<page>
UNITED STATES 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, 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)
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 herein by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ ].
Indicate by check mark whether the registrant is an
accelerated filer (as defined in Exchange Act Rule 12b-2).
Yes (X) No ( )
State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the
price at which the common equity was last sold, or the average bid
and asked price of such common equity, as of the last business day
of the registrant's most recently completed second fiscal quarter.
$351,907,817 as of June 30, 2002.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock as of the latest practicable
date (February 1, 2003).
Class A Common 21,804,152 shares
Class B Common 667,814 shares
DOCUMENTS INCORPORATED HEREIN BY REFERENCE
Portions of the Corporation's 2002 Annual Report to Shareholders
are incorporated herein 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 as well as domestic and
foreign defense markets with a variety of products, including the
SH-2G Super Seasprite naval helicopter and the K-MAX medium-to-
heavy lift helicopter; aircraft structures and components for
commercial and military aircraft, including specialized aircraft
bearings; and various advanced technology products for specialized
applications, including missile and bomb fuzing devices. The
Industrial Distribution segment provides bearings and power
transmission, motion control, material handling and electrical
components as well as value-added services to a highly diversified
cross-section of North American industry. The Music Distribution
segment serves domestic and foreign markets with a wide variety of
musical instruments and accessories for amateur and professional
musicians.
AEROSPACE
In the Aerospace segment, programs involving helicopter
manufacturing, spare parts and support represented approximately
31% of 2002 sales, compared to approximately 41% in 2001.
Aerostructure and helicopter subcontract work along with
production of components such as self-lubricating bearings and
driveline couplings for aircraft applications represented about
48% of segment sales in 2002, compared to about 42% in 2001.
Advanced technology products represented approximately 21% of
segment sales in 2002, compared to 17% in 2001.
In the second quarter of 2002, the corporation recorded a pre-
tax charge of $86.0 million attributable to the Aerospace
segment (of which $52.7 million was non-cash), which included a
$25.0 million charge for cost growth associated with the
Australia SH-2G(A) program; $50.0 million for the write-down of
K-MAX helicopter assets, principally inventories; and $11.0
million for the anticipated costs to phase out operations at the
Corporation's Moosup, Connecticut manufacturing facility by the
end of 2003. In the second quarter of 2001, the corporation
recorded a $31.2 million sales and pre-tax earnings adjustment
related to cost growth in the Australia helicopter program.
The segment's helicopter programs include the SH-2G multi-
mission naval helicopter and the K-MAX (registered trademark)
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medium-to-heavy external lift helicopter. The SH-2G helicopter
represents the vast majority of the 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 in service with the Egyptian Air
Force and the Royal New Zealand Navy. The corporation is
continuing performance of programs for Australia and Poland.
The retrofit program for New Zealand, which involved five
aircraft with support, is essentially complete. During 2002,
four aircraft were accepted and put into service by the New
Zealand government. The fifth and final aircraft, which was
purchased under an option to the original contract, has been
delivered and is now in the customer's flight acceptance test
process. The contract has an anticipated value of about $189
million (US) of which about 98% was recorded as sales through
December 31, 2002.
Work continued during 2002 on the SH-2G(A) retrofit program for
Australia. This program involves eleven helicopters with
support, including a support services facility, for the Royal
Australian Navy (RAN). The total contract has an anticipated
value of about $711 million (US) and the helicopter production
portion of the program is valued at approximately $590 million
(US) of which about 91% was recorded as sales through December
31, 2002. This program is now in a loss position due to the
previously mentioned charge taken in second quarter of 2002 and
pre-tax sales and earnings adjustment taken in the second
quarter of 2001. Both items are related to cost growth in the
program stemming largely from a contract dispute with the
original subcontractor responsible for development of the
aircraft's Integrated Tactical Avionics System (ITAS) hardware
and software (a feature unique to the Australia program).
Settlement of that dispute in 2001 resulted in the need to hire
replacement subcontractors for the balance of the ITAS software
development and the corporation's assumption of final
integration testing responsibility. An additional loss accrual
was recognized in the fourth quarter of 2002 in connection with
higher overhead rates across all active programs in the
corporation's Kaman Aerospace subsidiary.
Ten of the Australia aircraft are substantially complete; the
corporation has retained the eleventh aircraft for test
purposes. All of the aircraft lack the full ITAS software and
the replacement subcontractors are in the process of completing
this element of the program. The corporation and the RAN have
reached agreement on a plan for phased acceptance of the
aircraft and completion of aircraft deliveries. Under the
agreement, phased acceptance is contingent upon the RAN's
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satisfaction with the corporation's progress with respect to
certain important project milestones during 2003. The
corporation currently expects that the software will be fully
completed, installed and operational on all of the Australia
aircraft by the end of 2004.
The corporation is continuing work on a small contract to
refurbish four existing SH-2G aircraft previously in service
with the U.S. Navy Reserves to operate aboard two Polish Navy
frigates in multi-mission roles such as surface surveillance and
anti-submarine warfare. The program involves reactivation of
the aircraft, training, and logistics support, including
delivery of initial spares components. Reactivation of two
aircraft was completed in the fourth quarter of 2002 and they
have been accepted. Reactivation of the other two aircraft is
underway and is scheduled for completion by the end of 2003.
During 2002, the corporation continued to provide on-site
support in the Republic of Egypt for ten SH-2G helicopters that
were delivered in 1998 under that country's foreign military
sale agreement with the U.S. Navy.
The corporation is also participating in a competition to supply
up to six search and rescue helicopters to Egypt, proposing to
supply remanufactured SH-2Gs for that requirement. The
corporation's involvement in this process began in early 1999.
Based upon discussions with Egyptian officials during recent
visits, management believes that the selection process is being
further delayed and is not likely to result in an award
announcement in 2003.
The corporation is actively pursuing other opportunities for the
SH-2G helicopter in the international defense market. This
market is highly competitive and heavily influenced by economic
and political conditions. However, management continues to
believe 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.
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 corporation the ability to utilize certain
inventory for support of its SH-2G programs.
The corporation also manufactures the K-MAX medium-to-heavy lift
helicopter that can be used in a variety of applications,
including fire fighting, logging, construction, and logistics
support. The program began in 1994 and has experienced
significant market difficulties in the past several years. In
the second quarter of 2002, based upon a current market
evaluation of the aircraft, management made a determination that
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it would produce further aircraft only upon firm order by a
customer and would pursue both a sale and short-term lease
program for existing new and used K-MAX aircraft inventory.
During 2002, three used aircraft were leased and two used
aircraft (one of which had been under lease) were sold under
that program. In connection with the decision made in the
second quarter, the corporation wrote down the value of existing
aircraft, excess spare parts, and equipment inventories.
Development costs for the aircraft were expensed in the past.
On a going forward basis, the corporation intends to maintain
adequate inventories and personnel to support the fleet.
In the second quarter of 2002, management made the decision to
phase out the corporation's aircraft manufacturing plant in
Moosup, Connecticut by the end of 2003. This is the oldest and
least efficient of the corporation's facilities and the work
performed there will be relocated to other company facilities.
In connection with this closure, the corporation expects that the
employment of approximately 400 individuals located in Bloomfield
and Moosup, Connecticut will be eliminated.
The Aerospace segment also performs aerostructure and helicopter
subcontract work for a variety of aerospace manufacturing
programs and produces proprietary self-lubricating bearings.
This business is an area of strategic emphasis for the
corporation, however performance was adversely affected by
weakness in the commercial aerospace market during 2002.
Aerostructures subcontract work involves commercial and military
aircraft programs. Current programs include production of wing
structures for virtually all Boeing commercial aircraft and the
C-17 military transport. In the third quarter of 2002, the
corporation received a follow-on contract from Boeing for C-17
structural components. The contract runs through June 2007 and
has a potential value of $67.5 million. During the second quarter
of 2002, the corporation received a new contract from Boeing under
which the segment will receive and assemble additional parts from
other suppliers and ship higher-level assemblies to Boeing. These
assemblies will become part of aircraft fuselages, wings and tail
structures for Boeing 747, 757, 767, and 777 families of commercial
airplanes.
In addition, the corporation acquired Plastic Fabricating
Company, Inc., a Wichita, Kansas manufacturer of composite parts
and assemblies for aerospace applications, in December 2001.
