UNITED STATES 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, 2001
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-1093
KAMAN CORPORATION
(Exact Name of Registrant)
Connecticut 06-0613548
(State of Incorporation) (I.R.S. Employer Identification No.)
1332 Blue Hills Avenue, Bloomfield, Connecticut 06002
(Address of principal executive offices)
Registrant's telephone number, including area code-
(860) 243-7100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
-Class A Common Stock, Par Value $1.00
-6% Convertible Subordinated Debentures Due 2012
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (Section 229.405 of this
chapter) is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or
information statements incorporated herein by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [ X ].
State the aggregate market value of the voting and non-voting
stock held by non-affiliates of the registrant. The
aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked
prices of such stock, as of a specified date within 60 days prior
to the date of filing.
$313,942,293 as of February 1, 2002.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock as of the latest practicable
date (February 1, 2002).
Class A Common 21,625,432 shares
Class B Common 667,814 shares
DOCUMENTS INCORPORATED HEREIN BY REFERENCE
Portions of the Corporation's 2001 Annual Report to Shareholders
are incorporated herein by reference and filed as Exhibit 13 to
this Report.
PART I
ITEM 1. BUSINESS
Kaman Corporation, incorporated in 1945, reports information for
itself and its subsidiaries (collectively, the "corporation") in
the following business segments: Aerospace, Industrial
Distribution, and Music Distribution.
The Aerospace segment serves commercial, U.S. defense and foreign
government markets. Its principal programs consist of the SH-2G
maritime helicopter, K-MAX (Registered Trademark) medium-to-heavy
lift helicopter, subcontract work involving aerostructures and
helicopter airframes as well as the manufacture of components such
as self-lubricating bearings and advanced technology products. The
Industrial Distribution segment serves nearly every sector of U.S.
industry with industrial repair and OEM products as well as support
services. The Music Distribution segment serves domestic and
foreign markets with a wide variety of musical instruments and
accessories and manufactures guitars and other music products for
musicians of all capabilities and skill levels.
AEROSPACE
The Aerospace segment consists of several operating subsidiaries
of Kaman Aerospace Group, Inc., including Kaman Aerospace
Corporation, Kaman Aerospace International Corporation, K-MAX
Corporation, and Kamatics Corporation. In December 2001, Kaman
Aerospace Group, Inc. acquired H.I.G. Aerospace Group, Inc.(now
known as Kaman PlasticFab Group, Inc.) and its subsidiary, Plastic
Fabricating Company, Inc.
The segment's largest program is the SH-2G Super Seasprite
helicopter, an advanced, intermediate-weight, multi-mission,
maritime aircraft designed to meet the needs of navies around the
world that operate smaller ships for which the SH-2G is ideally
sized. The helicopter is configured for rapid deployment and multi-
mission flexibility, including anti-submarine warfare, surface
surveillance, attack and search and rescue. The SH-2, including its
F and G configurations, was originally manufactured for the U.S.
Navy. At the present time the corporation's work generally consists
of retrofit of the SH-2F helicopters to the SH-2G configuration or
refurbishment of existing SH-2G helicopters.
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The SH-2G is currently operational with the Egyptian Air Force and
the corporation is performing retrofit work under commercial
contracts with the governments of Australia and New Zealand.
The program for New Zealand involves five (5) aircraft, and
support, for the Royal New Zealand Navy. The contract has an
anticipated value of about $186 million (US). The corporation has
delivered three SH-2G(NZ) helicopters and a fourth will be shipped
pending completion of testing at the corporation's
facilities in Bloomfield, CT, with final acceptance of all four
aircraft expected to follow thereafter. The fifth aircraft, which
represents the exercise of an option under the contract, is
currently scheduled for delivery before the end of 2002.
The program for Australia involves eleven (11) helicopters with
support, including a support services facility, for the Royal
Australian Navy. The total contract has an anticipated value of
about $700 million (US) and the helicopter production portion of
the work is valued at $580 million. The Australian SH-2G(A) will
contain an integrated tactical avionics system ("ITAS") that will
provide the most sophisticated, integrated cockpit and weapons
system available in an intermediate-weight helicopter.
In the second quarter of 2001, the corporation recorded a sales and
pre-tax earnings adjustment of $31.2 million attributable to the
Aerospace segment, substantially all of which was associated with a
change in the estimated cost to complete the Australia SH-2G
program. This adjustment has had the effect of lowering the profit
rate on the Australia program. The cost growth for that program is
related to a contract dispute settlement with Litton Guidance and
Control Systems (now part of Northrop Grumman) which had been the
subcontractor responsible for ITAS hardware and software
development as well as integration testing. As a result of the
settlement arrived at in early 2001, the balance of ITAS software
development is being completed by other subcontractors. One result
of the process of negotiating new subcontracts for this development
has been that the corporation will have responsibility for aircraft
integration testing, a task previously subcontracted to Litton.
