<page>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
- --- SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED March 31, 2004.
--------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
- --- SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM TO
------------------ ------------------.
Commission File No. 0-1093
KAMAN CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Connecticut 06-0613548
- -------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1332 Blue Hills Avenue
Bloomfield, Connecticut 06002
----------------------------------------
(Address of principal executive offices)
(860) 243-7100
--------------------------------------------------
Registrant's telephone number, including area code
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Exchange Act Rule 12b-2)
Yes x No
--- ---
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of May 1, 2004:
Class A Common 22,014,578
Class B Common 667,814
Page 1 of 35 Pages
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets(In thousands)
<table>
Assets March 31, 2004 December 31, 2003
------ ------------------ -------------------
<s> <c> <c> <c> <c>
Current assets:
Cash and cash equivalents $ 9,825 $ 7,130
Accounts receivable, net 209,442 193,243
Inventories:
Contracts and other
work in process $ 63,748 60,125
Finished goods 27,553 24,785
Merchandise for resale 97,901 189,202 94,042 178,952
------- -------
Income taxes receivable - 1,043
Deferred income taxes 26,026 26,026
Other current assets 11,627 12,457
------- -------
Total current assets 446,122 418,851
Property, plant & equip., at cost 155,098 154,031
Less accumulated depreciation
and amortization 104,537 102,982
------- -------
Net property, plant & equipment 50,561 51,049
Goodwill 38,794 38,638
Other intangible assets, net 14,682 14,709
Other assets, net 4,843 5,064
------- -------
Total assets $555,002 $528,311
======= =======
- 2 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets(In thousands) (continued)
March 31, 2004 December 31, 2003
------------------ -------------------
<s> <c> <c> <c> <c>
Liabilities and Shareholders' Equity
------------------------------------
<s> <c> <c>
Current liabilities:
Notes payable, incl. current
portion of long-term debt $ 10,857 $ 7,673
Accounts payable - trade 58,810 59,600
Accrued contract loss 23,805 23,611
Accrued restructuring costs 5,445 6,109
Other accrued liabilities 24,141 26,123
Advances on contracts 19,966 19,693
Other current liabilities 16,810 17,746
Income taxes payable 759 -
------- -------
Total current liabilities 160,593 160,555
Long-term debt, excl. current portion 62,620 36,624
Other long-term liabilities 28,491 27,949
Shareholders' equity 303,298 303,183
------- -------
Total liabilities and
Shareholders' Equity $555,002 $528,311
======= =======
</table>
See accompanying notes to condensed consolidated financial statements.
- 3 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Condensed Consolidated Statements of Operations
(In thousands except per share amounts)
<table>
For the Three Months
Ended March 31,
--------------------
2004 2003
---- ----
<s> <c> <c>
Net sales $245,678 $216,010
Costs and expenses:
Cost of sales 183,023 159,956
Selling, general and
administrative expense 59,427 49,137
Other operating (income)/expense, net (318) (273)
Net gain on sale of product line and
other assets - (16,849)
Interest expense, net 795 768
Other expense, net 484 405
-------- --------
243,411 193,144
-------- --------
Earnings before income taxes 2,267 22,866
Income taxes 975 8,900
-------- --------
Net earnings $ 1,292 $ 13,966
======== ========
Net earnings per share:
Basic $ .06 $ .62
Diluted $ .06 $ .60
======== ========
Average shares outstanding:
Basic 22,648 22,495
Diluted 23,660 23,480
======== ========
Dividends declared per share $ .11 $ .11
======== ========
</table>
See accompanying notes to condensed consolidated financial statements.
- 4 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Condensed Consolidated Statements of Cash Flows
(In thousands)
<table>
For the Three Months
Ended March 31,
--------------------
2004 2003
--------- --------
<s> <c> <c>
Cash flows from operating activities:
Net earnings $ 1,292 $13,966
Depreciation and amortization 2,238 2,626
Net gain on sale of product line and other assets - (16,849)
Other, net 1,025 191
Changes in current assets and liabilities,
excluding effects of divestiture:
Accounts receivable (16,125) (24,209)
Inventory (10,163) (7,108)
Income taxes receivable 1,043 5,192
Accounts payable (807) 6,393
Advances on contracts 273 (747)
Income taxes payable 763 5,260
Changes in other current assets and liabilities (2,598) (1,510)
-------- --------
Cash provided by (used in) operating
activities (23,059) (16,795)
-------- --------
Cash flows from investing activities:
Proceeds from sale of product line and other assets - 28,021
Expenditures for property, plant & equipment (1,586) (1,789)
Other, net 370 (461)
-------- --------
Cash provided by (used in) investing
activities (1,216) 25,771
-------- --------
- 5 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Condensed Consolidated Statements of Cash Flows (continued)
(In thousands)
For the Three Months
Ended March 31,
--------------------
2004 2003
--------- --------
<s> <c> <c>
Cash flows from financing activities:
Changes to notes payable 3,158 1,926
Additions/(reductions) to long-term debt 25,996 (5,897)
Dividends paid (2,489) (2,471)
Purchases of treasury stock (4) (205)
Proceeds from sale of stock 309 324
-------- --------
Cash provided by (used in) financing
activities 26,970 (6,323)
-------- --------
Net increase (decrease) in cash and cash equivalents 2,695 2,653
Cash and cash equivalents at beginning of period 7,130 5,571
-------- --------
Cash and cash equivalents at end of period $ 9,825 $ 8,224
======== ========
</table>
See accompanying notes to condensed consolidated financial statements.
- 6 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Notes to Condensed Consolidated Financial Statements
(In thousands)
Basis of Presentation
- ---------------------
The December 31, 2003 condensed consolidated balance sheet
amounts have been derived from the previously audited
consolidated balance sheet of Kaman Corporation and subsidiaries.
