SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
- --- SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
March 31, 1995.
------------------
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
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of May 1, 1995:
Class A Common 17,628,502
Class B Common 667,814
Page 1 of 13 Pages
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets(In thousands)
March 31, December 31,
Assets 1995 1994
------ ----------------- ------------------
Current assets:
Cash $ 3,968 $ 3,711
Accounts receivable (net of
allowance for doubtful
accounts of $1,949 in
1995, $1,665 in 1994) 165,791 146,411
Inventories:
Raw materials $ 8,548 $ 9,616
Work-in-process 50,810 36,408
Finished goods 20,782 17,282
Merchandise for resale 99,730 179,870 96,918 160,224
------- -------
Other current assets 26,624 28,666
------- -------
Total current assets 376,253 339,012
Property, plant & equip., at cost 182,774 183,403
Less accumulated depreciation
and amortization 98,683 98,782
------- -------
Net property, plant & equipment 84,091 84,621
Other assets 19,262 19,316
-------- --------
$479,606 $442,949
======== ========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Notes payable $ 57,109 $ 53,318
Accounts payable 58,409 54,561
Accrued liabilities 31,304 34,560
Other current liabilities 54,406 50,443
------- -------
Total current liabilities 201,228 192,882
Deferred credits 9,123 8,880
Long-term debt, excl. current portion 62,220 37,433
Shareholders' equity:
Series 2 preferred stock $ 57,167 $ 57,167
Other shareholders' equity 149,868 207,035 146,587 203,754
-------- -------- -------- --------
$479,606 $442,949
======== ========
- 2 -
PAGE
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Condensed Consolidated Statements of Earnings
(In thousands except per share amounts)
For the Three Months
Ended March 31,
--------------------
1995 1994
---- ----
Revenues $ 210,016 $ 197,980
Costs and expenses:
Cost of sales 152,166 145,629
Selling, general and
administrative expense 46,525 44,238
Interest expense 1,834 870
Other expense 285 104
-------- -------
200,810 190,841
-------- -------
Earnings before
income taxes 9,206 7,139
Income taxes 3,656 2,899
-------- -------
Net earnings $ 5,550 $ 4,240
======== =======
Preferred stock dividend
requirement $ (929) $ (929)
======== =======
Earnings applicable to
common stock $ 4,621 $ 3,311
======== =======
Net earnings per common share:
Primary $ .25 $ .18
Fully diluted $ .24 $ .18
======== =======
Dividends declared per share:
Series 2 preferred stock $ 3.25 $ 3.25
Common stock $ .11 $ .11
======== =======
- 3 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Condensed Consolidated Statements of Cash Flows
(In thousands)
For the Three Months
Ended March 31,
--------------------
1995 1994
--------- --------
Cash flows from operating activities:
Net earnings $ 5,550 $ 4,240
Depreciation and amortization 2,829 3,138
Gain on sale of assets (1,756) ---
Changes in current assets and liabilities (34,117) 1,122
Other, net 331 240
-------- --------
Cash provided by (used in) operating
activities (27,163) 8,740
-------- --------
Cash flows from investing activities:
Proceeds from sale of assets 3,639 ---
Expenditures for property, plant & equipment (2,393) (2,267)
Other, net (38) (746)
-------- --------
Cash provided by (used in) investing
activities 1,208 (3,013)
-------- --------
Cash flows from financing activities:
Additions(reductions)to notes payable 3,791 (4,507)
Additions to long-term debt 25,000 ---
Dividends paid (2,939) (2,926)
Other, net 360 724
-------- --------
Cash provided by (used in) financing
activities 26,212 (6,709)
-------- --------
Net increase (decrease) in cash 257 (982)
Cash at beginning of period 3,711 3,845
-------- --------
Cash at end of period $ 3,968 $ 2,863
======== ========
- 4 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Notes to Condensed Consolidated Financial Statements
(In Thousands)
Basis of Presentation
- ----------------------
The December 31, 1994 condensed consolidated balance sheet
amounts have been derived from the previously audited consolidated
balance sheet of Kaman Corporation and subsidiaries.
