SEC Filing | Kaman Corporation

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, 1994 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-(203) 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 -Series 2 Preferred Stock, Par Value $1.00 -Depositary Shares, each representing one quarter of a share of Series 2 Preferred Stock 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 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. $1,730,406 as of February 1, 1995. Indicate the number of shares outstanding of each of the registrant's classes of common stock as of February 1, 1995. Class A Common 17,535,987 shares Class B Common 667,814 shares DOCUMENTS INCORPORATED BY REFERENCE Portions of the Corporation's 1994 Annual Report to Shareholders are incorporated by reference and filed as Exhibit 13 to this Report. No other documents except those previously filed with the Commission are incorporated herein by reference. PART I ITEM 1. BUSINESS Kaman Corporation, incorporated in 1945, and its subsidiaries (collectively, the "Corporation") serve government, industrial and commercial markets through two industry segments: Diversified Technologies and Distribution. The Diversified Technologies group provides design and manufacture of advanced technology products and systems, advanced technology services and aircraft manufacturing. The Distribution segment distributes industrial products, distributes and manufactures music products and provides support services to its customers and provides aviation services. DIVERSIFIED TECHNOLOGIES The Diversified Technologies segment consists of several wholly-owned subsidiaries, including Kaman Diversified Technologies Corporation, Kaman Aerospace Corporation, Kaman Sciences Corporation, Kamatics Corporation, Kaman Electromagnetics Corporation, and Kaman Instrumentation Corporation, as well as a 50% interest in Advanced Energetic Materials Corporation of America. A former Diversified Technologies subsidiary, Raymond Engineering Inc., was merged into Kaman Aerospace Corporation on January 31, 1995. The Diversified Technologies segment develops and manufactures various advanced technology products and systems which are used in markets that the Corporation serves. Among the products manufactured are self lubricating bearings used on aircraft and in other systems, flexible couplings for helicopters, precision measuring instruments, composite flyer bows, RF transmission and delay lines, telecommunication products, photonic and optical systems, ruggedized tape and disk memory systems used primarily in aircraft, and safing and fuzing systems for use in missiles. The Corporation also develops and produces various motors, generators, alternators, launchers and electric drive systems using electromagnetic technology. In addition, the Corporation has contracts with the U.S. government for a number of advanced technology programs relating to some of the systems described above and to other proprietary systems developed by the Corporation. The Corporation's merger of its Raymond Engineering Inc. subsidiary into Kaman Aerospace Corporation was undertaken in order to downsize Raymond Engineering's operations and to focus on advanced technology product areas which, in the opinion of the Corporation, demonstrate the most potential for future success. Page 1 As a second category of its business, the Diversified Technologies segment also provides advanced technology services to a number of customers, including all branches of the armed forces, various Government agencies, the Department of Energy, Department of Transportation, various defense contractors, utilities and industrial organizations. The services offered include software engineering and maintenance, operation of Government information analysis centers, field and laboratory testing services, communication system design and analysis, specialized sensor design, electromagnetic interference and compatibility evaluations, analysis and simulation of electronic signals, various types of artificial intelligence systems and weapon system evaluation. A third category of this segment's business is aircraft manufacturing, including the development and manufacture of helicopters and the integration of systems related to helicopters. The Corporation is the prime contractor for the SH-2 series helicopter, a multi-mission aircraft presently serving the U.S. Navy with two squadrons of the SH-2G configuration of such helicopter in the Navy's Reserve fleet. Reductions in defense spending resulted in the phasing out of the SH-2 series helicopter from the Navy's Active (non-Reserve) fleet in 1994 and the Corporation's contract with the Navy for retrofitting certain model SH-2F helicopters to the SH-2G configuration was completed in 1994. The Corporation is exploring long term foreign military sales potential for retrofitting SH-2G helicopters, as maritime helicopters operating off FF-1052 class frigates being leased to foreign governments by the U.S. Navy. In 1994 the Arab Republic of Egypt signed a letter of agreement for the foreign military sale of ten retrofitted SH-2G helicopters having dipping sonar capability. The Corporation is in the process of negotiating its contract with the U.S. Navy to perform such retrofit work for such helicopters which is expected to have a value of $100 million over a three year period. The Corporation also produces a new commercial helicopter, known as the K-MAX (registered trademark) "aerial truck" incorporating intermeshing rotor technology developed by the Corporation. The K-MAX is a medium lift helicopter designed to provide superior operational capabilities. The Corporation has devoted a substantial portion of its research and development activities to this product during the past several years and continues to do so. In 1994 the Corporation received Federal Aviation Administration (FAA) type certification and a total of five (5) K-MAX helicopters were delivered to customers under a special lease program in order to maintain active involvement in the product's introduction to the marketplace. Page 2 Kaman manufactures subcontract aircraft products for government and commercial customers on programs such as the McDonnell Douglas C-17 and the Boeing 767 and 777, and is involved in various programs requiring development of new technologies such as composite structural components for the F-22 and V-22 aircraft. It also manufactures composite rotor blades for helicopters, and airborne laser-based electro-optical imaging and detection systems for military and commercial operations. Such electro-optical systems include imaging LIDAR systems and the Corporation's proprietary Magic Lantern (registered trademark) system which allows underwater objects to be detected from an airborne platform. DISTRIBUTION The Distribution segment consists of several wholly-owned subsidiaries including the following: Kaman Industrial Technologies Corporation, Kaman Music Corporation, and AirKaman of Jacksonville, Inc. This segment distributes industrial products, manufactures and distributes music products, and provides aviation services. Kaman Industrial Technologies Corporation is a national distributor of industrial products operating through more than 150 service centers located in 29 states and British Columbia, Canada. The Corporation supplies a broad range of industries with original equipment, repair and replacement products needed to maintain traditional manufacturing processes and, increasingly, with products of higher technological content that are required to support automated production processes. The Corporation serves nearly every sector of heavy and light industry, including automobile manufacturing, agriculture, food processing, pulp and paper manufacturing, mining, chemicals, electronics and general manufacturing. Products available include various types of standard and precision mounted and unmounted bearings; mechanical power transmission equipment such as V-belts, couplings, and gear reducers; electrical power transmission products, motors, AC/DC controls, sensors and motion control devices; materials handling equipment, belts, conveyor idlers and pulleys; hydraulic drive systems and parts; and accessory products such as lubricants and seals. Although the vast majority of the company's business consists of resale of products, operations include some design, fabrication, and assembly work in connection with products sold. Page 3 The Corporation continues to develop certain support service capabilities in order to meet the maintenance needs of its customers' manufacturing operations. These services include electrical panel and systems fabrication centers capabilities and similar capabilities for hydraulic and pneumatic control panels, linear positioning systems, and material handling systems. In 1994 the Corporation, on a limited basis, continued to act as a supplier of capital equipment to various systems engineering and manufacturing customers by acting as a sales agent for certain equipment manufacturers. As the Corporation has entered new market areas, it has invested in new product inventory and in some instances it has established inventory on consignment in customer locations. The Corporation maintains a management information system, consisting of an on-line computer network linking all of its mainland U.S. and Canadian industrial distribution facilities, which enhances its ability to provide more efficient nationwide service and to improve inventory management. In addition, the Corporation has undertaken initiatives to address the needs of certain national account customers that desire to reduce their vendor base by entering into "partnering" relationships to broaden geographical coverage. Kaman Music Corporation distributes more than 13,000 different music instruments and accessories to independent retailers in the United States, Canada, and Great Britain and to international distributors throughout the world. Products include acoustic, acoustic-electric and electric guitars and basses, music strings for all fretted instruments, drums, percussion products and related accessories, instrument and P.A. amplification systems, electronic tuners and metronomes, educational percussion and brass instruments and a full range of accessories for all musical instruments. The Corporation manufactures and distributes certain guitars under the Corporation's various brand names including Ovation and Hamer guitars, fretted musical instrument strings of various brands, and the Trace Elliot range of stringed instrument amplification equipment. In 1994 the Corporation acquired B & J Music Ltd., a Canadian distributor of musical instruments. Operations of Kaman Music Corporation are conducted through three (3) manufacturing facilities and seven (7) distribution centers in the United States and Canada, an international sales division based in the United States and a manufacturing and distribution facility in Great Britain. The segment also distributes aviation fuel and provides aviation services at Jacksonville International Airport, Jacksonville, Florida where the Corporation conducts fixed base operations for general and commercial aviation under a contract with the Port Authority of the City of Jacksonville which extends through the year 2008. Page 4 FINANCIAL INFORMATION Information concerning each segment's performance for the last three fiscal years appears in the Corporation's 1994 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 1992 1993 1994 ------ ------ ------ Diversified Technologies: Advanced Technology Products and Systems 12.6% 13.5% 12.1% Advanced Technology Services 13.6 14.1 13.5 Aircraft Manufacturing 19.7 15.5 12.3 ---- ---- ---- Segment Total 45.9 43.1 37.9 Distribution: Industrial Products 41.9 42.9 46.7 Music Products and Other Services 12.2 14.0 15.4 ---- ---- ---- Segment Total 54.1 56.9 62.1 Total 100.0% 100.0% 100.0% ===== ===== =====

RESEARCH AND DEVELOPMENT EXPENDITURES Government sponsored research expenditures by the Diversified Technologies segment were $123.7 million in 1994, $142.3 million in 1993, and $124.5 million in 1992. Independent research and development expenditures were $21.1 million in 1994, $18.4 million in 1993, and $17.8 million in 1992. Page 5 BACKLOG Program backlog of the Diversified Technologies segment was approximately $228.9 million at December 31, 1994, $240.8 million at December 31, 1993, and $361.4 million at December 31, 1992. The Corporation anticipates that approximately 88.9% of its backlog at the end of 1994 will be performed in 1995. Approximately 69.1% of the backlog at the end of 1994 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 1994, approximately 50% 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 Diversified Technologies segment operates in a highly competitive environment with many other organizations which are substantially larger and have greater financial and other resources. For sales of advanced technology products and systems, the Corporation competes with a wide range of manufacturers primarily on the basis of price and the quality, endurance, reliability and special performance characteristics of those products. Operations also depend in part on the ability to develop new technologies which have effective commercial and Page 6 military applications. Examples of proprietary or patented products developed by the Corporation include the Magic Lantern (Registered Trademark) system for detecting underwater objects from a helicopter, the Kamatics line of specialty bearings and the Corporation's line of electromagnetic motors and drives, among others. In providing scientific services and systems development, the Corporation competes primarily on the basis of the technical capabilities and experience of its personnel in specific fields. When bidding for aerospace contracts and subcontracts, the Corporation competes on the basis of price and quality of its products and services as well as the availability of its facilities, equipment and personnel to perform the contract. Defense market conditions have been significantly affected by an ongoing slowdown in defense spending; continued decreases in federal government expenditures are anticipated in future periods as well. During 1994 the Department of Defense actively pursued its implementation of defense acquisition reform by emphasizing the use of commercially developed state-of-the-art technology products and performance-based procurement standards rather than traditional military specification standards. The change in defense program emphasis and greater constraints in the federal budget have increased the level of competition for defense programs. The Corporation's contract to retrofit certain of its SH-2 series helicopters to the SH-2G configuration for the U.S. Navy was completed in 1994 and, as the U.S. Navy reduces the size of its fleet, the Corporation expects a corresponding reduction in the level of logistics and spare parts required. In providing spare parts, the Corporation competes with other helicopter manufacturers on the basis of price, performance and product capabilities and also on the basis of its experience as a manufacturer of helicopters. The Corporation's FAA certificated K-MAX helicopters will compete with other helicopters suitable for lifting, with surplus U.S. military helicopters, and with alternative methods of meeting lifting requirements. Distribution operations are subject to a high degree of competition from several other national distributors and many regional and local firms both in the U.S. and elsewhere in the world. Certain musical instrument products of the Corporation are subject to competition from U.S. and foreign manufacturers also. 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 both in the United States and under private label manufacturing in foreign countries. Page 7 EMPLOYEES As of December 31, 1994, the Corporation employed 5,239 individuals throughout its industry segments as follows: ~~Diversified Technologies 2,939 Distribution 2,241 Corporate Headquarters 59~~