In the opinion of management, the balance of the condensed
financial information reflects all adjustments which are
necessary for a fair presentation of the financial position,
results of operations and cash flows for the interim periods
presented and are of a normal recurring nature, unless otherwise
disclosed in this report.
The corporation reports results based on fiscal quarters that
generally consist of two four week months and one five week
month, with the fiscal year beginning on January 1 and ending on
December 31.
The statements should be read in conjunction with the consolidated
financial statements and notes included in the corporation's
annual report on Form 10K for the year ended December 31, 2003.
The results of operations for the interim period presented are not
necessarily indicative of trends or of results to be expected for
the entire year.
Cash Flow Items
- ---------------
Cash payments for interest were $1,093 and $1,168 for the three
months ended March 31, 2004 and 2003, respectively. Net cash
payments (refunds) for income taxes for the comparable periods
were $(791) and $(1,568), respectively.
Comprehensive Income
- --------------------
Comprehensive income was $2,104 and $14,023 for the three months
ended March 31, 2004 and 2003, respectively. Comprehensive
income includes net earnings plus foreign currency translation
adjustments.
- 7 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Notes to Condensed Consolidated Financial Statements
(In thousands)
Net Gain on Sale of Product Line
- --------------------------------
On January 15, 2003, the corporation sold its electric motor and
drive business to DRS Technologies, Inc. The results for the
first quarter 2003 include an after-tax gain of $10,100 as a
result of this transaction.
Accounts Receivable
- -------------------
Accounts receivable consist of the following:
<table>
March 31, December 31,
2004 2003
-------- -----------
<s> <c> <c>
Trade receivables, net of allowance
for doubtful accounts of
$3,698 in 2004, $3,340 in 2003 $ 84,028 $ 74,816
U.S. Government contracts:
Billed 10,279 9,355
Recoverable costs and accrued profit
- not billed 9,452 10,014
Commercial and other government contracts:
Billed 22,369 19,711
Recoverable costs and accrued profit
- not billed 83,314 79,347
-------- --------
Total $209,442 $193,243
======== ========
- 8 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Notes to Condensed Consolidated Financial Statements
(In thousands)
Shareholders' Equity
- --------------------
Changes in shareholders' equity were as follows:
<s> <c>
Balance, January 1, 2004 $303,183
Net earnings 1,292
Foreign currency translation adjustment 812
--------
Comprehensive income 2,104
Dividends declared (2,493)
Purchase of treasury stock (4)
Employee stock plans 508
--------
Balance, March 31, 2004 $303,298
========
Restructuring Costs
- -------------------
The following table displays the activity and balances of these
pre-tax charges as of and for the three months ended March 31,
2004:
Deductions
----------
Balance at Cash Non-Cash Balance at
December 31, 2003 Payments Charges March 31, 2004
----------------- -------- -------- --------------
<s> <c> <c> <c> <c>
Restructuring costs
- -------------------
Employee termination
benefits $ 1,109 $ 501 $ - $ 608
Facility closings 5,000 163 - 4,837
------ ------ ------ ------
Total restructuring
costs $ 6,109 $ 664 $ - $ 5,445
====== ====== ====== ======
- 9 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Notes to Condensed Consolidated Financial Statements
(In thousands)
Pension Cost
- ------------
Components of net pension cost are as follows:
For the Three Months
Ended March 31,
----------------------
2004 2003
------- -------
<s> <c> <c>
Service cost for benefits
earned during the quarter $ 2,558 $ 2,500
Interest cost on projected
benefit obligation 6,163 6,087
Expected return on plan assets (7,169) (7,862)
Net amortization and deferral 2 2
------- -------
Net pension cost $ 1,554 $ 727
======= =======
- 10 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Notes to Condensed Consolidated Financial Statements
(In thousands)
Business Segments
- -----------------
Summarized financial information by business segment is as follows:
For the Three Months
Ended March 31,
-------------------------
2004 2003
--------- ---------
<s> <c> <c>
Net sales:
Aerospace $ 59,730 $ 61,724
Industrial Distribution 145,607 120,266
Music 40,341 34,020
-------- --------
$245,678 $216,010
======== ========
Operating profit:
Aerospace $ 3,553 $ 7,210
Industrial Distribution 5,030 2,797
Music 1,981 1,847
-------- --------
10,564 11,854
Corporate and other expense, net (7,502) (5,069)
Interest expense, net (795) (768)
Gain on sale of product line
and other assets - 16,849
-------- --------
Earnings before income taxes $ 2,267 $ 22,866
======== ========
March 31, December 31,
2004 2003
-------- --------
<s> <c> <c>
Identifiable assets:
Aerospace $306,261 $294,345
Industrial Distribution 159,713 150,115
Music 66,607 65,704
Corporate 22,421 18,147
-------- --------
$555,002 $528,311
======== ========
</table>
- 11 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Notes to Condensed Consolidated Financial Statements
(In thousands except per share amounts)
Stock Option Accounting
- -----------------------
The following table reflects pro forma net earnings and earnings
per share had the corporation elected to record employee stock
option expense based on the fair value methodology:
<table>
For the Three Months
Ended March 31,
-------------------------
2004 2003
-------- --------
<s> <c> <c>
Net earnings:
As reported $ 1,292 $13,966
Less stock option expense, net of
tax effect (170) (193)
------ ------
Pro forma net earnings $ 1,122 $13,773
====== ======
Earnings per share - basic:
As reported 0.06 0.62
Pro forma after option expense 0.05 0.61
Earnings per share - diluted:
As reported 0.06 0.60
Pro forma after option expense 0.05 0.60
</table>
These pro forma amounts may not be representative of future
disclosures since the estimated fair value of stock options is
amortized to expense over the vesting period, and additional
options may be granted in future years. The pro forma amounts
assume that the corporation had been following the fair value
approach since the beginning.