The balance of the condensed financial information reflects all
adjustments which are, in the opinion of management, necessary for
a fair presentation of the financial position, results of
operations and cash flows for the interim periods presented and
are of a normal recurring nature unless otherwise disclosed in
this report.
The statements should be read in conjunction with the notes to
the consolidated financial statements included in Kaman
Corporation's 1994 Annual Report.
Cash Flow Items
- ---------------
Cash payments for interest were $2,201 and $1,424 for the three
months ended March 31, 1995 and 1994, respectively. Cash
payments for income taxes for the comparable periods were $934
and $1,555, respectively.
- 5 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
- ---------------------
Consolidated revenues for the three month period ended March 31,
1995 were $210.0 million compared to $198.0 million for the same
period of 1994. These results are attributable to increased
sales in the Distribution segment.
For the first quarter of 1995, Distribution segment revenues
increased by almost 16% compared to the same period of 1994.
These results are largely attributable to the Industrial
Distribution business, which comprises slightly more than 75% of
the Distribution segment.
Industrial Distribution sales continue to benefit from growth in
the domestic economy, although revenue increases are 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, have resulted in increased market share for the
Industrial Distribution business.
Music Distribution sales also increased during the first quarter
of 1995. These results are attributable to increased domestic
sales and continuing development of international markets for
the company s products.
Diversified Technologies segment revenues for the first quarter
of 1995 were down 11% compared to the first quarter of 1994,
reflecting the influence of conditions in defense markets and
the commercial aircraft industry.
Management continues to believe that U.S. defense planning and
spending priorities are shifting toward more emphasis on
advanced technology programs and that considerable pressure
exists within the defense market for allocation of the overall
defense budget. In light of this, military hardware programs
continue to be more vulnerable to risk of program termination,
contract cancellation, or lack of funding. The corporation has
- 6 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (cont.)
felt the effects of this risk, principally with respect to its
SH-2 helicopter. Its contract with the U.S. Navy to retrofit
SH-2Fs to the SH-2G configuration has been substantially
completed and there is no current expectation that the Navy will
have further requirements, since fleet size is now being
reduced. There are presently two squadrons of SH-2 helicopters
(i.e, sixteen helicopters) serving in the Naval reserves with 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 for SH-2 sales to foreign military
services and the corporation is actively pursuing those
opportunities. 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 about $100
million over a three (3) year period. During the first quarter
of 1995, the corporation received a letter contract for $31
million to provide long lead materials and services in support
of the sale.
Management believes that it is well positioned to compete in a
defense environment that emphasizes advanced technology smart
weapons programs. The corporation has significant expertise in
this area, having performed a multitude of government contracts
for advanced technology programs over the years. These
contracts have involved products and systems, as well as
advanced technology services such as computer software
development, intelligence analysis, and research and
development. The corporation continues to be successful in
maintaining revenues from this type of business, however,
competition for these contracts is increasing.
Additionally, the defense department began last year to clearly
signal its intention to pursue procurement of state-of-the-art
commercial products and use of performance based standards,
wherever possible, rather than traditional military
specifications ( mil spec ) standards. This appears to be an
element of the government s plan to enhance efficiency in
procurement and reduce defense expenditures in the longer term.
- 7 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (cont.)
The corporation s assessment of its mil spec type product lines,
principally at Raymond Engineering, resulted in a decision to
downsize that operation to focus on product areas that are
expected to be the most successful and merge it into Kaman
Aerospace to achieve enhanced operational efficiency. During
the first quarter of 1995, the corporation took steps to
implement the downsizing and complete the merger of these
subsidiaries.