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 such areas as nuclear sciences, strategic defense and other commercial, scientific and defense related 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 2011. These patents are allocated among the Corporation's industry segments as follows: U.S. PATENTS FOREIGN Patents Segment Issued Pending Issued Pending ~~Diversified Technologies 113 24 53 45 Distribution 26 0 13 0~~
Trademarks of Kaman Corporation include Adamas, Applause, Hamer, KAflex, KAron, K-Max, Magic Lantern, and Ovation. In all, the Corporation maintains 208 U.S. and foreign trademarks with 51 applications pending, most of which relate to music products in the 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, there will be no material adverse effect upon the capital expenditures, earnings or competitive position of the Corporation or any of its subsidiaries occasioned by compliance with any environmental protection laws. The Corporation is subject to the usual reviews and inspections by environmental agencies of the various states in which the Corporation has facilities, and the Corporation has entered into agreements and consent decrees at various times in connection with such reviews. On occasion the Corporation also has been identified as a potentially responsible party ("PRP") by the U.S. Environmental Protection Agency in connection with its investigation of certain waste disposal sites. In each such instance to date, the Corporation's involvement, if any, has been either of a de minimis nature or 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 (i) the financial resources of other PRP's 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 Ninety-three percent (93%) of the sales of the Corporation are made to customers located in the United States. In 1994, the Corporation continued its efforts to develop international markets for its products and foreign sales (including sales for export). Page 9 ITEM 2. PROPERTIES The Corporation occupies approximately 4.6 million square feet of space throughout the United States, Canada, and Great Britain, distributed as follows: SEGMENT SQUARE FEET (in thousands) ~~Diversified Technologies 2,105 Distribution 2,412 Corporate Headquarters 40~~
Diversified Technologies principal facilities are located in Arizona, Colorado, Connecticut, Florida, Massachusetts, Pennsylvania and Virginia; other facilities including offices and smaller manufacturing and assembly operations are located in several other states. These facilities are used for manufacturing, scientific 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 facility contract. In 1994 the Corporation purchased an 80 thousand square foot office building in Colorado Springs, Colorado, for use by its subsidiary, Kaman Sciences Corporation. The Distribution segment occupies approximately 2.1 million square feet of space throughout the United States with principal facilities located in California, Connecticut, New York, Texas and Utah; approximately 100 thousand square feet of space in British Columbia, Canada; approximately 40 thousand square feet of space in Ontario, Canada; and approximately 150 thousand square feet of space in Essex, England. These facilities consist principally of regional distribution centers, service centers and office space with a portion used for fabrication and assembly work. Also included are facilities used for manufacturing musical instruments, and facilities leased in Florida for aviation services operations. Kaman Corporation occupies a 40 thousand square foot Corporate headquarters building in Bloomfield, Connecticut. Page 10 The Corporation's facilities are suitable and adequate to serve its purposes. While substantially all of such properties are currently fully utilized, the Corporation consolidated some of its properties in the Diversified Technologies segment during 1994 and expects to consolidate further in the next few years. Many of the properties, especially within the Distribution segment, are leased and certain of the Corporation's properties are subject to mortgages. 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 1994. 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 1994 Annual Report to Shareholders and is included in Exhibit 13 to this Form 10-K, and is incorporated herein by reference. DIVIDEND REINVESTMENT PLAN Registered shareholders of Kaman Class A common stock are eligible to participate in the Automatic Dividend Reinvestment Program. A booklet describing the plan may be obtained by writing to the Corporation's transfer agent, Chemical Bank, Securityholder Relations, J.A.F. Building, P. O. Box 3068, New York, NY 10116-3068. Page 11 QUARTERLY CLASS A COMMON STOCK INFORMATION - ----------------------------------------------------------------- High Low Close Dividend - ----------------------------------------------------------------- 1994 First $10 3/8 $9 $ 9 5/8 $.11 Second 10 1/8 8 7/8 9 1/8 $.11 Third 10 1/8 8 1/2 9 5/8 $.11 Fourth 11 1/8 9 1/8 11 $.11 - ----------------------------------------------------------------- 1993 First $12 1/8 $9 1/2 $11 1/4 $.11 Second 11 3/4 9 7/8 10 3/4 $.11 Third 11 1/2 9 1/2 10 $.11 Fourth 10 1/8 8 5/8 10 1/8 $.11 - ----------------------------------------------------------------- QUARTERLY DEBENTURE INFORMATION (6% Conv. Subordinated)(Bid) - ----------------------------------------------------------------- High Low Close - ----------------------------------------------------------------- 1994 First $85 $83 $83 Second 83 76 76 Third 76 74 74 Fourth 74 71 74 - ----------------------------------------------------------------- 1993 First $88 1/2 $77 $88 1/2 Second 88 1/2 85 85 Third 89 1/2 83 1/2 89 1/4 Fourth 89 3/4 84 3/4 85 - ----------------------------------------------------------------- QUARTERLY DEPOSITARY SHARES INFORMATION - ----------------------------------------------------------------- High Low Close Dividend - ----------------------------------------------------------------- 1994 First $52 $50 1/2 $50 3/4 $.81 1/4 Second 51 42 1/2 42 1/2 $.81 1/4 Third 46 40 3/4 43 5/8 $.81 1/4 Fourth 48 42 3/4 46 3/4 $.81 1/4 - -----------------------------------------------------------------
Kaman's Depositary Shares (each representing a one-quarter interest in a share of its Series 2 preferred stock, $200 liquidation preference) were issued in October 1993, and traded in a range between 48 and 51 1/2, closing 1993 at 51 1/2. 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 will be held on Tuesday, April 18, 1995 at 11:00 a.m. in the offices of the Corporation, 1332 Blue Hills Avenue, Bloomfield, Connecticut 06002. ITEM 6. SELECTED FINANCIAL DATA Information required by this item appears in the Corporation's 1994 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 1994 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 1994 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: T. Jack Cahill Mr. Cahill, 46, has held various positions with Kaman Industrial Technologies Corporation, a subsidiary of the Corporation, since 1975. He was appointed President of Kaman Industrial Technologies in 1993. Page 13 E. Reeves Callaway, II Mr. Callaway, 47, is a Director Nominee for election at the Corporation's 1995 Annual Meeting of Shareholders. He is President of The Callaway Companies, Inc. Frank C. Carlucci Mr. Carlucci, 64, has been a Director since 1989. He is Chairman of The Carlyle Group, merchant bankers, having formerly served as Vice Chairman since 1989. Prior to that he served as U.S. Secretary of Defense. Mr. Carlucci is also a Director of Westinghouse Electric Corporation, Ashland Oil, Inc., Bell Atlantic Corporation, General Dynamics Corporation, Neurogen Corporation, Northern Telecom Limited, Quaker Oats Company, The Upjohn Company, Sun Resorts, Inc., and Texas Biotechnology Corporation. William P. Desautelle Mr. Desautelle, 55, has been Senior Vice President and Treasurer since 1990 and was also designated Chief Investment Officer in April 1992. Prior to that he had served as Vice President and Treasurer. John A. DiBiaggio Dr. DiBiaggio, 62, 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. Edythe J. Gaines Dr. Gaines, 72, has been a Director since 1982. She is a retired Commissioner of the Public Utility Control Authority of the State of Connecticut. Robert M. Garneau Mr. Garneau, 50, has been Senior Vice President and Controller since 1990 and was also designated Chief Financial Officer in April, 1992. Prior to that he had served as Vice President and Controller. Huntington Hardisty Admiral Hardisty (USN-Ret.), 65, 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, and presently acts as a consultant to private industry. Page 14 Charles H. Kaman Mr. Kaman, 75, has been Chief Executive Officer and Chairman of the Board of Directors since 1945. He was also President from 1945 to 1990. C. William Kaman II Mr. Kaman, 43, has been a Director since 1992. He has held various positions with Kaman Music Corporation, a subsidiary of the Corporation, since 1974, serving as President of Kaman Music since 1986. Mr. Kaman is the son of Charles H. Kaman, Chairman and Chief Executive Officer of the Corporation. Walter R. Kozlow Mr. Kozlow, 59, has held various positions with Kaman Aerospace Corporation, a subsidiary of the Corporation, since 1960. He has been President of Kaman Aerospace since 1986. Hartzel Z. Lebed Mr. Lebed, 67, has been a Director since 1982. He is the retired President of CIGNA Corporation and is a Director of Shawmut National Trust Company. Harvey S. Levenson Mr. Levenson, 54, has been a Director since 1989. He has been President and Chief Operating Officer since April, 1990. Prior to that he had served as Senior Vice President and Chief Financial Officer. He is also a director of Connecticut Natural Gas Corporation and Security-Connecticut Corporation. Walter H. Monteith, Jr. Mr. Monteith, 64, has been a Director since 1987. He is the retired Chairman of Southern New England Telecommuni- cations Corporation. Mr. Monteith is also a director of Shawmut Bank. John S. Murtha Mr. Murtha, 81, 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. Page 15 Robert L. Newell Mr. Newell, 72, has been a Director since 1976. He is the retired Chairman of Hartford National Corporation, now a part of Shawmut Bank. Patrick L. Renehan Mr. Renehan, 61, has been a Vice President of Kaman Diversified Technologies Corporation, a subsidiary of the Corporation, since 1987. Prior to that he served as a Vice President of Kaman Aerospace Corporation. Wanda L. Rogers Mrs. Rogers, 62, has been a Director since 1991. She is Chief Executive Officer of Rogers Helicopters, Inc. She is also Chairman of the Board of Clovis Community Bank. Richard E.W. Smith Mr. Smith, 60, was appointed a Vice President of the Corporation in 1989. He has been President of Kaman Diversified Technologies Corporation, a subsidiary of the Corporation, since 1990 and prior to that he served as Vice President of Kaman Sciences Corporation, a subsidiary of the Corporation. 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 such 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 18, 1995. 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 16 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 LTIP Comp. Position Year ($) ($) Comp. ($)(1)(#Shares)Payments ($)(2) - --------------------------------------------------------------------------- C. H. Kaman 1994 660,000 ------- ------ ------ ------ --- 55,261 Chairman and 1993 660,000 218,000 73,004(3) ------ ------ --- 69,768 Chief 1992 660,000 290,000 ------ ------ ------ --- 57,956 Executive Officer H.S.Levenson 1994 400,000 ------- ------ ------ ------ --- 10,743 President 1993 400,000 108,000 ------ 38,000 12,000 --- 18,603 and Chief 1992 400,000 144,000 ------ 49,375 ------ --- 10,664 Operating Officer W.R.Kozlow 1994 216,000 60,000 ------ ------ ------ --- 8,636 President, 1993 216,000 50,000 ------ 28,500 9,000 --- 10,446 Kaman 1992 210,000 60,000 ------ 29,625 ------ --- 6,271 Aerospace Corporation R.M.Garneau 1994 200,000 60,000 ------ ------ ------ --- 4,845 Senior Vice 1993 190,000 45,000 ------ 28,500 9,000 --- 5,931 President 1992 172,000 50,000 ------ 29,625 ------ --- 4,761 and Chief Financial Officer P.L.Renehan 1994 210,000 45,000 ------ ------ ------ --- 8,214 Vice 1993 205,000 40,000 ------ 28,500 9,000 --- 8,799 President 1992 198,000 50,000 ------ 24,688 ------ --- 6,479 Kaman Diversified Technologies Corporation
Page 17 1. As of December 31, 1994, aggregate restricted stock holdings and their year end values were: C.H. Kaman, none; H.S. Levenson, 18,200 shares valued at $200,200; W.R. Kozlow, 6,000 shares valued at $66,000; R.M.Garneau, 6,000 shares valued at $66,000; P.L. Renehan, 5,400 shares valued at $59,400. 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: H.S. Levenson, 4,000 shares in 1993 and 5,000 shares in 1992; W.R. Kozlow, 3,000 shares each in 1993, and 1992; R. M. Garneau, 3,000 shares each in 1993 and 1992; P. L. Renehan, 3,000 shares in 1993, and 2,500 shares in 1992. Dividends are paid on the restricted stock. 2. Amounts reported in this column consist of: C. H. Kaman, $53,000 - Officer 162 Insurance Program, $2,261 - medical expense reimbursement program ("MERP"); H.S. Levenson, $3,322 - Senior executive life insurance program ("Executive Life"), $4,524 - Officer 162 Insurance Program, $1,875 - employer matching contributions to the Kaman Corporation Thrift and Retirement Plan (the "Thrift Plan employer match"), $1,022 - MERP; W. R. Kozlow, $4,131 - Executive Life, $1,875 - Thrift Plan employer match, $1,238 - MERP; $1,392 - Discretionary cash-out of certain stock options under Stock Incentive Plan; R. M. Garneau, $1,654 - Executive Life, $851 - Officer 162 Insurance Program, $1,875 - Thrift Plan employer match, $465 - MERP; P. L. Renehan, $5,219 - Executive Life, $1,875 - Thrift Plan employer match, $1,120 - MERP. 3. 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. $62,164 of the figure reported in this column relates to payments for such services on behalf of Mr. Kaman. Page 18 C) OPTION/SAR GRANTS IN THE LAST FISCAL YEAR: - --------------------------------------------------------------------------- Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Individual Grants Option Term - --------------------------------------------------------------------------- (a) (b) (c) (d) (e) (f) (g) % of Total Options/ SARs Options/ Granted to SARs Employees Exercise or Granted in Fiscal Base Price Expiration Name (#) Year ($/Sh) Date 5%($) 10%($) - ---------------------------------------------------------------------------- C. H. Kaman none --- --- --- --- --- H.S. Levenson none --- --- --- --- --- W. R. Kozlow none --- --- --- --- --- R. M. Garneau none --- --- --- --- --- P. L. Renehan none --- --- --- --- ---
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/SARs options/SARs at FY-end (#) at FY-end ($) Shares acquired on Value exercisable/ exercisable/ Name Exercise(#) realized unexercisable unexercisable (a) (b) (c) (d) (e) - ------------------------------------------------------------------- C. H. Kaman None --- 45,000/-0- 143,125/0 H. S. Levenson None --- 29,400/12,800 89,400/24,600 W. R. Kozlow None --- 18,400/9,000 52,150/16,500 R. M. Garneau None --- 11,600/9,000 34,000/16,500 P. L. Renehan None --- 11,700/8,700 34,200/15,500
Page 19 E) LONG TERM INCENTIVE PLAN AWARDS: No long term incentive plan awards were made to any named executive officer in the last fiscal year. F) PENSION AND OTHER DEFINED BENEFIT DISCLOSURE. The following table shows estimated annual benefits payable at normal retirement age to participants in the Corporation's Pension Plan at various compensation and years of service levels using the benefit formula applicable to Kaman Corporation. Pension benefits are calculated based on 60 percent of the average of the highest five consecutive years of "covered compensation" out of the final ten years of employment less 50 percent of the primary social security benefit, reduced proportionately for years of service less than 30 years: PENSION PLAN TABLE Years of Service Remuneration* 15 20 25 30 35 - ----------------------------------------------------------------- 125,000 34,059 45,639 56,538 68,118 68,118 150,000 41,559 55,689 68,988 83,118 83,118 175,000 49,059 65,739 81,438 98,118 98,118 200,000 56,559 75,789 93,888 113,118 113,118 225,000 64,059 85,839 106,338 128,118 128,118 250,000 71,559 95,889 118,788 143,118 143,118 300,000 86,559 115,989 143,688 173,118 173,118 350,000 101,559 136,089 168,588 203,118 203,118 400,000 116,559 156,189 193,488 233,118 233,118 450,000 131,559 176,289 218,388 263,118 263,118 500,000 146,559 196,389 243,288 293,118 293,118 750,000 221,559 296,889 367,788 443,118 443,118 1,000,000 296,559 397,389 492,288 593,118 593,118 1,250,000 371,559 497,889 616,788 743,118 743,118 1,500,000 446,559 598,389 741,288 893,118 893,118 *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 Plan contributions but not deferrals under a non-qualified Deferred Compensation Plan), bonus and taxable income attributable to restricted stock awards. Salary and bonus amounts for the named Executive Officers for 1994 are as shown on Page 20 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. Levenson, $543,618; Mr. Kozlow, $250,185; Mr. Garneau, $230,034; Mr. Renehan, $238,682. Federal law imposes certain limitations on annual pension benefits under the Pension Plan. For the named executive officers, the excess will be paid under the Corporation's unfunded supplemental employees' retirement plan. The Executive Officers named in Item 11(b) are participants in the plan and as of January 1, 1995, had the number of years of credited service indicated: Mr. Kaman - 49 years; Mr. Levenson - 12 years; Mr. Kozlow - 35 years; Mr. Garneau - 13 years; and Mr. Renehan - 11 years. Benefits are computed generally in accordance with the benefit formula described above. G) COMPENSATION OF DIRECTORS. Non-officer members of the Board of Directors of the Corporation receive an annual retainer of $14,000 and a fee of $750 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 $850 for attending each meeting of that Committee. These fees may be received on a deferred basis. H) EMPLOYMENT CONTRACTS AND TERMINATION, SEVERANCE AND CHANGE OF CONTROL ARRANGEMENTS. Except as described 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. J) COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS. Page 21 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: Dr. Gaines, Mr. Carlucci, Mr. Murtha, Mr. Newell and Mr. Monteith. None of these individuals was an officer or employee of the Corporation or any of its subsidiaries during the last fiscal year. Mr. Murtha was Secretary of the Corporation in years prior to April 1989 and his 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 22 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, 1995 of Class - ----------------------------------------------------------------- Class B Charles H. Kaman 258,375(1) 38.69% Kaman Corporation Blue Hills Avenue Bloomfield, CT 06002 Class B Newgate Associates, Ltd. 199,802 29.91% c/o John T. Del Negro CityPlace I 185 Asylum Street Hartford, CT 06103 Class B Robert D. Moses 48,729(2) 7.30% Farmington Woods Avon, CT 06001 Class B Glenn M. Messemer 33,500 5.02% Kaman Corporation Blue Hills Avenue Bloomfield, CT 06002 (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) Includes 15,192 shares held by Mr. Moses and 33,537 shares held by Paulson and Company as follows: 11,481 shares for the benefit of Mr. Moses, and 22,056 shares held for a partnership controlled by Mr. Moses.
Page 23 (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, 1995 of Class - -------------------------------------------------------------------- Frank C. Carlucci Class A 3,000(1) * John A. DiBiaggio -- -- -- Edythe J. Gaines Class A 1,983 * Robert M. Garneau Class A 29,608(2) * Class B 2,160 * Huntington Hardisty -- -- -- Charles H. Kaman Class A 383,040(3) 2.18% Class B 258,375(4) 38.69% C. William Kaman, II Class A 105,414(5) * Class B 7,567(6) 1.13% Walter R. Kozlow Class A 51,696(7) * Class B 296 * Hartzel Z. Lebed Class A 7,355(8) * Harvey S. Levenson Class A 76,300(9) * Class B 19,500(10) 2.92% Walter H. Monteith, Jr. Class A 200 * John S. Murtha Class A 48,618(11) * Class B 432 * Robert L. Newell Class A 2,880 * Patrick L. Renehan Class A 33,552(12) * Wanda L. Rogers Class A 1,000 -- All Directors and Class A 799,337(13) 4.56% Executive Officers as a group ** Class B 300,273 44.96%
Page 24 (1) Held jointly with Mrs. Carlucci. (2) Includes 11,600 shares subject to exercisable portion of stock options. (3) Excludes the following: 24,132 shares held by Mrs. Kaman; 7,796 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; and 60,000 shares held by the Charles H. Kaman Charitable Foundation, a private charitable foundation. Included are 45,000 shares subject to exercisable portion of stock options. (4) 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. (5) Includes 13,000 shares subject to exercisable portion of stock options; and excludes 73,190 shares held by Mr. Kaman as Trustee, in which shares Mr. Kaman disclaims any beneficial ownership. (6) Excludes 4,800 shares held by Mr. Kaman as Trustee in which shares Mr. Kaman disclaims any beneficial ownership. (7) Includes 18,400 shares subject to exercisable portion of stock options. (8) Includes 7,330 shares held jointly with Mrs. Lebed, excludes 480 shares held by Mrs. Lebed. (9) Includes 2,400 shares subject to exercisable portion of stock options. (10)Excludes 500 shares held by Mrs. Levenson. (11)Held by Fleet National Bank pursuant to a revocable trust. Excludes 7,980 shares held by Fleet National Bank pursuant to a revocable trust for the benefit of Mrs. Murtha. (12)Includes 11,700 shares subject to exercisable portion of stock options; and includes 1,275 shares held jointly with Mrs. Renehan. (13)Includes 131,300 shares subject to exercisable portion of stock options. * Less than one percent. ** Excludes 24,612 Class A shares and 1,971 Class B shares held by spouses of certain Directors and Executive Officers. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During 1994, the Corporation obtained legal services from the Hartford, Connecticut law firm of Murtha, Cullina, Richter and Pinney of which Mr. Murtha, a Director of the Corporation, is counsel. Also during 1994, the Corporation obtained design and promotional services in the amount of $78,344.50 from Steven W. Kaman and Polykonn Corporation, a corporation controlled by him. Steven W. Kaman is the son of Charles H. Kaman, Chairman and Chief Executive Officer of the Corporation. Page 25 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. No reports on Form 8-K were filed during the last quarter of the year ended December 31, 1994, which year is covered by this report. Page 26 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 3rd day of March, 1995. KAMAN CORPORATION (Registrant) By Charles H. Kaman, Chairman 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, Chief Executive March 8, 1995 Officer and Director (Chief Executive Officer) Harvey S. Levenson President and Director March 8, 1995 (Chief Operating Officer) Robert M. Garneau Senior Vice President March 8, 1995 and Chief Financial Officer (Principal Financial and Accounting Officer) Harvey S. Levenson March 8, 1995 Attorney-in-Fact for: Frank C. Carlucci Director John A. DiBiaggio Director Edythe J. Gaines Director Huntington Hardisty Director C. William Kaman, II Director Hartzel Z. Lebed Director Walter H. Monteith, Jr. Director John S. Murtha Director Robert L. Newell Director Wanda L. Rogers Director Page 27 KAMAN CORPORATION AND SUBSIDIARIES Index to Financial Statement Schedules Report of Independent Auditors Financial Statement Schedules: Schedule VIII - Valuation and Qualifying Accounts Schedule IX - Short-Term Borrowings Schedule X - Supplemental Income Statement Information Page 28 REPORT OF INDEPENDENT AUDITORS KPMG Peat Marwick LLP Certified Public Accountants CityPlace II Hartford, Connecticut 06103 The Board of Directors and Shareholders Kaman Corporation: Under date of January 25, 1995, we reported on the consolidated balance sheets of Kaman Corporation and subsidiaries as of December 31, 1994 and 1993 and the related consolidated statements of earnings, changes in shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1994, as contained in the 1994 annual report to shareholders. These consolidated financial statements and our report thereon are included in the annual report on Form 10-K for 1994. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedules as listed in the accompanying index. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits. In our opinion, such schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. /s/ KPMG Peat Marwick LLP Hartford, Connecticut January 25, 1995 Page 29 KAMAN CORPORATION AND SUBSIDIARIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS (Dollars in Thousands) YEAR ENDED DECEMBER 31, 1992 Additions --------- BALANCE CHARGED TO BALANCE JANUARY 1, COSTS AND DECEMBER 31, DESCRIPTION 1992 EXPENSES OTHERS DEDUCTIONS 1992 Allowance for doubtful accounts $1,198 $1,076 $----- $1,040(A) $1,234 ====== ====== ====== ====== ====== Accumulated amortization of goodwill $7,465 $1,265 $----- $----- $8,730 ====== ====== ====== ====== ====== YEAR ENDED DECEMBER 31, 1993 Additions --------- BALANCE CHARGED TO BALANCE JANUARY 1, COSTS AND DECEMBER 31, DESCRIPTION 1993 EXPENSES OTHERS DEDUCTIONS 1993 Allowance for doubtful accounts $1,234 $1,141 $----- $ 799(A) $1,576 ====== ====== ====== ====== ====== Accumulated amortization of goodwill $8,730 $1,268 $----- $----- $9,998 ====== ====== ====== ====== ====== YEAR ENDED DECEMBER 31, 1994 Additions --------- BALANCE CHARGED TO BALANCE JANUARY 1, COSTS AND DECEMBER 31, DESCRIPTION 1994 EXPENSES OTHERS DEDUCTIONS 1994 Allowance for doubtful accounts $1,576 $1,198 $----- $1,109(A) $1,665 ====== ====== ====== ====== ====== Accumulated amortization of goodwill $9,998 $1,318 $----- $7,772(B) $3,544 ====== ====== ====== ====== ======
(A) Write-off of bad debts, net of recoveries (B) Write-off of accumulated amortization of goodwill related to the write-down of goodwill in Raymond Engineering Inc. Page 30 KAMAN CORPORATION AND SUBSIDIARIES SCHEDULE IX -- SHORT-TERM BORROWINGS (Dollars in Thousands) YEAR ENDED DECEMBER 31, 1992 Maximum Average Weighted Amount Amount Average Category of Weighted Out- Out- Interest Aggregate Balance Average standing standing Rate Short-Term Dec. 31, Interest During the During the During Borrowings 1992 Rate Year Year the Year - ---------- -------- -------- ---------- ---------- -------- Notes Payable - -- Bank $7,668 5.0% $34,857 $16,734 4.4% ======== ======== ======= ======= ==== YEAR ENDED DECEMBER 31, 1993 Maximum Average Weighted Amount Amount Average Category of Weighted Out- Out- Interest Aggregate Balance Average standing standing Rate Short-Term Dec. 31, Interest During the During the During Borrowings 1993 Rate Year Year the Year - ---------- -------- -------- ---------- ---------- -------- Notes Payable - -- Bank $31,161 3.6% $62,880 $43,158 3.5% ======== ======== ======= ======= ==== YEAR ENDED DECEMBER 31, 1994 Maximum Average Weighted Amount Amount Average Category of Weighted Out- Out- Interest Aggregate Balance Average standing standing Rate Short-Term Dec. 31, Interest During the During the During Borrowings 1994 Rate Year Year the Year - ---------- -------- -------- ---------- ---------- -------- Notes Payable - -- Bank $52,659 5.9% $81,053 $45,546 5.0% ======== ======== ======= ======= ====
Page 31 KAMAN CORPORATION AND SUBSIDIARIES Schedule X -- Supplemental Income Statement Information (Dollars in Thousands) Charged to Costs ITEM and Expenses - ---- ---------------- Year Ended December 31, 1992 Maintenance and repairs $ 9,041 ======= Year Ended December 31, 1993 Maintenance and repairs $ 8,650 ======= Year Ended December 31, 1994 Maintenance and repairs $10,482 =======
Depreciation and amortization of intangible assets, preoperating costs and similar deferrals; taxes, other than payroll and income taxes; royalties and advertising costs were not included above since they were not of a significant amount. Page 32 KAMAN CORPORATION INDEX TO EXHIBITS Exhibit 3a The Amended and Restated by reference Certificate of Incorporation of the Corporation, as amended, including the form of amendment designating the Corporation's Series 2 Preferred Stock has been filed as Exhibits 2.1 and 2.2 to the Corporation's Form 8-A (Document No. 0-1093 filed on September 27, 1993), and is incorporated in this report by reference. Exhibit 3b The By-Laws of the Corporation by reference were filed as Exhibit 3(b) to the Corporation's Annual Report on Form 10-K for 1990 (Document No. 0-1093, filed with the Securities and Exchange Commission on March 14, 1991). 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. Page 33 Exhibit 4b The Revolving Credit Agreement by reference between the Corporation and The Shawmut Bank Connecticut, as agent, dated as of July 15, 1994 was previously filed as an Exhibit to the Corporation's Quarterly Report on Form 10-Q for the period ending June 30, 1994 (Document No. 0-1093 filed with the Securities and Exchange Commission on August 11, 1994) and is incorporated in this report by reference. Exhibit 4c The Revolving Credit Agreement by reference between the Corporation and The Bank of Nova Scotia, as agent, dated as of July 15, 1994 has been filed as an Exhibit to Form 10-Q filed for the quarter ended June 30, 1994 (Document No. 0-1093 filed with the Securities and Exchange Commission on August 11, 1994)and is incorporated in this report by reference. Exhibit 4d Deposit Agreement dated as of by reference October 15, 1993 between the Corporation and Chemical Bank as Depositary and Holder of Depositary Shares has been filed as Exhibit (c)(1) to Schedule 13E-4 (Document No. 5-34114 filed with the Securities and Exchange Commission on September 15, 1993) and is incorporated in this report by reference. Exhibit 4e 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 1983 Stock Incentive Plan by reference (formerly known as the 1983 Stock Option Plan) has been filed as Exhibit 10b(iii) to the Corporation's Annual Report on Form 10-K for 1988 (Document No. 0-1093 filed with the Securities and Exchange Commission on March 22, 1989) and is incorporated in this report by reference. Exhibit 10b The Kaman Corporation 1993 Stock by reference Incentive Plan has been filed as Exhibit 10(b) to the Corporation's Annual Report on Form 10-K for 1993 (Document No. 0-1093 filed with the Securities and Exchange Commission on March 11, 1994) and is incorporated herein by reference. Exhibit 10c The Kaman Corporation Employees by reference Stock Purchase Plan as amended has been filed as Exhibit 10(c) to the Corporation's Annual Report on Form 10-K for 1993 (Document No. 0-1093 filed with the Securities and Exchange Commission on March 11, 1994) and is incorporated herein by reference. Exhibit 11 Statement regarding computation Attached of per share earnings. Exhibit 13 Portions of the Corporation's Attached 1994 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

