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, 1996.
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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.)
Blue Hills Avenue
Bloomfield, Connecticut 06002
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (860) 243-7100
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, 1996:
Class A Common 17,911,183
Class B Common 667,814
Page 1 of 13 Pages
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets(In thousands)
March 31, December 31,
Assets 1996 1995
------ ----------------- ------------------
Current assets:
Cash $ 5,175 $ 4,078
Accounts receivable (net of
allowance for doubtful
accounts of $2,411 in
1996, $2,289 in 1995) 192,466 177,878
Inventories:
Raw materials $ 8,708 $ 8,761
Work-in-process 71,001 53,696
Finished goods 22,638 22,870
Merchandise for resale 107,011 209,358 107,407 192,734
------- -------
Other current assets 29,974 30,174
------- -------
Total current assets 436,973 404,864
Property, plant & equip., at cost 189,056 189,317
Less accumulated depreciation
and amortization 108,544 106,263
------- -------
Net property, plant & equipment 80,512 83,054
Other assets 12,065 12,151
-------- --------
$529,550 $500,069
======== ========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Notes payable $ 63,650 $ 63,498
Accounts payable 68,769 61,729
Accrued liabilities 37,632 38,151
Other current liabilities 42,633 42,895
------- -------
Total current liabilities 212,684 206,273
Deferred credits 13,706 13,127
Long-term debt, excl. current portion 86,202 66,386
Shareholders' equity:
Series 2 preferred stock $ 57,167 $ 57,167
Other shareholders' equity 159,791 216,958 157,116 214,283
-------- -------- -------- --------
$529,550 $500,069
======== ========
- 2 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Condensed Consolidated Statements of Earnings
(In thousands except per share amounts)
For the Three Months
Ended March 31,
--------------------
1996 1995
---- ----
Revenues $ 240,033 $ 210,016
Costs and expenses:
Cost of sales 177,464 152,166
Selling, general and
administrative expense 51,013 46,525
Interest expense 2,429 1,834
Other expense 155 285
-------- -------
231,061 200,810
-------- -------
Earnings before
income taxes 8,972 9,206
Income taxes 3,770 3,656
-------- -------
Net earnings $ 5,202 $ 5,550
======== =======
Preferred stock dividend
requirement $ (929) $ (929)
======== =======
Earnings applicable to
common stock $ 4,273 $ 4,621
======== =======
Net earnings per common share:
Primary $ .23 $ .25
Fully diluted $ .22 $ .24
======== =======
Dividends declared per share:
Series 2 preferred stock $ 3.25 $ 3.25
Common stock $ .11 $ .11
======== =======
- 3 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Condensed Consolidated Statements of Cash Flows
(In thousands)
For the Three Months
Ended March 31,
--------------------
1996 1995
--------- --------
Cash flows from operating activities:
Net earnings $ 5,202 $ 5,550
Depreciation and amortization 2,980 2,829
Gain on sale of assets (213) (1,756)
Changes in current assets and liabilities (24,753) (34,117)
Other, net 645 331
-------- --------
Cash provided by (used in) operating
activities (16,139) (27,163)
-------- --------
Cash flows from investing activities:
Proceeds from sale of assets 1,669 3,639
Expenditures for property, plant & equipment (1,794) (2,393)
Other, net (170) (38)
-------- --------
Cash provided by (used in) investing
activities (295) 1,208
-------- --------
Cash flows from financing activities:
Additions to notes payable 152 3,791
Additions to long-term debt 20,000 25,000
Dividends paid (2,970) (2,939)
Other, net 349 360
-------- --------
Cash provided by (used in) financing
activities 17,531 26,212
-------- --------
Net increase in cash 1,097 257
Cash at beginning of period 4,078 3,711
-------- --------
Cash at end of period $ 5,175 $ 3,968
======== ========
- 4 -
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, 1995 condensed consolidated balance sheet
amounts have been derived from the previously audited consolidated
balance sheet of Kaman Corporation and subsidiaries.