This acquisition has complemented the segment's existing
composites and metal bonding operations and provided the segment
with a presence in one of the largest aerospace manufacturing
areas in the United States.
Helicopter subcontract work involves commercial helicopter
programs. Current work includes multi-year contracts that were
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awarded in 2000 for production of fuselages and rotor systems
for various MD Helicopters, Inc. (MDHI) aircraft. Total orders
received from MDHI continue to run at significantly lower sales
rates than originally anticipated due to lower than expected
demand. The corporation has developed a large investment in
these contracts (including receivables, start-up costs, and
other program expenditures) and has experienced difficulty with
receipt of payments from MDHI. Management is concerned about
this exposure and is working with MDHI in an effort to address
their payment issues.
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. During 2002, this
business continued to be affected by the drop-off in commercial
and regional aircraft manufacturing, although the effect has
been offset to some degree by increases in commercial
aftermarket and military programs. In July 2002, the
corporation acquired RWG Frankenjura-Industrie Flugwerklager
GmbH ("RWG"), a privately held German aerospace bearing
manufacturer. RWG complements the corporation's proprietary
line of bearings and provides a presence in European aerospace
markets. RWG had sales of about US $10 million in 2001 and its
largest customer is Airbus Industrie.
The Aerospace segment also produces advanced technology products
and this portion of the segment's business is benefiting from
increased defense spending. These products involve systems,
devices and assemblies for a variety of military and commercial
applications, including safe, arm and fuzing devices for several
missile and bomb programs; high reliability memory systems for
airborne, shipboard, and ground-based programs; precision non-
contact measuring systems for industrial and scientific use; and
electro-optic systems for mine detection and other applications.
Advanced technology products is also an area of strategic emphasis
for the corporation. In July 2002, the corporation completed its
acquisition of the assets and certain liabilities of Dayron (a
division of DSE, Inc.), a weapons fuze manufacturer, located in
Orlando, Florida. Dayron manufactures bomb fuzes for a variety of
munitions programs, and has the contract to develop a fuze for the
U.S. Air Force and Navy Joint Programmable Fuze (JPF) program. As
a result of qualification test results received during the first
quarter of 2003, the corporation is evaluating the need for certain
changes to the fuze and its production process. In addition, a new
government requirement has been identified for which the
corporation expects to receive a contract modification in the near
term. Management currently expects to complete changes, if any,
and resume final qualification testing by early in the third
quarter of 2003.
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In the third quarter of 2002, the corporation was selected to
participate on a Northrop-Grumman led team for a U.S. Navy
program to design and develop the Rapid Airborne Mine Clearance
System, a helicopter-borne clearance capability system for near
surface and surface moored sea mines that will provide airborne
mine defense for carrier battle groups and amphibious ready
groups. The corporation will be responsible for the laser-based
target sensor subsystem development. The 36-month subcontract
is valued at approximately $7.6 million. In October 2002, the
corporation was selected to participate with the University of
Arizona to build a collimator used for testing large optical
systems in a vacuum environment. The corporation's portion of
the five-year contract is valued at about $12.8 million, with
the majority of the work expected to occur in 2003.
During the past twelve months, the corporation sold two non-core
portions of the Aerospace segment. Specifically, in the second
quarter of 2002, the corporation sold its microwave products line.
That product line was associated with the former Kaman Sciences
Corp. subsidiary which was sold in 1997. Microwave product sales
were about $7.5 million in 2001. In January 2003, the corporation
sold its Electromagnetics Development Center (EDC), an electric
motor and drive business that had sales of approximately $14
million in 2002. The EDC is part of the industry team selected by
the U.S. Navy to design the integrated electric drive system for
the Navy's DD(X) next generation surface vessel.
Also during 2002, a common lean thinking methodology was adopted
in manufacturing and office environments across the segment and
results have included elimination of production time and parts
travel, and required square footages for the segment's
activities. The application of lean thinking principles
continues.
Due to the lack of new helicopter production orders, in
combination with the wind down of the New Zealand and Australia
SH-2G programs and weakness in the commercial aerospace market,
significant measures are being taken in the corporation's Kaman
Aerospace subsidiary in order to attempt to bring operating
overheads in line with a lower business base. These steps
have included the charge already described to phase out
operations at the Moosup, Connecticut production facility and
continuing reductions in the segment's workforce. As a result of
lower production levels, active programs must absorb overhead
expenditures at higher rates, and in the fourth quarter of 2002
these increased overhead rates resulted in higher costs, lower
program profitability and loss accruals for a few long-term
programs, including certain Boeing work, and the additional loss
accrual for the Australia SH-2G program that was previously
described.
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INDUSTRIAL DISTRIBUTION
This segment, one of the nation's larger industrial
distributors, offers more than 1.5 million items as well as
value-added services to a base of more than 50,000 customers
spanning nearly every sector of U.S. industry. Distributed
items are supplied by some 1,400 manufacturers and include
bearings and power transmission, motion control, materials
handling, fluid power and linear motion components. The segment's
top ten suppliers (listed alphabetically) include Baldor
Electric, Emerson (EMT), Falk Corporation, Gates Rubber, Rexnord,
Rockwell Automation, SKF, Thompson Industries, Timken, and the
Torrington Company.
The segment serves 67 of the top 100 industrial markets in the
United States with a system of strategically located warehouses
and service centers. Additional facilities are located in Canada
and Mexico through which the segment serves local customers and
large enterprises whose plants span North America.
In executing the segment's strategy to expand its geographic
coverage through both acquisitions and internal growth, the
segment acquired a majority of the assets and certain
liabilities of A-C Supply, Inc., located in the upper Midwest,
in 2001 and a 60% equity interest in Delamac de Mexico S.A. de
C.V. ("Delamac"), a distributor of industrial products
headquartered in Mexico City, in the first quarter of 2002.
These acquisitions have expanded the segment's presence into new
geographical areas and improved its ability to serve national
account customers. In addition, during 2002, the segment opened
two locations in Roanoke and Lynchburg, Virginia and one
location in Omaha, Nebraska.
The segment's value-added services and systems assist customers
to lower costs and improve their processes. Services include
same or next day delivery for most customers across North
America, current order accuracy from its warehouses at over 99%,
and trained, knowledgeable customer service personnel. The
segment was named Supplier of the Year by Frito Lay North
America in 2002 and was designated 2002 Majority Supplier of the
Year for minority business utilization by Procter & Gamble.
During 2002, the segment launched a new, updated version of its
e-commerce website. The new site provides a computer-to
computer link that features a complete electronic catalog,
allowing on-line ordering and payment, and supporting inventory
management. This website increases customer convenience and
reduces paperwork and costs.
The segment's business is influenced by industrial production
levels and has been adversely affected by conditions in the
manufacturing sector that have existed since late 2000. These
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difficult economic conditions are continuing, however cost
reduction activity helped the segment to remain profitable in
2002. And particularly in this economic environment, the
industry's practice of providing vendor incentives was an
important contributor to the segment's operating profits.
In the past, this segment has been one of numerous defendants in
a few "John Doe" type legal proceedings, and generally relating
to parts allegedly supplied to the U.S. Navy's shipyard in San
Diego, California by a predecessor company over 25 years ago,
that may have contained asbestos. The corporation settled those
few claims for nominal amounts with contribution by insurance
carriers. In the third quarter of 2002, however, the
corporation experienced an increase in such claims. Management
believes that the segment has good defenses to these claims,
which it will assert and does not currently expect that this
situation will have a material adverse effect on the
corporation.
MUSIC DISTRIBUTION
This segment is America's largest independent distributor of
musical instruments and accessories, offering more than 10,000
products to retailers of all sizes, from national chains to
independent shops, for musicians of all capabilities and skill
levels. The segment had good results for 2002, reflecting
sustained levels of consumer spending in the music retail market.
Products include proprietary items such as the segment's own
Ovation (registered trademark) and Hamer (registered trademark)
guitars as well as Takamine (registered trademark) guitars offered
under an exclusive North American distribution agreement; and
distributed products such as TOCA (registered trademark) Latin
style hand percussion instruments, Gibraltar percussion hardware,
Sabian* cymbals and Gretsch* Drums. In October 2002, the segment
acquired Latin Percussion, Inc., a leading global distributor of a
wide range of Latin hand percussion instruments.
To ensure high quality while offering value at different price
points, the segment's products are manufactured both in the United
States and abroad.