- 12 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
- ---------------------
Overview
Kaman Corporation is composed of three business segments:
Aerospace, Industrial Distribution, and Music.
The Aerospace segment's programs are conducted through three
principal businesses, consisting of Aircraft Structures and
Components, Advanced Technology Products, and Helicopter Programs.
The Aircraft Structures and Components business involves
aerostructure and helicopter subcontract work as well as
manufacture of components such as self-lubricating bearings and
driveline couplings for aircraft applications. For the first
quarter of 2004, this business constituted about 56 percent of
Aerospace segment sales, compared to about 52 percent for the same
period of 2003. The aerostructure subcontract element of this
business continues to be an area of strategic emphasis for the
corporation. The Advanced Technology Products business manufactures
products involving systems, devices and assemblies for a variety of
military and commercial applications, including safe, arm and
fuzing devices for several missile and bomb programs; precision
non-contact measuring systems for industrial and scientific use;
electro-optical target detection and designation systems; and high
reliability memory systems for airborne, shipboard, and ground-
based programs. For the first quarter of 2004, this business
constituted about 19 percent of segment sales, the same as the
comparable period of 2003. The Advanced Technology Products
business is also an area of strategic emphasis for the corporation.
Helicopter Programs include prime helicopter production along with
spare parts and support. The helicopters produced by this business
are the SH-2G multi-mission maritime helicopter and the K-MAX
medium to heavy external lift helicopter. For the first quarter of
2004, this business constituted about 25 percent of segment sales,
compared to about 29 percent in the same period of 2003.
The Industrial Distribution segment is the third largest U.S.
industrial distributor servicing the bearing, electrical/mechanical
power transmission, fluid power, motion control and materials
handling markets in the United States. This segment 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 from about 200 branches and regional distribution centers
in the U.S., Canada, and Mexico.
- 13 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
The Music segment is America's largest independent distributor of
music instruments and accessories, and is involved in some
combination of designing, manufacturing, marketing and distributing
more than 15,000 products from five facilities located in the
United States and Canada, to retailers of all sizes for musicians
at all skill levels.
In general, results for the first quarter of 2004 reflect
improvement in market conditions for the corporation's Industrial
Distribution segment, continued resilience in consumer spending
patterns for the Music segment and the strength of military and
commercial aftermarket sales in the Kamatics specialty bearing
business (part of the Aerospace segment), offset by continued
weakness in other operations of the Aerospace segment. Aerospace
segment results reflect the impact of adverse conditions in the
commercial aerospace market, competitive conditions in the market
for detail parts manufacturing and assembly work, the stop-work
mode of the MD Helicopters, Inc. ("MDHI") subcontract program,
the delay experienced in final qualification of the Joint
Programmable Fuze ("JPF") program, and cost and operational issues
associated with the segment's expanded facility in Jacksonville,
Florida (the facility to which most of the work formerly conducted
at the Moosup, Connecticut facility was moved in 2003).
For discussion of the activities of, and factors affecting,
each of these business segments, please refer to the specific
discussions below.
TABULAR PRESENTATION OF FINANCIAL RESULTS
- -----------------------------------------
The following table summarizes certain financial results of the
corporation and its business segments for the first quarter of 2004
compared to the same period of 2003:
- 14 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
<table>
Segment Information
(In millions)
For the Three Months Ended March 31, 2004 2003
- ----------------------------------- ---- ----
<s> <c> <c>
Net sales:
Aerospace $ 59.8 $ 61.7
Industrial Distribution 145.6 120.3
Music 40.3 34.0
- ------------------------------------------------------------
$ 245.7 $ 216.0
============================================================
Operating profit:
Aerospace $ 3.6 $ 7.2
Industrial Distribution 5.0 2.8
Music 2.0 1.9
- ------------------------------------------------------------
10.6 11.9
Corporate and other expense, net (7.5) (5.0)
Interest expense, net (.8) (.8)
Gain on sale of product line and
other assets - 16.8
- ------------------------------------------------------------
Earnings before income taxes 2.3 22.9
Income taxes 1.0 8.9
- ------------------------------------------------------------
Net earnings $ 1.3 $ 14.0
============================================================
</table>
- 15 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
DISCUSSION AND ANALYSIS OF NET SALES BY BUSINESS SEGMENT
- --------------------------------------------------------
AEROSPACE SEGMENT
Aerospace segment net sales decreased 3.2% for the first quarter
of 2004 compared to the same period of 2003. Performance was
adversely affected by several factors at the Kaman Aerospace
subsidiary. These factors are discussed below.
Aircraft Structures and Components
First quarter 2004 sales for Aircraft Structures and Components
were $33.5 million compared to $32.2 million in the 2003 period.
This business involves commercial and military aircraft programs,
including production of aircraft subassemblies and other parts for
Boeing commercial airliners and the C-17 military transport, as
well as helicopter subcontract work. This has become a core
business area for the corporation and a focal point for future
growth.
The business is being affected by the current weak market for
commercial airliners which has resulted in order stretch-outs,
pricing pressures, and a lower volume of deliveries than
anticipated for Boeing commercial aircraft programs. In addition,
the market for detail parts manufacturing and assembly work remains
very competitive industry wide and in this environment new business
awards have been difficult to achieve. These conditions will make
it more difficult for the Jacksonville facility to develop an
optimal business base, at least until the commercial aviation
market improves. In this environment, military work, including
the C-17, which is one of the operation's largest programs, has
been an important contributor.
