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, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-1093
KAMAN CORPORATION
(Exact Name of Registrant)
Connecticut 06-0613548
(State of Incorporation) (I.R.S. Employer Identification No.)
1332 Blue Hills Avenue, Bloomfield, Connecticut 06002
(Address of principal executive offices)
Registrant's telephone number, including area code-(860) 243-7100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
-Class A Common Stock, Par Value $1.00
-6% Convertible Subordinated Debentures Due 2012
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (Section 229.405 of this
chapter) is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ X ].
State the aggregate market value of the voting and non-voting
stock held by non-affiliates of the registrant. The aggregate
market value shall be computed by reference to the price at which
the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of
filing.
$322,401,359.00 as of February 1, 1999.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock as of the latest practicable
date.
Class A Common 22,971,946 shares
Class B Common 667,814 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Corporation's 1998 Annual Report to Shareholders
are incorporated by reference and filed as Exhibit 13 to this
Report.
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 corporation has
reorganized its business segment reporting in accordance with
new financial accounting standards applicable to the corporation
for calendar year 1998. Another segment identified as Scientific
Services was sold on December 30, 1997.
The Aerospace segment (formerly part of the Diversified
Technologies segment) serves commercial, U.S. defense and foreign
government markets with principal programs consisting of its SH-2G
maritime helicopter, K-MAX (Registered Trademark) "aerial truck"
helicopter, subcontract work involving airframe structures and the
manufacture of niche market products such as self-lubricating
bearings and driveline couplings for aircraft applications. The
Industrial Distribution segment serves nearly every sector of U.S.
industry with industrial repair and OEM products as well as
support services. The Music Distribution segment serves
domestic and foreign markets with a wide variety of music
instruments and accessories and manufactures guitars and other
music products for professional and amateur musicians. The
Scientific Services segment consisted of Kaman Sciences
Corporation, the corporation's defense information technology
business and was formerly part of the Diversified Technologies
segment.
In December of 1998, the Board of Directors of the corporation
established a committee of its members to conduct a search for a
new chief executive officer, at the recommendation of Charles H.
Kaman, the founder, chairman, chief executive officer and president
of the corporation. The search is in progress with the goal that
the corporation continue to be led in the cultural tradition that
has sustained it for more than 50 years. In August of 1998, Mr.
Kaman suffered a mild stroke following successful knee replacement
surgery. He has made excellent progress and resumed his role as
Chairman of the Board in January, 1999. Until his return to work,
the board of directors has designated Robert M. Garneau, the
corporation's executive vice president and chief financial officer,
to have the duties and responsibilities of the corporation's chief
executive officer. Mr. Garneau has held various corporate
financial officer positions since joining the corporation in 1981.
AEROSPACE
The Aerospace segment consists of several operating
subsidiaries of Kaman Aerospace Group, Inc., including Kaman
Aerospace Corporation, Kaman Aerospace International Corporation,
K-MAX Corporation, Kamatics Corporation, Kaman Electromagnetics
Corporation and Kaman Instrumentation Corporation.
Page 1
The SH-2G helicopter currently represents the Aerospace
segment's largest program and generally involves retrofit of the
corporation's SH-2F helicopters, previously manufactured for the
U.S. Navy (and currently in desert storage), to the "G"
configuration. The SH-2G aircraft is well suited to the smaller,
more powerful ships that several foreign navies are utilizing and
the corporation is currently performing work for the Governments of
Egypt, Australia, and New Zealand.
During 1998, the corporation completed delivery of ten (10)
SH-2G(E) helicopters to the Republic of Egypt under that country's
foreign military sale agreement with the U.S. Navy. This program
has a value of about $150 million. The corporation is now
conducting pilot training and providing on site support services.
Under its commercial sale contract with the Commonwealth of
Australia, the corporation will provide eleven (11) retrofit
SH-2G(A) aircraft and support, including a support services
facility, for the Royal Australian Navy. This contract was entered
into in 1997 and has an anticipated value of nearly $600 million.
The Australian SH-2G will incorporate an integrated weapons system,
advanced sensors, a state-of-the-art cockpit, long range Penguin
missiles, and composite rotor blades. Under its commercial sale
contract with the Government of New Zealand, the corporation will
provide four (4) SH-2G(NZ) aircraft and support, for New Zealand
defense forces. These aircraft will be manufactured with new
airframes and remanufactured dynamic components from the stored
SH-2F aircraft. This contract was entered into in 1997 and has an
anticipated value of nearly $170 million. During 1998, work
proceeded on both the Australia and New Zealand programs with
deliveries scheduled to begin in the 2000 - 2001 time frame.
During 1998, the corporation continued to pursue other potential
SH-2 business (including possible further orders from current
customers) as various countries develop their naval helicopter
requirements. This market is highly competitive and naturally
influenced by global economic and political conditions. Management
believes that conditions currently prevailing in some areas, most
notably economic difficulties in Asia, have slowed the prospects
for potential sales. While the corporation no longer manufactures
the SH-2 for the United States Navy, the U.S. Naval Reserves has
twelve (12) SH-2G aircraft active in its fleet. It is anticipated
that at some point, such aircraft will be retired from this type of
service. In the meantime, the corporation expects to continue
providing logistics and spare parts support for the aircraft in the
Reserves.
The corporation also produces the K-MAX (Registered Trademark)
medium to heavy lift "aerial truck" helicopter which has a variety
of potential applications, including logging, oil and gas
exploration, power line construction, and fire fighting.
The K-MAX, which received its Federal Aviation Administration
certification in August, 1994, is based on the corporation's
intermeshing rotor technology with servo-flap control. Constructed
with fewer components and less airframe weight, the K-MAX has
increased payload capacity and lower manpower, maintenance and
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spare parts inventory requirements, making it a generally cost
effective tool for industries requiring medium to heavy repetitive
lift capabilities. The corporation has been conservative in its
production of this aircraft (generally, six (6) aircraft per year)
since its introduction because it has been anticipated that it
would take some time to develop markets for a new aircraft and thus
achieve sales and profitability. There are currently fifteen (15)
aircraft in operations located in six (6) countries. The principal
application for the K-MAX to date has been in the commercial
logging industry, a market that has weakened significantly in the
past two years, particularly in the U.S. Pacific Northwest and
Canada, due in part to the effect of economic conditions in Asia
upon export sales. These circumstances appear to be affecting
certain current customers as well as potential sales of the K-MAX
and production has been further adjusted to address these
circumstances. The corporation has been working to further develop
other potential uses for the K-MAX. The K-MAX also has a potential
non-combat role for the military in the task of vertical
replenishment ("VERTREP"). As the federal government has explored
the concept of outsourcing this role to commercial providers, the
U.S. Navy Military Sealift Command has awarded K-MAX two separate
demonstration projects using charter/lease arrangements. Although
there were no developments in this arena during 1998, it appears
that the federal government is continuing to consider the
commercial outsourcing alternative.