The segment serves the needs of music retailers with an advanced
distribution system and processes that are designed to assure speed
and accuracy. Customers have access to the segment's website as
well as phone, fax and e-mail ordering systems. The website
provides electronic exchange of invoices and statements and
customers can download high resolution images of the segment's
products for their own marketing purposes. During 2002, the
segment implemented a new inventory replenishment system in order
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to strengthen inventory management and further improve just in time
delivery schedules.
In the third quarter of 2002, one of the Music Distribution
segment's larger chain store customers, Mars Music, filed for
Chapter 11 bankruptcy protection. The corporation's exposure as
an unsecured creditor has been reserved for.
*Sabian and Gretsch are registered trademarks of others.
AVAILABLE INFORMATION
The corporation's website address is www.kaman.com. The
corporation's annual report on Form 10-K, quarterly reports on Form
10-Q, and current reports on Form 8-K as well as amendments to
those reports filed or furnished pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934, together with Section 16
insider beneficial stock ownership reports, are available free of
charge through the website as soon as reasonably practicable after
they are electronically filed or furnished to the Securities and
Exchange Commission. The information contained in the corporation's
website is not intended to be incorporated into this Annual Report
on Form 10-K.
FINANCIAL INFORMATION
Information concerning each segment's performance for the
last three fiscal years is included in the Segment Information
section of the corporation's 2002 Annual Report to Shareholders
(Exhibit 13 to this Form 10-K) and such section is incorporated
herein by reference.
PRINCIPAL PRODUCTS AND SERVICES
Following is information for the three preceding fiscal
years concerning the percentage contribution of each business
segment's products and services to the corporation's
consolidated net sales:
<table>
Years Ended December 31
2000 2001 2002
------ ------ ------
<s> <c> <c> <c>
Aerospace 37.0% 34.4% 31.3%
Industrial Distribution 50.5% 51.8% 54.2%
Music Distribution 12.5% 13.8% 14.5%
------ ------ ------
Total 100.0% 100.0% 100.0%
</table>
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RESEARCH AND DEVELOPMENT EXPENDITURES
Government sponsored research expenditures by the
Aerospace segment were $9.8 million in 2002, $6.7 million in
2001, and $10.2 million in 2000. Independent research and
development expenditures were $5.4 million in 2002, $4.7 million in
2001, and $5.5 million in 2000.
BACKLOG
Program backlog of the Aerospace segment was approximately
$370.0 million at December 31, 2002 ($10.4 million of which was
attributable to the EDC division of the Aerospace segment, which
was sold on January 15, 2003), $364.9 million at December 2001,
and $439.9 million at December 31, 2000.
The corporation anticipates that approximately 54.6% of its
backlog at the end of 2002 will be performed in 2003.
Approximately 31.3% of the backlog at the end of 2002 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. Virtually all of these funded
government contracts have been signed.
GOVERNMENT CONTRACTS
During 2002, approximately 90.9% of the work performed by
the corporation directly or indirectly for the U.S. 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, some of 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
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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's FAA certified K-MAX
helicopters compete with military surplus helicopters and other
used commercial helicopters employed for lifting, as well as with
alternative methods of meeting lifting requirements. The
corporation competes for its subcontract aerostructures,
helicopter structures and components business on the basis of
price and quality; product endurance and special performance
characteristics; proprietary knowledge; and the reputation of the
corporation. The corporation competes for its advanced
technology fuzing business primarily on the basis of technical
competence, product quality, and to some extent, price;
and also on the basis of its experience as a developer and
manufacturer of fuzes for particular weapon types and the
availability of facilities, equipment and personnel. The
corporation is also affected by the political and economic
circumstances of its potential foreign customers.
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
have intensified due to weakness in the U.S. manufacturing
sector that has existed since late 2000, the growth of major
competitors through consolidation and the increasing importance
of large national or North American accounts.
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 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, aerostructures and helicopter
subcontract programs and components, advanced technology
products, including fuzes for the JPF program, 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
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conclusion of competitions and thereafter contract negotiations
with government authorities, including foreign governments,
including specifically the Egypt helicopter competition; 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) attainment of remaining project milestones and
satisfactory completion of the Australian SH-2G(A) program; 6)
recovery of the corporation's investment in the MD Helicopter,
Inc. contracts; 7) actual costs for moving equipment and re-
certifying products and processes in connection with phase out of
the Moosup, Connecticut facility; 8) JPF program final
qualification test results and receipt of production orders; 9)
achievement of enhanced business base in the Aerospace segment in
order to better absorb overhead rates; 10) successful sale or
lease of existing K-MAX inventory; 11) profitable integration of
acquired businesses into the corporation's operations; 12)
U.S. industrial production levels; 13) changes in supplier sales
policies; 14) the effect of price increases or decreases; and 15)
currency exchange rates, taxes, changes in laws and regulations,
interest rates, inflation rates, general business conditions and
other factors. Any forward-looking information should be
considered with these factors in mind.
EMPLOYEES
As of December 31, 2002, the Corporation employed 3,615
individuals throughout its business segments and corporate
headquarters as follows:
<table>
<s> <c>
Aerospace 1,729
Industrial Distribution 1,439
Music Distribution 376
Corporate Headquarters 71
-----
3,615
</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.
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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 2022.
These patents are allocated among the corporation's business
segments as follows:
<table>
U.S. PATENTS FOREIGN PATENTS
Segment Issued Pending Issued Pending
<s> <c> <c> <c> <c>
Aerospace 39 2 14 4
Industrial Distribution 0 0 0 0
Music Distribution 31 2 37 63
-- -- -- --
70 4 51 67
</table>
Registered trademarks of Kaman Corporation include Adamas,
Applause, Hamer, KAflex, KAron, K-MAX, Magic Lantern, Ovation, LP
and Latin Percussion. In all, the corporation maintains 298 U.S.
and foreign trademarks with 46 applications pending, most of which
relate to music products in the Music Distribution segment.
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.
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. One such matter, Rocque vs. Kaman, is
discussed in Item 3 (Legal Proceedings). In addition, the
Corporation engages in various environmental studies and
investigations and, where legally required to do so, undertakes
appropriate remedial actions at facilities owned or controlled by
it, either voluntarily or in connection with the acquisition,
disposal or operation of such facilities. 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
Page 13
<page>
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. One such matter involved the
Barkhamsted Landfill site located in New Hartford, Connecticut (the
"Barkhamsted site") which the corporation has previously reported
in its report on Form 10-Q for the quarter ended June 30, 2002,
Document No. 0000054381-02-000022 filed with the Securities and
Exchange Commission on August 14, 2002. The Corporation,
together with other PRPs has entered into a consent decree with
the EPA settling its involvement and responsibility for
remediation of the site for a non-material amount, subject to
certain contingencies which the corporation believes are
reasonable. Such consent decree and settlement is in the process
of being finalized in accordance with EPA procedures. With
respect to any other 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
Fourteen percent (14%) of the sales of the corporation made
in 2002 were to customers located outside the United States. In
2002, the corporation continued its efforts to develop
international markets for its products and foreign sales
(including sales for export). The corporation also 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. Additional information required by this item
is included in the Segment Information section of the
corporation's 2002 Annual Report to Shareholders (Exhibit 13 to
this Form 10-K) which section is incorporated herein by
reference.
Page 14
<page>
ITEM 2. PROPERTIES
The corporation occupies approximately 3,507 thousand square
feet of space throughout the United States and in Australia,
Canada, Germany and Mexico, and distributed as follows:
<table>
SEGMENT SQUARE FEET
(in thousands as of 12/31/02)
<s> <c>
Aerospace 1,788
Industrial Distribution 1,213
Music Distribution 466
Corporate Headquarters 40
-----
Total 3,507
</table>
The Aerospace segment's principal facilities are located in
Arizona, Connecticut, Florida, and Kansas; other facilities
including offices and smaller manufacturing and assembly
operations are located in several other states and in Dachsbach,
Germany. 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 is currently in the
process of requesting a two-year extension of this lease. The
corporation also occupies a facility in Nowra, New South Wales,
Australia under a contract providing for a ten (10) year term
expiring in June, 2010. The corporation is also in the process
of closing one Aerospace segment facility located in Moosup,
Connecticut (the "Moosup facility"). The closure is expected
to be completed by the end of 2003. In addition, approximately
49,000 square feet of space listed above is attributable to the
EDC division, which was sold on January 15, 2003.