Helicopter subcontract work involves commercial and military
helicopter programs. Commercial programs include multi-year
contracts for production of fuselages for the MDHI 500 and 600
series helicopters and composite rotor blades for the MD Explorer
helicopter. Total orders from MDHI have run at significantly lower
rates than originally anticipated due to lower than expected
demand. The corporation's investment in these contracts consists
principally of $4.3 million in billed receivables and $16.2 million
in recoverable costs - not billed (including start-up costs and
- 16 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
other program expenditures) as of March 31, 2004. In 2003, the
corporation received payments totaling $4.4 million, primarily for
items shipped during 2003. The corporation received nominal
payments in the first quarter of 2004. The recoverability of
unbilled costs will depend to a significant extent upon MDHI's
future requirements through 2013, the year to which both contracts
extend. The corporation stopped production on these contracts in
the second quarter of 2003, but continues to work closely with the
customer to resolve overall payment issues and establish conditions
under which production could be resumed, including the timing
thereof. Based upon MDHI's projected future requirements and
inventory on hand at both MDHI and the corporation, this would not
be expected to occur until late in the second half of 2004 at the
earliest. Although the outcome is not certain, the corporation
understands that MDHI management is pursuing strategies to improve
its current financial and operational circumstances.
The segment's Kamatics operation manufactures proprietary self-
lubricating bearings used in commercial airliners operated by the
major and regional airlines, and increasingly, in military
programs. This business had increased sales in the first quarter
of 2004, with military and commercial aftermarket sales helping to
offset continued softness in commercial and regional aircraft
manufacturing. Boeing is Kamatics' largest commercial customer.
Advanced Technology Products
First quarter 2004 sales for Advanced Technology Products were
$11.3 million compared to $11.8 million in the 2003 period. This
business manufactures products for military and commercial markets,
including safe, arm and fuzing devices for a number of major
missile and bomb programs as well as precision measuring systems,
mass memory systems and electro-optic systems. The Kaman Dayron
operation, acquired in 2002, manufactures fuzes for a variety of
munitions programs and has the contract to develop a fuze for the
U.S. Air Force and Navy JPF program. Securing the JPF program was
the principal motivation for making the Dayron acquisition. Final
qualification testing conducted by the company as the prime
contractor was completed in the fourth quarter of 2003 and final
qualification testing conducted by the Air Force was completed in
April 2004. The company has recently received written notification
from the Air Force that it has successfully met the testing
criteria established in its contract and the Air Force has
- 17 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
authorized production deliveries as provided in the contract.
Production unit sales had been delayed during 2003 and the first
quarter of 2004 due to issues with earlier final qualification
testing results.
Since 2001, the company's Electro-Optics Development Center
("EODC") has been teamed with the University of Arizona to build a
6.5-meter aperture collimator that will be used for testing large
optical systems in a vacuum environment. EODC has been working
under a $12.8 million fixed-price contract to design and fabricate
the structural, electrical, mechanical and software control systems
for the collimator. EODC has experienced significant cost growth
in its portion of the program as a result of changes in the scope
of the project and management believes that there is a valid basis
to recover these amounts. As a result, in April 2004, the company
submitted a claim in the amount of $6.3 million to the University
to recover these additional costs.
Helicopter Programs
First quarter 2004 sales for Helicopter Programs were $15.0 million
compared to $17.7 million in the 2003 period. The segment's
helicopter products include the SH-2G multi-mission maritime
helicopter and the K-MAX medium-to-heavy external lift helicopter.
SH-2G-related sales were the predominant source of sales in the
first quarter. The SH-2G helicopter program 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 New Zealand and Polish
navies.
Work continues on the SH-2G(A) program for Australia which involves
eleven helicopters with support, including a support services
facility, for the Royal Australian Navy ("RAN"). The total
contract has a current anticipated value of about $734 million.
The helicopter production portion of the program is valued at
approximately $598 million, of which about 97% has been recorded as
sales through March 31, 2004. As previously reported, this
contract is now in a loss position due to increases in anticipated
costs to complete the program. The in-service support center
contract has a current anticipated value of about $136 million of
which about 25% has been recorded as sales through March 31, 2004.
- 18 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Production of the eleven SH-2G(A) aircraft for the program is
essentially complete. As previously reported, the aircraft lack
the full Integrated Tactical Avionics System ("ITAS") software and
progress is continuing on this element of the program. In
September 2003, the RAN began the process of provisional acceptance
of these aircraft. Since that time, four of the aircraft have
completed the provisional acceptance process. The corporation
expects to be able to deliver the full capability of the ITAS
weapons system software in late 2004 with final acceptance
anticipated in 2005. While management believes that the
corporation's reserves are sufficient to cover estimated costs to
complete the program, final development of the software by
subcontractors and its integration, which is the corporation's
responsibility, are underway, and these are complex tasks.
The corporation continues to pursue 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.
With respect to its K-MAX helicopter program, the segment continues
to pursue both a sale and short-term lease program for existing
K-MAX aircraft inventory that was written down to estimated fair
market value in 2002. There were no sales or new leases of K-MAX
helicopters in the first quarter of 2004. During April 2004, a
short-term K-MAX lease transaction was implemented. There are six
aircraft remaining available for sale, including three aircraft
currently leased to customers.
Kaman Aerospace Subsidiary Reorganization
To establish clear lines of responsibility and improve decision-
making, the Aerospace subsidiary recently initiated a
reorganization to address differences between its various
businesses and their specific requirements. Three divisions are
- 19 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
being created to replace portions of the existing structure: Kaman
Aerostructures, having production facilities in Jacksonville and
Wichita, Kans., will be responsible for fixed-wing aircraft
subcontract programs; Kaman Fuzing, having production facilities in
Middletown, Conn. and Orlando, Fla., will be responsible for fuze
operations; and Kaman Helicopters, having production facilities in
Bloomfield, Conn., will be responsible for prime and subcontract
helicopter programs, including the SH-2G, K-MAX and MDHI programs.
