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
JUNE 30, 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 July 31, 1995:
Class A Common 17,689,159
Class B Common 667,814
Page 1 of 11 Pages
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
(In thousands)
June 30, December 31,
Assets 1995 1994
------ ---------------- -----------------
Current assets:
Cash $ 3,104 $ 3,711
Accounts receivable (net of allowance
for doubtful accounts of $2,136 in
1995, $1,665 in 1994) 165,146 146,411
Inventories:
Raw materials 8,087 $ 9,616
Work-in-process 49,038 36,408
Finished goods 20,180 17,282
Merchandise for resale 105,139 182,444 96,918 160,224
-------- --------
Other current assets 27,465 28,666
-------- --------
Total current assets 378,159 339,012
Property, plant and equipment, at cost 185,409 183,403
Less accumulated depreciation and
amortization 101,177 98,782
-------- --------
Net property, plant and equipment 84,232 84,621
Other assets 19,277 19,316
-------- --------
$481,668 $442,949
======== ========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Notes payable $ 54,568 $ 53,318
Accounts payable 56,036 54,561
Accrued liabilities 34,109 34,560
Other current liabilities 56,194 50,443
-------- --------
Total current liabilities 200,907 192,882
Deferred credits 9,498 8,880
Long-term debt, excluding current
portion 61,805 37,433
Shareholders' equity:
Series 2 preferred stock $ 57,167 $ 57,167
Other shareholders' equity 152,291 209,458 146,587 203,754
-------- -------- -------- --------
$481,668 $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 For the Six Months
Ended June 30, Ended June 30,
-------------------- ------------------
1995 1994 1995 1994
---- ---- ---- ----
Revenues $221,938 $208,957 $431,954 $406,937
Costs and expenses:
Cost of sales 165,230 155,923 317,396 301,552
Selling, general and
administrative expense 46,696 44,167 93,221 88,405
Interest expense 2,250 1,052 4,084 1,922
Other expense (45) 401 240 505
-------- -------- -------- --------
214,131 201,543 414,941 392,384
-------- -------- -------- --------
Earnings before income taxes 7,807 7,414 17,013 14,553
Income taxes 3,144 2,818 6,800 5,717
-------- -------- -------- --------
Net earnings $ 4,663 $ 4,596 $ 10,213 $ 8,836
======== ======== ======== ========
Preferred stock dividend
requirement $ (929) $ (929) $ (1,858) $ (1,858)
======== ======== ======== ========
Earnings applicable to
common stock $ 3,734 $ 3,667 $ 8,355 $ 6,978
======== ======== ======== ========
Net earnings per common share:
Primary $ .20 $ .20 $ .45 $ .38
Fully diluted $ .20 $ .20 $ .44 $ .38
======== ======== ======== ========
Dividends declared per share:
Series 2 preferred stock $ 3.25 $ 3.25 $ 6.50 $ 6.50
Common stock $ .11 $ .11 $ .22 $ .22
======== ======== ======== ========
- 3 -
PAGE
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Condensed Consolidated Statements of Cash Flows
(In thousands)
For the Six Months
Ended June 30,
-------------------
1995 1994
------ ------
Cash flows from operating activities:
Net earnings $10,213 $ 8,836
Depreciation and amortization 5,627 6,122
Gain on sale of assets (1,773) -
Changes in current assets and liabilities (34,667) (7,412)
Other, net 789 584
-------- --------
Cash provided by (used in) operating
activities (19,811) 8,130
-------- --------
Cash flows from investing activities:
Proceeds from sale of assets 3,810 -
Expenditures for property, plant &
equipment (5,367) (5,119)
Other, net (122) (1,110)
-------- --------
Cash provided by (used in) investing
activities (1,679) (6,229)
-------- --------
Cash flows from financing activities:
Additions to notes payable 1,250 2,400
Additions to long-term debt 25,000 -
Dividends paid (5,885) (5,858)
Other, net 518 1,145
-------- --------
Cash provided by (used in) financing
activities 20,883 (2,313)
-------- --------
Net increase (decrease) in cash (607) (412)
Cash at beginning of period 3,711 3,845
-------- --------
Cash at end of period $ 3,104 $ 3,433
======== ========
- 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 $3,866 and $1,876 for the six months
ended June 30, 1995 and 1994, respectively. Cash payments for income
taxes for the six months ended June 30, 1995 and 1994 were $1,743 and
$6,270, 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 increased approximately 6% for both the three
month and six month periods ended June 30, 1995 compared with the
same periods of 1994. These results are attributable to increased
sales in the Distribution segment.
Distribution segment revenues were up about 12% and 14% for the
quarter and six months ended June 30, 1995, respectively, compared
with the same periods of 1994. These increases are primarily due
to the industrial distribution business, which comprises slightly
more than 75% of the Distribution segment.