The corporation also performs subcontract work for certain
airframe manufacturing programs and manufactures various niche
market products, including self-lubricating bearings for use
principally in aircraft flight controls, turbine engines and
landing gear, as well as driveline couplings for use principally in
helicopters. The corporation provides aircraft structures and
components for most commercial jetliners made today, including all
Boeing 700 series aircraft and most commuter and executive jets.
The corporation also supplies parts for a variety of U.S. military
aircraft, including the C-17 transport, F-22 fighter, E2-C airborne
early warning aircraft and the Comanche helicopter. These
operations have benefitted in the past few years from growth in the
aviation industry, a trend which appears to be leveling off.
Boeing, for example, is an important and long standing customer for
the corporation's airframe subcontract work and certain niche
market products and, while it is believed that the corporation is
well positioned to maintain its level of business with this
customer, pricing pressure is expected to intensify.
Among its smaller programs, the corporation also produces
computer memory systems for a variety of military aircraft,
including the F-16 fighter and the C-130J transport; fuzing and
safety devices for missiles, including the Tomahawk and AMRAAM; and
photonic and optical systems such as Magic Lantern (Registered
Trademark) a laser-based mine detection system.
Page 3
INDUSTRIAL DISTRIBUTION
The Industrial Distribution segment (formerly part of the
Distribution segment) consists of Kaman Industrial Technologies
Corporation and its Canadian subsidiary, Kaman Industrial
Technologies, Ltd.
Operating from 190 locations in thirty-six (36) states and
British Columbia, this segment's business is one of the nation's
leading distributors of industrial products, including bearings,
power transmission, electrical, motion control, material-handling
components and other equipment and services needed to maintain
various manufacturing processes. Its customers constitute
virtually every segment of U.S. industry, including agriculture,
automotive, bottling, chemical processing, construction, consumer
goods, entertainment, food processing, general manufacturing, heavy
equipment, logging, materials conveyance, mining, oil refining,
paper, petrochemical, pharmaceutical, power generation,
semiconductors, steel, and transportation. The corporation's
computer-linked distribution centers are strategically located to
position the segment to more efficiently serve its customers.
During 1998, an additional distribution center was opened in
Louisville, KY. The products that the corporation purchases for
distribution are for the most part derived from traditional
technologies, although the corporation is increasingly selling
products with the higher technological content required to support
automated production processes. The corporation also offers
additional support service capabilities, including asset
management, value-added engineering and systems/fabrication
capabilities, just-in-time delivery, cost savings analysis (called
Documented Savings (trademark)), inventory management services, and
a direct link between its state-of-the-art computer system and
customers' and suppliers' purchasing departments in order to
streamline order processing and improve transaction time. Given
the spectrum of industry that the corporation serves, its business
tends to be influenced by industrial production levels. During
1998, export demand in certain industries such as lumber,
chemicals, paper, and semiconductors was adversely affected by
economic difficulties in Asia, which resulted in increased price
pressures on this segment. In this environment, the corporation is
working to focus sales efforts in the markets that offer the best
opportunities and to carry out initiatives to enhance operating
efficiencies, including consolidation and centralization of various
organizational support functions.
MUSIC DISTRIBUTION
The Music Distribution segment (formerly part of the
Distribution segment) consists of Kaman Music Corporation, KMI
Europe Inc., and its Canadian subsidiary, B&J Music Ltd.
This segment is one of the largest distributors of music
instruments and accessories in the United States, providing product
principally to retailers in the United States and Canada as well as
to certain international distributors. Among its offerings are
Page 4
more than 13,000 items, including guitars, violins, horns, drums
and other percussion products, electronic tuners and metronomes and
music instrument accessories. This segment also provides a variety
of proprietary products, including Ovation (Registered Trademark)
and Hamer (Registered Trademark) guitars. During 1998, this
segment continued its initiatives to improve operating efficiency,
including consolidation of warehouse facilities and introduction of
a new warehouse facility in Nashville, Tennessee, as well as
consolidation of certain organizational support functions.
Operations are currently conducted through seven (7) distribution
centers in the United States and Canada, and an international sales
division and a manufacturing facility, both of which are located in
the United States.
FINANCIAL INFORMATION
Information concerning each segment's performance for the
last three fiscal years appears in the corporation's 1998 Annual
Report to Shareholders and is included in Exhibit 13 to this Form
10-K, and is incorporated by reference.
PRINCIPAL PRODUCTS AND SERVICES
Following is information for the three preceding fiscal
years concerning the percentage contribution of the corporation's
classes of products and services to the corporation's
consolidated net sales:
Years Ended December 31
1996 1997 1998
------ ------ ------
Aerospace 23.7% 27.6% 38.1%
Scientific Services (1) 13.2% 13.9% --
Industrial Distribution 47.3% 45.9% 50.1%
Music Distribution 15.8% 12.6% 11.8%
----- ----- -----
Total 100.0% 100.0% 100.0%
(1) The Scientific Services segment, which consisted of Kaman
Sciences Corporation, was sold on December 30, 1997.
RESEARCH AND DEVELOPMENT EXPENDITURES
Government sponsored research expenditures by the
Aerospace and Scientific Services segments were $13.2 million in
1998, $75.7 million in 1997, and $68.8 million in 1996. Independent
research and development expenditures were $8.5 million in 1998,
$6.9 million in 1997, and $8.0 million in 1996. The Scientific
Services segment which conducted significant government sponsored
research in 1996 and 1997 was sold on December 30, 1997.
Page 5
BACKLOG
Program backlog of the Aerospace and Scientific Services
segments was approximately $757.1 million at December 31, 1998,
$935.2 million at December 31, 1997, and $267 million at December
31, 1996. The corporation anticipates that approximately 44% of
its backlog at the end of 1998 will be performed in 1999.
Approximately 7.7% of the backlog at the end of 1998 is related to
government contracts or subcontracts which are included in backlog
to the extent that funding has been appropriated by Congress and
allocated to the particular contract by the relevant procurement
agency. Certain of these government contracts, less than 1% of the
backlog, have been funded but not signed.
GOVERNMENT CONTRACTS
During 1998, approximately 81.7% of the work performed by
the corporation directly or indirectly for the United States
government was performed on a fixed-price basis and the balance
was performed on a cost-reimbursement basis. Under a fixed-price
contract, the price paid to the contractor is negotiated at the
outset of the contract and is not generally subject to adjustment
to reflect the actual costs incurred by the contractor in the
performance of the contract. Cost reimbursement contracts
provide for the reimbursement of allowable costs and an
additional negotiated fee.
The corporation's United States government contracts and
subcontracts contain the usual required provisions permitting
termination at any time for the convenience of the government
with payment for work completed and associated profit at the time
of termination.