The balance of the condensed financial information reflects all
adjustments which are, in the opinion of management, necessary for
a fair presentation of the financial position, results of
operations and cash flows for the interim periods presented and
are of a normal recurring nature unless otherwise disclosed in
this report.
The statements should be read in conjunction with the notes to
the consolidated financial statements included in Kaman
Corporation's 1995 Annual Report.
Cash Flow Items
- ---------------
Cash payments for interest were $2,717 and $2,201 for the three
months ended March 31, 1996 and 1995, respectively. Cash
payments for income taxes for the comparable periods were $1,158
and $934, respectively.
- 5 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
- ---------------------
Consolidated revenues for the three month period ended March 31,
1996 were $240.0 million compared to $210.0 million for the same
period of 1995. These results reflect increased revenues in both
the Distribution and Diversified Technologies segments.
For the first quarter of 1996, Distribution segment revenues
increased by about 7% compared to the same period of 1995. These
results are attributable to the industrial distribution business,
which constitutes 75% of the Distribution segment.
During the first quarter, Industrial Distribution sales continued
to benefit from a relatively healthy domestic economy. Revenue
increases have been stronger than the rate of increase in
industrial production, however, due in part to the company's
efforts to expand partnering relationships with suppliers, address
the needs of customers who want to consolidate their vendor base,
and provide value added services in areas such as electrical and
electronic systems, materials handling, and precision positioning
systems. For its larger customers, the corporation is increasingly
being given the opportunity to perform an "integrated supply"
function, involving management of the customer's parts inventories
and associated personnel as well as selection of suppliers for the
facility. These initiatives, in combination with enhanced
operating efficiencies attained during the past few years, have
resulted in increased market share for the industrial distribution
business. Even so, management is closely monitoring economic
indicators for any signs of a possible slowdown in the domestic
economy.
Music Distribution sales also increased slightly during the first
quarter, which results are attributable to both foreign and
domestic markets.
Diversified Technologies segment revenues increased by about 29%
for the first quarter of 1996 compared to the first quarter of
1995, largely due to sales of the K-MAX (Registered Trademark)
helicopter and SH-2G retrofit work in connection with the Republic
of Egypt's acquisition of ten (10) SH-2G helicopters from the U.S.
Navy.
Within the Diversified Technologies segment, management continues
initiatives to adapt the corporation's businesses to conditions in
defense and commercial aircraft markets. With respect to its SH-2
- 6 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (cont.)
helicopter, management is pursuing the potential for use of this
aircraft by foreign military services. In 1995, the corporation
began work pursuant to a letter agreement between the Republic of
Egypt and the U.S. Navy for the acquisition of ten (10) SH-2G
helicopters. This work, which could have a value of up to $135
million over a three year period, involves the retrofit of SH-2F
helicopters already manufactured for the U.S. Navy into the SH-2G
configuration. The contract between the corporation and the U.S.
Navy for this work is still in the negotiation process, however,
the corporation has received a contract to provide long lead
materials and services in support of the sale in the amount of $56
million. Deliveries are scheduled to begin in the third quarter
of 1997. The corporation is pursuing other opportunities for
foreign sales as well; during 1995 an office was established in
Australia to coordinate work on competitions in New Zealand,
Australia, and Malaysia. The corporation is one of only two
competitors (and the only U.S. company) that was invited to enter
the Best and Final Offer process for the government of New
Zealand's procurement of four (4) to six (6) aircraft. The
corporation has submitted its best and final offer and New Zealand
officials are expected to announce their decision sometime during
the second quarter of 1996. Although the corporation is not
manufacturing further aircraft for the U.S. Navy, sixteen aircraft
are currently in the Naval Reserves and the corporation expects to
provide logistics and spare parts support for these aircraft.
As to its advanced technology defense programs, management
continues to believe that it is well positioned to compete in a
defense environment that is increasingly emphasizing advanced
technology "smart weapons" programs in its strategic planning. The
corporation has significant expertise in the field of high-
technology programs, having performed a multitude of government
contracts over the years. These contracts have involved products
and systems, as well as services such as computer software
development, intelligence analysis, and research and development.
