<page>
<page>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
- --- SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED March 31, 2002.
--------------
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 as specified in its charter)
Connecticut 06-0613548
- -------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1332 Blue Hills Avenue
Bloomfield, Connecticut 06002
----------------------------------------
(Address of principal executive offices)
(860) 243-7100
--------------------------------------------------
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of May 1, 2002:
Class A Common 21,731,015
Class B Common 667,814
Page 1 of 19 Pages
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets(In thousands)
<table>
Assets March 31, 2002 December 31, 2001
------ ------------------ ------------------
<s> <c> <c> <c> <c>
Current assets:
Cash and cash equivalents $ 7,608 $ 30,834
Accounts receivable (net of
allowance for doubtful
accounts of $4,353 in
2002, $3,939 in 2001) 209,841 186,798
Inventories:
Contracts and other
work in process 65,056 65,676
Finished goods 44,846 45,315
Merchandise for resale 83,747 193,649 86,409 197,400
------- -------
Other current assets 27,926 27,619
-------- -------
Total current assets 439,024 442,651
Property, plant & equip., at cost 175,204 173,900
Less accumulated depreciation
and amortization 115,368 113,131
------- -------
Net property, plant & equipment 59,836 60,769
Other assets 19,239 18,526
-------- --------
$518,099 $521,946
======== ========
Liabilities and Shareholders' Equity
------------------------------------
<s> <c> <c>
Current liabilities:
Notes payable $ 4,364 $ 4,038
Accounts payable 45,274 52,044
Accrued liabilities 26,759 25,332
Advances on contracts 32,850 30,781
Other current liabilities 22,294 29,065
Income taxes payable 2,296 -
-------- -------
Total current liabilities 133,837 141,260
Long-term debt, excl. current portion 21,566 23,226
Other long-term liabilities 25,593 23,879
Shareholders' equity 337,103 333,581
-------- --------
$518,099 $521,946
======== ========
</table>
- 2 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Condensed Consolidated Statements of Operations
(In thousands except per share amounts)
<table>
For the Three Months
Ended March 31,
--------------------
2002 2001
---- ----
<s> <c> <c>
Revenues $223,363 $244,692
Costs and expenses:
Cost of sales 162,683 182,692
Selling, general and
administrative expense 51,407 49,047
Interest (income)/expense, net 446 (26)
Other (income)/expense, net 216 (487)
-------- --------
214,752 231,226
-------- --------
Earnings before income taxes 8,611 13,466
Income taxes 3,270 4,725
-------- --------
Net earnings $ 5,341 $ 8,741
======== ========
Net earnings per share:
Basic $ .24 $ .39
Diluted $ .24 $ .38
======== ========
Dividends declared per share $ .11 $ .11
======== ========
</table>
- 3 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Condensed Consolidated Statements of Cash Flows
(In thousands)
<table>
For the Three Months
Ended March 31,
--------------------
2002 2001
--------- --------
<s> <c> <c>
Cash flows from operating activities:
Net earnings $ 5,341 $ 8,741
Depreciation and amortization 2,760 2,815
Net gain on sale of assets - (630)
Other, net 896 (172)
Changes in current assets and liabilities,
excluding effects of acquisition:
Accounts receivable (21,565) (3,823)
Inventory 5,166 6,007
Accounts payable (7,849) (10,002)
Advances on contracts 2,069 (6,657)
Income taxes payable 2,296 579
Changes in other current assets and liabilities (5,779) (5,913)
-------- --------
Cash provided by (used in) operating
activities (16,665) (9,055)
-------- --------
Cash flows from investing activities:
Proceeds from sale of assets - 1,124
Expenditures for property, plant & equipment (1,361) (1,040)
Acquisition of business, less cash acquired (1,724) -
Other, net (41) (55)
-------- --------
Cash provided by (used in) investing
activities (3,126) 29
-------- --------
Cash flows from financing activities:
Changes to notes payable 238 (51)
Reductions to long-term debt (1,660) (1,660)
Dividends paid (2,451) (2,447)
Proceeds from sale of stock 438 371
-------- --------
Cash provided by (used in) financing
activities (3,435) (3,787)
-------- --------
Net increase (decrease) in cash and cash equivalents (23,226) (12,813)
Cash and cash equivalents at beginning of period 30,834 48,157
-------- --------
Cash and cash equivalents at end of period $ 7,608 $ 35,344
======== ========
</table>
- 4 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Notes to Condensed Consolidated Financial Statements
(In thousands)
Basis of Presentation
- ----------------------
The December 31, 2001 condensed consolidated balance sheet
amounts have been derived from the previously audited
consolidated balance sheet of Kaman Corporation and subsidiaries.