By placing purchasing, operations, finance, contracts and human
resources personnel within each division, management expects that
each will be better able to effectively manage expenses for the
services and/or functions they require, and achieve optimal
customer service. It is expected that the reorganization will be
completed by the end of 2004. It is also expected that the
Kamatics operation will remain a separate business within the
segment.
INDUSTRIAL DISTRIBUTION SEGMENT
Industrial Distribution segment net sales increased about 21% in
the first quarter of 2004 compared to the same period of 2003.
Sales for the first quarter included $7.2 million from the former
Industrial Supplies, Inc. which was acquired in the fourth quarter
of 2003. Results for the quarter largely reflect an improvement in
the U.S. economic environment and to some extent, the inclusion of
four extra sales days in the first quarter of 2004 compared to the
same period of 2003. Management also believes that pent up demand
from those customers who have delayed purchases because of economic
conditions was a factor in the segment's increased sales for the
first quarter and it is not currently expected that the level of
increase will recur in future periods.
This segment is the third largest U.S. industrial distributor
servicing the bearing, electrical/mechanical power transmission,
fluid power, motion control and materials handling markets in the
United States. The segment 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.
Because the segment's customers include a broad spectrum of U.S.
industry, this business is directly affected by national
macroeconomic variables such as the percentage of plant capacity
utilization within the U.S. industrial base, and the business tends
to track the U.S. Industrial Production Index with a short lag.
- 20 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Success in the segment's markets requires a combination of
competitive pricing and value-added services that save the customer
money while helping it become more efficient and productive. Over
the past several years, large companies have increasingly
centralized their purchasing, focusing on suppliers that can
service all of their plant locations across a wide geographic area.
To meet these requirements, the segment has expanded its geographic
presence through the selective opening of new branches and
acquisitions in key markets of the upper Midwest, the South, and
Mexico. The segment's footprint of nearly 200 branches and
regional distribution centers now covers 70 of the top 100
industrial markets in the United States. Management's goal is to
grow the Industrial Distribution segment by expanding into
additional areas that enhance its ability to compete for large
regional and national customer accounts.
MUSIC SEGMENT
Music segment net sales increased 18.6% for the first quarter of
2004 compared to the same period in 2003. Results reflect
improvement in U.S. economic conditions. Sales increased to both
independent retailers and large chain store accounts, however sales
to the large chain store accounts were particularly strong.
The segment is America's largest independent distributor of music
instruments and accessories and is involved in some combination of
designing, manufacturing, marketing and distributing more than
15,000 products from five facilities in the U.S. and Canada to
retailers of all sizes for musicians of all skill levels. The
segment's array of instruments includes premier and proprietary
products, such as the Ovation (registered trademark) and Hamer
(registered trademark) guitars, and Takamine (registered trademark)
guitars under an exclusive distribution agreement. The segment has
also significantly extended its line of percussion products and
accessories over the past few years, augmenting its CB, Toca
(registered trademark) and Gibraltar (registered trademark) lines
to include an exclusive distribution agreement with Gretsch
(registered trademark) drums and acquiring Latin Percussion (a
leading distributor of hand percussion instruments) and Genz Benz
(an amplification equipment manufacturer). The segment continues
to seek opportunities to add exclusive premier brand product lines
that would build upon the segment's market position.
- 21 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
DISCUSSION AND ANALYSIS OF OPERATING PROFITS - CONSOLIDATED
- -----------------------------------------------------------
As would be expected with any commercial business, operating
profits is a key indicator utilized by management in its evaluation
of the performance of its business segments. The net operating
profit of the corporation's segments, in total, for the first
quarter of 2004 decreased 11% compared to the same period of 2003.
Both the Industrial Distribution and Music segment experienced
increased operating profits for the quarter, however those
increases were more than offset by continued difficulties in the
Aerospace segment.
Another key performance indicator for management is each business
segment's return on investment. Management defines "return on
investment" as operating profits divided by average investment for
each segment. Average investment is computed by combining equity,
intercompany borrowings plus letters of credit and, for foreign
subsidiaries, outside debt financings. The corporation's goals for
return on investment are expressed as a range, with 15% at the
lower end of the range. For the first quarter of 2004, the
Industrial Distribution segment performed above the minimum
percentage, the Music segment performed slightly below the minimum,
and the Aerospace segment performed substantially below the
minimum.
DISCUSSION AND ANALYSIS OF OPERATING PROFITS BY BUSINESS SEGMENT
- ----------------------------------------------------------------
AEROSPACE SEGMENT
Kamatics was the source of a significant portion of total segment
operating profits for the first quarter of 2004 on the strength of
military and commercial aftermarket sales.
First quarter results include $0.2 million in ongoing relocation
and re-certification costs related to the transfer of operations in
2003 from the company's Moosup facility to the Jacksonville
facility and $0.8 million in underutilized facility costs primarily
associated with the absence of new helicopter orders at the
Bloomfield facility.
- 22 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
For the Kaman Aerospace subsidiary, results for the first quarter
of 2004 reflect the continuing effects of adverse conditions in the
commercial aerospace market, competitive conditions in the market
for detail parts manufacturing and assembly work, the stop-work
mode of the MDHI subcontract program, the delay experienced in
final qualification of the JPF program, and cost and operational
issues associated with the segment's expanded Jacksonville
facility.