This new responsibility along with the estimated time frame for the
subcontractors' development of the full ITAS software suggests that
there will be a longer delay than previously anticipated in
delivery of the full ITAS software to Australia. The corporation is
working with the Royal Australian Navy to develop a process that
will allow for phased acceptance and delivery of the aircraft
without the full ITAS, and subsequent installation of the full
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software. Six aircraft are currently in Australia, all without
the full ITAS software; two are operational and the others are in
the final stages of assembly.
The corporation is actively pursuing opportunities for the SH-2G
helicopter in the international defense market, enhancing
familiarization with the SH-2G's capabilities among various
governments around the world. The corporation is currently in
discussions with the Egyptian government concerning a requirement
for up to six search and rescue helicopters and with the United
States government about a program for refurbishment of four
existing SH-2G aircraft for the Polish Navy, along with future
training and support. Management believes that the aircraft is
in a good competitive position, while also recognizing that this
market is highly competitive and influenced by economic and
political conditions.
The corporation also maintains a consignment of the U.S. Navy's
inventory of SH-2 spare parts under a multi-year agreement that
provides the ability to utilize certain inventory for support of
the corporation's SH-2 programs.
During 2001, the corporation continued to provide on-site support
in the Republic of Egypt for ten (10) SH-2G helicopters that were
delivered in 1998 under that country's foreign military sale
agreement with the U.S. Navy.
The corporation also manufactures the K-MAX medium-to-heavy lift
helicopter that can be used for fire fighting and commercial
applications such as logging and construction of power lines and
oil rigs. The K-MAX program, which began in late 1994, is based on
the corporation's intermeshing rotor technology with servo-flap
control and the corporation has been conservative in its production
of this aircraft since inception. The program, for which the
corporation maintains a significant inventory, has experienced
significant market difficulties in the past several years, due
partly to conditions in the commercial logging industry, the
aircraft's principal application to date. While the corporation
continues to pursue a strategy of refocusing K-MAX sales
development on global market opportunities in industry and
government, those efforts have met with limited success. There were
no sales of the K-MAX helicopter during 2001, other than the three
aircraft that were part of the five aircraft order received
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from the U.S. State Department in late 2000, a transaction that
represented the first sale of the K-MAX to the U.S. government and
its first application in a law enforcement role. Management is in
the process of evaluating the amount of time and further investment
that could be required to achieve successful sales development and
profitability for the program.
The Aerospace segment also performs aerostructure and helicopter
subcontract work for a variety of aerospace manufacturing programs.
Aerostructure subcontract work focuses on commercial and military
aircraft programs, including wing structures and components for
commercial airliners, major structural assemblies for military
transports, aircraft thrust reversers, business jet subassembly
components; and the manufacture of proprietary self-lubricating
bearings for use in aircraft flight controls, turbine engines and
landing gear, as well as driveline couplings for helicopters.
Helicopter subcontract work includes helicopter airframes,
composite rotor blades, and component work. Current aerostructure
and helicopter subcontract programs include production of wing
structures and various components for virtually all Boeing
commercial aircraft, fuselages and rotor blades for MD Helicopters,
and components for military aircraft such as the C-17 military
transport, the F-22 fighter and the Comanche helicopter. As Boeing
is the largest customer of the segment's subcontract business,
management is monitoring the drop off in commercial aircraft orders
and the impact this may have on production in the next two years.
Management is in the process of identifying opportunities to
leverage the strengths of the aerospace business and is also
focused on building upon its well recognized expertise in aerospace
subcontracting and advanced technology products. For example, in
December 2001 the corporation acquired Plastic Fabricating Company,
Inc., a Wichita, Kansas manufacturer of composite parts and
assemblies for aerospace applications. This acquisition provides
the segment with a presence in one of the largest aerospace
manufacturing areas in the United States and complements its
existing composites and metal bonding operations.
The Aerospace segment's advanced technology products include safe,
arm and fuzing devices for several missile programs; high
reliability memory systems for airborne, shipboard, and ground-
based programs; precision non-contact measuring systems for
industrial and scientific use; high-performance microwave cable
assemblies for aircraft electronic warfare devices and other
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applications; and high-power permanent magnet motors used
commercially in the oil service and transportation industries and
for military uses.
In late 2001, Kaman Aerospace Corporation, the subsidiary that
accounted for 80% of Aerospace segment net sales in 2001, undertook
a realignment of its product line management structure in an effort
to increase market development of its core capabilities while
improving efficiency, enhancing customer service and reducing
costs. During 2001, the Aerospace segment also continued
implementation of `Lean-Thinking' strategies throughout the
organization in order to further enhance efficiency and reduce
costs.
INDUSTRIAL DISTRIBUTION
The Industrial Distribution segment consists of Kaman Industrial
Technologies Corporation and its Canadian subsidiary, Kaman
Industrial Technologies, Ltd. In March, 2002, Kaman Industrial
Technologies Corporation acquired a majority ownership interest
in Delamac de Mexico S.A. de C.V., a Mexican corporation.
