13 8.52
Market price range 16 1/8 20 3/8 20 3/8 13 3/8 13 3/8
10 1/16 13 12 9 3/8 10
GENERAL STATISTICS:
Shareholders 6,522 6,921 7,291 7,632 7,646
Employees 4,016 4,276 4,318 5,476 5,400
============================================================================
</TABLE>
*Cost of sales for 1999 includes the write-off of inventory of $8,250
associated with the charge taken in the Industrial Distribution segment.
KAMAN CORPORATION AND SUBSIDIARIES Page 36
<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 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>
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 24, 2000, relating to the
consolidated balance sheets of Kaman Corporation and subsidiaries
as of December 31, 1999 and 1998 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, 1999, and the related schedule, which reports appear
or are incorporated by reference in the December 31, 1999 annual
report on Form 10-K of Kaman Corporation.
/s/ KPMG LLP
Hartford, Connecticut
March 17, 2000
<PAGE>
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned does
hereby appoint and constitute Paul R. Kuhn 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,
1999 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 17th day of March, 2000.
Brian E. Barents Charles H. Kaman
E. Reeves Callaway, III C. William Kaman, II
Frank C. Carlucci Eileen S. Kraus
Laney J. Chouest Paul R. Kuhn
John A. DiBiaggio Hartzel Z. Lebed
Huntington Hardisty Walter H. Monteith, Jr.
Wanda L. Rogers
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE COMPANY'S 1999 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 76,249
<SECURITIES> 0
<RECEIVABLES> 160,692
<ALLOWANCES> (4,519)
<INVENTORY> 199,731
<CURRENT-ASSETS> 460,111
<PP&E> 166,754
<DEPRECIATION> (102,422)
<TOTAL-ASSETS> 534,203
<CURRENT-LIABILITIES> 168,374
<BONDS> 26,546
0
0
<COMMON> 23,734
<OTHER-SE> 292,643
<TOTAL-LIABILITY-AND-EQUITY> 534,203
<SALES> 982,460
<TOTAL-REVENUES> 984,233
<CGS> 735,982
<TOTAL-COSTS> 944,286
<OTHER-EXPENSES> 1,088
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,614)
<INCOME-PRETAX> 40,473
<INCOME-TAX> 15,400
<INCOME-CONTINUING> 25,073
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,073
<EPS-BASIC> 1.07
<EPS-DILUTED> 1.05
<PAGE>
</TABLE>