The Industrial Distribution segment's facilities are located
throughout the United States with principal facilities located in
California, Connecticut, New York, Kentucky and Utah. Additional
Industrial Distribution segment facilities are located in Mexico
and 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, New Jersey and
Tennessee. An additional Music Distribution facility is located
in Ontario, Canada. These facilities consist principally of
regional distribution centers and office space. Also included
are facilities used for manufacturing musical instruments. Ap-
Page 15
<page>
proximately 36,000 square feet of space listed above is
attributable to a warehouse which was closed on February 28,
2003.
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 with the exception of the Moosup
facility and the helicopter assembly space located in Bloomfield.
Many of the properties, especially within the Industrial
Distribution segment, are leased.
ITEM 3. LEGAL PROCEEDINGS
The corporation is continuing settlement discussions with the
Connecticut Department of Environmental Protection regarding the
matter referred to as Rocque vs. Kaman previously reported by the
corporation in its report on Form 10-K for fiscal year ended
December 31, 2000, Document No.0000054381-01-500002 filed with the
Securities and Exchange Commission on March 15, 2001. The
complaint in this matter alleges certain regulatory violations (the
majority of which are administrative in nature) at facilities
located in Connecticut related to routine inspections which took
place between 1988 and 1998. The complaint seeks civil penalties
and injunctive relief. Management believes that in all cases where
corrective action was required at the time of such inspections,
such action was promptly taken.
On June 25, 2002, a motion was filed in the United States
District Court for the District of Oregon in the case of Robert
G. Baker v. Kaman Aerospace Corporation, K-MAX Corporation, and
Kamatics Corporation (all subsidiaries of the Corporation)
seeking to amend the complaint in this action to include a claim
for punitive damages in the amount of $25 million. The original
complaint was filed on April 2, 2001 by Mr. Baker as a claim for
$10 million in damages for economic and non-economic injuries
arising out of an accident involving one of the corporation's
K-MAX helicopters alleged to have been caused by the failure of
a clutch assembly on the aircraft. This matter was previously
reported by the Corporation in its report on Form 10-Q for the
quarter ended June 30, 2002, Document No. 0000054381-02-000022
filed with the Securities and Exchange Commission on August 14,
2002. The parties agreed to settle the matter in December
2002 and the case was dismissed in January 2003. The suit filed
by the hull insurer in the same accident was also settled in
January 2003. Both of these matters were covered by insurance.
There are two additional cases pending in which loss of use and
property damages sustained in two other accidents involving K-MAX
helicopters are alleged to have been caused by similar equipment
failures. These claims are also covered by insurance.
Page 16
<page>
The corporation believes that none of the foregoing legal
proceedings, either individually or in the aggregate, is, or will
be, material to the business of the corporation.
Other legal proceedings or enforcement actions relating to
environmental matters are discussed in the section entitled
Compliance with Environmental Protection Laws.
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 2002.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
MARKET FOR CLASS A COMMON STOCK
The Class A Common Stock of the corporation is traded on the
NASDAQ Stock Market under the symbol "KAMNA". The corporation's
Class B Common Stock is not actively traded.
HOLDERS OF COMMON STOCK
As of March 3, 2003, there were approximately 5,580 holders
of record of the corporation's Class A Common Stock and 72
holders of record of the corporation's Class B Common Stock.
INVESTOR SERVICES PROGRAM
Shareholders of Kaman Class A common stock are eligible to
participate in the Mellon 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 Investor Services, P.O. Box 590, Ridgefield
Park, NJ 07660.
Page 17
<page>
<table>
QUARTERLY CLASS A COMMON STOCK INFORMATION
- -----------------------------------------------------------------
<s> <c> <c> <c> <c>
High Low Close Dividend
2002
First $17.61 $13.46 $16.95 $.11
Second 18.81 14.82 16.76 .11
Third 17.50 11.00 12.25 .11
Fourth 13.75 9.42 11.00 .11
- -----------------------------------------------------------------
2001
First $19.50 $13.31 $16.38 $.11
Second 18.18 14.70 17.70 .11
Third 17.95 12.26 13.24 .11
Fourth 16.38 10.90 15.60 .11
- -----------------------------------------------------------------
QUARTERLY DEBENTURE INFORMATION (6% Conv. Subordinated)
- -----------------------------------------------------------------
<s> <c> <c> <c>
High Low Close
2002
First $ 99.00 $91.00 $99.00
Second - - - - No Trades - - - - -
Third - - - - No Trades - - - - -
Fourth 100.00 91.00 95.00
- -----------------------------------------------------------------
2001
First $ 92.00 $82.00 $ 92.00
Second 98.00 90.00 98.00
Third 99.00 98.00 99.00
Fourth 96.00 90.00 96.00
- -----------------------------------------------------------------
</table>
NASDAQ market quotations reflect inter-dealer prices,
without retail mark-up, mark-down, or commission and may not
necessarily represent actual transactions.
Page 18
<page>
<table>
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS:
- -------------------------------------------------------------------
Number of
securities
Number of remaining
securities to available for
be issued Weighted- future issuance
upon average under equity
exercise of exercise compensation
outstanding price of plans
options, outstanding (excluding
warrants options, securities
and warrants reflected in
Plan Category rights and rights column (a))
(a) (b) (c)
- -------------------------------------------------------------------
<s> <c> <c> <c>
Equity compensation
plans approved by
security holders:
Stock Incentive Plan 1,218,800 $ 14.08 321,700
Employees Stock
Purchase Plan ------- ---- 865,300
Equity compensation
plans not approved by
security holders 0 0 0
- -------------------------------------------------------------------
Total 1,218,800 $ 14.08 1,187,000
- -------------------------------------------------------------------
</table>
ANNUAL MEETING
The Annual Meeting of Shareholders of the corporation will
be held on Tuesday, April 15, 2003 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.
Page 19
<page>
ITEM 6. SELECTED FINANCIAL DATA
Information required by this item is included in the Five-
Year Selected Financial Data section of the corporation's 2002
Annual Report to Shareholders (Exhibit 13 to this Form 10-K) and
that section is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Information required by this item is included in the
Management's Discussion and Analysis section of the corporation's
2002 Annual Report to Shareholders (Exhibit 13 to this Form 10-K)
and that section is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The corporation has various market risk exposures that arise from
its normal business operations, including interest rates,
currency exchange rates, and supplier price changes as well as
other factors described in the Forward-Looking Statements section
of this report.
The corporation's exposure to interest rate risk relates
primarily to its financial instruments, and is managed
principally through the use of long-term debt obligations with
fixed interest rates and revolving credit facilities with
variable interest rates. Fees and interest rates charged on
revolving credit commitments and borrowings are based upon
borrowing levels, market interest rates, and the corporation's
credit rating. Letters of credit are generally considered
borrowings for purposes of the corporation's revolving credit
agreement.
The corporation's primary interest rate risk is derived from its
outstanding variable-rate revolving credit facilities. Changes
in market interest rates or the corporation's credit rating would
impact the interest rates on these facilities. There was some
increase in the corporation's exposure to this market risk factor
during 2002, as bank borrowings increased principally due to
planned acquisitions. At December 31, 2002, the result of a
hypothetical 1% increase in the average cost of the corporation's
revolving credit facilities would have increased the loss before
income taxes by $181,000.
The corporation has manufacturing, sales, and distribution
facilities in certain locations throughout the world and makes
investments and conducts business transactions denominated in
Page 20
<page>
various currencies, including the U.S. dollar, Euro, Canadian
dollar, Mexican peso, and Australian dollar. The corporation's
exposure to currency exchange rates is managed at the corporate
and subsidiary operations levels as an integral part of the
business. Management believes that any near-term changes in
currency exchange rates would not materially affect the
consolidated financial position, results of operations or cash
flows of the corporation.
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. Management believes that any near-term changes in
supplier sales policies and price changes would not materially
affect the consolidated financial position, results of operations
or cash flows of the corporation.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item is included in the
Consolidated Financial Statements, Notes to Consolidated
Financial Statements and Selected Quarterly Financial Data
sections of the corporation's 2002 Annual Report to Shareholders
(Exhibit 13 to this Form 10-K) and such sections are incorporated
herein by reference.