EXHIBIT 11 KAMAN CORPORATION AND SUBSIDIARIES EARNINGS PER COMMON SHARE COMPUTATION (In Thousands Except Per Share Amounts) 1994 1993 1992 ---- ---- ---- Primary: Net earnings (loss) applicable to common stock $(16,897) $(29,497) $17,376 ======== ======= ======= Weighted average number of common shares outstanding 18,175 18,133 18,172 Weighted average shares issuable on exercise of dilutive stock options * * 111 ------- ------- ------- Total 18,175 18,133 18,283 ======= ======= ======= Net earnings (loss) per common share-primary $ (.93) $ (1.63) $ .95 ======= ======= ======= Fully diluted: Net earnings(loss)applicable to common stock $(16,897) $(29,497) $17,376 Elimination of interest expense on 6% subordinated convertible debentures (net after taxes) * * 3,414 Elimination of preferred stock dividend requirement * * --- ------- ------- ------ Net earnings(loss)(as adjusted) $(16,897) $(29,497) $20,790 ======= ======= ======= Weighted average number of shares outstanding including shares issuable on stock option exercises 18,175 18,133 18,283 Shares issuable on conversion of 6% subordinated convertible debentures * * 4,067 Shares issuable on conversion of Series 2 preferred stock * * - Additional shares using ending market price instead of average market on treasury method use of stock option proceeds * * 16 ------- ------- ------- Total 18,175 18,133 22,366 ======= ======= ======= Net earnings (loss) per common share-fully diluted $ ( .93) $ (1.63) $ .93 ======= ======= ======= *Anti-dilutive and accordingly not included in the computation.