In the opinion of management, the balance of the condensed
financial information reflects all adjustments which are
necessary for a fair presentation of the financial position,
results of operations and cash flows for the interim periods
presented and are of a normal recurring nature, unless otherwise
disclosed in this report.
The statements should be read in conjunction with the notes to
the consolidated financial statements included in Kaman
Corporation's 2001 Annual Report.
Cash Flow Items
- ---------------
Cash payments for interest were $911 and $964 for the three
months ended March 31, 2002 and 2001, respectively. Cash
payments for income taxes for the comparable periods were
$236 and $3,856, respectively.
Comprehensive Income
- --------------------
Comprehensive income was $5,347 and $8,604 for the three months
ended March 31, 2002 and 2001, respectively, as the result of
foreign currency translation adjustments.
- 5 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Notes to Condensed Consolidated Financial Statements
(In thousands)
Shareholders' Equity
- --------------------
Changes in shareholders' equity were as follows:
<table>
<s> <c>
Balance, January 1, 2002 $333,581
Net earnings 5,341
Foreign currency translation adjustment 6
--------
Comprehensive income 5,347
Dividends declared (2,461)
Employee stock plans 636
--------
Balance, March 31, 2002 $337,103
========
</table>
Recent Accounting Standards
- ---------------------------
In June 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 142, "Goodwill
and Other Intangible Assets" ("SFAS 142"). Effective July 1,
2001, the corporation adopted the provisions of SFAS 142
applicable to business combinations completed after June 30,
2001. The remaining provisions of SFAS 142, relating to business
combinations completed prior to June 30, 2001, became effective
January 1, 2002 and were adopted by the corporation at that time.
The corporation's adoption of the remaining provisions of SFAS 142
did not have a material impact on its consolidated results of
operations or financial position.
Effective January 1, 2002, the corporation adopted Statement of
Financial Accounting Standards No. 144 "Accounting for the
Impairment or Disposal of Long-lived Assets" ("SFAS 144"). SFAS
144 establishes a single accounting model for the impairment or
disposal of long-lived assets, including discontinued operations.
The provisions of the statement are generally applied
prospectively. The corporation's adoption of SFAS 144 did not
have a material impact on its consolidated results of operations
or financial position.
- 6 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Notes to Condensed Consolidated Financial Statements
(In thousands except share amounts)
Business Segments
- -----------------
Summarized financial information by business segment is as follows:
<table>
For the Three Months
Ended March 31,
-------------------------
2002 2001
--------- ---------
<s> <c> <c>
Net sales:
Aerospace $ 75,601 $ 92,158
Industrial Distribution 117,441 123,071
Music Distribution 30,051 29,260
-------- --------
$223,093 $244,489
======== ========
Operating profit:
Aerospace $ 9,150 $ 10,189
Industrial Distribution 2,593 5,078
Music Distribution 1,355 1,319
-------- --------
13,098 16,586
Interest, corporate and
other expense, net (4,487) (3,120)
-------- --------
Earnings before income taxes $ 8,611 $ 13,466
======== ========
March 31, December 31,
2002 2001
-------- --------
<s> <c> <c>
Identifiable assets:
Aerospace $307,965 $302,076
Industrial Distribution 144,617 134,974
Music Distribution 42,566 45,783
Corporate 22,951 39,113
-------- --------
$518,099 $521,946
======== ========
</table>
- 7 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
- ---------------------
Consolidated revenues for the three months ended March 31, 2002
were $223.4 million compared to $244.7 million for the same
period of 2001, in line with management's expectations.
Aerospace segment net sales were $75.6 million for the first
quarter of 2002 compared to $92.2 million the previous year,
primarily due to a decline in helicopter sales. The Aerospace
segment's programs include helicopter manufacturing along with
spare parts and support; aerostructure and helicopter subcontract
work as well as manufacture of components such as self-
lubricating bearings and driveline couplings for aircraft
applications; and advanced technology products.
The corporation's helicopter programs include the SH-2G multi-
mission maritime helicopter and the K-MAX medium-to-heavy
external lift helicopter. Together these programs currently
constitute about 33 percent of Aerospace segment sales, which is
down from 52 percent a year ago, reflecting the tapering off in
revenues from the SH-2G programs for Australia and New Zealand as
those programs mature, and the absence of K-MAX sales.