COMPETITION
The Aerospace segment operates in a highly competitive
environment with many other organizations which are
substantially larger and have greater financial and other
resources. The corporation competes with other helicopter
manufacturers on the basis of price, performance, and mission
capabilities; and also on the basis of its experience as a
manufacturer of helicopters, the quality of its products and
services, and the availability of facilities, equipment and
personnel to perform contracts. Consolidation in the industry, the
change in defense program emphasis and constraints in the defense
budgets of various countries have increased the level of
international competition for helicopter programs. The corporation
is also affected by the political and economic circumstances of its
potential foreign customers, such as the current economic crisis in
certain Asian markets. The corporation's FAA certified K-MAX
helicopters compete with military surplus helicopters and other
helicopters used for lifting, as well as with alternative methods
Page 6
of meeting lifting requirements. The corporation competes for its
subcontract aircraft structure, specialty aircraft component, and
advanced technology products business on the basis of price and
quality; product endurance and special performance characteristics;
proprietary knowledge; and the reputation of the corporation.
Industrial distribution operations are subject to a high
degree of competition from several other national distributors, two
of which are substantially larger than the corporation; and from
many regional and local firms. Competitive forces are intensifying
as the major competitors grow through consolidation.
Music distribution operations compete with domestic and
foreign distributors. Certain musical instrument products
manufactured by the corporation are subject to competition from
U.S. and foreign manufacturers as well. The corporation competes
in these markets on the basis of service, price, performance, and
inventory variety and availability. The corporation also competes
on the basis of quality and market recognition of its music
products and has established certain trademarks and trade names
under which certain of its music products are produced, as well as
under private label manufacturing in a number of foreign countries.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking information relating to
the corporation's business and prospects, including the SH-2G and
K-MAX helicopter programs, specialty self-lubricating bearings
and couplings, the industrial and music distribution businesses,
and other matters that involve a number of uncertainties that may
cause actual results to differ materially from expectations. Those
uncertainties include, but are not limited to: 1) the successful
conclusion of contract negotiations with government authorities,
including foreign governments; 2) political developments in
countries where the corporation intends to do business; 3) standard
government contract provisions permitting renegotiation of terms
and termination for the convenience of the government; 4) economic
and competitive conditions in markets served by the corporation
including industry consolidation in the United States and global
economic conditions (most notably in Asia); 5) the degree of
acceptance of new products in the marketplace; 6) U.S. industrial
production levels; 7) achievement of Year 2000 compliance by the
corporation, its customers, suppliers and service providers,
including various federal, state and foreign governments and
agencies thereof; 8) currency exchange rates, taxes, laws and
regulations, inflation rates, general business conditions and other
factors. Any forward-looking information should be considered with
these factors in mind.
Page 7
EMPLOYEES
As of December 31, 1998, the Corporation employed 4,276
individuals throughout its industry segments and corporate
headquarters as follows:
Aerospace 2,101
Industrial Distribution 1,691
Music Distribution 405
Corporate Headquarters 79
-----
4,276
PATENTS AND TRADEMARKS
The corporation holds patents reflecting scientific and
technical accomplishments in a wide range of areas covering both
basic production of certain products, including aerospace
products and musical instruments, as well as highly specialized
devices and advanced technology products in defense related
and commercial fields.
Although the corporation's patents enhance its competitive
position, management believes that none of such patents or patent
applications is singularly or as a group essential to its
business as a whole. The corporation holds or has applied for
U.S. and foreign patents with expiration dates that range through
the year 2019.
These patents are allocated among the corporation's industry
segments as follows:
U.S. PATENTS FOREIGN PATENTS
Segment Issued Pending Issued Pending
Aerospace 81 28 57 15
Industrial Distribution 0 0 0 0
Music Distribution 15 3 8 4
-- -- -- --
96 31 65 19
Trademarks of Kaman Corporation include Adamas, Applause,
Hamer, KAflex, KAron, K-MAX, Magic Lantern, and Ovation. In all,
the corporation maintains 213 U.S. and foreign trademarks with 14
applications pending, most of which relate to music products in
the Music Distribution segment.
Page 8
COMPLIANCE WITH ENVIRONMENTAL PROTECTION LAWS
In the opinion of management, based on the corporation's
knowledge and analysis of relevant facts and circumstances,
compliance with any environmental protection laws is not likely to
have a material adverse effect upon the capital expenditures,
earnings or competitive position of the corporation or any of its
subsidiaries.
The corporation is subject to the usual reviews, inspections
and enforcement actions by various federal and state environmental
and enforcement agencies and has entered into agreements and
consent decrees at various times in connection with such reviews.
Also on occasion the corporation has been identified as a
potentially responsible party ("PRP") by the U.S. Environmental
Protection Agency ("EPA") in connection with the EPA's investigation
of certain third party facilities. In each instance, the
corporation has provided appropriate responses to all requests for
information that it has received, and the matters have been
resolved either through de minimis settlements, consent agreements,
or through no further action being taken by the EPA or the
applicable state agency with respect to the corporation. With
respect to any such matters which may currently be pending, the
corporation has been able to determine, based on its current
knowledge, that resolution of such matters is not likely to have a
material adverse effect on the future financial condition of the
corporation.
In arriving at this conclusion, the corporation has taken
into consideration site-specific information available regarding
total costs of any work to be performed, and the extent of work
previously performed. Where the corporation has been identified
as a PRP at a particular site, the corporation, using information
available to it, also has reviewed and considered a number of
other factors, including: (i) the financial resources of other
PRPs involved in each site, and their proportionate share of the
total volume of waste at the site; (ii) the existence of
insurance, if any, and the financial viability of the insurers;
and (iii) the success others have had in receiving reimbursement
for similar costs under similar policies issued during the
periods applicable to each site.
FOREIGN SALES
Twenty-Two and Three Tenths percent (22.3%) of the sales of
the corporation made in 1998 were to customers located outside the
United States. In 1998, the corporation continued its efforts to
develop international markets for its products and foreign sales
(including sales for export); and during 1998 the corporation
continued to perform work under contracts with the Commonwealth of
Australia and the Government of New Zealand for the supply of
retrofit SH-2G helicopters with deliveries under both programs
expected to begin in the 2000-2001 time frame. Additional
information required by this item appears in the corporation's 1998
Page 9
Annual Report to Shareholders, and is included in Exhibit 13 to
this Form 10-K, and is incorporated herein by reference.