EXHIBIT 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Revenues for 1994 were $820.8 million compared to $794.1 million in 1993, and $784.7 million in 1992. During 1994, the corporation's Distribution businesses benefitted from healthy growth in the domestic economy, however it was another year in which conditions in the defense market adversely affected the corporation's overall performance. In the fourth quarter of 1994, the corporation recorded a pre-tax charge of $44.0 million representing a write-down of the corporation's investment in Raymond Engineering, a Diversified Technologies subsidiary which has now been merged into Kaman Aerospace, another Kaman subsidiary. Diversified Technologies segment revenues were down 9% in 1994, and 5% in both 1993 and 1992. The defense portion of Diversified Technologies' business (80% in 1994) has been affected for some time now by shifts in U.S. defense planning and spending priorities and federal budget constraints which continue to result in declining defense expenditures. During 1994, another aspect of change in defense market emphasis emerged. Specifically, the federal government and the Department of Defense appear to be undertaking a serious effort to implement the concept of defense acquisition reform. This reform effort, described in a 1994 Department of Defense paper, calls for the Department to meet its needs, wherever possible, through the use of commercially developed state-of-the-art technology products and performance based procurement standards rather than traditional military specifications ("mil spec") standards. In part, this acquisition reform effort provides an avenue for addressing certain inefficiencies of the mil spec process. In many instances, mil spec has become overly bureaucratic, complex, and time consuming, often resulting in needless expenditure of taxpayer dollars. It is anticipated that, in time, acquisition reform which emphasizes procurement of commercially developed technology products can save money by shortening product development time and avoiding costly delays and budget overruns, consequences which are typical of many mil spec development programs. The trend toward defense acquisition of commercial products, and management's expectation that defense spending will probably continue to decline in future periods have influenced management's assessment of the forecasted operations of Raymond Engineering, a Kaman subsidiary which maintains several mil spec type product lines. Management believes that these product lines Page 1 are in need of varying levels of investment (some more substantial than others) in order to be competitively positioned in the technologically evolving marketplace. Management has evaluated the long term prospects for these programs, and has determined that it will undertake investment in further development of products which demonstrate the most potential for success in future periods, while forgoing investment in other products which are unable to demonstrate such potential. Therefore, Raymond Engineering's operations are being downsized to focus on product areas which are expected to be most successful and it has been merged into Kaman Aerospace, another Kaman company, in order to achieve reduced overheads and enhanced operational efficiency. As a result, the corporation took a fourth quarter pre-tax charge of $44.0 million to write-down its investment in Raymond Engineering. Management's best estimate of Raymond Engineering's forecasted future operations, including interest expense, is that they do not support the recoverability of its goodwill balance and a certain amount of facilities and equipment, which has resulted in a write-down of approximately $25.5 million for these items. In addition, inventories whose cost is not expected to be recovered have been written down to estimated net realizable value during the fourth quarter. The remainder of the charge relates to personnel reductions and other expenses associated with downsizing Raymond Engineering's business. The majority of work force reductions involve management and administrative staff whose functions are redundant to the merged organization. Severance payments of approximately $2.5 million are to be made in accordance with Raymond Engineering's written severance pay policy and, in certain cases, individually negotiated agreements. Other expenses include contract close-out costs of $6.5 million and related expenses of $4.0 million which will not benefit the continuing activities of the merged organization. Without regard to acquisition reform, management continues to believe that advanced technology defense programs are likely to fare better than other types of programs in a defense environment which has shifted to greater emphasis on more cost effective advanced technology "smart" weapons that are intended to limit loss of life and unnecessary destruction of property. The corporation has significant expertise in this area, having performed a multitude of government contracts for advanced technology programs over the years. Management believes that the corporation is well positioned to compete in a defense environment that emphasizes these types of products and systems, as well as advanced technology services such as computer software development, intelligence analysis, and research and development. Even so, management recognizes that as the government continues to focus on advanced technology programs in an environment where overall defense expenditures are declining, competition for these types of government contracts can be expected to increase. Page 2 The shift in defense market emphasis to advanced technology programs and defense spending reductions continue to foster an environment in which military hardware programs remain more vulnerable to risk of program termination, contract cancellation, or lack of funding. The corporation has felt the effects of these risks, principally with respect to its SH-2 helicopter. The corporation finished its contract to retrofit certain SH-2Fs to the SH-2G configuration in 1994. Management does not believe that the U.S. Navy will presently have further requirements for retrofits of this helicopter for its own use since the Navy is reducing the size of its fleet. At the present time, there are two squadrons of SH-2 helicopters (i.e., a total of sixteen helicopters) serving in the Naval reserves and no helicopters in active Naval service. The corporation expects to continue to provide logistics and spare parts support for the SH-2, but at lower levels than in the past. There is some potential that in the event the Navy provides these retired ships to foreign military services, an opportunity might exist for use of the SH-2 for those purposes. This potential is evidenced by the fact that during 1994, the Egyptian government signed a letter of agreement with the U.S. Navy for the acquisition of ten (10) SH-2G helicopters. The corporation is in the process of negotiating its contract with the U.S. Navy to perform the retrofit work which is expected to have a value of $100 million over a three (3) year period. With respect to commercial work of the Diversified Technologies segment, management has been successful in developing a variety of markets. The corporation continues to perform work on a number of commercial airframe manufacturing programs. However, the level of commercial air travel and lack of profitability in the domestic aircraft industry have caused a slowdown in aircraft production rates which is continuing to affect the segment's subcontract work. Although the corporation received a stop work order late in 1993 with respect to its manufacture of thrust reverser fixed structures for the GE CF6 engines, the corporation was able to continue to perform that work for Martin Marietta in 1994. An important achievement in the segment's commercial diversification is the K-MAX (Registered Trademark) helicopter, 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. A substantial portion of the corporation's research and development expenditures during the last three years have been devoted to this product. The helicopter received FAA Type Certification (Part 27) on August 30, 1994 and type approval by Transport Canada in November, 1994. Receipt of other foreign type approvals is anticipated for 1995. The first production lot of five (5) helicopters were completed Page 3 and deliveries were made to initial customers prior to year end under a special lease program that allows the corporation to maintain active involvement in the product's introduction to the marketplace. The next production lot is expected to consist of six (6) helicopters for sale to strategically located customers in the United States and abroad. Deliveries are already scheduled for Canada and Switzerland. Management believes that this program is an important part of the corporation's defense conversion effort, however, sales and profitability will take some time to achieve and in the shorter term the program is not expected to materially offset the effects of reduced defense spending. Distribution segment revenues increased by 13% in 1994, 7% in 1993, and 6% in 1992. Industrial Distribution sales (about 75% of this segment's business in 1994) are made to nearly every sector of U.S. industry so demand for its products tends to be influenced by industrial production levels. Sales for 1994 benefitted from healthy domestic economic growth, although revenue increases were even stronger than the general rate of growth. Management believes that this increase is due, in part, to initiatives undertaken to address the needs of customers that desire to reduce their vendor base and expand "partnering" relationships with suppliers. Industrial Distribution's efforts include value added services in the advanced technology areas of electrical and electronic systems, materials handling and precision positioning systems. These measures, in combination with enhanced operating efficiencies attained during the past few years, resulted in increased market share for the industrial distribution business in 1994. Music Distribution sales increased significantly during 1994, largely as a result of further development of international markets for the company's products. The corporation had an operating loss of $8.8 million and a net loss of $13.2 million for 1994, due to the fourth quarter pre-tax charge. In 1993, the corporation had an operating loss of $37.2 million and a net loss of $28.8 million, due to the restructuring charge of $69.5 million taken in the third quarter of that year. The Diversified Technologies segment had an operating loss of $17.2 million for 1994 compared to an operating loss of $41.3 million for 1993. The Distribution segment had operating income of $19.6 million for 1994 compared to $16.5 million for 1993, with the increase attributable largely to increased sales in the Industrial Distribution business. These results also reflect the fact that the overall mix of the corporation's activities is in the process of shifting to businesses with somewhat lower profit margins and an increase of 14.8% for Diversified Technologies research and development expenditures in 1994. The third quarter 1993 charge reflects restructuring and other non-recurring costs in connection with the corporation's plan to reduce the size of its defense and commercial aircraft manufacturing business and implement defense conversion Page 4 initiatives. About sixty percent (60%) of the charge represents the write-off of costs incurred for development, retooling and start-up for defense conversion initiatives, notably the K-MAX helicopter. The balance relates to personnel and facility reductions, contract close-out and related expenses associated with downsizing the defense and commercial aircraft manufacturing business. Implementation of the plan proceeded during 1994 and will continue during 1995. The corporation had an operating loss of $37.2 million and a net loss of $28.8 million for 1993 compared to operating income of $36.5 million and net earnings of $17.4 million for the year ended December 31, 1992. Diversified Technologies had an operating loss of $41.3 million for 1993 compared to an operating profit of $31.0 million for the previous year. The Distribution segment had operating profits of $16.5 million for 1993 compared to $15.2 million for 1992. The Diversified Technologies segment results were primarily attributable to the charge for restructuring and other costs, reductions in defense spending, research and development expenditures which increased by 3% for 1993 and 27% in 1992, and the ongoing shift in its business mix to products and services with somewhat lower profit margins. The Distribution segment's performance was primarily the result of increased sales and internal initiatives to increase the efficiency of operations. The fully diluted earnings per share figure for 1994 and 1993 do not reflect the potential conversion of the 6% convertible subordinated debentures, potential conversion of the corporation's new Series 2 preferred stock (issued in the fourth quarter of 1993) or the exercise of stock options, since their effect was anti-dilutive. Fully diluted earnings per share figures for 1992 include the potential conversion of the debentures and exercises since they were dilutive. Interest expense decreased 33% for 1994 compared to 1993 and was relatively flat in 1993 compared to 1992. The corporation had slightly higher average bank borrowings during 1994, however, total debt and interest expense was significantly lower in 1994 as a result of the exchange of Series 2 preferred stock for the majority of the outstanding 6% convertible subordinated debentures during the fourth quarter of 1993. Interest expense in 1993 was also affected by the aforementioned exchange. The corporation had other income in 1993 principally due to the gain realized upon the exchange of the debentures. The corporation recorded an income tax benefit on its loss before income taxes at an overall rate of 7.1% for 1994, due primarily to a state income tax refund. The fourth quarter 1994 charge would have probably resulted in a higher income tax benefit, except for the fact that a substantial portion of the goodwill Page 5 balance is non-deductible. The corporation recorded an income tax benefit of 28.9% for 1993 (due primarily to the 1993 restructuring charge), while the consolidated effective income tax rate was 40.1% for 1992. Effective January 1, 1993, the corporation adopted Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. The cumulative effect of this change in accounting for income taxes determined as of January 1, 1993 was immaterial to the consolidated statements of earnings. On that date, the corporation also adopted Statement of Financial Accounting Standards No. 106 concerning rules for certain post-retirement benefits. Retirees are generally responsible for the cost of their post-retirement benefits, therefore, adoption of this statement did not result in any material adjustment to or disclosure in the consolidated financial statements. Finally, on January 1, 1993, the corporation adopted Statement of Financial Accounting Standards No. 112 concerning accounting for certain post-employment benefits. Adoption of this statement did not result in any material adjustment to or disclosure in the consolidated financial statements. 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. For general borrowing purposes, the corporation has maintained revolving credit agreements involving several banks located in the United States, Canada, and Europe. In July 1994, the corporation entered into amended and restated revolving credit agreements which replaced the previous agreements and increased the corporation's maximum unsecured line of credit from $145 million to $200 million. The agreements each have a term of five years and contain provisions permitting the term to be extended for additional one-year periods upon concurrence of the parties. The agreements also contain various covenants, including debt to capitalization and consolidated net worth requirements. There were no borrowings under these agreements during 1994 or 1993. The corporation also maintains other short-term credit arrangements with various banks. As of December 31, 1994, these borrowings were at $52.7 million. For the year ended December 31, 1994, average bank borrowings against these short-term arrangements were $45.5 million compared to $43.2 million for 1993. In June, 1994, the corporation's board of directors authorized a renewal ('the 1994 program') of the stock repurchase program which was authorized in 1992 (`the 1992 program'). Under the 1994 program, the corporation may repurchase up to 700,000 Class A Page 6 shares in addition to the shares remaining authorized under the 1992 program. As of December 31, 1994, a total of 188,000 Class A shares had been repurchased pursuant to the 1994 program. The primary purpose of the stock repurchase program is to meet the needs of the Employees Stock Purchase Plan and Stock Incentive Plan. During the third quarter of 1993, the corporation made an offer pursuant to which holders of its 6% convertible subordinated debentures might exchange them for the corporation's newly created Series 2 preferred stock. The purpose of the offer was to increase the corporation's equity capital while reducing its indebtedness. On October 22, 1993 the corporation issued $57.2 million of preferred stock (representing 285,837 shares of preferred stock or 1,143,348 depositary shares) in exchange for $61.8 million of debentures (66.73% of the amount actually tendered). The preferred stock is convertible to Class A common stock at a price of $12.56 per share and has a 6.5% cumulative dividend rate. The corporation recorded a net gain of $3 million as a result of the exchange. While the transaction was favorable to the corporation from a debt to equity standpoint, it resulted in further dilution of outstanding common stock in the event of conversion of the preferred stock and some dilution of the earnings that would otherwise be available for common shareholders. Management believes that the corporation's cash flow from operations and available unused bank lines of credit under its revolving credit agreements will be sufficient to finance its working capital and other capital requirements for the foreseeable future. Page 7 SELECTED QUARTERLY FINANCIAL DATA (In thousands except per share amounts) FIRST SECOND THIRD FOURTH TOTAL QUARTER QUARTER QUARTER QUARTER YEAR - ---------------------------------------------------------------- Net sales: 1994...........$197,583 $208,625 $198,933 $214,041 $819,182 1993........... 197,598 194,553 202,488 197,871 792,510 Gross profit: 1994...........$ 52,351 $ 53,034 $ 52,183 $ 51,444 $209,012 1993........... 53,301 52,128 48,845 49,999 204,273 Net earnings (loss): 1994...........$ 4,240 $ 4,596 $ 4,901 $(26,918) $(13,181) 1993........... 4,012 4,779 (42,499) 4,913 (28,795) Per common share--primary: 1994........... $.18 $.20 $.22 $(1.53) $(.93) 1993........... .22 .26 (2.36) .23 (1.63) Per common share--fully diluted: 1994........... $.18 $.20 $.22 $(1.53) $(.93) 1993........... .22 .25 (2.36) .23 (1.63)
Gross profit for 1994 and 1993 excludes the effect of restructuring, impairment and other costs. The conversion of the convertible subordinated debentures (and to the extent applicable the Series 2 preferred stock) along with the exercise of the stock options were not assumed in the net loss per common share--primary and fully diluted calculations for the fourth quarter of and year 1994 and third quarter of and year 1993 because they had an anti-dilutive effect. As a result, the quarterly per common share amounts when added together do not equal the total for the year 1993. Page 8 CONSOLIDATED BALANCE SHEETS Kaman Corporation and Subsidiaries December 31, 1994 and 1993 (In thousands except share and per share amounts) 1994 1993 - --------------------------------------------------------------------- ASSETS CURRENT ASSETS: Cash.......................................... $ 3,711 $ 3,845 Accounts receivable........................... 146,411 165,615 Inventories................................... 160,224 130,451 Deferred income taxes......................... 21,041 11,929 Other current assets.......................... 7,625 4,761 - --------------------------------------------------------------------- Total current assets....................... 339,012 316,601 - --------------------------------------------------------------------- PROPERTY, PLANT AND EQUIPMENT, NET............... 84,621 81,711 GOODWILL, NET.................................... 8,486 29,438 OTHER ASSETS..................................... 10,830 12,446 - --------------------------------------------------------------------- $442,949 $440,196 ===================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable................................. $ 52,659 $ 31,161 Current portion of long-term debt............. 659 704 Accounts payable--trade....................... 54,561 51,246 Accrued salaries and wages.................... 9,609 6,338 Accrued vacations............................. 6,350 6,454 Accrued restructuring and other costs......... 27,650 32,500 Other accruals and payables................... 40,416 35,023 Income taxes payable.......................... 978 3,339 - --------------------------------------------------------------------- Total current liabilities.................. 192,882 166,765 - ---------------------------------------------------------------------
Page 9 CONSOLIDATED BALANCE SHEETS Kaman Corporation and Subsidiaries December 31, 1994 and 1993 (In thousands except share and per share amounts) (continued) 1994 1993 - -------------------------------------------------------------------------- DEFERRED CREDITS...................................... 8,880 7,141 LONG-TERM DEBT, EXCLUDING CURRENT PORTION............. 37,433 37,977 SHAREHOLDERS' EQUITY: Capital stock, $1 par value per share: Preferred stock, authorized 700,000 shares: Series 2 preferred stock, 6-1/2% cumulative convertible (stated at liquidation preference of $200 per share) authorized 500,000 shares, issued 285,837 shares in 1994 and 1993.................................. 57,167 57,167 Common stock: Class A, authorized 48,500,000 shares, nonvoting; $.10 per common share dividend preference; issued 17,600,381 shares in 1994 and 1993................ 17,600 17,600 Class B, authorized 1,500,000 shares, voting; issued 667,814 shares in 1994 and 1993............ 668 668 Additional paid-in capital........................... 17,853 18,459 Retained earnings.................................... 112,592 137,490 Unamortized restricted stock awards.................. (744) (968) Equity adjustment from foreign currency translation. (444) (158) - -------------------------------------------------------------------------- 204,692 230,258 Less 95,479 shares and 174,407 shares of Class A common stock in 1994 and 1993, respectively, held in treasury, at cost........................... (938) (1,945) - -------------------------------------------------------------------------- Total shareholders' equity...................... 203,754 228,313 - -------------------------------------------------------------------------- $442,949 $440,196 ========================================================================== See accompanying notes to consolidated financial statements.