This segment is one of the nation's larger industrial distributors,
supplying OEM and replacement parts to more than 50,000 customers
representing nearly every industry sector. The segment's catalog of
more than one million individual items includes an extensive array
of power transmission, motion control, materials handling and
electrical components, and a wide range of bearings. The segment
maintains a sophisticated warehouse management system, a network of
over 170 branches across the U.S. and British Columbia, Canada and
strategically located distribution centers, all of which helps the
segment to provide same-day or next-day delivery for most of its
offerings. The products that the segment purchases for
distribution are for the most part derived from traditional
technologies, although the segment is increasingly selling products
with the higher technological content required to support automated
production processes.
In addition to providing products, the segment uses its know-how to
help its customers solve problems, drive out inefficiencies and
become more profitable and competitive in their own markets. The
segment continues to move forward with its e-commerce initiatives
to provide customers the convenience of ordering products online
and accessing real-time account information on the Internet.
Page 5
This channel represents a small portion of total sales today,
however it is expected to become an increasingly important method
of doing business.
At the end of the third quarter of 2001, the segment acquired the
industrial distribution business of A-C Supply, Inc. of Milwaukee,
Wisconsin. This acquisition strengthens the segment's presence in
key industrial markets in the upper Midwest, where it has had
limited presence, and will facilitate service to national account
customers with operating plants in that region. This acquisition is
in keeping with management's intention to build value for the
segment through both acquisitions and internal growth.
In March, 2002, the segment acquired a majority ownership interest
in Delamac de Mexico S.A. de C.V., a Mexican distributor of
industrial products headquartered in Mexico City. This
acquisition provides the segment with access to Mexico's
industrial markets and enhances its ability to service
the Mexico-based operations of its North American customers.
Since the segment's customers include many sectors of U.S.
industry, this business is influenced by industrial production
levels and was adversely affected in 2001 by a weakened
manufacturing sector that brought the industrial production index
(the key economic indicator for this business) to levels not seen
since the early 1980s. The segment was also impacted by specific
events affecting particular customer industries, such as the effect
that the energy crisis in the West had on the aluminum industry.
The segment had taken steps to implement workforce adjustments and
control costs in late 2000 and as economic conditions worsened in
2001, the corporation implemented further reductions and
efficiencies. These efforts, along with good results with business
retention efforts and certain new national account awards, helped
the segment to remain profitable in 2001 despite lower sales.
MUSIC DISTRIBUTION
The Music Distribution segment consists of Kaman Music
Corporation, KMI Europe, Inc., and a Canadian subsidiary,
B & J Music Ltd.
This segment is the largest independent distributor of musical
instruments and accessories, offering more than 10,000
products that reach musicians of all capabilities and skill
levels. Products include the segment's proprietary Ovation
(Registered Trademark) and Hamer (Registered Trademark) guitars,
as well as the Takamine (Registered Trademark) guitar line, Toca
percussion instruments, Gibraltar drum hardware, and an extensive
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offering of other musical instruments and accessories. In 2001,
the segment also completed the first year of its exclusive
distribution and sales license with Fred Gretsch Enterprises,
successfully launching its high quality Gretsch drum kit lines in
domestic and foreign markets.
Segment results for 2001 were affected by weakened consumer
markets both domestically and abroad, although a better than
expected Christmas season helped to mitigate some of the year's
sales shortfall.
During 2001, the segment continued its focus on `Lean-Thinking'
strategies and was able to enhance operating efficiencies and
improve customer service as a result. During the year, the segment
completed the consolidation of two warehouses into one state-of-
the-art facility. The segment also implemented an electronic data
exchange program that allows the sharing of data and information
directly with customers, providing a value-added tool that
customers use to place orders, verify order status, and check
inventory availability at any time.
FINANCIAL INFORMATION
Information concerning each segment's performance for the
last three fiscal years is included in the corporation's 2001
Annual Report to Shareholders (Exhibit 13 to this Form 10-K)
and is incorporated herein by reference.
PRINCIPAL PRODUCTS AND SERVICES
Following is information for the three preceding fiscal
years concerning the percentage contribution of each business
segment's products and services to the corporation's
consolidated net sales:
Years Ended December 31
1999 2000 2001
------ ------ ------
Aerospace 37.3% 37.0% 34.4%
Industrial Distribution 50.8% 50.5% 51.8%
Music Distribution 11.9% 12.5% 13.8%
------ ------ ------
Total 100.0% 100.0% 100.0%
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RESEARCH AND DEVELOPMENT EXPENDITURES
Government sponsored research expenditures by the
Aerospace segment were $6.7 million in 2001, $10.2 million in
2000, and $11.3 million in 1999. Independent research and
development expenditures were $4.7 million in 2001, $5.5 million
in 2000, and $4.9 million in 1999.
BACKLOG
Program backlog of the Aerospace segment was approximately
$364.9 million at December 31, 2001, $439.9 million at
December 31, 2000, and $580.1 million at December 31, 1999. As the
Aerospace segment completes its work on the commercial contracts
with the governments of Australia and New Zealand, the segment's
backlog is decreasing and returning to more historic levels.