YEAR 2000 ("Y2K") COMPLIANCE
During 1998, the corporation utilized the services of KPMG LLP
as a consultant to assist in formalizing the corporation's Y2K
compliance program and to provide periodic assessment of the
corporation's progress. Each operating subsidiary designated a
program manager responsible for coordinating its activities and
developed a plan providing for assessment, problem solving and
compliance testing of Y2K related matters. The initial planning
and assessment phases were completed in 1998, and testing to
confirm compliance was also conducted. To date, compliance time
tables are being met with a target date to achieve overall Y2K
compliance, including compliance testing, as of June 30, 1999. In
addition, the corporation and each operating subsidiary are
currently working with suppliers, customers and service providers
to gauge their Y2K readiness and monitor their progress toward
compliance. An oversight committee reporting to the executive vice
president and chief financial officer, has been established at
corporate headquarters to monitor the progress of each subsidiary's
compliance work. Senior management provides progress reports to
the corporation's board of directors and audit committee on a
regular basis. The corporation separately identifies costs of Y2K
efforts as an internal management tool and based upon information
known to it at this time, management does not anticipate that the
costs of addressing Y2K issues will be material to the
corporation's financial position, results of operations, or cash
flows in future periods. Although the corporation does not
anticipate incurring significant costs to modify its computer
systems, there can be no assurance that significant costs will not
be incurred. Additional information concerning this item appears
in the corporation's 1998 Annual Report to Shareholders and is
included in Exhibit 13 to the form 10-K, and is incorporated herein
by reference.
ITEM 2. PROPERTIES
The corporation occupies approximately 3.39 million square
feet of space throughout the United States and Canada, distributed
as follows:
SEGMENT SQUARE FEET
(in thousands as of 12/31/98)
Aerospace 1,553
Industrial Distribution 1,396
Music Distribution 399
Corporate Headquarters 40
-----
Total 3,388
Page 10
The Aerospace segment's principal facilities are located in
Arizona, Connecticut, and Massachusetts; other facilities including
offices and smaller manufacturing and assembly operations are
located in several other states, and the corporation also has an
office in Turner, Australia. 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 Industrial Distribution segment's facilities are located
throughout the United States with principal facilities located in
California, Connecticut, New York, Kentucky and Utah. Additional
Industrial Distribution segment facilities are located in British
Columbia, Canada. These facilities consist principally of
regional distribution centers, service centers and office space
with a portion used for fabrication and assembly work.
The Music Distribution segment's facilities in the United
States are located in Connecticut, California, Georgia, Tennessee
and Texas. An additional Music Distribution facility is located in
Ontario, Canada. These facilities consist principally of regional
distribution centers, source centers and office space. Also
included are facilities used for manufacturing musical instruments.
The corporation occupies a 40 thousand square foot
Corporate headquarters building in Bloomfield, Connecticut.
The corporation's facilities are suitable and adequate to
serve its purposes and substantially all of such properties
are currently fully utilized. Many of the properties, especially
within the Industrial Distribution segment, are leased.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the
corporation or any of its subsidiaries is a party or to which any
of their property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security
holders during the fourth quarter of 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
CAPITAL STOCK AND PAID-IN CAPITAL
Information required by this item appears in the
corporation's 1998 Annual Report to Shareholders and is included
in Exhibit 13 to this Form 10-K, and is incorporated herein by
reference.
Page 11
INVESTOR SERVICES PROGRAM
Shareholders of Kaman Class A common stock are eligible to
participate in the ChaseMellon Investor Services Program
administered by Mellon Bank, N.A. which offers a variety of
services including dividend reinvestment. A booklet describing the
program may be obtained by writing to the program's Administrator,
Mellon Bank, N.A., P. O. Box 3338, South Hackensack, NJ 07606-1938.
QUARTERLY CLASS A COMMON STOCK INFORMATION
- -----------------------------------------------------------------
High Low Close Dividend
1998
First $18.38 $15.75 $18.38 $.11
Second 20.38 17.63 19.03 .11
Third 19.38 13.00 17.13 .11
Fourth 17.13 14.50 16.06 .11
- -----------------------------------------------------------------
1997
First $14.75 $12.25 $ 13.50 $.11
Second 16.00 12.00 15.38 .11
Third 18.88 14.50 18.38 .11
Fourth 20.38 15.25 16.38 .11
- -----------------------------------------------------------------
QUARTERLY DEBENTURE INFORMATION (6% Conv. Subordinated)
- -----------------------------------------------------------------
High Low Close
- -----------------------------------------------------------------
1998
First $101.00 $96.00 $100.00
Second 100.50 98.00 98.00
Third 100.63 96.00 96.50
Fourth 104.00 96.50 97.50
- -----------------------------------------------------------------
1997
First $ 92.00 $84.00 $92.00
Second 96.00 87.00 94.00
Third 100.00 94.00 96.00
Fourth 101.00 96.00 96.50
- -----------------------------------------------------------------
NASDAQ market quotations reflect inter-dealer prices,
without retail mark-up, mark-down, or commission and may not
necessarily represent actual transactions.
Page 12
ANNUAL MEETING
The Annual Meeting of Shareholders of the Corporation will be
held on Tuesday, April 13, 1999 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 matters on the agenda for the meeting will require the vote
of Class B shareholders only.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this item appears in the
corporation's 1998 Annual Report to Shareholders and is included
in Exhibit 13 to this Form 10-K, and is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Information required by this item appears in the
corporation's 1998 Annual Report to Shareholders and is included
in Exhibit 13 to this Form 10-K, and is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item appears in the
corporation's 1998 Annual Report to Shareholders and is included
in Exhibit 13 to this Form 10-K, and is incorporated herein by
reference. Additional financial information is contained in the
Financial Data Schedule included as Exhibit 27 to this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Following is information concerning each Director and
Executive Officer of Kaman Corporation including name, age,
position with the corporation, and business experience during the
last five years:
Brian E. Barents Mr. Barents, 55, has been a Director
since 1996. He is President and
Chief Executive Officer of Galaxy
Aerospace Company L.P. Prior to that
he was President and Chief Executive
Officer of Learjet, Inc. He is a
director of Tri-Star Aerospace Corp.
Page 13
Fred A. Breidenbach Mr. Breidenbach, 52, was elected a
Director in February 1998. He is the
owner of F. A. Breidenbach & Associates,
LLC, and is the former President and
Chief Operating Officer of
Gulfstream Aerospace Corp. Prior to
that he held various positions with
General Electric Corporation. He is a
director of Sensormatic Electronics
Corporation.
T. Jack Cahill Mr. Cahill, 50, 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, 51, has been a Director
since 1995. He is President of The
Callaway Advanced Technology Corporation.
Frank C. Carlucci Mr. Carlucci, 68, has been a Director
since 1989. He is Chairman of The
Carlyle Group, merchant bankers. Prior to
that he served as U.S. Secretary of
Defense. Mr. Carlucci is also a director
of Ashland, Inc., Neurogen Corporation,
Northern Telecom, Ltd., Pharmacia &
Upjohn, Inc., Quaker Oats Company, Sun
Resorts, Ltd., N.V., Texas
Biotechnology Corporation, and
IRI International Corporation.
Laney J. Chouest, M.D. Dr. Chouest, 45, has been a Director
since 1996. He is Senior Vice President
of Edison Chouest Offshore, Inc. and
Galliano Marine.
Candace A. Clark Ms. Clark, 44, has been Senior Vice
President and Chief Legal Officer 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, 66, has been a Director
since 1984. He is President and Chief
Executive Officer of Tufts University.
Prior to that he was President and Chief
Executive Officer of Michigan State
University.