The Diversified Technologies segment continues efforts to
further develop commercial markets for its products. For some
time now, the corporation has performed subcontract work on
several commercial airframe manufacturing programs. This work
continues although it has been affected by the slowdown in
aircraft production rates in the domestic aircraft industry.
The K-MAX (Registered Trademark) helicopter program is another
important commercial initiative for the segment. The K-MAX
(Registered Trademark) is a medium to heavy lift 'aerial truck'
with operating characteristics that distinguish it from other
helicopters for use in logging, fire fighting, reforestation,
utility power line work, and other applications. The helicopter
received Federal Aviation Administration Type Certification in
August, 1994 and type approval by Transport Canada in November,
1994. The first five (5) helicopters were completed and
deliveries to initial customers began in September, 1994 under a
special lease program which provides the corporation the
opportunity to maintain active involvement in the product's
introduction to the marketplace. The next production lot will
consist of six (6) helicopters, which will be available for sale
during 1995 to customers in the United States and abroad.
Deliveries to Canada and Switzerland are scheduled for the
second quarter of 1995. Management has taken a conservative
approach to introducing this new model of helicopter and expects
that profitability and higher sales for this program will take
some time to achieve. In keeping with this conservative
strategy, management currently plans to maintain a production
rate of one helicopter every other month throughout this year
and into 1996.
Total operating profits for the segments increased almost 30%
for the first quarter of 1995 compared to the same period a year
ago. Operating profits for the Diversified Technologies segment
increased about 40% for the quarter compared to the first
quarter of 1994.
- 8 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (cont.)
Approximately 68% (i.e., $1.8 million) of the increase is
attributable to the gain on sale of real estate in the segment.
The remainder is largely due to completion of the SH-2 retrofit
contract with the Navy. Operating profits for the Distribution
segment increased 13% for the first quarter of 1995 compared to
the same period of 1994, due in large part to a healthy domestic
economy and to some degree to the effects of the company s value
added systems marketing strategy which has differentiated it
from its competitors.
Interest expense for the first quarter of 1995 increased 111%
compared to the same period of 1994, due to increases in average
borrowings and somewhat higher interest rates.
The consolidated effective income tax rate for the first three
months of 1995 was 39.7%. For the same period of 1994, the rate
was 40.6%.
Net earnings for the quarter ended March 31, 1995 were $5.6
million, compared to $4.2 million for the same period of 1994.
After giving effect to preferred stock dividend requirements,
earnings available to common shareholders were $4.6 million for
the first quarter of 1995 compared to $3.3 million for the same
period of 1994.
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. During the first
quarter of 1995, the corporation financed more of its
requirements from bank borrowings, compared to the same period
of 1994.
For general borrowing purposes, the corporation has maintained
revolving credit agreements involving several banks located in
the United States, Canada, and Europe, with a maximum unsecured
line of credit of $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. The corporation borrowed $25 million under these
agreements in early March, 1995 and there were no borrowings for
the first quarter of 1994.
- 9 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (cont.)
The corporation also maintains other short-term credit
arrangements with various banks. As of March 31, 1995, these
borrowings were at $56.5 million. For the quarter ended March
31, 1995, average bank borrowings against these short-term
arrangements were $69.6 million compared to $31 million a year
ago.
The corporation maintains a stock repurchase program, under
which it is authorized to repurchase a total of approximately
700,000 Class A shares. As of March 31, 1995, a total of 194
thousand Class A shares had been repurchased pursuant to the
program. The primary purpose of the stock repurchase program is
to meet the needs of the Employees Stock Purchase Plan and Stock
Incentive Plan.
Management believes that the corporation's cash flow from
operations and available unused bank lines of credit under its
revolving credit agreements will be sufficient to finance its
working capital and other capital requirements for the
foreseeable future.