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, 59, has been a Director
since 1996. He is the retired President
and Chief Executive Officer of Galaxy
Aerospace Corp. Prior to that he was
President and Chief Executive Officer of
Learjet, Inc. He is also a director of
Eclipse Aerospace Corp.
Page 21
<page>
T. Jack Cahill Mr. Cahill, 54, 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, 55, has been a Director
since 1995. He is the Chief Executive
Officer of The Callaway Companies, an
engineering services firm.
Frank C. Carlucci Mr. Carlucci, 72, has been a Director
since 1989. Prior to that he served as
U.S. Secretary of Defense. He is the
Chairman Emeritus of The Carlyle Group,
merchant bankers. Mr. Carlucci is also
a director of Ashland, Inc., Neurogen
Corporation, Pharmacia Corp., United
Defense, LP, and Texas Biotechnology
Corporation.
Laney J. Chouest, M.D. Dr. Chouest, 49, has been a Director
since 1996. He is Owner-Manager
of Edison Chouest Offshore, Inc.
Candace A. Clark Ms. Clark, 48, has been Senior Vice
President, 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, 70, has been a Director
since 1984. He is now President
Emeritus of Tufts University, having
served as President until the fall of
2001. Prior to that he was President
and Chief Executive Officer of Michigan
State University.
Ronald M. Galla Mr. Galla, 51, 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 22
<page>
Robert M. Garneau Mr. Garneau, 59, 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.), 74, is the
retired President of Kaman Aerospace
International Corporation, a subsidiary
of the corporation. He has been a
Director since 1991 and served as a
consultant to the corporation until
February 28, 2003. He retired from
the U.S. Navy in 1991 having served as
Commander-in-Chief for the U.S. Navy
Pacific Command since 1988.
Edwin A. Huston Mr. Huston, 64, became a director at the
2002 Annual Meeting of Shareholders. Mr.
Huston is the retired Vice Chairman
of Ryder System, Incorporated, an
international logistics and
transportation solutions company. He
served as Senior Executive Vice
President Finance and Chief Financial
Officer of that company from 1986 to 1999.
Mr. Huston is a director of Unisys
Corporation, Answerthink, Inc. and
Enterasys Networks, Inc.
C. William Kaman II Mr. Kaman, 51, has been a Director
since 1992 and is Vice Chairman of the
board of directors of the corporation.
He is the retired Chairman and CEO of
AirKaman of Jacksonville, Inc., an
entity unaffiliated with the
corporation. Previously he was
Executive Vice President of the
corporation and President of Kaman Music
Corporation, a subsidiary of the
corporation.
John C. Kornegay Mr. Kornegay, 53, has been President of
Kamatics Corporation, a subsidiary of
the corporation, since 1999, and has
held various positions with Kamatics
Corporation since 1988.
Eileen S. Kraus Ms. Kraus, 64, has been a Director
since 1995. She is the retired
Page 23
<page>
Chairman of Fleet Bank Connecticut.
She is a director of The Stanley Works
and Rogers Corporation.
Paul R. Kuhn Mr. Kuhn, 61, has been a Director since
1999. He has been President and Chief
Executive Officer of the corporation
since August 1999 and was appointed to
the additional position of Chairman in
2001. 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. He is a director of the
Connecticut Business and Industry
Association.
Joseph H. Lubenstein Mr. Lubenstein, 55, became President of
Kaman Aerospace Corporation, a subsidiary
of the corporation, in 2001. Prior to
that, he served for many years in a
variety of senior management positions
at Pratt & Whitney, a subsidiary of
United Technologies Corporation, most
recently as Vice President - Quality and
Vice President - Materials.
Walter H. Monteith, Jr. Mr. Monteith, 72, has been a Director
since 1987. He is the retired Chairman
of Southern New England Telecommuni-
cations Corporation.
Wanda L. Rogers Mrs. Rogers, 70, has been a Director
since 1991. She is President and Chief
Executive Officer of Rogers
Helicopters, Inc. She is also a
director of both Central Valley
Community Bancorp and its subsidiary,
Clovis Community Bank.
Robert H. Saunders, Jr. Mr. Saunders, 61, became President of
Kaman Music Corporation, a subsidiary
of the corporation, in 1998. Prior to
that, he served as Senior Vice
President of the corporation from 1995
and also held the position of Senior
Executive Vice President of Kaman Music
Corporation during a portion of that
period.
Page 24
<page>
Richard J. Swift Mr. Swift, 58, became a director at the
2002 Annual Meeting of Shareholders.
Mr. Swift is currently Chairman of the
Financial Accounting Standards Advisory
Council. In 2001, he retired as
Chairman, President and Chief
Executive Officer of Foster Wheeler Ltd.,
a provider of design, engineering,
construction, and other services, a
position he held since 1994. Prior to
that, Mr. Swift held various positions
at Foster Wheeler, having joined the
company in 1972. Mr. Swift is a
director of Ingersoll-Rand Company Ltd.
and Public Service Enterprise Group
Incorporated.
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 15, 2003.
Section 16(a) Beneficial Ownership Reporting Compliance.
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 2002, except that Admiral Hardisty
reported on a Form 5 filed for the year 2002 a gift of 500 shares
of Class A common stock made to his spouse on August 29, 2001
which should have been reported on Form 5 for the year 2001.
ITEM 11. EXECUTIVE COMPENSATION
A) GENERAL. The following tables provide certain information
relating to the compensation of the corporation's Chief
Executive Officer and its four other most highly compensated
executive officers.
Page 25
<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) (#Shares) Payments ($)(2)
- ---------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c> <c> <c> <c>
P. R. Kuhn 2002 800,000 240,000 ------- 174,000 21,000/ --- 13,497
Chairman, 52,000
President and
Chief 2001 762,500 300,000 ------- 261,000 25,000/ --- 15,630
Executive 65,000
Officer 2000 650,000 570,000 ------- 154,688 20,000/--- 11,924
50,000
R.M. Garneau 2002 470,000 118,000 ------- 101,500 12,000/ --- 23,655
Executive 29,000
Vice Pres- 2001 450,000 150,000 ------- 163,125 12,500/ --- 25,056
ident and 40,000
Chief 2000 425,000 310,000 ------- 77,344 10,000/ --- 25,181
Financial 30,000
Officer
J.H. Lubenstein
President, 2002 325,000 65,000 ------- 72,500 9,000/ --- 7,766
Kaman 22,000
Aerospace 2001 300,000 160,000 ------- 406,875 45,000/ --- 2,875
Corporation 45,000
2000 -------(3) ------ ------- ------ ------ --- -----
T.J.Cahill 2002 280,000 56,000 ------- 58,000 7,000/ --- 12,229
President, 18,000
Kaman 2001 280,000 90,000 ------- 97,875 9,000/ --- 15,077
Industrial 20,000
Technologies 2000 260,000 160,000 ------- 41,250 6,000/ --- 15,670
Corporation 15,000
R.H.Saunders Jr.
President, 2002 245,000 196,000 ------- 50,750 6,000/ --- 18,384
Kaman Music 15,000
Corporation 2001 235,000 85,000 ------- 81,563 8,000/ --- 15,681
15,000
2000 210,000 110,000 ------- 41,250 6,000/ --- 13,832
10,000
<fn>
1. As of December 31, 2002, aggregate restricted stock holdings
and their year end value were: P.R. Kuhn, 53,800 shares valued at
Page 26
<page>
$591,800; R.M. Garneau, 22,200 shares valued at $244,200; J.H.
Lubenstein, 25,000 shares valued at $275,000; T.J.Cahill, 13,200
shares valued at $145,200; and R.H. Saunders, Jr., 12,100 shares
valued at $133,100. Restrictions generally 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, 12,000 shares in 2002, 16,000 shares in 2001, and 15,000
shares in 2000; R. M. Garneau, 7,000 shares in 2002, 10,000
shares in 2001, and 7,500 shares in 2000; J.H. Lubenstein, 5,000
shares in 2002, and 25,000 shares in 2001; T. J. Cahill, 4,000
shares in 2002, 6,000 shares in 2001, and 4,000 shares in 2000;
R. H. Saunders, Jr., 3,500 shares in 2002, 5,000 shares in 2001,
and 4,000 in 2000. Dividends are paid on the restricted stock.