The corporation continues to be successful in maintaining revenues
from this type of business, however, competition for these
contracts is increasing.
The corporation is also involved in aerospace subcontracting work
for several commercial airframe manufacturing programs. This work
has been affected by weakness in the domestic aircraft industry in
the last several years. However, there are indications from the
commercial aircraft industry itself of some potential for renewed
health in the industry, with the roll out of the new Boeing 777
being a prime example. Additionally, the Department of Defense
announcement regarding longer term production of the McDonnell
Douglas C-17 is an encouraging sign.
- 7 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (cont.)
The K-MAX helicopter program is now in its second year of
commercial operation. K-MAX is a medium to heavy lift 'aerial
truck' with operating characteristics that distinguish it from
other helicopters for use in logging, fire fighting, reforestation,
utility power line work, and other applications. The aircraft is
now certified in the United States, Canada, and Switzerland; final
approval in Japan is anticipated in the second quarter of 1996.
The special lease program for the first five (5) helicopters has
been substantially completed; the corporation continues to lease
certain of the aircraft, generally with initial customers. For the
most part, the aircraft is now being sold in the United States and
abroad. Production of six (6) aircraft is scheduled for 1996.
Management continues to take a conservative approach to market
introduction of this aircraft and expects that sales and
profitability will take some time to achieve. Management also
believes that a conservative approach is prudent since the market
has been affected by a number of military surplus aircraft that
have been (and may be in the future) released to the public at
lower cost than new aircraft.
In April 1996 the Military Sealift Command ("MSC"), U.S. Navy,
awarded the corporation a contract to provide an extended
demonstration of the K-MAX helicopter's vertical replenishment
("VERTREP") capability. Under the award, two (2) K-MAX helicopters
will support MSC airborne cargo movement for a period of
approximately 30 days, with an optional 180 day follow-on period.
The value of the contract, with the option, is estimated at $5.7
million. The demonstration will be conducted under a charter/lease
arrangement whereby the corporation provides the aircraft, crew,
and all maintenance and logistics support. This is the second MSC
award that the corporation has received for this type of work; the
first award was for a two month VERTREP demonstration in the third
quarter of 1995. Management believes that this may be another step
by the federal government toward acquisition reform by evaluating
the concept of charter/lease for this aircraft in a non-combat
role.
Total operating income for the segments increased 7% for the
quarter ended March 31, 1996 compared to the same period of 1995.
Operating profits for Diversified Technologies increased 8% for the
quarter, compared to the same period last year. First quarter 1995
results for Diversified Technologies included a gain on the sale of
land, however. If the gain is disregarded, operating profits for
the first quarter of 1996 increased some 33%, due in part to two
aerospace subcontract programs that are in the final stages of
completion. Operating profits for Distribution were up about 5%
overall for the quarter, compared to the same period last year.
Work continues in the Music business to address manufacturing costs
for its European activities.
- 8 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (cont.)
Interest expense for the first quarter of 1996 increased 32%
compared to the same period of 1995, due to increases in average
borrowings and higher interest rates.
The consolidated effective income tax rate for the first three
months of 1996 was 42.0%. For the same period of 1995, the rate
was 39.7%.
Net earnings for the quarter ended March 31, 1996 were $5.2
million, compared to $5.6 million for the same period of 1995.
After giving effect to preferred stock dividend requirements,
earnings available to common shareholders were $4.3 million for the
first quarter of 1996 compared to $4.6 million for the same period
of 1995. First quarter 1995 results included a gain of
approximately $1.8 million on the sale of real estate within the
Diversified Technologies segment. Adjusted to exclude this one-
time gain, net earnings for the first quarter of 1996 were up
approximately 16% compared to the prior year.
Liquidity and Capital Resources
- -------------------------------
The corporation's cash flow from operations has generally been
sufficient to finance a significant portion of its working capital
and other capital requirements. In recent periods, the corporation
has financed somewhat more of its requirements from bank
borrowings.