Page 10 CONSOLIDATED STATEMENTS OF EARNINGS Kaman Corporation and Subsidiaries Years ended December 31, 1994, 1993 and 1992 (In thousands except per share amounts) 1994 1993 1992 - -------------------------------------------------------------------------- REVENUES: Net sales...................................$819,182 $792,510 $782,850 Other....................................... 1,592 1,582 1,882 - -------------------------------------------------------------------------- 820,774 794,092 784,732 - -------------------------------------------------------------------------- COSTS AND EXPENSES: Cost of sales............................... 611,762 588,237 583,638 Selling, general and administrative expense. 173,853 173,581 164,603 Interest expense............................ 4,694 6,976 7,086 Restructuring, impairment and other costs... 44,000 69,500 -- Other expense (income)...................... 646 (3,728) 401 - -------------------------------------------------------------------------- 834,955 834,566 755,728 - -------------------------------------------------------------------------- EARNINGS (LOSS) BEFORE INCOME TAXES........... (14,181) (40,474) 29,004 INCOME TAXES (BENEFIT)........................ (1,000) (11,679) 11,628 - -------------------------------------------------------------------------- NET EARNINGS (LOSS)...........................$(13,181) $(28,795) $17,376 - -------------------------------------------------------------------------- PREFERRED STOCK DIVIDEND REQUIREMENT..........$ (3,716) $ (702) $ --- - -------------------------------------------------------------------------- EARNINGS (LOSS) APPLICABLE TO COMMON STOCK....$(16,897) $(29,497) $17,376 - -------------------------------------------------------------------------- PER SHARE: Net earnings (loss) per common share: Primary................................... $(.93) $(1.63) $.95 Fully diluted............................. (.93) (1.63) .93 Dividends declared: Series 2 preferred stock.................. 13.00 1.37 -- Common stock.............................. .44 .44 .44 - -------------------------------------------------------------------------- See accompanying notes to consolidated financial statements.