Industrial Distribution sales have continued to benefit from the
relatively healthy domestic economy, although economic growth slowed
somewhat during the second quarter. Revenue increases have been
stronger than the general rate of growth, however, 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 three month and
six month periods of 1995, primarily due to increased domestic
sales. Music experienced some softening in European and Asian
markets during the second quarter.
Diversified Technologies segment revenues were down about 2% for the
three month period and down 6% for the six month period ended June
30, 1995, compared with the same periods of 1994. These results
reflect the ongoing influence of conditions in defense markets and
the commercial aircraft industry.
The Diversified Technologies segment continues to adapt to the
evolving U.S. defense market. The federal government's planning and
spending priorities are shifting toward more emphasis on advanced
technology programs. Management believes that it is well positioned
to compete in this environment because it has significant expertise
in the field of advanced technology programs, having performed a
multitude of government contracts 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.
- 6 -
PAGE
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
There is also considerable pressure within the defense market for
allocation of the overall defense budget. In this environment,
military hardware programs have been more vulnerable to the risk of
program termination. The corporation's program to retrofit its SH-2F
helicopter to the SH-2G configuration illustrates this. Its
contract with the U.S. Navy for retrofit work has now been completed
and management has no current expectation that the Navy will have
further requirements for the SH-2, as fleet size is now being
reduced. The naval reserves continue to maintain two squadrons of
this helicopter, however, there are no SH-2s in active service at
this time. The corporation expects to continue to provide logistics
and spare parts support, 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. For
example, in late 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 a
contract with the U.S. Navy to perform this retrofit work, which
could have a value of up to $140 million over a three (3) year
period. During the first quarter of 1995, the corporation received
a letter contract valued at about $30 million to provide long lead
materials and services in support of the sale.
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 has
since received type approval in Canada and Switzerland. 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 were made during
the second quarter of 1995. Management expects that the third
production lot will also consist of six (6) helicopters, which will
be available for sale in 1996. Management has deliberately taken a
conservative approach to introducing this new model of helicopter
and expects that sales and profitability will take some time to
achieve.
- 7 -
PAGE
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Total operating profits for the segments increased 11% and 20% for
the three months and six months of 1995 compared to the same periods
a year ago. Operating profits for the Diversified Technologies
segment were up 17% and 28% for the quarter and six months,
respectively, from the same periods of 1994. Almost fifty percent
of the Diversified Technologies segment increase is attributable to
the gain on sale of real estate in the segment during the first
quarter. Operating profits for the Distribution segment increased 3%
and 7% for the quarter and six months ended June 30, 1995, compared
with the same periods of 1994. These results are attributable to a
healthy domestic economy and to some degree to the effects of the
industrial distribution business' value added systems marketing
strategy which has differentiated it from its competitors. Music
distribution results were adversely affected by some softening in
European and Asian markets during the second quarter and this
impacted overall results for the segment.
Interest expense for the first six months of 1995 increased 112%
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 six months
of 1995 was 40.0%. For the same period of 1994, the rate was 39.3%.
Net earnings were $4.7 million for the quarter ended June 30, 1995,
compared to $4.6 million for the same period of 1994. After giving
effect to preferred stock dividend requirements, earnings available
to common shareholders were $3.7 million for the second quarter of
1995, level with the same period of 1994.
Net earnings were $10.2 million for the first six months of 1995,
compared to $8.8 million for the same period of 1994. After giving
effect to preferred stock dividend requirements, earnings available
to common shareholders were $8.4 million for the six month period of
1995, compared to $7.0 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 six months of
1995, the corporation financed somewhat 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. During
the second quarter of 1995, the agreements were extended for a
period of one additional year to July, 2000.
- 8 -
PAGE
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
The agreements also contain various covenants, including debt to
capitalization and consolidated net worth requirements; these
covenants could serve to limit total available borrowings. The
corporation borrowed $25 million under these agreements in March,
1995, which borrowing was still outstanding at June 30, 1995. There
were no borrowings for the first six months of 1994.
The corporation also maintains other short-term credit arrangements
with various banks. As of June 30, 1995, these borrowings were at
$53.9 million. For the quarter ended June 30, 1995, average bank
borrowings against these short-term arrangements were $69.8 million
compared to $34.4 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 June 30, 1995, a total of 188 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 are currently sufficient to finance its working capital
and other capital requirements for the foreseeable future.
- 9 -
KAMAN CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits to Form 10-Q:
(4a) Amendment to the Second Amended and Restated Revolving
Credit Agreement between the Corporation and The Shawmut
Bank Connecticut, as agent, dated as of July 15, 1994.
(4b) Amendment to the Second Amended and Restated Revolving
Credit Agreement between the Corporation and The Bank
of Nova Scotia, as agent, dated as of July 15, 1994.