The corporation anticipates that approximately 57.7% of its
backlog at the end of 2001 will be performed in 2002.
Approximately 16.6% of the backlog at the end of 2001 is related
to U.S. 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. Virtually all of these funded government
contracts have been signed.
GOVERNMENT CONTRACTS
During 2001, approximately 91.8% of the work performed by
the corporation directly or indirectly for the U.S. 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
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outset of the contract and is not generally subject to
adjustment to reflect the actual costs incurred by the
contractor in the performance of the contract. Cost
reimbursement contracts provide for the reimbursement of
allowable costs and an additional negotiated fee.
The corporation's United States government contracts and
subcontracts contain the usual required provisions permitting
termination at any time for the convenience of the government
with payment for work completed and associated profit at the
time of termination.
COMPETITION
The Aerospace segment operates in a highly competitive
environment with many other organizations which are
substantially larger and have greater financial and other
resources. The corporation competes with other helicopter
manufacturers on the basis of price, performance, and mission
capabilities; and also on the basis of its experience as a
manufacturer of helicopters, the quality of its products and
services, and the availability of facilities, equipment and
personnel to perform contracts. Consolidation in the industry
has increased the level of international competition for
helicopter programs. The corporation is also affected by the
political and economic circumstances of its potential foreign
customers. The corporation's FAA certified K-MAX helicopters
compete with military surplus helicopters and other used
commercial helicopters employed for lifting, as well as with
alternative methods of meeting lifting requirements. The
corporation competes for its subcontract aerostructures,
helicopter structures and components business on the basis of
price and quality; product endurance and special performance
characteristics; proprietary knowledge; and the reputation of the
corporation.
Industrial distribution operations are subject to a high
degree of competition from several other national distributors,
two of which are substantially larger than the corporation;
and from many regional and local firms. Competitive forces
have intensified as a result of weakness in the U.S. manufacturing
sector during 2001 and as major competitors grow through
consolidation.
Page 9
Music distribution operations compete with domestic and
foreign distributors. Certain musical instrument products
manufactured by the corporation are subject to competition from
U.S. and foreign manufacturers as well. The corporation competes
in these markets on the basis of service, price, performance, and
inventory variety and availability. The corporation also competes
on the basis of quality and market recognition of its music
products and has established certain trademarks and trade names
under which certain of its music products are produced, as well as
under private label manufacturing in a number of foreign
countries.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking information relating to the
corporation's business and prospects, including the SH-2G and
K-MAX helicopter programs, aerostructures, helicopter structures,
and components, the industrial and music distribution businesses,
operating cash flow, and other matters that involve a number of
uncertainties that may cause actual results to differ materially
from expectations. Those uncertainties include, but are not
limited to: 1) the successful conclusion of competitions and
thereafter contract negotiations with government authorities,
including foreign governments; 2) political developments in
countries where the corporation intends to do business; 3)
standard government contract provisions permitting renegotiation
of terms and termination for the convenience of the government; 4)
economic and competitive conditions in markets served by the
corporation, including industry consolidation in the United States
and global economic conditions; 5) timing of satisfactory
completion of the Australian SH-2G(A) program; 6) timing, degree
and scope of market acceptance for products such as a repetitive
lift helicopter; 7) U.S. industrial production levels; 8) changes
in supplier sales policies; 9) the effect of price increases or
decreases; 10) currency exchange rates, taxes, laws and
regulations, inflation rates, general business conditions and
other factors; 11) effects of the September 11, 2001 attacks on
the World Trade Center in New York and the Pentagon in Washington,
D.C. Any forward-looking information should be considered with
these factors in mind.
Page 10
EMPLOYEES
As of December 31, 2001, the Corporation employed 3,780
individuals throughout its business segments and corporate
headquarters as follows:
Aerospace 1,900
Industrial Distribution 1,457
Music Distribution 361
Corporate Headquarters 62
-----
3,780
PATENTS AND TRADEMARKS
The corporation holds patents reflecting scientific and
technical accomplishments in a wide range of areas covering both
basic production of certain products, including aerospace
products and musical instruments, as well as highly specialized
devices and advanced technology products in defense related
and commercial fields.
Although the corporation's patents enhance its competitive
position, management believes that none of such patents or patent
applications is singularly or as a group essential to its
business as a whole. The corporation holds or has applied for
U.S. and foreign patents with expiration dates that range through
the year 2021.
These patents are allocated among the corporation's business
segments as follows:
U.S. PATENTS FOREIGN PATENTS
Segment Issued Pending Issued Pending
Aerospace 59 4 28 6
Industrial Distribution 0 0 0 0
Music Distribution 6 1 2 12
-- -- -- --
65 5 30 18
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Trademarks of Kaman Corporation include Adamas, Applause,
Hamer, KAflex, KAron, K-MAX, Magic Lantern, and Ovation. In all,
the corporation maintains 205 U.S. and foreign trademarks with 16
applications pending, most of which relate to music products in
the Music Distribution segment.