- 10 -
PAGE
KAMAN CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders
The annual meeting of the shareholders of the corporation was held
at the offices of the corporation on April 18, 1995. Following is a
brief description of each matter voted upon at the meeting:
1. Election of Directors
---------------------
The following thirteen (13) individuals were elected directors of
the corporation to serve until the next annual meeting and until their
successors have been elected:
E. Reeves Callaway III Eileen S. Kraus
Frank C. Carlucci Hartzel Z. Lebed
John A. DiBiaggio Harvey S. Levenson
Edythe J. Gaines Walter H. Monteith, Jr.
Huntington Hardisty John S. Murtha
Charles H. Kaman Wanda Lee Rogers
C. William Kaman II
For each director, the Class B shareholders voted 632,469 shares in
favor; 20 shares against; no abstentions; and no broker non-votes.
2. Authorization to Elect One Additional Director
----------------------------------------------
A proposal to authorize the Board of Directors to elect one (1)
additional director during the ensuing year was adopted by the Class B
shareholders who voted 632,469 shares in favor; 20 against; no
abstentions; and no broker non-votes.
3. Appointment of KPMG Peat Marwick LLP
------------------------------------
A proposal to appoint KPMG Peat Marwick LLP as auditors for the
corporation during the ensuing year was adopted by the Class B
shareholders, who voted 632,489 shares in favor; none against; no
abstentions; and no broker non-votes.
- 11 -
KAMAN CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits to Form 10-Q:
(11) Earnings per common share computation
(27) Financial Data Schedule
(b) Reports on Form 8-K:
Form 8-K was filed on January 20, 1995. The filing
reported the merger of Raymond Engineering, Inc. with
Kaman Aerospace Corporation and the related pre-tax
charge of $44 million to write-down the Raymond
investment. No financial statements were required to
be filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
KAMAN CORPORATION
Registrant
Date: May 12, 1995 By
Harvey S. Levenson
President
(Duly Authorized Officer)
Date: May 12, 1995 By
Robert M. Garneau
Senior Vice President and
Chief Financial Officer
- 12 -
KAMAN CORPORATION AND SUBSIDIARIES
Index to Exhibits
Exhibit 11 Earnings Per Share Common
Computation Attached
Exhibit 27 Financial Data Schedule Attached
- 13 -
KAMAN CORPORATION AND SUBSIDIARIES
EXHIBIT 11 - EARNINGS PER COMMON SHARE COMPUTATION
(In thousands except per share amounts)
For the Three Months
Ended March 31,
--------------------
1995 1994
---- ----
Primary:
Net earnings applicable to common stock $ 4,621 $ 3,311
======== ========
Weighted average number of common
shares outstanding 18,225 18,127
Weighted average shares issuable on
exercise of dilutive stock options 175 109
-------- --------
Total 18,400 18,236
======== ========
Net earnings per
common share - primary $ .25 $ .18
======== ========
Fully diluted:
Net earnings applicable to common stock $ 4,621 $ 3,311
Elimination of interest expense on 6%
subordinated convertible debentures
(net after taxes) 300 *
Elimination of preferred stock dividend
requirement 929 *
-------- -------
Net earnings(as adjusted) $ 5,850 $ 3,311
======== =======
Weighted average number of shares
outstanding including shares
issuable on stock option exercises 18,400 18,236
Shares issuable on conversion of 6%
subordinated convertible debentures 1,421 *
Shares issuable on conversion of
Series 2 preferred stock 4,552 *
Additional shares using ending market
price instead of average market on
treasury method use of stock option
proceeds --- ---
-------- -------
Total 24,373 18,236
======== =======
Net earnings per common share
- fully diluted $ .24 $ .18
======== =======
* Anti-dilutive and accordingly not included in the computation
PAGE
5
1,000
3-MOS
DEC-31-1995
JAN-01-1995
MAR-31-1995
3,968
0
167,740
(1,949)
179,870
376,253
182,774
(98,683)
479,606
201,228
62,220
18,274
0
57,167
131,594
479,606
207,982
210,016
152,166
198,691
285
0
1,834
9,206
3,656
5,550
0
0
0
5,550
.25
.24