2. Amounts reported in this column consist of: P.R. Kuhn, $7,173
- - Senior executive life insurance program ("Executive Life"),
$5,000 - employer matching contributions to the Kaman Corporation
Thrift and Retirement Plan (the "Thrift Plan employer match");
$1,324 - medical expense reimbursement program ("MERP"); R.M.
Garneau, $5,949 - Executive Life, $851 - Officer 162 Insurance
Program, $5,000 - Thrift Plan employer match, $2,155 - MERP,
$9,700 - all supplemental employer contributions under the Kaman
Corporation Deferred Compensation Plan ("supplemental employer
contributions"); J. H. Lubenstein, $2,766 - Executive Life,
$5,000 - Thrift Plan employer match; T. J. Cahill, $3,153 -
Executive Life, $5,000 - Thrift Plan employer match, $676 - MERP,
$3,400 - supplemental employer contributions; R.H. Saunders, Jr.,
$6,585 - Executive Life, $5,000 - Thrift Plan employer match,
$3,491 - MERP, $3,308 - supplemental employer contributions.
3. Mr. Lubenstein joined the Corporation in July 2001.
</fn>
</table>
Page 27
<page>
C) OPTION/SAR GRANTS IN THE LAST FISCAL YEAR:
<table>
- ----------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term*
- ----------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
% of Total
Options/
SARs**
Options/ Granted to
SARs** Employees Exercise or
Granted in Fiscal Base Price Expiration
Name (#) Year ($/Sh) Date 5%($) 10%($)
- ----------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c> <c>
P. R. Kuhn 21,000/ 9.93/ 14.5000 2/12/12 665,685 1,686,976
52,000 38.24
R. M. Garneau 12,000/ 5.67/ 14.5000 2/12/12 373,878 947,480
29,000 21.32
J. H. Luben- 9,000/ 4.26/ 14.5000 2/12/12 282,688 716,387
stein 22,000 16.18
T. J. Cahill 7,000/ 3.31/ 14.5000 2/12/12 227,974 577,732
18,000 13.24
R. H. Saunders 6,000/ 2.84/ 14.5000 2/12/12 191,498 485,295
15,000 11.03
*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") are payable in cash only,
not in shares of common stock.
Options and SARs relate to the corporation's Class A common
stock and generally vest at the rate of 20% per year, beginning
one year after the grant date provided the recipient remains an
employee of the corporation or a subsidiary.
</table>
Page 28
<page>
D) STOCK OPTION EXERCISES IN THE LAST FISCAL YEAR, AND
FISCAL YEAR-END OPTION VALUES.
<table>
Number of
Shares under- Value of
lying Unexercised
Unexercised in-the-money
options options*
Shares at FY-end (#) at FY-end ($)
acquired on Value exercisable/ exercisable/
Name Exercise(#) realized unexercisable unexercisable
(a) (b) (c) (d) (e)
- -----------------------------------------------------------------------
<s> <c> <c> <c> <c>
P. R. Kuhn none - 73,000/93,000 $ 5,500/8,250
R. M. Garneau 26,500 $213,038 27,900/33,100 $ 2,750/4,125
J. H. Lubenstein none - 9,000/45,000 0/ 0
T. J. Cahill none - 40,200/22,300 $ 7,275/2,475
R. H. Saunders none - 17,600/19,400 $ 3,525/2,475
*Difference between the 12/31/02 Fair Market Value and the exercise price.
</table>
Page 29
<page>
STOCK APPRECIATION RIGHT ("SAR")EXERCISES IN THE LAST FISCAL YEAR
AND YEAR-END SAR VALUES.
<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>
P. R. Kuhn none none 141,000/206,000 $13,750/20,625
R. M. Garneau 75,000 $386,250 73,000/ 93,500 $ 8,250/12,375
J. H. Lubenstein none none 9,000/ 58,000 0/ 0
T. J. Cahill " " 75,000/ 50,500 $ 4,125/ 6,188
R. H. Saunders " " 10,000/ 35,000 $ 2,750/ 4,125
*Difference between the 12/31/02 Fair Market Value and the exercise price(s).
</table>
Page 30
<page>
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.
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 32,523 43,581 53,988 65,046 65,046
150,000 40,023 53,631 66,438 80,046 80,046
175,000 47,523 63,681 78,888 95,046 95,046
200,000 55,023 73,731 91,338 110,046 110,046
225,000 62,523 83,781 103,788 125,046 125,046
250,000 70,023 93,831 116,238 140,046 140,046
300,000 85,023 113,931 141,138 170,046 170,046
350,000 100,023 134,031 166,038 200,046 200,046
400,000 115,023 154,131 190,938 230,046 230,046
450,000 130,023 174,231 215,838 260,046 260,046
500,000 145,023 194,331 240,738 290,046 290,046
750,000 220,023 294,831 365,238 440,046 440,046
1,000,000 295,023 395,331 489,738 590,046 590,046
1,250,000 370,023 496,831 614,238 740,046 740,046
1,500,000 445,023 596,331 738,738 890,046 890,046
1,750,000 520,023 696,831 863,238 1,040,046 1,040,046
2,000,000 595,023 797,331 988,738 1,190,046 1,190,046
*Remuneration: Average of the highest five consecutive years of
"Covered Compensation" out of the final ten years of service.
</table>
Page 31
<page>
"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, stock appreciation
rights, and the cash out of employee stock options. Salary and
bonus amounts for the named executive officers for 2002 are as
shown on the Summary Compensation Table. Compensation deferred
under the corporation's non-qualified deferred compensation plan
is included in Covered Compensation here because it is covered by
the corporation's unfunded supplemental employees' retirement
plan for the participants in that plan.
Current Compensation covered by the Pension Plan for any
named executive whose Covered Compensation differs by more than
10% from the compensation disclosed for that executive in the
Summary Compensation Table: Mr. Kuhn, $1,354,066; Mr. Garneau,
$1,119,821; Mr. Cahill, $444,501; Mr. Lubenstein, $579,000;
Mr. Saunders, $382,129.
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, 2002, had the number of
years of credited service indicated: Mr. Kuhn - 8.0; Mr. Garneau -
21.5 years; Mr. Cahill - 27.7 years; Mr. Lubenstein - 2.7 years;
Mr. Saunders - 7.0.
Benefits are computed generally in accordance with the
benefit formula described above.
G) COMPENSATION OF DIRECTORS. Effective January 1,2002, non-
employee members of the Board of Directors of the corporation
receive an annual retainer of $25,000 and a fee of $1,200 for
attending each meeting of the Board and each meeting of a
Committee of the Board, except that the Chairman of each
committee receives a fee of $1,600 for attending each meeting of
that Committee. The Vice Chairman is entitled to a fee of $2,500
per meeting when serving as the Chairman. 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 2003 Annual Meeting of Shareholders.
Page 32
<page>
H) EMPLOYMENT CONTRACTS AND TERMINATION, SEVERANCE AND CHANGE OF
CONTROL ARRANGEMENTS. The corporation has entered into
Employment Agreements and Change in Control Agreements with
certain executive officers, copies of which were filed as
exhibits to the following filings made by the corporation with
the Securities and Exchange Commission: Form 10-Q (Document
54381-99-14) filed on November 12, 1999; Form 10-K (Document No.
54381-00-03 filed on March 21, 2000; and Form 10-Q (Document
54381-00-500006) filed on November 14, 2000. Form 10-Q filed
August 14, 2001 (Document No. 0000054381-01-500011 and Form
10-Q filed November 14, 2001 (Document No. 0000054381-01-500016.
The employment agreements do not have a fixed term and generally
provide for a severance payment to be made to any such officer if
he or she is terminated from employment (other than for willful
failure to perform proper job responsibilities or violations of
law) or if he or she leaves employment for good reason (e.g., due
to a diminution in job responsibilities). The change in control
agreements generally provide that, for a three year period
following a change in control of Kaman Corporation or, in certain
cases, a subsidiary thereof, a severance payment will be made to
any such officer if his or her employment ends following the change
in control (unless the termination was for cause, the officer dies
or becomes disabled or if he or she leaves employment without good
reason). The change in control agreements do not have a fixed
term.
Admiral Hardisty's consulting agreement with the Corporation, which
was renewed for a period of one year effective March 1, 2002 at a
per diem rate of $1,000.00 expired on February 28, 2003. A copy of
such agreement was attached as Exhibit 10(f)(I) to the
Corporation's Form 10-K for fiscal year ended December 31, 2001,
filed with the Securities and Exchange Commission on March 15,
2002.