COMPLIANCE WITH ENVIRONMENTAL PROTECTION LAWS
In the opinion of management, based on the corporation's
knowledge and analysis of relevant facts and circumstances,
compliance with any environmental protection laws is not likely
to have a material adverse effect upon the capital expenditures,
earnings or competitive position of the corporation or any of
its subsidiaries.
The corporation is subject to the usual reviews, inspections
and enforcement actions by various federal and state
environmental and enforcement agencies and has entered into
agreements and consent decrees at various times in connection with
such reviews. One such matter, Rocque vs. Kaman, is discussed in
Item 3 (Legal Proceedings). Also on occasion the corporation has
been identified as a potentially responsible party ("PRP") by the
U.S. Environmental Protection Agency ("EPA") in connection with
the EPA's investigation of certain third party facilities. In
each instance, the corporation has provided appropriate responses
to all requests for information that it has received, and the
matters have been resolved either through de minimis settlements,
consent agreements, or through no further action being taken by
the EPA or the applicable state agency with respect to the
corporation. With respect to any such matters which may
currently be pending, the corporation has been able to determine,
based on its current knowledge, that resolution of such matters
is not likely to have a material adverse effect on the future
financial condition of the corporation.
In arriving at this conclusion, the corporation has taken
into consideration site-specific information available regarding
total costs of any work to be performed, and the extent of work
previously performed. Where the corporation has been identified
as a PRP at a particular site, the corporation, using information
available to it, also has reviewed and considered a number of
other factors, including: (i) the financial resources of other
PRPs involved in each site, and their proportionate share of the
total volume of waste at the site; (ii) the existence of
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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
Seventeen percent (17%) of the sales of the corporation made
in 2001 were to customers located outside the United States. In
2001, the corporation continued its efforts to develop
international markets for its products and foreign sales
(including sales for export); and during 2001 the corporation
continued to perform work under contracts with the Commonwealth
of Australia and the Government of New Zealand for the supply of
retrofit SH-2G helicopters. Additional information required by
this item is included in the corporation's 2001 Annual Report to
Shareholders (Exhibit 13 to this Form 10-K)and is incorporated
herein by reference.
ITEM 2. PROPERTIES
The corporation occupies approximately 3.393 million square
feet of space throughout the United States and in Canada and
Australia, distributed as follows:
SEGMENT SQUARE FEET
(in thousands as of 12/31/01)
Aerospace 1,755
Industrial Distribution 1,194
Music Distribution 404
Corporate Headquarters 40
-----
Total 3,393
The Aerospace segment's principal facilities are located in
Arizona, Connecticut, Florida, Kansas and Massachusetts; other
facilities including offices and smaller manufacturing and
assembly operations are located in several other states. These
facilities are used for manufacturing, research and development,
engineering and office purposes. The U.S. Government owns
154 thousand square feet of the space occupied by Kaman
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Aerospace Corporation in Bloomfield, Connecticut in accordance
with a Facilities Lease Agreement with a five (5) year term
expiring in March 2003. The corporation also occupies a
facility in Nowra, New South Wales, Australia under a contract
providing for a ten (10) year term expiring in June, 2010.
The Industrial Distribution segment's facilities are located
throughout the United States with principal facilities located in
California, Connecticut, New York, Kentucky and Utah. Additional
Industrial Distribution segment facilities are located in British
Columbia, Canada. These facilities consist principally of regional
distribution centers, branches and office space with a portion
used for fabrication and assembly work.
The Music Distribution segment's facilities in the United
States are located in Connecticut, California, and Tennessee.
An additional Music Distribution facility is located in Ontario,
Canada. These facilities consist principally of regional
distribution centers, source centers and office space. Also
included are facilities used for manufacturing musical
instruments.
The corporation occupies a 40 thousand square foot Corporate
headquarters building in Bloomfield, Connecticut.
The corporation's facilities are suitable and adequate to
serve its purposes and substantially all of such properties
are currently fully utilized. Many of the properties, especially
within the Industrial Distribution segment, are leased.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the
corporation or any of its subsidiaries is a party or to which any
of their property is subject. Legal proceedings or enforcement
actions relating to environmental matters are discussed in the
section entitled Compliance with Environmental Protection Laws.
The corporation is presently in settlement discussions with the
Connecticut Department of Environmental Protection regarding the
matter referred to as Rocque vs. Kaman previously reported by the
corporation in its report on Form 10-K for fiscal year ended
December 31, 2000, Document No. 0000054381-01-500002 filed with the
Securities and Exchange Commission on March 15, 2001. The
complaint in this matter alleges certain regulatory violations (the
majority of which are administrative in nature) at facilities
located in Connecticut related to routine inspections which took
place between 1988 and 1998. The complaint seeks civil penalties
and injunctive relief. Management believes that in all cases where
corrective action was required at the time of such inspections,
such action was promptly taken. Management does not anticipate
that the resolution of this matter will be material to the business
or financial condition of the corporation.