Page 14
Edythe J. Gaines Dr. Gaines, 76, has been a Director
since 1982. She is a retired
Commissioner of the Public Utility
Control Authority of the State of
Connecticut.
Ronald M. Galla Mr. Galla, 48, 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.
Robert M. Garneau Mr. Garneau, 55, 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.), 70, has
been President of Kaman Aerospace
International Corporation, a
subsidiary of the corporation, since 1995
and he has been a Director since 1991.
He retired from the U.S. Navy in 1991
having served as Commander-in-Chief for
the U.S. Navy Pacific Command since
1988. He is also a director of
Contraves, Inc., MPR Inc., and
CNA Corporation.
Charles H. Kaman Mr. Kaman, 79, has been Chief Executive
Officer and Chairman of the Board of
Directors since 1945. He was also
appointed President in December, 1995,
a position he previously held from 1945
to 1990.
C. William Kaman II Mr. Kaman, 47, has been a Director
since 1992. He is Chairman and CEO of
AirKaman of Jacksonville, Inc., a former
subsidiary of the corporation which was
sold in 1997 and is no longer affiliated
with the corporation. Previously he was
Executive Vice President of the
corporation and was President of
Kaman Music Corporation, a subsidiary of
the corporation. Mr. Kaman is the son of
Charles H. Kaman, Chairman, President and
Chief Executive Officer of the
corporation.
Page 15
Walter R. Kozlow Mr. Kozlow, 63, has held various
positions with Kaman Aerospace
Corporation, a subsidiary of the
corporation, since 1960. He has been
President of Kaman Aerospace Corporation
since 1986.
Eileen S. Kraus Ms. Kraus, 60, has been a Director since
1995. She is Chairman of Connecticut
Fleet National Bank. Since 1979 she has
held various positions at Shawmut Bank
Connecticut and Shawmut National
Corporation, predecessors of Fleet Bank,
N.A. and its holding company, Fleet
Financial Group. She is a director of
Yankee Energy System, Inc., The Stanley
Works, and Bestfoods Corporation.
Hartzel Z. Lebed Mr. Lebed, 71, has been a Director since
1982, and became Vice Chairman of the
Board of Directors in January, 1999. He
is the retired President of CIGNA
Corporation.
Walter H. Monteith, Jr. Mr. Monteith, 68, has been a Director
since 1987. He is the retired Chairman
of Southern New England Telecommuni-
cations Corporation.
John S. Murtha Mr. Murtha, 85, has been a Director
since 1948. He is counsel to, and a
former senior partner of, the law firm of
Murtha, Cullina, Richter and Pinney LLP.
Patrick L. Renehan Mr. Renehan, 65, has been Senior
Vice President of Kaman Aerospace Group,
Inc. (formerly Kaman Diversified
Technologies Corporation), a subsidiary
of the corporation, since 1996. Prior
to that he served as Vice President of
that subsidiary. Mr. Renehan has held
various positions with the corporation
since 1983.
Wanda L. Rogers Mrs. Rogers, 66, has been a Director
since 1991. She is President and Chief
Executive Officer of Rogers Helicopters,
Inc. She is also a director of Clovis
Community Bank.
Page 16
Robert H. Saunders, Jr. Mr. Saunders, 58, became President of
Kaman Music Corporation, a subsidiary
of the corporation in 1998. Previously
he served as Senior Vice President of
the corporation since 1995 and also held
the position of Senior Executive Vice
President of Kaman Music Corporation
during a portion of that period. Prior
to that he was Vice President and Chief
Financial Officer of the University of
Hartford.
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 13, 1999.
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 1998.
ITEM 11. EXECUTIVE COMPENSATION
A) GENERAL. The following tables provide certain information
relating to the compensation of the Corporation's Chief Executive
Officer, its four other most highly compensated executive
officers and its directors.
Page 17
B) SUMMARY COMPENSATION TABLE.
Annual Compensation Long Term Compensation
------------------- ----------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
All
Name and Other AWARDS Other
Principal Salary Bonus Annual RSA Options/SARs LTIP Comp.
Position Year ($) ($) Comp.(1)($)(2) (#Shares) Payments ($)(3)
- ---------------------------------------------------------------------------
C. H. Kaman 1998 850,000 408,000 116,201 ------- 0/ --- 64,120
Chairman and 125,000
Chief 1997 750,000 400,000 ------- ------- ------ --- 56,793
Executive 1996 725,000 340,000 56,252 ------- ------ --- 58,412
Officer
R.M.Garneau 1998 375,000 175,000 ------- 127,500 7,500/ --- 12,418
Executive 12,500
Vice Pres- 1997 340,000 185,000 ------- 99,375 10,000/ --- 10,896
ident and 100,000
Chief 1996 240,000 82,000 ------- 77,812 10,000/ --- 7,935
Financial 0
Officer
W.R.Kozlow 1998 255,000 100,000 ------- 85,000 7,500/ --- 13,170
President 10,000
Kaman 1997 240,000 100,000 ------- 79,500 9,000/ --- 13,588
Aerospace 50,000
Corporation 1996 233,000 65,000 ------- 62,250 9,000/ --- 10,881
0
T.J. Cahill 1998 245,000 80,000 ------- 85,000 7,500/ --- 7,397
President, 7,500
Kaman 1997 230,000 90,000 ------- 79,500 9,000/ --- 7,754
Industrial 50,000
Technologies 1996 210,000 70,000 ------- 62,250 9,000/ --- 7,952
Corporation 0
H. Hardisty 1998 225,000 90,000 ------- 85,000 7,500/ --- 20,141
President 10,000
Kaman 1997 215,000 90,000 ------- 79,500 9,000/ --- 13,012
Aerospace 50,000
Interna- 1996 200,000 55,000 ------- 62,250 9,000/ --- 9,198
tional 0
Corporation
Page 18
<FN>
1. The corporation maintains a program pursuant to which it pays
for tax and estate planning services provided to executive officers
by third parties, up to certain limits. Amounts reported in this
column include payments for such services as follows: $91,060 on
behalf of C.H. Kaman in 1998 and $45,314 on behalf of C. H. Kaman
in 1996.
2. As of December 31, 1998, aggregate restricted stock holdings
and their year end value were: C.H. Kaman, none; R.M. Garneau,
20,000 shares valued at $321,250; W.R. Kozlow, 15,400 shares
valued at $247,363; T.J. Cahill, 15,400 shares valued at $247,363;
and H. Hardisty, 13,400 shares valued at $215,238. Restrictions
lapse at the rate of 20% per year for all awards, beginning one
year after the grant date. Awards reported in this column are
as follows: R.M. Garneau, 7,500 shares in 1998, 7,500 shares in
1997, and 7,500 shares in 1996; W.R. Kozlow, 5,000 shares in 1998,
6,000 shares in 1997, and 6,000 shares in 1996; T.J. Cahill, 5,000
shares in 1998, 6,000 shares in 1997, and 6,000 shares in 1996; H.