Page 11 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY Kaman Corporation and Subsidiaries Years ended December 31, 1994, 1993 and 1992 (In thousands except share amounts) 1994 1993 1992 - -------------------------------------------------------------------------- SERIES 2 PREFERRED STOCK: Balance--beginning of year..................$ 57,167 $ -- $ -- Shares issued............................... -- 57,167 -- - -------------------------------------------------------------------------- Balance--end of year........................ 57,167 57,167 -- - -------------------------------------------------------------------------- CLASS A COMMON STOCK.......................... 17,600 17,600 17,600 - -------------------------------------------------------------------------- CLASS B COMMON STOCK.......................... 668 668 668 - -------------------------------------------------------------------------- ADDITIONAL PAID-IN CAPITAL: Balance--beginning of year.................. 18,459 19,343 19,686 Employee stock plans........................ (611) (409) (329) Restricted stock awards..................... 5 (75) (14) Exps. relating to issuance of preferred stock -- (400) -- - --------------------------------------------------------------------------- Balance--end of year........................ 17,853 18,459 19,343 - --------------------------------------------------------------------------- RETAINED EARNINGS: Balance--beginning of year.................. 137,490 174,607 165,218 Net earnings (loss)......................... (13,181) (28,795) 17,376 Dividends declared: Preferred stock........................... (3,716) (392) -- Common stock.............................. (8,001) (7,930) (7,987) - --------------------------------------------------------------------------- Balance--end of year........................ 112,592 137,490 174,607 - --------------------------------------------------------------------------- UNAMORTIZED RESTRICTED STOCK AWARDS: Balance--beginning of year.................. (968) (1,008) (1,003) Stock awards issued......................... (119) (323) (356) Amortization of stock awards................ 343 363 351 - --------------------------------------------------------------------------- Balance--end of year........................ (744) (968) (1,008) - ---------------------------------------------------------------------------

Page 12 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY Kaman Corporation and Subsidiaries Years ended December 31, 1994, 1993 and 1992 (In thousands except share amounts) (Continued) 1994 1993 1992 - -------------------------------------------------------------------------- EQUITY ADJUSTMENT FROM FOREIGN CURRENCY TRANSLATION: Balance--beginning of year.................. (158) 52 33 Translation adjustment...................... (286) (210) 19 - --------------------------------------------------------------------------- Balance--end of year........................ (444) (158) 52 - --------------------------------------------------------------------------- TREASURY STOCK: Balance--beginning of year.................. (1,945) (1,727) (52) Shares acquired in 1994--193,399; 1993--315,961; 1992--444,280.............. (1,847) (3,520) (4,382) Shares reissued under various stock plans... 2,854 3,302 2,707 - --------------------------------------------------------------------------- Balance--end of year........................ (938) (1,945) (1,727) - --------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY....................$203,754 $228,313 $209,535 - --------------------------------------------------------------------------- See accompanying notes to consolidated financial statements.

Page 13 CONSOLIDATED STATEMENTS OF CASH FLOWS Kaman Corporation and Subsidiaries Years ended December 31, 1994, 1993 and 1992 (In thousands) 1994 1993 1992 - -------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss).........................$(13,181) $(28,795) $ 17,376 Adjustments to reconcile net earnings (loss) to cash provided by (used in) operating activities: Depreciation and amortization............. 13,053 13,456 13,373 Net gain on exchange of debentures........ -- (3,037) -- Restructuring, impairment and other costs. 44,000 69,500 -- Deferred income taxes..................... (7,062) (19,679) (4,500) Other, net................................ 1,999 937 1,009 Changes in current assets and liabilities: Accounts receivable..................... 19,204 13,058 (8,304) Inventories............................. (44,273) (22,155) (8,388) Other current assets.................... (2,864) (229) (638) Accounts payable--trade................. 3,315 (8,063) 7,934 Accrued expenses and payables........... 892 (7,614) (4,398) Income taxes payable.................... (2,361) (248) 622 - --------------------------------------------------------------------------- Cash provided by (used in) operating activities................ 12,722 7,131 14,086 - --------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property, plant and equipment and other assets............ 195 1,014 515 Expenditures for property, plant and equipment............................. (21,581) (20,428) (10,562) Other, net.................................. (482) 689 (299) - --------------------------------------------------------------------------- Cash provided by (used in) investing activities................ (21,868) (18,725) (10,346) - ---------------------------------------------------------------------------

Page 14 CONSOLIDATED STATEMENTS OF CASH FLOWS Kaman Corporation and Subsidiaries Years ended December 31, 1994, 1993 and 1992 (In thousands) (Continued) 1994 1993 1992 - -------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Changes in notes payable.................... 21,498 23,493 7,331 Changes in current portion of long-term debt (45) (59) (390) Reduction of long-term debt................. (834) (1,108) (1,164) Proceeds from exercise of employee stock plans 2,128 2,500 2,008 Purchases of treasury stock................. (1,847) (3,520) (4,382) Dividends paid--Series 2 preferred stock.... (3,716) (392) -- Dividends paid--common stock................ (8,001) (7,930) (7,987) Other, net.................................. (171) -- -- - --------------------------------------------------------------------------- Cash provided by (used in) financing activities................ 9,012 12,984 (4,584) - --------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH............... (134) 1,390 (844) CASH AT BEGINNING OF YEAR..................... 3,845 2,455 3,299 - --------------------------------------------------------------------------- CASH AT END OF YEAR...........................$ 3,711 $ 3,845 $ 2,455 - ---------------------------------------------------------------------------

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES: On October 22, 1993, the corporation exchanged $61,804 of its 6% convertible subordinated debentures for $57,167 of its new Series 2 preferred stock. See accompanying notes to consolidated financial statements. Page 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1994, 1993, and 1992 (In thousands except share and per share amounts) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of the parent corporation and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. LONG-TERM CONTRACTS--REVENUE RECOGNITION Certain sales are made under fixed price and cost reimbursement type contracts. Estimated profits under such contracts are recorded concurrently with costs incurred thereon on the basis of percentage of completion. Any anticipated total contract losses are charged to operations during the period the loss is first indicated. Profits and losses accrued include the cumulative effect of changes in prior periods' price and cost estimates. INVENTORIES Inventory of merchandise for resale is stated at cost (using the average costing method) or market, whichever is lower. Contracts and work in process and finished goods are valued at production cost represented by material, labor and overhead, including general and administrative expenses where applicable. Contracts and work in process and finished goods are not recorded in excess of net realizable values. PROPERTY, PLANT AND EQUIPMENT Depreciation of property, plant and equipment is computed primarily on a straight-line basis over the estimated useful lives of the assets. At the time of retirement or disposal, the acquisition cost of the asset and related accumulated depreciation are eliminated and any gain or loss is credited or charged against income. Maintenance and repair items are charged against income as incurred, whereas renewals and betterments are capitalized and depreciated. GOODWILL Amortization of goodwill is calculated on a straight-line method over its estimated useful life but not in excess of forty years. Such amortization amounted to $1,318 in 1994, $1,268 in 1993 and $1,265 in 1992. At each balance sheet date, the corporation evaluates the carrying value of goodwill based upon its assessment of the forecasted future operations (including interest expense) and other factors for each subsidiary having a material goodwill Page 16 balance. Based upon management's most recent analysis, the corporation wrote-down goodwill relating to its investment in Raymond Engineering in the amount of $20,500 during the fourth quarter of 1994. Accumulated amortization, excluding the write-down, amounted to $3,544 at December 31, 1994. RESEARCH AND DEVELOPMENT Research and development costs not specifically covered by contracts are charged against income as incurred. Such costs amounted to $21,062 in 1994, $18,350 in 1993 and $17,778 in 1992. INCOME TAXES The corporation adopted Statement of Financial Accounting Standards No. 109 (SFAS 109), Accounting for Income Taxes, effective January 1, 1993. Under the asset and liability method prescribed by SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates expected to apply in the years in which temporary differences are expected to be recovered or settled. Prior to adopting SFAS 109, deferred income taxes were recorded for differences in the recognition of items of income and expense for financial and tax reporting purposes using the tax rates applicable in the year of the calculation. RESTRUCTURING, IMPAIRMENT AND OTHER COSTS The corporation recorded pre-tax charges in 1994 and 1993, both reflecting its strategy for addressing trends in U.S. defense planning and spending priorities. Specifically, in 1994 the corporation recorded charges of $44.0 million before taxes ($32.1 million after taxes or $1.76 per common share); in 1993, the charge was $69.5 million before taxes ($45.5 million after taxes or $2.52 per common share). The 1994 fourth quarter charge of $44.0 million represents a write-down of the corporation's investment in Raymond Engineering, a diversified technologies subsidiary, in anticipation of a reduction in the size of its operation and certain of its product lines, and its merger into Kaman Aerospace, another Kaman subsidiary. When fully implemented, the consolidation is expected, on an overall basis, to result in reduced overheads and enhanced administrative and operational efficiency. This will assist the merged organization in positioning itself to compete more effectively in a defense environment which seems increasingly likely to favor the use of commercial technology products where possible. Approximately seventy percent (70%) of the charge represents the write-down of impaired assets, including goodwill, facilities and equipment, and inventories. A variety of factors have contributed to the Page 17 impairment of Raymond's assets. These include defense spending reductions, changes in defense planning and spending priorities, and more recently, technological evolution in certain product areas where Raymond has done business. In order for Raymond to compete in these product areas in the future, varying levels of investment in technological development would be required. In the fourth quarter of 1994, the corporation determined that it was not economically feasible to make such investments in those products which are unable to demonstrate potential for success. Consequently, the corporation's best estimate of Raymond's forecasted future operations, including interest expense, is that they do not support the recoverability of goodwill and a certain amount of facilities and equipment, which has resulted in the write-down of approximately $25,500 for these items. In addition, inventories whose cost is not expected to be recovered have been written down to estimated net realizable value during the fourth quarter. The remainder of the charge relates to personnel reductions and other expenses associated with downsizing Raymond's business. The majority of work force reductions involve management and administrative employees whose functions are redundant to the merged organization. Severance payments of approximately $2,500 are to be made in accordance with Raymond's written severance pay policy and, in certain cases, individually negotiated agreements. Other expenses include contract close-out costs of $6,500 and related expenses of $4,000 which will not benefit the continuing activities of the merged organization. The 1993 third quarter charge of $69.5 million represented restructuring and other costs in connection with its plan to reduce the size of its defense and commercial aircraft manufacturing business and develop defense conversion initiatives. About sixty percent (60%) of the charge represents the write-off of costs for development, retooling, and start-up of the conversion initiatives, notably K-MAX (Registered Trademark). The balance relates to personnel and facility reductions, contract close-out and related expenses associated with the downsizing of the defense and commercial manufacturing businesses. EXCHANGE OF CONVERTIBLE SUBORDINATED DEBENTURES On October 22, 1993, pursuant to an exchange offer to all debentureholders, the corporation exchanged $57,167 of its new 6-1/2% cumulative convertible Series 2 preferred stock (convertible into Class A common stock at $12.56 per share) for $61,804 of its 6% convertible subordinated debentures. The pre-tax gain on the exchange of the debentures was $3,037 net of expenses of approximately $1,600. Additional issuance expenses of $400 were charged directly to additional paid-in capital. Page 18 ACCOUNTS RECEIVABLE Accounts receivable consist of the following: December 31, 1994 1993 - --------------------------------------------------------------- Trade receivables, net of allowance for doubtful accounts of $1,665 in 1994, $1,576 in 1993..................$ 66,477 $ 57,568 U.S. Government contracts: Billed................................... 36,407 42,235 Recoverable costs and accrued profit--not billed..................... 19,585 34,072 Commercial contracts: Billed................................... 12,004 11,781 Recoverable costs and accrued profit--not billed..................... 11,938 19,959 - --------------------------------------------------------------- Total..................................$146,411 $165,615 ===============================================================