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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 2001.
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 is included in the
corporation's 2001 Annual Report to Shareholders (Exhibit 13
to this Form 10-K) and is incorporated herein by reference.
INVESTOR SERVICES PROGRAM
Shareholders of Kaman Class A common stock are eligible to
participate in the Mellon Investor Services Program
administered by Mellon Bank, N.A. which offers a variety of
services including dividend reinvestment. A booklet describing
the program may be obtained by writing to the program's
Administrator, Mellon Bank, N.A., P. O. Box 3338, South
Hackensack, NJ 07606-1938.
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QUARTERLY CLASS A COMMON STOCK INFORMATION
- -----------------------------------------------------------------
High Low Close Dividend
2001
First $19.50 $13.31 $16.38 $.11
Second 18.18 14.70 17.70 .11
Third 17.95 12.26 13.24 .11
Fourth 16.38 10.90 15.60 .11
- -----------------------------------------------------------------
2000
First $12.81 $8.77 $9.75 $.11
Second 11.69 9.44 10.69 .11
Third 15.25 10.50 12.63 .11
Fourth 17.75 11.00 16.88 .11
- -----------------------------------------------------------------
QUARTERLY DEBENTURE INFORMATION (6% Conv. Subordinated)
- -----------------------------------------------------------------
High Low Close
2001
First $ 92.00 $82.00 $ 92.00
Second 98.00 90.00 98.00
Third 99.00 98.00 99.00
Fourth 96.00 90.00 96.00
- -----------------------------------------------------------------
2000
First $ 94.00 $86.00 $88.00
Second 93.00 82.00 82.00
Third 90.00 82.00 84.00
Fourth 92.00 84.00 87.00
- -----------------------------------------------------------------
NASDAQ market quotations reflect inter-dealer prices,
without retail mark-up, mark-down, or commission and may not
necessarily represent actual transactions.
Page 16
ANNUAL MEETING
The Annual Meeting of Shareholders of the corporation will
be held on Tuesday, April 16, 2002 at 11:00 a.m. in the offices
of the corporation, 1332 Blue Hills Avenue, Bloomfield,
Connecticut 06002. Holders of all classes of Kaman securities
are invited to attend, however it is expected that matters on
the agenda for the meeting will require the vote of Class B
shareholders only.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this item is included in the
corporation's 2001 Annual Report to Shareholders (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 is included in the
corporation's 2001 Annual Report to Shareholders (Exhibit 13
to this Form 10-K) and is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The corporation has various market risk exposures that arise
from its normal business operations, including currency
exchange rates, supplier price changes, and interest rates as well
as other factors described in the Forward-Looking Statements
section of this report.
The corporation's exposure to currency exchange rates is
managed at the corporate and subsidiary operations levels as
an integral part of the business.
The corporation's exposure to supplier sales policies and
price changes relates primarily to its distribution businesses and
the corporation seeks to manage this risk through its procurement
policies and maintenance of favorable relationships with suppliers.
The corporation's exposure to interest rate risk relates
primarily to its financial instruments, which include short-term
Page 17
investments with market interest rates and debt obligations with
fixed interest rates. Currently the corporation has limited
exposure in this area due to the level of its fixed rate debt
obligation and borrowings under its financing arrangements, however
this exposure is expected to increase during 2002. Interest rate
risk is managed through the use of a combination of fixed rate
long-term debt and variable rate borrowings under its financing
arrangements. Letters of credit are generally considered borrowings
for purposes of the corporation's revolving credit agreement; they
are not subject to interest rate risk, however, fees are charged
based upon the corporation's usage and credit rating.
There has been no significant change in the corporation's
exposure to these market risk factors during the year 2001.
Management believes that any near-term change in the market risk
factors described above should not materially affect the
consolidated financial position, results of operations or cash
flows of the corporation.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item is included in the
corporation's 2001 Annual Report to Shareholders (Exhibit 13
to this Form 10-K) and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Page 18
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Following is information concerning each Director, Director
Nominee and Executive Officer of Kaman Corporation including name,
age, position with the corporation, and business experience during
the last five years:
Brian E. Barents Mr. Barents, 58, has been a Director
since 1996. He is the retired President
and Chief Executive Officer of Galaxy
Aerospace Company L.P. Prior to that
he was President and Chief Executive
Officer of Learjet, Inc.
T. Jack Cahill Mr. Cahill, 53, has held various
positions with Kaman Industrial
Technologies Corporation, a subsidiary
of the corporation, since 1975, and has
been President of that subsidiary since
1993.
E. Reeves Callaway, III Mr. Callaway, 54, has been a Director
since 1995. He is the Founder of The
Callaway Companies, an engineering
services firm.
Frank C. Carlucci Mr. Carlucci, 71, has been a Director
since 1989. Prior to that he served as
U.S. Secretary of Defense. He is
Chairman of The Carlyle Group, merchant
bankers, and Chairman of Nortel Networks
Corporation. Mr. Carlucci is also a
director of Ashland, Inc., Neurogen
Corporation, Pharmacia Corp., Sun
Resorts, Ltd., N.V., United Defense, LP,
and Texas Biotechnology Corporation.