The SH-2G helicopter represents virtually all of the Aerospace
segment's helicopter program sales and generally consists of
retrofit of the corporation's SH-2F helicopters to the SH-2G
configuration or refurbishment of existing SH-2G helicopters.
The SH-2, including its F and G configurations, was originally
manufactured for the U.S. Navy. The SH-2G aircraft is currently
operational with the Egyptian Air Force and the corporation is
performing retrofit work under commercial contracts with the
governments of Australia and New Zealand.
The program for New Zealand involves five (5) aircraft, and
support, for the Royal New Zealand Navy. The contract has an
anticipated value of about $186 million (US), of which about 95%
has now been recorded as revenue. The corporation has shipped
four SH-2G(NZ) helicopters to New Zealand and is working with the
government toward final acceptance of these aircraft, which is
expected in the second quarter. The fifth aircraft, which
represents the exercise of an option under the contract, is
currently scheduled for delivery before the end of 2002.
The program for Australia involves eleven (11) helicopters with
support, including a support services facility, for the Royal
Australian Navy. The total contract has an anticipated value of
- 8 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
about $700 million (US). The helicopter production portion of
the work is valued at $580 million, of which about 87% has now
been recorded as revenue.
Eight SH-2G(A) aircraft have been shipped to Australia. These
aircraft lack the full Integrated Tactical Avionics System
("ITAS") software because the corporation has been required to
select new subcontractors to complete ITAS software development
as a result of a contract dispute settlement with the original
software supplier. One result of the negotiation process with
the new subcontractors is that Kaman now has responsibility for
aircraft integration testing (previously a subcontracted task).
This, together with the time frame for the new subcontractors'
development of the full ITAS software, indicates that there will
be a longer delay than previously anticipated in delivery of the
full ITAS software to Australia. Work with the new subcontractors
is proceeding and the corporation continues its discussions with
Royal Australian Navy officials to develop an acceptable plan for
completion of aircraft deliveries with the full ITAS software,
which plan is expected to include phased acceptance of the
aircraft. When equipped with the full ITAS, the SH-2G(A)
helicopter will have the most sophisticated, integrated
cockpit and weapons system available in an intermediate weight
helicopter.
In February, the corporation received an initial contract from
the U.S. Navy for preliminary work leading to reactivation of
four surplus U.S. Navy SH-2G aircraft for the Polish Navy.
Negotiations for additional follow-on work, including
refurbishment of the aircraft and future training and support,
are in process. When in service, the aircraft will operate
aboard two Polish Navy frigates performing surface surveillance,
anti-submarine warfare and utility missions.
Also, discussions are continuing with the Egyptian government
concerning a requirement for up to six search and rescue
helicopters; it is not expected that a winner of the contract
award will be announced before the fourth quarter of this year.
The Egyptian Air Force currently operates 10 SH-2G aircraft,
primarily in anti-submarine warfare and utility roles.
The corporation is actively pursuing other opportunities for the
SH-2G helicopter in the international defense market. Management
believes that the aircraft is in a good competitive position to
meet the specialized needs of navies around the world that
operate smaller ships for which the SH-2G is ideally sized, while
also recognizing that this market is highly competitive and
influenced by economic and political conditions.
- 9 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
The corporation also maintains a consignment of the U.S. Navy's
inventory of SH-2 spare parts under a multi-year agreement that
provides the ability to utilize certain inventory for support of
the corporation's SH-2G programs.
The K-MAX helicopter program, which began in 1994 and for which
the corporation maintains a substantial inventory, has
experienced significant market difficulties in the past several
years. There have been no sales of this helicopter since the
first quarter of 2001. While the corporation continues to pursue
global market opportunities in industry and government, those
efforts have so far met with limited success. Following a market
evaluation of the program that began in 2001 and was recently
completed, management currently plans to pursue both a sale and
short-term lease program for existing K-MAX aircraft inventory
and produce additional aircraft only upon order by a customer.
The Aerospace segment also performs aerostructure and helicopter
subcontract work for a variety of aerospace manufacturing
programs as well as manufacture of proprietary self-lubricating
bearings. This work currently constitutes about 46% of Aerospace
segment sales, compared to about 35% a year ago.
Aerostructures subcontract work involves commercial and military
aircraft programs. Current programs include production of
various structures for virtually all Boeing commercial aircraft
and major structural assemblies for the C-17 military transport.