Recoverable costs and accrued profit--not billed represent costs incurred on contracts, including contract retentions, which will become billable upon future deliveries or completion of engineering and service type contracts. Management estimates that approximately $8,298 of such costs and accrued profits at December 31, 1994 will be collected after one year. INVENTORIES Inventories are comprised as follows: December 31, 1994 1993 - --------------------------------------------------------------- Merchandise for resale.................... $ 96,918 $ 91,495 Contracts in process: U.S. Government......................... 10,834 9,122 Commercial.............................. 2,376 5,356 Other work in process (including certain general stock material and parts).............................. 32,814 24,478 Finished goods............................ 17,282 -- - --------------------------------------------------------------- Total................................... $160,224 $130,451 ===============================================================

Progress payments of approximately $2,683 and $7,100 were netted against contracts in process at December 31, 1994 and 1993, respectively. Page 19 Finished goods inventory consists of five K-MAX (Registered Trademark) helicopters being used by initial customers under a special lease program. The aggregate amounts of general and administrative costs allocated to inventories during 1994, 1993 and 1992 were $50,437, $57,654 and $54,277 respectively. The estimated amounts of general and administrative costs remaining in inventories at December 31, 1994 and 1993 amount to $8,066 and $5,141, respectively, and are based on the ratio of such allocated costs to total costs incurred. PROPERTY, PLANT AND EQUIPMENT, NET Property, plant and equipment are recorded at cost and summarized as follows: December 31, 1994 1993 - --------------------------------------------------------------- Land.......................................$ 8,521 $ 8,744 Buildings.................................. 57,383 55,047 Leasehold improvements..................... 13,123 13,214 Machinery, office furniture and equipment................................ 104,376 98,765 - --------------------------------------------------------------- Total.................................... 183,403 175,770 Less accumulated depreciation and amortization......................... 98,782 94,059 - --------------------------------------------------------------- Property, plant and equipment, net......................................$ 84,621 $ 81,711 ===============================================================

CREDIT ARRANGEMENTS-- SHORT-TERM BORROWINGS AND LONG-TERM DEBT SHORT-TERM BORROWINGS The corporation has arrangements with several banks to borrow funds on a short-term basis with interest at current market rates. There were borrowings of $52,659 outstanding under these arrangements at December 31, 1994. Page 20 LONG-TERM DEBT The corporation has long-term debt as follows: December 31, 1994 1993 - --------------------------------------------------------------- Unsecured notes: Revolving credit agreements...............$ -- $ -- Convertible subordinated debentures.............................. 33,191 33,191 Other obligations........................... 4,901 5,490 - --------------------------------------------------------------- Total..................................... 38,092 38,681 Less current portion........................ 659 704 - --------------------------------------------------------------- Total excluding current portion...........$37,433 $37,977 ===============================================================

REVOLVING CREDIT AGREEMENTS The corporation has two revolving credit agreements involving several domestic and foreign lenders. The agreements provide an aggregate maximum commitment of $200,000 and each agreement expires in 1999. Interest under both agreements is payable at various market rates. CONVERTIBLE SUBORDINATED DEBENTURES The corporation issued $95,000 of its 6% convertible subordinated debentures during 1987. The debentures are convertible into shares of the Class A common stock of Kaman Corporation at any time on or before March 15, 2012 at a conversion price of $23.36 per share at the option of the holder unless previously redeemed by the Corporation. Pursuant to a sinking fund requirement beginning March 15, 1997, the corporation will redeem 5% of the outstanding principal amount of the debentures annually. The debentures are subordinated to the claims of senior debt holders and general creditors. The corporation exchanged $61,804 of these debentures for its new Series 2 preferred stock on October 22, 1993. The remaining debentures have a fair value of $24,561 at December 31, 1994 based upon current market prices. OTHER OBLIGATIONS These obligations consist primarily of notes issued by the corporation to industrial and economic development authorities in connection with the issuance of their bonds in similar amounts. The proceeds were used by the corporation to finance certain of its building construction within the regions of the authorities. These obligations are secured by mortgages and generally have interest rates and payment terms more favorable than conventional financing. Page 21 LONG-TERM DEBT ANNUAL MATURITIES The aggregate amounts of annual maturities of long-term debt for each of the next five years are approximately as follows: ~~1995.............................$ 659 1996............................. 709 1997............................. 2,373 1998............................. 2,350 1999............................. 2,248~~

RESTRICTIVE COVENANTS The most restrictive of the covenants contained in the loan agreements require the corporation to have operating income, as defined, at least equal to 250% of interest expense, consolidated total indebtedness to total capitalization to be less than 45% and consolidated net worth at least equal to $200,000 at December 31, 1994. INTEREST PAYMENTS Cash payments for interest were $4,572, $8,092 and $7,103 for 1994, 1993 and 1992, respectively. INCOME TAXES The corporation adopted Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, effective January 1, 1993. The cumulative effect of this change in accounting for income taxes determined as of January 1, 1993 was immaterial to the consolidated statements of earnings. The components of income taxes are as follows: 1994 1993 1992 - ---------------------------------------------------------------- Current: Federal........................... $ 6,362 $ 6,250 $12,401 State............................. (300) 1,750 3,727 - ---------------------------------------------------------------- 6,062 8,000 16,128 - ---------------------------------------------------------------- Deferred: Federal........................... (5,762) (17,929) (3,500) State............................. (1,300) (1,750) (1,000) - ---------------------------------------------------------------- (7,062) (19,679) (4,500) - ---------------------------------------------------------------- Total............................. $(1,000) $(11,679) $11,628 ================================================================

Page 22 Deferred income taxes are recorded for differences in the recognition of certain items of income and expense for financial and tax reporting purposes. The sources of these differences and the tax effect of each are as follows: 1994 1993 1992 - ---------------------------------------------------------------- Depreciation and amortization...................... $(2,319) $(1,402) $(1,328) Long-term contracts................. (170) 2,619 (2,742) Restructuring, impairment and other costs........ 600 (20,650) -- Inventory........................... (3,418) 1,304 250 Deferred employee benefits.......... (835) (1,698) (169) Other items......................... (920) 148 (511) - ---------------------------------------------------------------- Total............................. $(7,062) $(19,679) $(4,500) ================================================================

The components of the deferred tax assets and deferred tax liabilities are presented below: December 31, 1994 1993 - --------------------------------------------------------------- Deferred tax assets: Long-term contracts...................... $1,908 $1,739 Deferred employee benefits............... 7,093 6,258 Restructuring, impairment and other costs............................ 20,050 20,650 Inventory................................ 2,121 -- Accrued liabilities and other items...... 6,678 5,378 - --------------------------------------------------------------- Total deferred tax assets.............. 37,850 34,025 - --------------------------------------------------------------- Deferred tax liabilities: Depreciation and amortization............ (6,319) (8,638) Inventory................................ -- (1,297) Other items.............................. (3,040) (2,661) - --------------------------------------------------------------- Total deferred tax liabilities......... (9,359) (12,596) - --------------------------------------------------------------- Net deferred tax asset................. $28,491 $21,429 ===============================================================

No valuation allowance has been recorded because the corporation believes that these deferred tax assets will, more likely than not, be realized. This determination is based largely upon the corporation's historical earnings trend as well as its ability to carryback reversing items within three years to offset taxes paid. In addition, the corporation has the ability to offset deferred tax assets against deferred tax liabilities created for such items as depreciation and amortization. Page 23 The provisions for federal income taxes approximate the amounts computed by applying the U.S. federal income tax rate to earnings (loss) before income taxes after giving effect to state income taxes. The federal tax provision has been reduced by $4,600 in 1994 as a result of the non-deductible portion of the write-down of goodwill. The federal tax benefit in 1993 has been reduced $1,800 to provide for prior years' tax examinations. Cash payments for income taxes were $8,255, $7,988 and $15,708 in 1994, 1993 and 1992, respectively. PENSION PLAN The corporation has a non-contributory defined benefit pension plan covering all of its full-time employees. Benefits under this plan are based upon an employee's years of service and compensation levels during employment and there is an offset provision for social security benefits. It is the corporation's policy to fund pension costs accrued. Plan assets are invested in a diversified portfolio consisting of equity and fixed income securities (including $8,388 of Class A common stock of Kaman Corporation at December 31, 1994). The pension plan costs were computed using the projected unit credit actuarial cost method and include the following components: 1994 1993 1992 - ---------------------------------------------------------------- Service cost for benefits earned during the year....................$ 9,636 $ 8,661 $ 8,249 Interest cost on projected benefit obligation......................... 16,558 15,900 14,747 Actual return on plan assets......... (1,848) (21,498) (13,991) Net amortization and deferral........(17,543) 2,200 (3,929) - ---------------------------------------------------------------- Net pension cost.....................$ 6,803 $ 5,263 $ 5,076 ================================================================

Page 24 The funded status of the pension plan is as follows: December 31, 1994 1993 - --------------------------------------------------------------- Actuarial present value of accumulated benefit obligation: Vested benefits..........................$200,745 $192,753 Non-vested benefits...................... 2,153 2,572 - --------------------------------------------------------------- Total..................................$202,898 $195,325 =============================================================== Actuarial present value of projected benefit obligation.............$233,312 $224,870 Plan assets at fair value.................. 226,054 228,439 - --------------------------------------------------------------- Excess (deficiency) of assets over projected benefit obligation............. (7,258) 3,569 Unrecognized prior service cost............ (621) 350 Unrecognized net loss...................... 18,503 9,466 Unrecognized net transition asset.......... (12,976) (14,829) - --------------------------------------------------------------- Accrued pension cost.......................$ 2,352 $ 1,444 ===============================================================

The actuarial assumptions used in determining the funded status of the pension plan are as follows: December 31, 1994 1993 - --------------------------------------------------------------- Discount rate...................................... 8% 7 1/2% Average rate of increase in compensation levels.... 5% 4 1/2%

The expected long-term rates of return on plan assets used to compute the net periodic pension costs were 9% for 1994 and 9 1/4% for 1993. COMMITMENTS AND CONTINGENCIES Rent commitments under various leases for office space, warehouse, land and buildings expire at varying dates from January 1995 to December 2008. Certain annual rentals are subject to renegotiation, with certain leases renewable for varying periods. Lease periods for machinery and equipment vary from 1 to 7 years. Substantially all real estate taxes, insurance and maintenance expenses are obligations of the corporation. It is expected that in the normal course of business, leases that expire will be renewed or replaced by leases on other properties. Page 25 The following future minimum rental payments are required under operating leases that have initial or remaining noncancellable lease terms in excess of one year as of December 31, 1994: 1995...................$10,091 1996................... 6,704 1997................... 4,700 1998................... 3,207 1999................... 2,528 Later years............ 4,426 - ------------------------------ Total..................$31,656 ==============================