Hardisty, 5,000 shares in 1998, 6,000 shares in 1997 and 6,000
shares in 1996. Dividends are paid on the restricted stock.
3. Amounts reported in this column consist of: C.H. Kaman,
$53,000 - Officer 162 Insurance Program, $11,120 - medical expense
reimbursement program ("MERP"); R.M. Garneau, $3,352 - Senior
executive life insurance program ("Executive Life"), $851 - Officer
162 Insurance Program, $2,000 - employer matching contributions to
the Kaman Corporation Thrift and Retirement Plan (the "Thrift Plan
employer match"), $1,340 - MERP, $4,875 - all supplemental employer
contributions under the Kaman Corporation Deferred Compensation
Plan ("supplemental employer contributions"); W.R. Kozlow, $6,375
- - Executive Life, $2,000 - Thrift Plan employer match, $2,358 -
MERP, $2,437 - supplemental employer contributions; T.J. Cahill,
$1,770 - Executive Life, $2,000 - Thrift Plan employer match,
$1,564 - MERP, $2,063 - supplemental employer contributions; H.
Hardisty, $20,141 - supplemental employer contributions.
</FN>
Page 19
C) OPTION/SAR GRANTS IN THE LAST FISCAL YEAR:
- ----------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term*
- ----------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
% of Total
Options/
SARs**
Options/ Granted to
SARs** Employees Exercise or
Granted in Fiscal Base Price Expiration
Name (#) Year ($/Sh) Date 5%($) 10%($)
- ----------------------------------------------------------------------------
C. H. Kaman 0/ 0.00/ 17.00 2/10/08 1,336,401 3,386,703
125,000 75.76
R. M. Garneau 7,500/ 3.66/ 17.00 2/10/08 213,824 541,872
12,500 7.58
W. R. Kozlow 7,500/ 3.66/ 17.00 2/10/08 187,096 474,138
10,000 6.06
T. J. Cahill 7,500/ 3.66/ 17.00 2/10/08 160,368 406,404
7,500 4.55
H. Hardisty 7,500/ 3.66/ 17.00 2/10/08 187,096 474,138
10,000 6.06
*The information provided herein is required by Securities and Exchange
Commission rules and is not intended to be a projection of future common
stock prices.
**Stock Appreciation Rights (SARs) payable in cash only, not in shares of
common stock.
Page 20
D) AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR, AND
FISCAL YEAR-END OPTION/SAR VALUES.
Value of
Number of Unexercised
Unexercised in-the-money
options options*
Shares at FY-end (#) at FY-end ($)
acquired on Value exercisable/ exercisable/
Name Exercise(#) realized unexercisable unexercisable
(a) (b) (c) (d) (e)
- -------------------------------------------------------------------
C. H. Kaman none ------- 20,000/0 166,250/0
R. M. Garneau 2,000 15,875 25,500/24,500 158,406/70,688
W. R. Kozlow 3,000 21,750 24,900/23,100 155,569/65,025
T. J. Cahill 1,000 8,000 19,400/23,100 112,475/65,025
H. Hardisty none ------ 5,400/20,100 25,538/50,963
Value of
Number of Unexercised
Unexercised in-the-money
SARs SARs*
Shares at FY-end (#) at FY-end ($)
acquired on Value exercisable/ exercisable/
Name Exercise(#) realized unexercisable unexercisable
(a) (b) (c) (d) (e)
- -------------------------------------------------------------------
C. H. Kaman N/A N/A 0/125,000 0/0
R. M. Garneau " " 20,000/92,500 56,250/225,000
W. R. Kozlow " " 10/000/50,000 28,150/112,500
T. J. Cahill " " 10,000/47,500 28,125/112,500
H. Hardisty " " 10,000/50,000 28,125/112,500
*Difference between the 12/31/98 FMV and the exercise price(s).
E) LONG TERM INCENTIVE PLAN AWARDS: Except as described above, no
long term incentive plan awards were made to any named executive
officer in the last fiscal year.
Page 21
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:
Page 22
PENSION PLAN TABLE
Years of Service
Remuneration* 15 20 25 30 35
- -----------------------------------------------------------------
125,000 33,471 44,851 55,562 66,942 66,942
150,000 40,971 54,901 68,012 81,942 81,942
175,000 48,471 64,951 80,462 96,942 96,942
200,000 55,971 75,001 92,912 111,942 111,942
225,000 63,471 85,015 105,362 126,942 126,942
250,000 70,971 95,101 117,812 141,942 141,942
300,000 85,971 115,201 142,712 171,942 171,942
350,000 100,971 135,301 167,612 201,942 201,942
400,000 115,971 155,401 192,512 231,942 231,942
450,000 130,971 175,501 217,412 261,942 261,942
500,000 145,971 195,601 242,312 291,942 291,942
750,000 220,971 296,101 366,812 441,942 441,942
1,000,000 295,971 396,601 491,312 591,942 591,942
1,250,000 370,971 497,101 615,812 741,942 741,942
1,500,000 445,971 597,601 740,312 891,942 891,942
1,750,000 520,971 698,101 864,812 1,041,942 1,041,942
2,000,000 595,971 798,601 989,312 1,191,942 1,191,942
*Remuneration: Average of the highest five consecutive years of
"Covered Compensation" out of the final ten years of service.
"Covered Compensation" means "W-2 earnings" or "base
earnings", if greater, as defined in the Pension Plan. W-2
earnings for pension purposes consist of salary (including 401(k)
and Section 125/129 Plan contributions but not deferrals under a
non-qualified Deferred Compensation Plan), bonus and taxable
income attributable to restricted stock awards and the cash out
of employee stock options. Salary and bonus amounts for the named
Executive Officers for 1998 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. Kaman, $1,250,000; Mr. Hardisty,
$361,410.
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.
Page 23
The Executive Officers named in Item 11(b) are participants
in the plan and as of December 31, 1998, had the number of years of
credited service indicated: Mr. Kaman - 53.1 years; Mr. Garneau -
17.48 years; Mr. Kozlow - 38.7 years; Mr. Cahill - 23.7 years;
Mr. Hardisty - 3.45 years.
Benefits are computed generally in accordance with the
benefit formula described above.
G) COMPENSATION OF DIRECTORS. In general, non-employee members of
the Board of Directors of the corporation receive an annual
retainer of $20,000 and a fee of $1,000 for attending each meeting
of the Board and each meeting of a Committee of the Board, except
that the Chairman of the Audit Committee receives a fee of $1,250
for attending each meeting of that Committee. Notwithstanding the
foregoing, (1) effective in January 1999, the position of Vice
Chairman of the Board was created with a retainer of $40,000 per
year and a fee of $2,000 for attending each meeting of the Board;
and (2) effective in September 1998, the Acting Chairman of the
Board received a monthly retainer of $8,000 (this position was
ended in February 1999) and a fee of $2,000 for attending each
meeting of the Board and each meeting of the Special Committee of
the Board. 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 1999 Annual Meeting of
Shareholders.