The corporation has also entered into an agreement with
Walter Kozlow retaining him as a consultant for a
period of two years following his retirement from regular
employment effective December 31, 2001 at an annual rate of
$242,500. A copy of such agreement was attached to the
corporation's Form 10-Q filed with the Securities and Exchange
Commission on August 14, 2001.
Page 33
<page>
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 officer 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: Brian E. Barents, E. Reeves Callaway,
III, Frank C. Carlucci, Laney J. Chouest, M.D., Wanda L. Rogers,
and Richard J. Swift.
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.
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.
Page 34
<page>
<table>
- -----------------------------------------------------------------
Number of Shares
Class of Beneficially Owned
Common Name and Address as of February 1, Percentage
Stock Beneficial Owner 2003 of Class
- -----------------------------------------------------------------
<s> <c> <c> <c>
Class B Charles H. Kaman 258,375(1),(2) 38.69%
Kaman Corporation
1332 Blue Hills Avenue
Bloomfield, CT 06002
Holders of Mr. Kaman's (2)
Power of Attorney
c/o John C. Yavis, Jr.
Murtha Cullina LLP
CityPlace I
185 Asylum Street
Hartford, CT 06105
Class B Newgate Associates 199,802(3),(4) 29.91%
Limited Partnership
c/o Murtha Cullina, LLP
CityPlace I
185 Asylum Street
Hartford, CT 06103
Voting Trustees pursuant (4)
to a Voting Trust
Agreement, dated as of
August 14, 2000
c/o John C. Yavis, Jr.
Murtha Cullina LLP
CityPlace I
185 Asylum Street
Hartford, CT 06105
Class B C. William Kaman, II 64,446(5) 9.65%
5367 Florence Point Drive
Fernandina Beach, FL 32034
Class B Robert D. Moses 51,177(6) 7.66%
Farmington Woods
Avon, CT 06001
Page 35
<page>
<fn>
(1) Excludes 1,471 shares held by Mrs. Kaman. Mr. Kaman shares
beneficial ownership of these shares with the holders of a
Power of Attorney, as described in note (2) below.
(2) The power to vote Mr. Kaman's shares of Class B common stock
is shared through a durable power of attorney (the "Power of
Attorney") with certain individuals who have the authority to
vote Mr. Kaman's shares by majority vote. These individuals
are: John S. Murtha, a director emeritus of the corporation
and of counsel to the Hartford, Connecticut law firm, Murtha
Cullina LLP, counsel to the corporation, Robert M. Garneau,
Executive Vice President and Chief Financial Officer of the
corporation, Roberta C. Kaman, Mr. Kaman's wife, C. William
Kaman II, Mr. Kaman's son and a director and Vice Chairman of
the Board of the corporation, Steven W. Kaman, Mr. Kaman's
son, and Cathleen H. Kaman-Wood, Mr. Kaman's daughter.
(3) These shares are subject to a voting trust agreement dated
August 14, 2000 (the "Voting Trust"), as described in note
(4) below. Newgate shares beneficial ownership of such
shares with the voting trustees of such trust, as described
in note (4) below.
(4) The power to vote the shares of Newgate Associates Limited
Partnership is vested in eleven voting trustees (the "Voting
Trustees") under the Voting Trust, which has a term of ten
(10) years, subject to renewal. The Voting Trustees
consist of the six (6) individuals identified in footnote
(2) above and the following five (5) individuals: T. Jack
Cahill, President of Kaman Industrial Technologies
Corporation, a subsidiary of the corporation, Paul R. Kuhn,
Chairman, President, and Chief Executive Officer of the
corporation, Huntington Hardisty and Eileen S. Kraus,
directors of the corporation, and John C. Yavis, Jr., a
partner of Murtha Cullina LLP, counsel to the corporation.
(5) Excludes 4,800 shares held as trustee for the benefit of
certain family members.
(6) Includes 39,696 shares held by a partnership controlled by
Mr. Moses.
</fn>
</table>
Page 36
<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>
Number of Shares
Class of Beneficially Owned Percentage
Name Common Stock as of February 1, 2003 of Class
- --------------------------------------------------------------------
<s> <c> <c> <c>
Brian E. Barents Class A 3,000 *
T. Jack Cahill Class A 101,856(1) *
E. Reeves Callaway Class A 3,000 *
Frank C. Carlucci Class A 6,000(2) *
Laney J. Chouest Class A 4,923 *
John A. DiBiaggio Class A 3,000 *
Robert M. Garneau Class A 106,518(3) *
Class B 24,404 3.48%
Huntington Hardisty Class A ------(4) *
Edwin A. Huston Class A 1,000 *
C. William Kaman, II Class A 60,388(5) *
Class B 64,446(6) 9.65%
Paul R. Kuhn Class A 228,869(7) *
Class B 3,288 *
Eileen S. Kraus Class A 3,922 *
Joseph H. Lubenstein Class A 49,800(8) *
Walter H. Monteith, Jr. Class A 3,200 *
Wanda L. Rogers Class A 3,000 *
Robert H. Saunders, Jr. Class A 45,922(9) *
Class B 720 *
Richard J. Swift Class A 1,000 *
All Directors and
Executive Officers Class A 730,058(10) 3.35%
as a group ** Class B 94,020 14.08%
* Less than one percent.
** Excludes 22,400 Class A shares held by spouses of certain
Directors and executive officers.
<fn>
(1) Includes 47,600 shares subject to stock options exercisable
or which will become exercisable within 60 days
(2) Includes 6,000 shares held jointly with Mrs. Carlucci.
(3) Includes 38,100 shares subject to stock options exercisable
or which will become exercisable within 60 days
(4) Excludes 22,400 shares held by Mrs. Hardisty.
(5) Excludes 89,891 shares held by Mr. Kaman as Trustee, in
which shares Mr. Kaman disclaims any beneficial ownership.
Page 37
<page>
(6) Excludes 4,800 shares held by Mr. Kaman as Trustee in which
shares Mr. Kaman disclaims any beneficial ownership.
(7) Includes 106,200 shares subject to stock options exercisable
or which will become exercisable within 60 days.
(8) Includes 19,800 shares subject to stock options exercisable
or which will become exercisable within 60 days.
(9) Includes 23,800 shares subject to stock options exercisable
or which will become exercisable within 60 days.
(10) Includes 294,200 shares subject to stock options which will
become exercisable within 60 days.
</fn>
</table>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2002, the corporation obtained legal services in the
amount of $1,013,910 from the Hartford, Connecticut law firm of
Murtha Cullina LLP of which Mr. John S. Murtha, is of counsel and
Mr. John C. Yavis, Jr. is a partner. Mr. Murtha, a director
emeritus of the corporation, is currently one of six holders of a
power of attorney described in footnote (2) to the table entitled
"Security Ownership of Certain Beneficial Owners", and a voting
trustee of the Voting Trust described in footnote (4) of such
table. Mr. Yavis currently serves as a voting trustee of the
Voting Trust and as the general partner of Newgate Associates
Limited Partnership.
PART IV
ITEM 14. DISCLOSURE CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. Within
the ninety days prior to the date of this report, management,
with the participation of the Chief Executive Officer and Chief
Financial Officer, carried out an evaluation of the effectiveness
of the corporation's disclosure controls and procedures pursuant
to Securities Exchange Act Rule 13a-14 or 15d-14. Based on that
evaluation, the Chief Executive Officer and Chief Financial
Officer concluded, as of February 3, 2003, that the corporation's
disclosure controls and procedures are effective in providing
assurance that information required to be disclosed by the
corporation in the reports that it files or submits under the
Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported upon in a timely manner.
We note, however, that even the most well designed and executed
controls systems are subject to inherent limitations and as a
result, the control system cannot provide absolute assurance that
its objectives will be met under all potential future conditions.
Page 38
<page>
Changes in Internal Controls. There have been no significant
changes in the corporation's internal controls or in other
factors that could significantly affect these controls and
procedures subsequent to February 3, 2003.
ITEM 15. 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.
(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: A report on Form 8-K was filed
with the Securities and Exchange Commission on October
21, 2002, File No. 333-66179, Document No. 0000054381-
02-0000026 concerning the corporation's acquisition of
Latin Percussion, Inc.