(11) Earnings per common share computation.
(27) Financial Data Schedule.
(b) Reports on Form 8-K:
There have been no reports on Form 8-K filed during the
quarter ended June 30, 1995.
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: August 11, 1995 By Harvey S. Levenson
President
(Duly Authorized Officer)
Date: August 11, 1995 By Robert M. Garneau
Senior Vice President and
Chief Financial Officer
- 10 -
KAMAN CORPORATION AND SUBSIDIARIES
Index to Exhibits
Exhibit 4a Amendment to the Second Amended and
Restated Revolving Credit Agreement
between the Corporation and The Shawmut
Bank Connecticut, as agent, dated as of
July 15, 1994. Attached
Exhibit 4b Amendment to the Second Amended and
Restated Revolving Credit Agreement
between the Corporation and The Bank
of Nova Scotia, as agent, dated as of
July 15, 1994. Attached
Exhibit 11 Earnings Per Common Share Computation Attached
Exhibit 27 Financial Data Schedule Attached
- 11 -
EXHIBIT - 4a
CONSENT
The undersigned parties hereby consent to the extension of the
maturity date of the Second Amended and Restated Revolving Credit
Agreement dated as of July 15, 1994, by and among Kaman Corporation
and the undersigned parties (the "Agreement") in accordance with
Section 1.20 thereof for an additional one year period from
July 15, 1999 to July 15, 2000 as requested by Kaman Corporation in
its letter of March 16, 1995.
SHAWMUT BANK CONNECTICUT, N.A.
By: Jeffrey C. Lynch
THE FIRST NATIONAL BANK OF BOSTON
By: Harvey H. Thayer, Jr.
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: John W. Pocalyko
NATIONSBANK, N.A. (CAROLINAS)
By: Christopher C. Browder
PAGE
EXHIBIT - 4b
CONSENT
The undersigned parties hereby consent to the extension of the
maturity date of the Second Amended and Restated Revolving Credit
Agreement dated as of July 15, 1994, by and among Kaman Corporation
and the undersigned parties (the "Agreement") in accordance with
Section 1.20 thereof for an additional one year period from
July 15, 1999 to July 15, 2000 as requested by Kaman Corporation in
its letter of March 16, 1995.
THE BANK OF NOVA SCOTIA
By: T.M. Pitcher
ABN AMRO BANK, N.V.
By: James E. Davis
SOCIETE GENERALE
By: John W. Stelwagon
PAGE
KAMAN CORPORATION AND SUBSIDIARIES
EXHIBIT 11 - EARNINGS PER COMMON SHARE COMPUTATION
(In thousands except per share amounts)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
Primary:
Net earnings applicable to
common stock $ 3,734 $ 3,667 $ 8,355 $ 6,978
======== ======== ======== ========
Weighted average number
of common shares outstanding 18,306 18,190 18,266 18,158
Weighted avg. shares issuable on
exercise of dilutive stock options 210 83 192 97
-------- -------- -------- --------
Total 18,516 18,273 18,458 18,255
======== ======== ======== ========
Net earnings per common share-
primary $ .20 $ .20 $ .45 $ .38
======== ======== ======== ========
Fully diluted:
Net earnings applicable to
common stock $ 3,734 $ 3,667 $ 8,355 $ 6,978
Elimination of interest expense
on 6% subordinated convertible
debentures (net after taxes) 297 309 597 *
Elimination of preferred stock
dividend requirement 929 929 1,858 *
-------- -------- -------- --------
Net earnings (as adjusted) $ 4,960 $ 4,905 $ 10,810 $ 6,978
======== ======== ======== ========
Weighted avg. no. of shares out-
standing including shares issuable
on exercise of stock options 18,516 18,273 18,458 18,255
Shares issuable on conversion of
6% subordinated convertible
debentures 1,421 1,421 1,421 *
Shares issuable on conversion of
Series 2 preferred stock 4,551 4,551 4,551 *
Additional shares using ending
mkt. price instead of avg. mkt.
on treasury method use of stock
option proceeds 28 - 14 -
-------- -------- -------- --------
Total 24,516 24,245 24,444 18,255
======== ======== ======== ========
Net earnings per common share -
fully diluted $ .20 $ .20 $ .44 $ .38
======== ======== ======== ========
* Anti-dilutive and accordingly not included in the computation.
<\table)
PAGE
5
1,000
6-MOS
DEC-31-1995
JAN-01-1995
JUN-30-1995
3,104
0
167,282
(2,136)
182,444
378,159
185,409
(101,177)
481,668
200,907
61,805
18,337
0
57,167
133,954
481,668
429,491
431,954
317,396
410,617
240
0
4,084
17,013
6,800
10,213
0
0
0
10,213
.45
.44