The Jacksonville facility is operational and ready to accept new
business, although the plant's capabilities are taking time to
develop. Production man-hour performance is improving, however on
certain programs it continues to be well below the levels that had
existed at the Moosup facility in large part due to the continuing
process of training a new labor force. Management is working to
improve this measure of performance. As it pursues that goal, it
is also working to reestablish the level of product quality and
customer quality rankings that had been maintained at the Moosup
facility, and believes that, overall, progress is being made. As
the Jacksonville plant continues to develop its capabilities,
operating costs have also increased due to manpower and third-party
processing costs that have been required to expedite deliveries
along with the standard FAA and customer requirements to requalify
manufacturing and quality processes made necessary by the move.
Management believes that these conditions are temporary and
continues to expect that the move from Moosup to Jacksonville will
ultimately provide a lower cost structure from which to compete.
These factors have led to lower sales volume, as discussed earlier,
which in turn has resulted in overhead and general and
administrative expenses being absorbed at higher rates by active
segment programs. These circumstances have led to generally lower
profitability or losses for these programs. Aerospace segment
management continues to evaluate ways to grow in a competitive
global business environment that requires progressively lower
costs. In addition to actions taken to shift production to other
U.S. locations expected to provide lower cost structures, such as
Jacksonville, the segment is also continuing to adjust its
employment levels and is taking other actions, as appropriate, to
help bring its cost structure in line with the reduced business
base.
- 23 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Despite current circumstances, to date, management has elected to
continue expenditures for longer-term competitiveness in the
commercial aircraft market and to maintain its prime helicopter
program capabilities. In this regard, management is considering
exercising its contract option to purchase the facility located on
its Bloomfield campus that it has leased from the Navy for several
decades.
Finally, with respect to the $11.0 million charge taken in 2002 for
the cost of phasing out the corporation's Moosup facility, $3.3
million represents severance costs at the Moosup and Bloomfield
locations, which is expected to involve the separation from service
of approximately 400 employees. A total of about $2.7 million had
been paid for 324 such separations as of March 31, 2004.
INDUSTRIAL DISTRIBUTION SEGMENT
Operating profits in this segment for the first quarter of 2004
increased about 80% compared to the same period of 2003, primarily
due to increased sales which have resulted from improvement in the
U.S. economy. The operating profits increase also reflects the
impact of the company's `lean-thinking' practices and maintenance
of cost controls that were implemented by the segment during the
difficult economic times of the past few years. In addition,
vendor incentives in the form of rebates (i.e., vendors provide
inventory purchase rebates to distributors at specified volume-
purchasing levels) continue to be an important contributor to
operating profits.
MUSIC SEGMENT
Operating profits in this segment for the first quarter of 2004
increased 7% compared to the same period of 2003 primarily as a
result of increased sales that were substantially offset by lower
gross profit margins.
The gross profit rate was lower for the quarter, due to the
addition of several lower margin products to the segment's catalog,
a shift in sales mix toward lower margin products, increased guitar
manufacturing costs in the U.S., and increased sales of products to
some larger customers that carry a lower gross profit rate.
- 24 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
NET EARNINGS AND CERTAIN EXPENSE ITEMS
- --------------------------------------
Net earnings for the quarter ended March 31, 2004 were $1.3
million, or $0.06 per share diluted, compared to $14.0 million, or
$0.60 per share diluted, the previous year. First quarter 2003
results include an after-tax gain of $10.1 million, or $0.45 per
share, from the sale of the corporation's Electromagnetics
Development Center.
Selling, general and administrative expenses for the first quarter
of 2004 were higher than last year, for several reasons, including
increased sales, the ISI acquisition in the Industrial
Distribution segment, increases in Aerospace segment general and
administrative expenses and increases in corporate expenses,
principally attributable to pension and stock appreciation rights
expense.
Management is also monitoring the effects of rising steel prices
and energy costs, which could impact each of the segments.
For the quarter ended March 31, 2004, interest expense increased
3.0% due to higher average borrowings.
The consolidated effective income tax rate for the quarter ended
March 31, 2004 was 43.0% compared to 38.9% the previous year.
For a discussion of Financial Accounting Standards Board Statements
applicable to the corporation, please refer to the corporation's
annual report on Form 10-K for the year ended December 31, 2003.
CRITICAL ACCOUNTING ESTIMATES
- -----------------------------
There have been no significant changes in the corporation's
critical accounting estimates in the quarter ended March 31, 2004.
Please see the corporation's annual report on Form 10-K for the
year ended December 31, 2003 for discussion of the most significant
areas currently involving management judgments and estimates.
- 25 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Discussion and Analysis of Cash Flows
Management assesses the corporation's liquidity in terms of its
ability to generate cash to fund operating, investing and financing
activities. Cash flow generation is another key performance
indicator reviewed by management in evaluating business segment
performance. Significant factors affecting the management of
liquidity might include cash flows generated from or used by
operating activities, capital expenditures, investments in the
business segments and their programs, acquisitions, dividends,
adequacy of available bank lines of credit, and factors which might
otherwise affect the corporation's business and operations
generally, as described below under the heading "Forward-Looking
Statements". Management believes that the corporation's annual
cash flow from operations and available unused bank lines of credit
under its revolving credit agreement will be sufficient to finance
its working capital and other recurring capital requirements for
the next twelve-month period. Management is aware that earnings
for the first quarter of 2004 were weak and the principal source of
that weakness is in the Aerospace segment which has been adversely
affected by conditions in the commercial aerospace market and
certain operational issues discussed above. Aerospace management
is working to address these issues through its sales efforts as
well as ongoing evaluation of its current cost structure with the
goal of improving operating profits and cash flow generation.