Page 39
<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 26th day of March, 2003.
KAMAN CORPORATION
(Registrant)
/s/ Paul R. Kuhn
By Paul R. Kuhn, Chairman, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature: Title: Date:
- ---------------------------------------------------------------
/s/ Paul R. Kuhn
Paul R. Kuhn Chairman, President, and March 26, 2003
Chief Executive Officer
and Director
/s/ Robert M. Garneau
Robert M. Garneau Executive Vice President March 26, 2003
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Paul R. Kuhn
Paul R. Kuhn March 26, 2003
Attorney-in-Fact for:
Brian E. Barents Director
E. Reeves Callaway, III Director
Frank C. Carlucci Director
John A. DiBiaggio Director
Huntington Hardisty Director
Edwin A. Huston Director
C. William Kaman, II Director
Eileen S. Kraus Director
Walter H. Monteith, Jr. Director
Wanda L. Rogers Director
Richard J. Swift Director
Page 40
<page>
CERTIFICATIONS
I, Paul R. Kuhn, certify that:
1. I have reviewed this annual report on Form 10-K of Kaman
Corporation;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this annual report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
Page 41
<page>
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this annual report whether there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 26, 2003 By: /s/ Paul R. Kuhn
---------------------------
Paul R. Kuhn
Chairman, President and
Chief Executive Officer
(Duly Authorized Officer)
Page 42
<page>
CERTIFICATIONS
I, Robert M. Garneau, certify that:
1. I have reviewed this annual report on Form 10-K of Kaman
Corporation;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this annual report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
Page 43
<page>
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this annual report whether there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 26, 2003 By: /s/ Robert M. Garneau
---------------------------
Robert M. Garneau
Executive Vice President and
Chief Financial Officer
(Duly Authorized Officer)
Page 44
<page>
KAMAN CORPORATION AND SUBSIDIARIES
Index to Financial Statement Schedules
Report of Independent Auditors
Financial Statement Schedules:
Schedule V - Valuation and Qualifying Accounts
Page 45
<page>
REPORT OF INDEPENDENT AUDITORS
KPMG LLP
Certified Public Accountants
One Financial Plaza
Hartford, Connecticut 06103
The Board of Directors and Shareholders
Kaman Corporation:
Under date of January 28, 2003, we reported on the consolidated
balance sheets of Kaman Corporation and subsidiaries as of
December 31, 2002 and 2001 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, 2002, as contained in the 2002 annual report to
shareholders. These consolidated financial statements and our
report thereon are included in the annual report on Form 10-K
for 2002. 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
January 28, 2003
Page 46
<page>
KAMAN CORPORATION AND SUBSIDIARIES
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
<table>
YEAR ENDED DECEMBER 31, 2002
Additions
<s> <c> <c> <c> <c> <c>
BALANCE CHARGED TO BALANCE
JANUARY 1, COSTS AND DECEMBER 31,
DESCRIPTION 2002 EXPENSES OTHERS DEDUCTIONS 2002
Allowance for
doubtful accounts $3,939 $1,024 $ 110(B) $2,220(A) $2,853
====== ====== ====== ====== ======
Accumulated
amortization $1,817 $-----(C) $----- $----- $1,817
of goodwill ====== ====== ====== ====== ======
YEAR ENDED DECEMBER 31, 2001
Additions
<s> <c> <c> <c> <c> <c>
BALANCE CHARGED TO BALANCE
JANUARY 1, COSTS AND DECEMBER 31,
DESCRIPTION 2001 EXPENSES OTHERS DEDUCTIONS 2001
Allowance for
doubtful accounts $4,636 $ 868 $277(B) $1,842(A) $3,939
====== ====== ====== ====== ======
Accumulated
amortization $1,708 $ 109 $----- $----- $1,817
of goodwill ====== ====== ====== ====== ======
YEAR ENDED DECEMBER 31, 2000
Additions
<s> <c> <c> <c> <c> <c>
BALANCE CHARGED TO BALANCE
JANUARY 1, COSTS AND DECEMBER 31,
DESCRIPTION 2000 EXPENSES OTHERS DEDUCTIONS 2000
Allowance for
doubtful accounts $4,519 $1,490 $----- $1,373(A) $4,636
====== ====== ====== ====== ======
Accumulated
amortization $1,598 $ 110 $----- $----- $1,708
of goodwill ====== ====== ====== ====== ======
<fn>
(A) Write-off of bad debts, net of recoveries.
(B) Additions to allowance for doubtful accounts attributable to
acquisitions.
(C) In accordance with FASB 142, no amortization expense for
goodwill has been recorded in 2002.
</fn>
</table>
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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, and as amended
by Document No. 0000054381-02-000022
filed on August 14, 2002.
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.
Exhibit 4b Revolving Credit Agreement by reference
between the corporation and The
Bank of Nova Scotia and Fleet
National Bank as Co-Administrative
Agents and Bank One, N.A. as the
Documentation Agent and The Bank of
Nova Scotia and Fleet Securities, Inc.
as the Co-Lead Arrangers and Various
Financial Institutions dated as of
November 13, 2000 filed as Exhibit 4
to form 10-Q filed with the Securities
and Exchange Commission on November 14,
2000, Document No. 0000054381-00-500006,
as amended by Document No. 0000054381-02-
000022 filed on August 14, 2002.
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Exhibit 4c Credit Agreement between the attached
corporation, RWG Frankenjura-
Industrie Flugwerklager GmbH, and
Wachovia Bank, N.A., dated July 29,
2002. Schedules and Exhibits to the
Credit Agreement, which are listed in
its Table of Contents, are omitted but
will be provided to the Commission upon
request.
Exhibit 4d The corporation is party to certain
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 attached
Incentive Plan as amended effective
February 25, 2003.
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. 0000054381-98-09
filed with the Securities and
Exchange Commission on March 16, 1998,
as amended by Document No. 0000054381-98-13
filed on March 27, 1998.
Exhibit 10c Kaman Corporation Supplemental by reference
Employees' Retirement Plan, as
amended has been filed as an exhibit
to the Corporation's Form 10-K,
Document No. 0000054381-02-000005
filed with the Securities and Exchange
Commission on March 14, 2002.
Exhibit 10d Amended and Restated Deferred attached
Compensation Plan (Effective as of
November 12, 2002, except where
otherwise indicated).
Exhibit 10e(i) Kaman Corporation Cash Bonus Plan by reference
(Amended and Restated Effective as
of January 1, 2002) and First
Amendment thereto was filed as an
exhibit to the Corporation's Form 10-K
Document No. 0000054381-02-000005,
filed with the Securities and Exchange
Commission on March 14, 2002.
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Exhibit 10e(ii) Second Amendment to Kaman attached
Corporation Cash Bonus Plan
(Amended and Restated Effective as
of January 1, 2002).
Exhibit 10f Employment Agreements and Change in by reference
Control Agreements with certain
executive officers have been filed
as exhibits to the following
filings by the corporation with the
Securities and Exchange Commission:
Form 10-Q (Document No. 54381-99-14)
filed November 12, 1999; Form 10-K
(Document No. 54381-00-03) filed
March 21, 2000; Form 10-Q
(Document No. 54381-00-500006)
Filed November 14, 2000; and Form 10-Q
(Document No. 54381-01-500015) filed
November 14, 2001.
Exhibit 10f(I) Agreement between Kaman Aerospace by reference
Corporation and Huntington
Hardisty effective March 1, 2002
has been filed as exhibit to the
Corporation's Form 10-K, Document
No. 0000054381-02-000005 filed with
the Securities and Exchange Commission
on March 14, 2002.
Exhibit 10g Notice of change of control by reference
filed as Exhibit 99 to the
corporation's Form 8-K dated
August 16, 2000 as Document
No. 54381-00-000010.
Exhibit 11 Statement regarding computation attached
of per share earnings.
Exhibit 13 Portions of the Corporation's attached
2002 Annual Report to
Shareholders as required by
Item 8.
Exhibit 21 Subsidiaries. attached
Exhibit 23 Consent of Independent Auditors. attached
Exhibit 24 Power of attorney under which attached
this report has been signed on
behalf of certain directors.
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Exhibit 99.1 Certification of Chief Executive attached
Officer
Exhibit 99.2 Certification of Chief Financial attached
Officer
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