H) EMPLOYMENT CONTRACTS AND TERMINATION, SEVERANCE AND CHANGE
OF CONTROL ARRANGEMENTS. The corporation has entered an
arrangement with Mr. C. H. Kaman that (1) in the event he retires
or dies during active employment with the corporation, he and/or
Mrs. Kaman will be provided with medical/dental benefits for the
remainder of their lives; and (2) in the event he becomes disabled
during active employment, he will be assured of receiving an amount
equal to his then current annual base salary for the remainder of
his life. 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 employment contract, plan or arrangement with
respect to any named executive which relates to employment
termination for any reason, including resignation, retirement or
otherwise, or a change in control of the corporation or a change in
any such executive officer's responsibilities following a change of
control, which exceeds or could exceed $100,000.
I) Not Applicable.
Page 24
J) COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISIONS.
1) The following persons served as members of the Personnel
and Compensation Committee of the Corporation's Board of Directors
during the last fiscal year: Frank C. Carlucci, Brian E. Barents,
Edythe J. Gaines, Walter H. Monteith, Jr. and John S. Murtha.
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. Mr. Murtha's
relationship with the corporation is further disclosed in Item 13
of this report.
2) During the last fiscal year no executive officer of the
corporation served as a director of or as a member of the
compensation committee (or other board committee performing
equivalent functions) of another entity, one of whose executive
officers served as a director of, or on the Personnel and
Compensation Committee of the corporation.
K) Not Applicable.
L) Not Applicable.
Page 25
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.
- -----------------------------------------------------------------
Class of Number of Shares
Common Name and Address Owned as of Percentage
Stock Beneficial Owner February 1, 1999 of Class
- -----------------------------------------------------------------
Class B Charles H. Kaman 258,375(1) 38.69%
Kaman Corporation
Blue Hills Avenue
Bloomfield, CT 06002
Class B Newgate Associates 199,802 29.91%
Limited Partnership
c/o Murtha, Cullina,
Richter and Pinney LLP
CityPlace I
185 Asylum Street
Hartford, CT 06103
Class B C. William Kaman, II 64,446(2) 9.65%
c/o AirKaman of
Jacksonville, Inc.
Jacksonville International
Airport
14700 Yonge Drive
Jacksonville, FL 32218
Class B Robert D. Moses 48,729(3) 7.30%
Farmington Woods
Avon, CT 06001
<FN>
(1) Excludes 1,471 shares held by Mrs. Kaman. Excludes
199,802 shares reported separately above and held by
Newgate Associates Limited Partnership, a limited
partnership in which Mr. Kaman serves as general
partner.
(2) Excludes 4,800 shares held as trustee for the benefit of
certain family members.
(3) Includes 39,896 shares held by a partnership controlled by
Mr. Moses.
</FN>
Page 26
(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.
Class of Number of Shares Owned Percentage
Name Common Stock as of February 1, 1999 of Class
- --------------------------------------------------------------------
Brian E. Barents Class A 1,000 *
Fred A. Breidenbach Class A 4,500 *
T. Jack Cahill Class A 34,230(1) *
E. Reeves Callaway Class A 1,000 *
Frank C. Carlucci Class A 4,000(2) *
Laney J. Chouest Class A 6,331 *
John A. DiBiaggio Class A 1,000 *
Edythe J. Gaines Class A 3,269 *
Robert M. Garneau Class A 30,133(3) *
Class B 20,512 3.07%
Huntington Hardisty Class A 17,000(4) *
Charles H. Kaman Class A 217,884(5) *
Class B 258,375(6) 38.69%
C. William Kaman, II Class A 64,488(7) *
Class B 64,446(8) 9.65%
Walter R. Kozlow Class A 50,412(9) *
Class B 296 *
Eileen S. Kraus Class A 1,563 *
Hartzel Z. Lebed Class A 17,067(10) *
Walter H. Monteith, Jr. Class A 1,200 *
John S. Murtha Class A 52,948(11) *
Class B 432 *
Wanda L. Rogers Class A 1,000 *
All Directors and
Executive Officers Class A 573,757(12) 2.5%
as a group ** Class B 345,799 51.8%
* Less than one percent.
** Excludes 23,612 Class A shares and 1,471 Class B shares held
by spouses of certain Directors and Executive Officers.
<FN>
(1) Excludes 19,400 shares subject to the exercisable portion of
stock options.
(2) Includes 3,500 shares held jointly with Mrs. Carlucci.
(3) Excludes 25,500 shares subject to the exercisable portion
of stock options.
Page 27
(4) Excludes 5,400 shares subject to the exercisable portion of
stock options.
(5) Excludes the following: 23,132 shares held by Mrs. Kaman;
7,952 shares held by Fidelco Guide Dog Foundation, Inc., a
charitable foundation of which Mr. Kaman is President and
Director, in which shares Mr. Kaman disclaims beneficial
ownership; 184,434 shares held by Newgate Associates
Limited Partnership, a limited partnership of which Mr.
Kaman is the general partner; 21,816 shares held by Oldgate
Limited Partnership ("Oldgate") a limited partnership of which
Mr. Kaman is the general partner; 125,034 shares held by
Oldgate and as to which shares Mr. Kaman disclaims beneficial
interest, such portion of Oldgate having been placed in an
irrevocable trust; and 72,500 shares held by the Charles H.
Kaman Charitable Foundation, a private charitable foundation.
Included are 20,000 shares subject to exercisable portion of
stock options.
(6) Excludes the following: 1,471 shares held by Mrs. Kaman and
199,802 shares held by Newgate Associates Limited Partnership,
a limited partnership of which Mr. Kaman is the general
partner.
(7) Excludes 12,300 shares subject to exercisable portion of
stock options; and excludes 84,516 shares held by Mr. Kaman
as Trustee, in which shares Mr. Kaman disclaims any
beneficial ownership.
(8) Excludes 4,800 shares held by Mr. Kaman as Trustee in which
shares Mr. Kaman disclaims any beneficial ownership.
(9) Excludes 24,900 shares subject to exercisable portion of
stock options.
(10)Includes shares held jointly with Mrs. Lebed, excludes
8,000 shares held in an Individual Retirement Account and
480 shares held by Mrs. Lebed.
(11)Held by Fleet National Bank pursuant to a revocable trust.
Includes 7,980 shares held by Fleet National Bank pursuant
to a revocable trust for the benefit of Mrs. Murtha.
(12)Includes 142,800 shares subject to exercisable portion of
stock options.
</FN>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1998, the corporation obtained legal services from the
Hartford, Connecticut law firm of Murtha, Cullina, Richter and
Pinney LLP of which Mr. Murtha, a Director of the corporation, is
of counsel. The corporation also obtained video production services
in the amount of $134,218 from Polykonn Corporation, a
corporation controlled by Mr. Steven Kaman, son of Charles H.