For general borrowing purposes, the corporation maintains a
revolving credit agreement involving twelve domestic and foreign
banks. This facility was effective on January 29, 1996 and
replaces two previous revolving credit arrangements. The new
facility provides a maximum unsecured line of credit of $250
million and involves many of the same lenders as the previous
arrangements. The agreement has a term of five years and contains
various covenants, including debt to capitalization, consolidated
net worth requirements, and limitations on other loan indebtedness
that may be incurred.
As of March 31, 1996, the corporation's aggregate borrowings were
$113.0 million, most of which was borrowed under the revolving
credit facility. Average borrowings were $116.9 million for the
quarter, compared to $76.5 million for the same period of last
year.
- 9 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (cont.)
The corporation has a stock repurchase program under which it may
repurchase slightly more than 700,000 Class A shares. As of
March 31, 1996, a total of 188,000 Class A shares had been
repurchased under the program. The primary purpose of the stock
repurchase program is to meet the needs of the Employees Stock
Purchase Plan and Stock Incentive Plan.
Management believes that the corporation's cash flow from
operations and available unused bank lines of credit under its new
revolving credit agreement will be sufficient to finance its
working capital and other capital requirements for the foreseeable
future. These requirements may include working capital
requirements for potential foreign sales of the SH-2 helicopter.
Forward Looking Statements
- --------------------------
This report includes forward-looking statements that describe the
corporation's business prospects. Readers should keep in mind
factors that could have an adverse impact on those prospects.
These include political, economic, or other conditions, such as
recessionary or expansive trends, inflation rates, currency
exchange rates, taxes and regulations and laws affecting the
business; and standard government contract provisions permitting
termination for the convenience of the government; as well as
product competition, pricing, the degree of acceptance of new
products to the marketplace, and the difficulty of forecasting
sales at various times in various markets.
- 10 -
KAMAN CORPORATION AND SUBSIDIARIES
Part II - OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders
The annual meeting of the shareholders of the corporation was
held at the offices of the corporation on April 16, 1996.
Following is a brief description of each matter voted upon at the
meeting:
1. Election of Directors
---------------------
The following fourteen (14) individuals were elected directors
of the corporation to serve until the next annual meeting and until
their successors have been elected:
E. Reeves Callaway III Eileen S. Kraus
Frank C. Carlucci Hartzel Z. Lebed
Laney J. Chouest John A. DiBiaggio
Harvey S. Levenson Walter H. Monteith, Jr.
Edythe J. Gaines John S. Murtha
Huntington Hardisty Wanda Lee Rogers
Charles H. Kaman
C. William Kaman II
For each director, the Class B shareholders voted 602,951
shares in favor; no shares against; no abstentions; and no broker
non-votes.
2. Authorization to Elect One Additional Director
----------------------------------------------
A proposal to authorize the Board of Directors to elect one
(1) additional director during the ensuing year was adopted by the
Class B shareholders who voted 602,366 shares in favor; 585 shares
against; no abstentions; and no broker non-votes.
3. Appointment of KPMG Peat Marwick LLP
------------------------------------
A proposal to appoint KPMG Peat Marwick LLP as auditors for
the corporation during the ensuing year was adopted by the Class B
shareholders, who voted 602,851 shares in favor; no shares against;
100 shares abstaining; and no broker non-votes.
- 11 -
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 common share computation
(27) Financial Data Schedule
(b) Reports on Form 8-K:
There have been no reports on Form 8-K filed
during the quarter ended March 31, 1996.
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 10, 1996 By Charles H. Kaman
President and
Chief Executive Officer
(Duly Authorized Officer)
Date: May 10, 1996 By Robert M. Garneau
Executive Vice President and
Chief Financial Officer
- 12 -
KAMAN CORPORATION AND SUBSIDIARIES
Index to Exhibits
Exhibit 11 Earnings Per Share Common
Computation Attached
Exhibit 27 Financial Data Schedule Attached
- 13 -