Operating activities used cash in the amount of $23.1 million in
the first quarter of 2004, principally due to increases in accounts
receivable and inventories in both the Aerospace and Industrial
Distribution segments. The increases in accounts receivable were
attributable to higher sales in the Industrial Distribution segment
and largely to the Australia SH-2G program in the Aerospace
segment. In the Industrial Distribution segment, the inventory
increase was due to ongoing purchases while in the Aerospace
segment, the majority of the increase was attributable to the
fuzing operation.
Investing activities used cash in the amount of $1.2 million in the
first quarter of 2004, principally due to capital expenditures for
property, plant and equipment. Cash provided by financing
- 26 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
activities for the quarter ended March 31, 2004 consisted largely
of an increase in borrowings, offset somewhat by the payment of
dividends to shareholders.
Contractual Obligations
Overall, there has been no substantial change in the corporation's
contractual obligations as of March 31, 2004, except that there
were increased borrowings during the quarter (long-term debt).
Please see the corporation's annual report on Form 10-K for the
year ended December 31, 2003 for a discussion of its contractual
obligations.
Off-Balance Sheet Arrangements
There has been no substantial change in the corporation's off-
balance sheet arrangements as of March 31, 2004. Please see the
corporation's annual report on Form 10-K for the year ended
December 31, 2003 for a discussion of such arrangements.
Other Sources/Uses of Capital
At March 31, 2004, the corporation had $19.9 million of its 6%
convertible subordinated debentures outstanding. The debentures
are convertible into shares of Class A common stock at any time on
or before March 15, 2012 at a conversion price of $23.36 per share,
generally at the option of the holder. Pursuant to a sinking fund
requirement that began March 15, 1997, the corporation redeems
approximately $1.7 million of the outstanding principal of the
debentures each year.
In November 2000, the corporation's board of directors approved a
replenishment of the corporation's stock repurchase program,
providing for repurchase of an aggregate of 1.4 million Class A
common shares for use in administration of the corporation's stock
plans and for general corporate purposes. As of March 31, 2004, a
total of 269,150 shares had been repurchased since inception of
this replenishment program. For a discussion of share repurchase
activity during the first quarter of 2004, please refer to Part II,
Item 2, of this report.
- 27 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Financing Arrangements
Total average bank borrowings for the quarter ended March 31, 2004
were $46.0 million compared to $39.9 million for same period last
year.
The corporation maintains a revolving credit agreement (the
"Revolving Credit Agreement") with several banks that provides a
$150 million five-year commitment scheduled to expire in November
2005 with interest at current market rates. Facility fees are
charged on the basis of the corporation's credit rating from
Standard & Poors which is a BBB investment grade rating.
Management believes that this is a favorable rating for a
corporation of its size and the rating was reaffirmed by Standard &
Poors in April 2004. The rating is accompanied by the "negative
outlook" which was assigned to the corporation and several other
aerospace companies in the wake of the events of September 11, 2001
and the subsequent weakness in aerospace markets. Under the terms
of the current Revolving Credit Agreement, if this rating should
decrease, the effect would be to increase interest rates charged
and facility fees.
The most restrictive of the covenants contained in the Revolving
Credit Agreement requires the corporation to have EBITDA, as
defined, at least equal to 300% of net interest expense, on the
basis of a rolling four quarters and a ratio of consolidated total
indebtedness to total capitalization of not more than 55%.
In connection with the acquisition of RWG in 2002, the corporation
established a 9.5 million Euro term loan and revolving credit
facility (the "Euro Credit Agreement") with Wachovia Bank, National
Association ("Wachovia"), one of its Revolving Credit Agreement
lenders having offices in London. In general, the Euro Credit
Agreement contains the same financial covenants as the Revolving
Credit Agreement described previously and the term of the Euro
Credit Agreement expires at the same time as the Revolving Credit
Agreement.
Letters of credit are generally considered borrowings for purposes
of the Revolving Credit Agreement. A total of $29.8 million in
letters of credit were outstanding at March 31, 2004, a significant
portion of which is related to the Australia SH-2G(A) program. The
letter of credit for the production portion of the Australia
program now has a balance of $20 million, which is expected to
remain in place until final acceptance of the aircraft by the RAN.
- 28 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
FORWARD-LOOKING STATEMENTS
- --------------------------
This report contains forward-looking information relating to the
corporation's business and prospects, including aerostructures and
helicopter subcontract programs and components, advanced technology
products, the SH-2G and K-MAX helicopter programs, the industrial
distribution and music businesses, operating cash flow, and other
matters that involve a number of uncertainties that may cause
actual results to differ materially from expectations. Those
uncertainties include, but are not limited to: 1) the successful
conclusion of competitions and thereafter contract negotiations
with government authorities, including foreign governments; 2)
political developments in countries where the corporation intends
to do business; 3) standard government contract provisions
permitting renegotiation of terms and termination for the
convenience of the government; 4) economic and competitive
conditions in markets served by the corporation, particularly
industrial production and commercial aviation, and global economic
conditions; 5) satisfactory completion of the Australian SH-
2G(A)program, including successful completion and integration of
the full ITAS software; 6) recovery of the corporation's investment
in the MDHI contracts; 7) achievement of and actual costs for
recertifying products and processes in connection with start-up of
the expanded Jacksonville facility; 8) receipt of production orders
for the JPF program; 9) satisfactory resolution of the EODC
Collimator claim and completion of contract performance; 10)
achievement of enhanced business base in the Aerospace segment in
order to better absorb overhead and general and administrative
expenses; 11) successful sale or lease of existing K-MAX inventory;
12) the condition of consumer markets for musical instruments; 13)
profitable integration of acquired businesses into the
corporation's operations; 14) changes in supplier sales or vendor
incentive policies; 15) the effect of price increases or decreases;
and 16) 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.