Kaman, Chairman and Chief Executive Officer of the corporation. In
addition, the corporation entered into an agreement with Mr. C.
William Kaman, II, a Director and former Executive Vice President
of the corporation, confirming his resignation from active
employment with the corporation and retaining him as Senior
Executive Advisor through December 31, 2001 at the annual rate of
$245,000. A copy of such agreement is attached hereto as Exhibit
10c. In arriving at the terms of such agreement the corporation
obtained the advice of an independent professional consultant.
Page 28
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a)(1) FINANCIAL STATEMENTS.
See Item 8 concerning financial statements appearing as
Exhibit 13 to this Report and concerning the Financial
Data Schedule appearing as Exhibit 27 to this Report.
(a)(2) FINANCIAL STATEMENT SCHEDULES.
An index to the financial statement schedules immediately
precedes such schedules.
(a)(3) EXHIBITS.
An index to the exhibits filed or incorporated by
reference immediately precedes such exhibits.
(b) REPORTS ON FORM 8-K.
The following reports on Form 8-K were filed since the
filing of the Corporation's 1997 Annual Report on
Form 10-K.
Date Filed Accession Number
------------------ ----------------
December 17, 1998 54381-98-30
Page 29
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 16th day of March, 1999.
KAMAN CORPORATION
(Registrant)
By Charles H. Kaman, 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:
- -------------------------------------------------------------------
Charles H. Kaman Chairman, President, Chief March 16, 1999
Executive Officer and Director
(Chief Executive Officer)
Robert M. Garneau Executive Vice President March 16, 1999
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
Robert M. Garneau March 16, 1999
Attorney-in-Fact for:
Brian E. Barents Director
Fred A. Breidenbach Director
E. Reeves Callaway, III Director
Frank C. Carlucci Director
Laney J. Chouest Director
John A. DiBiaggio Director
Edythe J. Gaines Director
Huntington Hardisty Director
C. William Kaman, II Director
Eileen S. Kraus Director
Hartzel Z. Lebed Director
Walter H. Monteith, Jr. Director
John S. Murtha Director
Wanda L. Rogers Director
Page 30
KAMAN CORPORATION AND SUBSIDIARIES
Index to Financial Statement Schedules
Report of Independent Auditors
Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts
Page 31
REPORT OF INDEPENDENT AUDITORS
KPMG LLP
Certified Public Accountants
CityPlace II
Hartford, Connecticut 06103
The Board of Directors and Shareholders
Kaman Corporation:
Under date of January 27, 1999, we reported on the consolidated
balance sheets of Kaman Corporation and subsidiaries as of
December 31, 1998 and 1997 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, 1998, as contained in the 1998 annual report to
shareholders. These consolidated financial statements and our
report thereon are included in the annual report on Form 10-K for
1998. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related
consolidated financial statement schedule as listed in the
accompanying index. This financial statement schedule is the
responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such schedule, when considered in relation to
the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set
forth therein.
/s/ KPMG LLP
Hartford, Connecticut
March 16, 1999
Page 32
KAMAN CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
YEAR ENDED DECEMBER 31, 1996
Additions
BALANCE CHARGED TO BALANCE
JANUARY 1, COSTS AND DECEMBER 31,
DESCRIPTION 1996 EXPENSES OTHERS DEDUCTIONS 1996
Allowance for
doubtful
accounts $2,289 $1,288 $----- $1,003(A) $2,574
====== ====== ====== ====== ======
Accumulated
amortization
of goodwill $3,899 $ 365 $----- $ 397(B) $3,867
====== ====== ====== ====== ======
YEAR ENDED DECEMBER 31, 1997
Additions
BALANCE CHARGED TO BALANCE
JANUARY 1, COSTS AND DECEMBER 31,
DESCRIPTION 1997 EXPENSES OTHERS DEDUCTIONS 1997
Allowance for
doubtful
accounts $2,574 $2,950 $----- $1,697(A) $3,827
====== ====== ====== ====== ======
Accumulated
amortization
of goodwill $3,867 $ 345 $----- $2,834(B) $1,378
====== ====== ====== ====== ======
YEAR ENDED DECEMBER 31, 1998
Additions
BALANCE CHARGED TO BALANCE
JANUARY 1, COSTS AND DECEMBER 31,
DESCRIPTION 1998 EXPENSES OTHERS DEDUCTIONS 1998
Allowance for
doubtful
accounts $3,827 $1,058 $----- $ 838(A) $4,047
====== ====== ====== ====== ======
Accumulated
amortization
of goodwill $1,378 $ 110 $----- $----- $1,488
====== ====== ====== ====== ======
<FN>
(A) Write-off of bad debts, net of recoveries
(B) Write-off of accumulated amortization of goodwill related to
the sale of a subsidiary or division.
</FN>
Page 33
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 attached
as amended on February 9, 1999.
Exhibit 4a Indenture between the corporation by reference
and Manufacturers Hanover Trust
Company, as Indenture Trustee,
with respect to the
Corporation's 6% Convertible
Subordinated Debentures, has
been filed as Exhibit 4.1 to
Registration Statement No. 33 -
11599 on Form S-2 of the
corporation filed with the
Securities and Exchange
Commission on January 29, 1987
and is incorporated in this
report by reference.
Exhibit 4b The Amended and Restated by reference
Revolving Credit Agreement
between the corporation and The
Bank of Nova Scotia and Fleet National
Bank of Connecticut, as
Co-Administrative Agents, dated
as of July 3, 1997 has been filed
as an exhibit to the Corporation's
Form 10-Q Document No. 54381-97-16
filed with the Securities and
Exchange Commission on August 15, 1997
and is incorporated in this report
by reference.
Exhibit 4c The corporation is party to certain by reference
long-term debt obligations, such
as real estate mortgages, copies
of which it agrees to furnish to
the Commission upon request.
Page 34
Exhibit 10a The Kaman Corporation 1993 Stock by reference
Incentive Plan as amended effective
November 18, 1997 has been filed
as an exhibit to the Corporation's
Form 10-K Document No. 54381-98-09
filed with the Securities and
Exchange Commission on March 16, 1998
(as amended by Document No. 54381-98-13
on March 27, 1998) and is incorporated
in this report by reference.
Exhibit 10b The Kaman Corporation Employees by reference
Stock Purchase Plan as amended
effective November 19, 1997 has been filed
as an exhibit to the Corporation's
Form 10-K Document No. 54381-98-09
filed with the Securities and
Exchange Commission on March 16, 1998
(as amended by Document No. 54381-98-13
on March 27, 1998) and is incorporated
in this report by reference.
Exhibit 10c Agreement dated August 10, 1998 Attached
between the corporation and
C. William Kaman, II.
Exhibit 11 Statement regarding computation Attached
of per share earnings.
Exhibit 13 Portions of the Corporation's Attached
1998 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.
Exhibit 27 Financial Data Schedule Attached
Page 35