Laney J. Chouest, M.D. Dr. Chouest, 48, has been a Director
since 1996. He is Owner-Manager
of Edison Chouest Offshore, Inc.
Page 19
Candace A. Clark Ms. Clark, 47, has been Senior Vice
President, Chief Legal Officer and
Secretary since 1996. Prior to that
she served as Vice President and
Counsel. Ms. Clark has held various
positions with the corporation since
1985.
John A. DiBiaggio Dr. DiBiaggio, 69, has been a Director
since 1984. He is now President
Emeritus of Tufts University, having
served as President until the fall of
2001. Prior to that he was President
and Chief Executive Officer of Michigan
State University.
Ronald M. Galla Mr. Galla, 50, has been Senior Vice
President and Chief Information Officer
since 1995. Prior to that he served as
Vice President and director of the
corporation's Management Information
Systems, a position which he held since
1990. Mr. Galla has been director of
the corporation's Management
Information Systems since 1984.
Robert M. Garneau Mr. Garneau, 57, has been Executive
Vice President and Chief Financial
Officer since 1995. Previously he
served as Senior Vice President,
Chief Financial Officer and
Controller. Mr. Garneau has
held various positions with the
corporation since 1981.
Huntington Hardisty Admiral Hardisty (USN-Ret.), 73,
is the retired President of Kaman
Aerospace International Corporation,
a subsidiary of the corporation.
He has been a Director since 1991
and serves as a consultant
to the corporation. He retired from
the U.S. Navy in 1991 having served
as Commander-in-Chief for the U.S.
Navy Pacific Command since 1988.
Page 20
Edwin A. Huston Mr. Huston, 63, is a nominee for
election as a director at the 2002
Annual Meeting of Shareholders. Mr.
Huston is the retired Vice Chairman
of Ryder System, Incorporated,
an international logistics and
transportation solutions company. He
also served as Senior Executive Vice
President Finance and Chief
Financial Officer of that company and
had held various positions with that
company since 1973. Mr. Huston is a
director of Unisys Corporation,
Answerthink, Inc. and Enterasys
Networks, Inc.
C. William Kaman II Mr. Kaman, 50, has been a Director
since 1992 and is Vice Chairman of the
board of directors of the corporation.
He is Chairman and CEO of AirKaman of
Jacksonville, Inc., an entity
unaffiliated with the corporation.
Previously he was Executive Vice
President of the corporation and was
President of Kaman Music Corporation,
a subsidiary of the corporation.
John C. Kornegay Mr. Kornegay, 52, has been President of
Kamatics Corporation, a subsidiary of
the corporation, since 1999, and has
held various positions with Kamatics
Corporation since 1988.
Eileen S. Kraus Ms. Kraus, 63, has been a Director
since 1995. She is the retired
Chairman of Fleet Bank Connecticut.
She is a director of The Stanley Works
and Rogers Corporation.
Paul R. Kuhn Mr. Kuhn, 60, has been a Director since
1999. He has been President and Chief
Executive Officer of the corporation
since August 1999 and was appointed to
the additional position of Chairman in
April, 2001. From 1998 to 1999 he was
Senior Vice President, Operations,
Aerospace Engine Business, for Coltec
Industries, Inc. Prior to that
he was Group Vice President, Coltec
Industries, Inc. and President of its
Chandler Evans division. He is a
director of the Connecticut Business
and Industry Association.
Page 21
Joseph H. Lubenstein Mr. Lubenstein, 54, was appointed
President of Kaman Aerospace
Corporation, a subsidiary of the
corporation, in July, 2001. Prior to
that, he served for many years in a
variety of senior management positions
at Pratt & Whitney, a subsidiary of
United Technologies Corporation, most
recently as Vice President - Quality and
Vice President - Materials.
Walter H. Monteith, Jr. Mr. Monteith, 71, has been a Director
since 1987. He is the retired Chairman
of Southern New England Telecommuni-
cations Corporation.
Wanda L. Rogers Mrs. Rogers, 69, has been a Director
since 1991. She is President and Chief
Executive Officer of Rogers
Helicopters, Inc. She is also a
director of Clovis Community Bank.
Robert H. Saunders, Jr. Mr. Saunders, 60, became President of
Kaman Music Corporation, a subsidiary
of the corporation, in 1998. Prior to
that, he served as Senior Vice
President of the corporation from 1995
and also held the position of Senior
Executive Vice President of Kaman Music
Corporation during a portion of that
period.
Richard J. Swift Mr. Swift, 57, is a nominee for election
as a director at the 2002 Annual Meeting
of Shareholders. Mr. Swift is currently
Chairman of the Financial Accounting
Standards Advisory Council. In 2001, he
retired as Chairman, President and Chief
Executive Officer of Foster Wheeler
Corporation, a provider of design,
engineering, construction,
manufacturing, research, plant
operations and environmental services, a
position he held since 1994. Prior to
that, Mr. Swift held various positions
at Foster Wheeler, having joined the
company in 1972. Mr. Swift is a
director of Ingersoll-Rand Company and
Public Service Enterprise Group
Incorporated.