This portion of the segment's work is being affected somewhat by
lower commercial aircraft production rates, which is expected to
continue through 2003. Even so, in April of 2002, the corporation
received a new contract from Boeing related to the production and
fabrication of an additional group of subassemblies that will
become part of aircraft fuselages, wings and tail structures for
Boeing 747, 757, 767 and 777 families of commercial airplanes.
Under this new contract, the Aerospace segment will receive and
assemble parts from other suppliers and ship higher-level
assemblies to Boeing.
Helicopter subcontract work involves commercial helicopter
programs. Current work includes the production of fuselages and
rotor systems for various MD-Helicopters, Inc. programs that are
now projected to run at a significantly lower sales rate than had
originally been anticipated.
The segment's proprietary self-lubricating bearings are used in
aircraft flight controls, turbine engines and landing gear as
well as driveline couplings for helicopters. This business was
affected during the first quarter by an anticipated drop off in
- 10 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
commercial and regional aircraft manufacturing, however, this was
offset to some degree by increases in commercial aftermarket and
military programs.
Management considers the aircraft structures and components
operations to be a growth business and has placed strategic
emphasis on building revenues in this area, both internally and
by acquisition. For example, in December 2001 the corporation
acquired Plastic Fabricating Company, Inc., a Wichita, Kansas
manufacturer of composite parts and assemblies for aerospace
applications. This acquisition provides the segment with a
presence in one of the largest aerospace manufacturing areas in
the United States and complements its existing composites and
metal bonding operations.
The Aerospace segment also produces advanced technology products,
which accounted for approximately 21% of Aerospace segment
revenues in the first quarter of 2002 compared to about 13% for
the same period last year. Products include safe, arm and fuzing
devices for several missile programs; high reliability memory
systems for airborne, shipboard, and ground-based programs;
precision non-contact measuring systems for industrial and
scientific use; and high-power permanent magnet motors used
commercially in the oil service and transportation industries and
for military uses. During the first quarter, this operation saw
increased sales activity due in part to increased defense
spending. In April of 2002, the corporation sold its microwave
products line to Meggitt Safety Systems, Inc.. That product line
was associated with the former Kaman Sciences Corp. subsidiary
which was sold in 1997 to ITT Industries and was no longer core
to the segment's advanced technology business. Microwave product
sales were about $7.5 million for the year 2001.
Industrial Distribution segment net sales were $117.4 million for
the first quarter of 2002, compared to $123.1 million for the
same period last year, reflecting the poor manufacturing
environment. Since the segment's customers include nearly every
sector of U.S. industry, this business is influenced by
industrial production levels and has been adversely affected by
the conditions in the manufacturing sector that have continued
for more than a year. If recent key economic indicators
suggesting that the manufacturing sector may be starting to
rebound are correct, management believes that this segment will
- 11 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
be in a good position to benefit, although historically the
industrial distribution industry tends to experience recovery
several months after the upturn actually begins. The corporation
had taken steps to implement workforce adjustments and control
costs in late 2000 and as economic conditions worsened in 2001,
the corporation implemented further reductions and efficiencies.
These efforts have helped the segment to remain profitable
despite lower sales.
The Industrial Distribution segment's first quarter results
include A-C Supply of Milwaukee, Wisconsin, which was acquired in
September 2001. During the first quarter, the corporation also
acquired a 60% interest in Delamac de Mexico S.A. de C.V., a
leading Mexican distributor of industrial products headquartered
in Mexico City. Delamac, which had sales of about $7.0 million
in 2001, supplies power transmission, bearings and fluid power
products. These acquisitions expand the segment's presence into
new geographical areas and improve its ability to serve national
account customers. These acquisitions also represent incremental
steps in the corporation's overall strategy of building the value
of its businesses through acquisitions and internal growth.
Music Distribution segment net sales were $30.1 million for the
first quarter of 2002 compared to $29.3 million the previous
year. The segment performed well during the quarter, driven by
North American sales as dealers replenished their inventories
following the better than expected 2001 Christmas season.
In the second quarter of this year, it is anticipated that the
Music segment will begin distributing Sabian cymbals and
percussion accessories in the United States. Management
considers this to be a strong addition to its percussion product
lines. In addition, this segment is now in the second year of its
exclusive distribution and sales license with Fred Gretsch
Enterprises and has successfully launched the high quality
Gretsch drum kit lines in domestic and foreign markets.