- 29 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
There has been no significant change in the corporation's
exposure to market risk during the quarter ended March 31, 2004.
Please see the corporation's annual report on Form 10-K for the
year ended December 31, 2003 for discussion of the corporation's
exposure to market risk.
Item 4. Controls and Procedures
(a) Disclosure Controls and Procedures
The corporation's management, with the participation of the
corporation's Chief Executive Officer and Chief Financial Officer,
has evaluated the effectiveness of the corporation's disclosure
controls and procedures (as such term is defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) as of the end of the period covered by this
report. Based on such evaluation, the corporation's Chief
Executive Officer and Chief Financial Officer have concluded that,
as of the end of such period, the corporation's disclosure
controls and procedures were effective.
We note, however, that even the most well designed and executed
control systems are subject to inherent limitations and as a
result, the control system can provide reasonable but not absolute
assurance that its objectives will be met under all potential
future conditions. The corporation's Chief Executive Officer and
Chief Financial Officer have concluded that the corporation's
disclosure controls and procedures are effective at a reasonable
assurance level.
(b) Internal Control Over Financial Reporting
There have not been any changes in the corporation's internal
control over financial reporting (as such term is defined in Rules
13a-15(f) and 15d-15 (f) under the Exchange Act) during the fiscal
quarter to which this report relates that have materially affected,
or are reasonably likely to materially affect, the corporation's
internal control over financial reporting.
- 30 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 2. Changes in Securities, Use of Proceeds and Issuer
Purchases of Equity Securities
(e)Purchases of Equity Securities
In November 2000, the corporation's board of directors approved a
replenishment of the corporation's stock repurchase program
providing for repurchase of an aggregate of 1.4 million Class A
common shares for use in administration of the corporation's stock
plans and for general corporate purposes.
The following table provides information about purchases by the
corporation during the quarter ended March 31, 2004 of equity
securities that are registered by the corporation pursuant to
Section 12 of the Exchange Act:
<table>
Total Number
of Shares Maximum
Purchased as Number of
Total Part of Shares That
Number Average Publicly May Yet Be
of Shares Price Paid Announced Purchased Under
Period Purchased per Share Plan the Plan
- ------- --------- ---------- ------------ ---------------
<s> <c> <c> <c> <c>
01/01/04-
01/31/04 - - 268,850 1,131,150
02/01/04-
02/29/04 - - 268,850 1,131,150
03/01/04-
03/31/04 300 $14.11 269,150 1,130,850
</table>
- 31 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION, Continued
Item 4. Submission of Matters to Vote of Security Holders
The annual meeting of the shareholders of the corporation was held
at the offices of the corporation on April 20, 2004. Following is
a brief description of each matter voted upon at the meeting:
1. Election of Directors
---------------------
The following ten (10) individuals were elected directors of the
corporation to serve until the next annual meeting and until their
successors have been elected:
Brian E. Barents E. Reeves Callaway III John A. DiBiaggio
Edwin A. Huston C. William Kaman II Eileen S. Kraus
Paul R. Kuhn Walter H. Monteith, Jr. Wanda Lee Rogers
Richard J. Swift
For each director, the Class B shareholders voted 514,667 shares
in favor and authority was withheld with respect to 51,177 shares.
There were no abstentions or broker non-votes.
2. Approval of 2003 Stock Incentive Plan, as amended
-------------------------------------------------
A proposal to approve the corporation's 2003 Stock Incentive Plan,
as amended, was adopted by the Class B shareholders who voted
505,768 shares in favor, 8,899 shares opposed, and 51,177 shares
abstaining. There were no broker non-votes.
3. Ratification of KPMG LLP Appointment
------------------------------------
A proposal to ratify the appointment of KPMG LLP as the
corporation's auditors during the ensuing year was adopted by the
Class B shareholders who voted 565,844 in favor, none against, with
no abstentions and no broker non-votes.
- 32 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits to Form 10-Q:
11 Earnings Per Share Computation
31.1 Certification of Chief Executive Officer
Pursuant to Rule 13a-14 under the
Securities and Exchange Act of 1934
31.2 Certification of Chief Financial Officer
Pursuant to Rule 13a-14 under the
Securities and Exchange Act of 1934
32.1 Certification of Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K:
(1) A report on Form 8-K was filed on January 29,
2004, reporting that the corporation's 6%
Convertible Subordinated Debentures where moved
from the NASDAQ Small Cap Market listing to the
OTC Bulletin Board.
(2) A report on Form 8-K was filed on February 11
2004, reporting the corporation's financial
results for the fourth quarter and year ended
December 31, 2003.
(3) A report on Form 8-K was filed on April 21,
2004, reporting the corporation's financial
results for the quarter ended March 31, 2004,
and describing actions taken at the
shareholders' meeting on April 20, 2004.
- 33 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
KAMAN CORPORATION
Registrant
Date: May 5, 2004 By: /s/ Paul R. Kuhn
-----------------------------
Paul R. Kuhn
Chairman, President and
Chief Executive Officer
Date: May 5, 2004 By: /s/ Robert M. Garneau
-----------------------------
Robert M. Garneau
Executive Vice President and
Chief Financial Officer
- 34 -
<page>
KAMAN CORPORATION AND SUBSIDIARIES
Index to Exhibits
Exhibit 11 Earnings Per Share Computation Attached
Exhibit 31.1 Certification of Chief Executive Officer
Pursuant to Rule 13a-14 under the
Securities and Exchange Act of 1934 Attached
Exhibit 31.2 Certification of Chief Financial Officer
Pursuant to Rule 13a-14 under the
Securities and Exchange Act of 1934 Attached
Exhibit 32.1 Certification of Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 Attached
Exhibit 32.2 Certification of Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 Attached
- 35 -
<page>