Lease expense for all operating leases, including leases with terms of less than one year, amounted to $14,150, $15,172 and $15,221 for 1994, 1993 and 1992, respectively. From time to time, the corporation is subject to various claims and suits arising out of the ordinary course of business, including commercial, employment and environmental matters. While the ultimate result of all such matters is not presently determinable, based upon its current knowledge, management does not expect that their resolution will have a material adverse effect on the corporation's consolidated financial position. COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE The primary earnings (loss) per common share computation is based on the weighted average number of shares of common stock outstanding in 1994, 1993 and 1992 and includes the common stock equivalency of options granted to employees under the stock incentive plan. The fully diluted earnings per share computation also assumes that the 6% convertible subordinated debentures were converted at their date of issuance with the resultant reduction in interest costs net of tax and the additional dilutive effect of the stock options. Subsequent to the exchange of debentures for Series 2 preferred stock on October 22, 1993, the corporation added the preferred stock dividend requirement to its net loss to arrive at net loss applicable to common stock to calculate its loss per common share--primary for 1994 and 1993. In addition, in order to determine the fully diluted loss per common share, it is assumed that the Series 2 preferred stock would be converted into Class A common stock from its date of issuance and the preferred stock dividend requirement eliminated. Due to the net loss during 1994 and 1993, however, the dilutive effect from conversion of the outstanding 6% convertible subordinated debentures and the Series 2 preferred stock is anti-dilutive and accordingly not included in the computation. Page 26 EMPLOYEES STOCK PURCHASE PLAN The Kaman Corporation Employees Stock Purchase Plan allows employees to purchase Class A common stock of the corporation, through payroll deductions, at 85% of the market value of shares at the time of purchase. The plan provides for the grant of rights to employees to purchase a maximum of 1,500,000 shares of Class A common stock of the corporation commencing July 1, 1989. There are no charges or credits to income in connection with the plan. During 1994, 248,223 shares were issued to employees at prices ranging from $7.54 to $8.61 per share. During 1993, 241,808 shares were issued to employees at prices ranging from $7.86 to $9.78 per share. During 1992, 226,296 shares were issued to employees at prices ranging from $7.33 to $8.82 per share. Effective November 1, 1993, the maximum number of shares available for issuance under the Plan was replenished to 1,500,000 shares. At December 31, 1994, there were approximately 1,209,000 shares available for offering under the plan. STOCK INCENTIVE PLAN On September 20, 1993, the corporation adopted the 1993 Stock Incentive Plan--to be effective November 1, 1993. The 1993 Plan includes a continuation and extension of the stock incentive program of the corporation set forth in the 1983 Stock Incentive Plan which terminated on October 31, 1993. The 1993 Plan provides for the grant of non-statutory stock options, incentive stock options, restricted stock awards and stock appreciation rights primarily to officers and other key employees. The corporation has designated 962,199 shares of its Class A common stock for this plan, including 2,199 shares previously reserved under the 1983 plan. Stock options are generally granted at prices not less than the fair market value at the date of grant. Options granted under the plan generally expire ten years from the date of grant and are exercisable on a cumulative basis with respect to 20% of the optioned shares on each of the five anniversaries from the date of grant. Restricted stock awards are generally granted with restrictions that lapse at the rate of 20% per year and are amortized accordingly. These awards are subject to forfeiture if a recipient separates from service with the corporation. Stock appreciation rights generally expire ten years from the date of grant and are exercisable on a cumulative basis with respect to 20% of the rights on each of the five anniversaries from the date of grant. At December 31, 1994, there were outstanding options issued under the plan for the purchase of 864,589 shares at prices ranging from $7.50 to $13.83 per share. As of that date options covering Page 27 522,519 shares were exercisable at $7.50 to $13.83 per share. Options for 12,104, 37,929 and 16,550 shares were exercised during 1994, 1993 and 1992, respectively, at prices ranging from $7.50 to $9.88 per share. Restricted stock awards were made for 12,000 shares at $9.94 per share in 1994, 34,000 shares at $9.50 per share in 1993 and 36,000 shares at $9.88 per share in 1992. At December 31, 1994, there were 87,800 shares remaining subject to restrictions pursuant to these awards. No stock appreciation rights have been issued under the plan. SEGMENT INFORMATION The corporation serves government, industrial and commercial markets through two industry segments--Diversified Technologies and Distribution. Through its diversified technologies operations, the corporation provides a range of technical professional services involving either advanced information technologies or high technology science and engineering to government and industrial customers; advanced technology products such as electromagnetic motors, safety and fusing systems; sliding bearings, and non-contact measuring systems for military and industrial customers; commercial airframe subcontracting programs, and manufacturing work along with spare parts and logistics for the SH-2 helicopter for the U.S. Navy. The K-MAX (Registered Trademark) helicopter program, a significant commercial effort for the corporation, is included in the Diversified Technologies segment. The Diversified Technologies' segment operating loss for 1994 reflects the effect of the $44.0 million fourth quarter charge associated with the write-down of the investment in Raymond Engineering, its merger into Kaman Aero space, and the downsizing of Raymond's business. In addition, the Diversified Technologies' segment operating loss for 1993 includes the impact of the $69,500 charge for restructuring and other costs accrued in the third quarter to address various downsizing and product conversion efforts. Through its distribution operations, the corporation supplies nearly every sector of industry with industrial replacement parts (including bearings, power transmission equipment, fluid power, linear motion, and materials handling items) as well as industrial engineering and systems services. Operations are conducted from approximately 150 service centers located in 29 states and British Columbia, Canada. Music operations manufacture and distribute musical instruments and accessories in the United States and abroad through domestic, Canadian and U.K. based offices. Page 28 Summarized financial information by business segment is as follows: 1994 1993 1992 - ---------------------------------------------------------------- Net sales: Diversified Technologies..........$310,279 $341,621 $359,432 Distribution...................... 508,903 450,889 423,418 - ---------------------------------------------------------------- $819,182 $792,510 $782,850 ================================================================ Operating profit (loss): Diversified Technologies..........$(17,226) $(41,346) $31,009 Distribution...................... 19,558 16,521 15,205 - ---------------------------------------------------------------- 2,332 (24,825) 46,214 - ---------------------------------------------------------------- Interest, corporate and other income/expense, net............... 16,513 15,649 17,210 - ---------------------------------------------------------------- Earnings (loss) before income taxes.$(14,181) $(40,474) $29,004 ================================================================ Identifiable assets: Diversified Technologies..........$236,239 $252,450 $268,353 Distribution...................... 198,145 177,608 165,623 Corporate......................... 8,565 10,138 9,469 - ---------------------------------------------------------------- $442,949 $440,196 $443,445 ================================================================ Capital expenditures: Diversified Technologies..........$ 17,396 $ 13,678 $ 6,698 Distribution...................... 3,732 6,207 3,578 Corporate......................... 453 543 286 - ---------------------------------------------------------------- $ 21,581 $ 20,428 $ 10,562 ================================================================ Depreciation and amortization: Diversified Technologies..........$ 9,307 $ 9,439 $ 8,998 Distribution...................... 2,946 3,197 3,616 Corporate......................... 800 820 759 - ---------------------------------------------------------------- $ 13,053 $ 13,456 $ 13,373 ================================================================

Operating profit (loss) is total revenues less cost of sales and selling, general and administrative expense (including restructuring, impairment and other costs in 1994 and 1993) other than general corporate expense. Identifiable assets are year-end assets at their respective net carrying value segregated as to industry segment and corporate use. Corporate assets are principally cash and net property, plant and equipment. Net sales by the Diversified Technologies segment made under contracts with U.S. Government agencies account for $249,854 in 1994, $279,530 in 1993 and $260,823 in 1992. Page 29 REPORT OF INDEPENDENT AUDITORS KPMG PEAT MARWICK LLP Certified Public Accountants CityPlace II Hartford, Connecticut 06103 THE BOARD OF DIRECTORS AND SHAREHOLDERS KAMAN CORPORATION: We have audited the accompanying consolidated balance sheets of Kaman Corporation and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of earnings, changes in shareholders' equity and cash flows for each of the years in the three year period ended December 31, 1994. These consolidated financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Kaman Corporation and subsidiaries at December 31, 1994 and 1993 and the results of their operations and their cash flows for each of the years in the three year period ended December 31, 1994 in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick LLP January 25, 1995 Page 30 FIVE-YEAR SELECTED FINANCIAL DATA Kaman Corporation and Subsidiaries (In thousands except per share amounts, shareholders and employees) 1994 1993 1992 1991 1990 - --------------------------------------------------------------------------- OPERATIONS: Revenues....................$820,774 $794,092 $784,732 $780,357 $826,583 Cost of sales............... 611,762 588,237 583,638 582,641 623,042 Selling, general and administrative expense.... 173,853 173,581 164,603 160,824 159,775 Restructuring, impairment and other costs........... 44,000 69,500 -- -- --- Operating income (loss)..... (8,841) (37,226) 36,491 36,892 43,766 Interest expense............ 4,694 6,976 7,086 8,191 11,268 Other expense (income)...... 646 (3,728) 401 359 (280) Earnings (loss) before income taxes.............. (14,181) (40,474) 29,004 28,342 32,778 Income taxes (benefit)...... (1,000) (11,679) 11,628 11,375 13,553 Net earnings (loss)......... (13,181) (28,795) 17,376 16,967 19,225 FINANCIAL POSITION: Current assets..............$339,012 $316,601 $334,581 $309,970 $327,030 Current liabilities......... 192,882 166,765 122,015 110,916 116,710 Working capital............. 146,130 149,836 212,566 199,054 210,320 Property, plant and equipment, net............ 84,621 81,711 73,262 75,233 79,128 Total assets................ 442,949 440,196 443,445 421,866 443,739 Long-term debt.............. 37,433 37,977 100,889 102,053 123,207 Shareholders' equity........ 203,754 228,313 209,535 202,150 193,104 PER SHARE AMOUNTS: Net earnings (loss) per common share--primary..... $(.93) $(1.63) $.95 $.93 $1.06 Net earnings(loss)per common share--fully diluted................... (.93) (1.63) .93 .91 1.01 Dividends declared-- Series 2 preferred stock.. 13.00 1.37 -- -- -- Dividends declared-- common stock.............. .440 .440 .440 .440 .440 Shareholders' equity-- common stock.............. 8.07 9.46 11.58 11.07 10.61 Market price range.......... 11 1/8 12 1/8 10 3/4 9 5/8 9 1/2 8 1/2 8 5/8 7 7/8 7 3/8 6 1/4 GENERAL STATISTICS: Shareholders................ 7,198 6,920 6,994 7,139 6,809 Employees................... 5,239 5,363 5,424 5,544 6,085 ========================================================================== Note: The per common share amounts have been adjusted to reflect the eight-for-five common stock split in 1987 and the three-for-two common stock split in 1985.

~~Page 31~~

EXHIBIT 21 KAMAN CORPORATION SUBSIDIARIES Following is a list of the Corporation's subsidiaries, each of which is wholly owned by the Corporation either directly or through another subsidiary. Second-tier subsidiaries are listed under the name of the parent subsidiary. Name State of Incorporation - ----------------------------------------------------------------- Registrant: KAMAN CORPORATION Connecticut Subsidiaries: Kaman Diversified Technologies Corporation Connecticut Kaman Aerospace Corporation Delaware Kamatics Corporation Connecticut Kaman Aerospace International Corporation Connecticut Kaman X Corporation Connecticut Kaman Sciences Corporation Delaware Kaman Instrumentation Corporation Connecticut Kaman Electromagnetics Corporation Massachusetts AirKaman of Jacksonville, Inc. Connecticut Advanced Energetic Materials Corporation of America* Delaware Kaman Technologie GmbH Germany Kaman Industrial Technologies Corporation Connecticut Kaman Industrial Technologies, Ltd. Canada Kaman Music Corporation Connecticut KMI Europe, Inc. Delaware Kaman U.K. Limited Great Britain Trace Elliot Limited Great Britain B & J Music Ltd. Canada * Fifty percent (50%) of voting stock owned by Kaman Corporation

EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS KPMG Peat Marwick LLP Certified Public Accountants CityPlace II Hartford, Connecticut 06103 The Board of Directors and Shareholders Kaman Corporation: We consent to incorporation by reference in the Registration Statements (Nos. 33-51483 and 33-51485) on Form S-8 of Kaman Corporation of our reports dated January 25, 1995, relating to the consolidated balance sheets of Kaman Corporation and subsidiaries as of December 31, 1994 and 1993 and the related consolidated statements of earnings, changes in shareholders' equity and cash flows and related schedules for each of the years in the three-year period ended December 31, 1994 which reports appear or are incorporated by reference in the December 31, 1994 annual report on Form 10-K of Kaman Corporation. /s/ KPMG Peat Marwick LLP Hartford, Connecticut March 8, 1995

EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned does hereby appoint and constitute Charles H. Kaman and Harvey S. Levenson and each of them as his or her agent and attorney-in-fact to execute in his or her name, place and stead (whether on behalf of the undersigned individually or as an officer or director of Kaman Corporation or otherwise) the Annual Report on Form 10-K of Kaman Corporation respecting its fiscal year ended December 31, 1994 and any and all amendments thereto and to file such Form 10-K and any such amendment thereto with the Securities and Exchange Commission. Each of the said attorneys shall have the power to act hereunder with or without the other. IN WITNESS WHEREOF, the undersigned have executed this instrument this 14th day of February, 1995. Frank C. Carlucci Hartzel Z. Lebed John A. DiBiaggio Harvey S. Levenson Edythe J. Gaines Walter H. Monteith, Jr. Huntington Hardisty John S. Murtha Charles H. Kaman Robert L. Newell C. William Kaman, II Wanda L. Rogers

5 EXHIBIT 27 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S 1994 ANNUAL REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. ********************** 0000054381 KAMAN CORPORATION 1,000 YEAR DEC-31-1994 JAN-1-1994 DEC-31-1994 3,711 0 148,076 (1,665) 160,224 339,012 183,403 (98,782) 442,949 192,882 37,433 18,268 0 57,167 128,319 442,949 819,182 820,774 611,762 829,615 646 0 4,694 (14,181) (1,000) (13,181) 0 0 0 (13,181) (.93) (.93)