For the quarter ended March 31, 2002, the corporation's segments,
in total, had operating profit of $13.1 million compared to $16.6
million for the first quarter of 2001 due principally to weakness
in the nation's manufacturing base which has adversely impacted
the industrial distribution segment. Net earnings in the first
quarter of 2001 included a gain of $0.7 million from the sale of
a facility and net interest income.
- 12 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Operating profit for the Aerospace segment was $9.1 million for
the first quarter of 2002, compared to $10.2 million the previous
year. The decrease is not proportional to the decrease in
Aerospace segment revenues largely due to some profit
deterioration in the New Zealand SH-2G program recognized during
the first quarter of 2001 and the low profit margin associated
with K-MAX helicopter sales during the first quarter of 2001.
Operating profit for the Industrial Distribution segment was
$2.6 million for the first quarter, compared to $5.1 million in
the 2001 quarter, due to lower sales and conditions in the
manufacturing environment. Operating profit for the Music
Distribution segment was $1.4 million for the first quarter of
2002, compared to $1.3 million in the 2001 quarter; cost
reductions have assisted this segment's profitability.
The consolidated effective income tax rate was 38.0% for the
first quarter of 2002 compared to 35.1% for the same quarter of
2001.
Net earnings for the first quarter of 2002 were 24 cents per
share on a diluted basis compared to 38 cents per share diluted a
year ago.
In June 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 142, "Goodwill
and Other Intangible Assets" ("SFAS 142"). Effective July 1,
2001, the corporation adopted the provisions of SFAS 142
applicable to business combinations completed after June 30,
2001. The remaining provisions of SFAS 142, relating to business
combinations completed prior to June 30, 2001, became effective
January 1, 2002 and were adopted by the corporation at that time.
The corporation's adoption of the remaining provisions of SFAS 142
did not have a material impact on its consolidated results of
operations or financial position.
Effective January 1, 2002, the corporation adopted Statement of
Financial Accounting Standards No. 144 "Accounting for the
Impairment or Disposal of Long-lived Assets" ("SFAS 144"). SFAS
144 establishes a single accounting model for the impairment or
disposal of long-lived assets, including discontinued operations.
The provisions of the statement are generally applied
prospectively. The corporation's adoption of SFAS 144 did not
have a material impact on its consolidated results of operations
or financial position.
Liquidity and Capital Resources
- -------------------------------
On an annual basis, the corporation's cash flow from operations
has generally been sufficient to finance a significant portion of
its working capital and other capital requirements.
- 13 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
During the first quarter of 2002, operating activities used $16.7
million in cash, as anticipated, as accounts receivable increased
in the Aerospace and Industrial Distribution segments. Aerospace
accounts receivable increased principally as a result of the
Australian SH-2G helicopter program, while Industrial
Distribution receivables were higher as a result of increased
sales over the traditionally weaker fourth quarter of the prior
year. Accounts payable also decreased during the first quarter of
2002, principally in the Aerospace segment. This was offset to
some degree by a decrease in inventories in each of the business
segments.
During the quarter, cash was used in investing activities for the
acquisition of a 60% ownership interest in the stock of Delamac
de Mexico S.A. de C.V. and for the purchase of items such as
machinery and computer equipment. Cash used by financing
activities was primarily attributable to the payment of dividends
to shareholders and to a lesser degree the sinking fund
requirement for the corporation's debentures (described below).
At March 31, 2002, the corporation had $23.2 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.
In November, 2000, the corporation's board of directors approved
a replenishment of the corporation's stock repurchase program,
providing for repurchase of an aggregate of 1.4 million Class A
common shares for use in administration of the corporation's
stock plans and for general corporate purposes. No shares were
purchased during the first quarter of 2002. As of March 31, 2002,
a total of almost 212,000 shares have been repurchased under the
program.
The corporation maintains a revolving credit agreement involving
a group of financial institutions. The agreement has a maximum
unsecured line of credit of $225 million which consists of a $150
million commitment for 5 years, which expires in 2005, and a $75
million commitment under a "364 day" arrangement which is
renewable annually for an additional 364 days, upon the consent
of the banks. The $75 million commitment was so renewed in
November, 2001. The most restrictive of the covenants contained
in the new agreement requires the corporation to have EBITDA, as
defined, at least equal to 300% of net interest expense and a
- 14 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
ratio of consolidated total indebtedness to total capitalization
of not more than 55%.
Letters of credit are generally considered borrowings for
purposes of the revolving credit agreement. A total of $50.4
million in letters of credit are currently outstanding under
the agreement, most of which is related to the Australia SH-2G
program. Reductions to the Australia letters of credit are
anticipated as agreed upon performance milestones are reached
and as the corporation and the Australian government agree upon
a process for completion of delivery of the SH-2G(A) aircraft
with the full ITAS software.
Total average bank borrowings were $3.4 million and $2.1 million
for the three months ended March 31, 2002 and 2001, respectively.
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 recurring capital requirements for the
foreseeable future.
Forward-Looking Statements
- --------------------------
This report contains forward-looking information relating to the
corporation's business and prospects, including the SH-2G and
K-MAX helicopter programs, aerostructures, helicopter structures,
and components, the industrial and music distribution businesses,
operating cash flow, 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 competitions and
thereafter 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) timing of satisfactory
completion of the Australian SH-2G(A) program; 6) timing, degree
and scope of market acceptance for products such as a repetitive
lift helicopter; 7) U.S. industrial production levels; 8) changes
in supplier sales policies; 9) the effect of price increases or
decreases; and 10) 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.
-15-
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
The corporation has various market risk exposures that arise
from its normal business operations, including currency exchange
rates, supplier price changes, and interest rates as well as
other factors described in the Forward-Looking Statements
section of this report.
The corporation's exposure to currency exchange rates is managed
at the corporate and subsidiary operations levels as an integral
part of the business.
The corporation's exposure to supplier sales policies and price
changes relates primarily to its distribution businesses and
the corporation seeks to manage this risk through its
procurement policies and maintenance of favorable relationships
with suppliers.
The corporation's exposure to interest rate risk relates
primarily to its financial instruments, which include short-term
investments with market interest rates and debt obligations with
fixed interest rates. Interest rate risk is managed through the
use of a combination of fixed rate long-term debt and variable
rate borrowings under its financing arrangements. Letters of
credit are generally considered borrowings for purposes of the
corporation's revolving credit agreement; they are not subject
to interest rate risk, however, fees are charged based upon the
corporation's usage and credit rating.
There has been no significant change in the corporation's
exposure to these market risk factors during the first quarter
of 2002. Management believes that any near-term change in the
market risk factors described above should not materially affect
the consolidated financial position, results of operations or
cash flows of the corporation.
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KAMAN CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders
The annual meeting of the shareholders of the Corporation was
held at the offices of the Corporation on April 16, 2002.
Following is a brief description of each matter voted upon at the
meeting:
1. Election of Directors
---------------------
The following thirteen (13) individuals were elected directors of
the Corporation to serve until the next annual meeting and until
their successors have been elected:
Brian E. Barents E. Reeves Callaway III Frank C. Carlucci
Laney J. Chouest John A. DiBiaggio Huntington Hardisty
Edwin A. Huston C. William Kaman II Eileen S. Kraus
Paul R. Kuhn Walter H. Monteith, Jr. Wanda Lee Rogers
Richard J. Swift
For each director, the Class B shareholders voted 587,589 shares
in favor, 10,393 against, with no abstentions and no broker
non-votes.
2. Appointment of KPMG LLP
-----------------------
A proposal to appoint KPMG LLP as the Corporation's auditors
during the ensuing year was adopted by the Class B shareholders
who voted 597,950 in favor, 32 against, with no abstentions and
no broker non-votes.
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KAMAN CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits to Form 10-Q:
(11) Earnings per share computation
(b) Report on Form 8-K filed in the first quarter of
2002:
(1) A report on Form 8-K was filed on March 14,
2002, reporting the acquisition of a majority
ownership interest in Delamac de Mexico S.A. de
C.V., a Mexican distributor of industrial parts
headquartered in Mexico City.
(2) A report on Form 8-K was filed on March 22,
2002, reporting the Company's agreement to sell
its microwave products line to Meggitt Safety
Systems, Inc., a subsidiary of Meggitt PLC of
Great Britain.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
KAMAN CORPORATION
Registrant
Date: May 14, 2002 By: /s/ Paul R. Kuhn
-----------------------------
Paul R. Kuhn
Chairman, President and
Chief Executive Officer
(Duly Authorized Officer)
Date: May 14, 2002 By: /s/ Robert M. Garneau
-----------------------------
Robert M. Garneau
Executive Vice President and
Chief Financial Officer
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<page>
KAMAN CORPORATION AND SUBSIDIARIES
Index to Exhibits
Exhibit 11 Earnings Per Share Computation Attached
-19-
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