Page 22
Each Director and Executive Officer has been elected for a
term of one year and until his or her successor is elected.
The terms of all Directors and Executive Officers are expected
to expire as of the Annual Meeting of the Shareholders and
Directors of the corporation to be held on April 16, 2002.
Section 16(a) Beneficial Ownership Reporting Compliance.
Based upon information provided to the corporation by
persons required to file reports under Section 16(a) of the
Securities Exchange Act of 1934, no Section 16(a) reporting
delinquencies occurred in 2001.
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 one retired executive officer who would
have been included in these tables but for the fact that he was
not serving as an executive officer at December 31, 2001.
B) SUMMARY COMPENSATION TABLE.
Annual Compensation Long Term Compensation
------------------- ----------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
All
Name and Other AWARDS Other
Principal Salary Bonus Annual RSA Options/SARs LTIP Comp.
Position Year ($) ($) Comp.(1)($)(2) (#Shares) Payments ($)(3)
- ---------------------------------------------------------------------------
P. R. Kuhn 2001 762,500 300,000 ------- 261,000 25,000/ --- 15,630
Chairman, 65,000
President and
Chief 2000 650,000 570,000 ------- 154,688 20,000/ --- 11,924
Executive 50,000
Officer 1999 250,000(4) 360,000 ------- 706,250 100,000/--- 3,661
180,000
R.M.Garneau 2001 450,000 150,000 ------- 163,125 12,500/ --- 25,056
Executive 40,000
Vice Pres- 2000 425,000 310,000 ------- 77,344 10,000/ --- 25,181
ident and 30,000
Chief 1999 400,000 175,000 ------- 43,500 9,000/ --- 12,329
Financial 30,000
Officer
Page 23
Annual Compensation Long Term Compensation
------------------- ----------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
All
Name and Other AWARDS Other
Principal Salary Bonus Annual RSA Options/SARs LTIP Comp.
Position Year ($) ($) Comp.(1)($)(2) (#Shares) Payments ($)(3)
- ---------------------------------------------------------------------------
T.J.Cahill 2001 280,000 90,000 ------- 97,875 9,000/ --- 15,077
President, 20,000
Kaman 2000 260,000 160,000 ------- 41,250 6,000/ --- 15,670
Industrial 15,000
Technologies 1999 255,000 51,000 ------- 36,250 7,500/ --- 7,449
Corporation 15,000
C.A. Clark 2001 255,000 68,000 ------- 138,656 10,500/ --- 11,339
Sr. Vice 0
President 2000 240,000 140,000 ------- 51,563 7,500/ --- 12,590
and Chief 0
Legal 1999 225,000 75,000 ------- 58,000 6,000/ --- 5,666
Officer 0
R.H.Saunders Jr.
President, 2001 235,000 85,000 ------- 81,563 8,000/ --- 15,681
Kaman Music 15,000
Corporation 2000 210,000 110,000 ------- 41,250 6,000/ --- 13,832
10,000
1999 200,000 61,000 ------- 58,000 6,000/ --- 6,536
5,000
W.R. Kozlow 2001 325,000 ------- 66,196 114,188 10,500/ --- 21,866
President, 20,000
Kaman 2000 300,000 160,000 ------- 61,875 9,000/ --- 26,341
Aerospace 25,000
Corporation 1999 275,000 140,000 ------- 36,250 7,500/ --- 18,150
(retired) 20,000
1. The corporation maintains a program pursuant to which it
provides a company vehicle to designated executives and reimburses
such executives for the maintenance of the vehicle. Amounts
reported in this column include $52,346 attributable to W.R.
Kozlow.
Page 24
2. As of December 31, 2001, aggregate restricted stock holdings
and their year end value were: P.R. Kuhn, 58,000 shares valued at
$904,800; R.M. Garneau, 22,300 shares valued at $347,880; T.J.
Cahill, 13,900 shares valued at $216,840; C.A. Clark, 16,500 shares
valued at $257,400; R.H. Saunders, Jr., 11,800 shares valued at
$184,080; and W.R. Kozlow, no shares. Restrictions lapse at the
rate of 20% per year for all awards, beginning one year after the
grant date provided recipient remains an employee of the
corporation or a subsidiary. Awards reported in this column are
as follows: P. R. Kuhn, 16,000 shares in 2001, 15,000 shares in
2000 and 50,000 shares in 1999; R. M. Garneau, 10,000 shares in
2001, 7,500 shares in 2000, and 3,000 shares in 1999;
T. J. Cahill, 6,000 shares in 2001, 4,000 shares in 2000, and
2,500 shares in 1999; C.A. Clark, 8,500 shares in 2001, 5,000
shares in 2000, and 4,000 shares in 1999; R. H. Saunders, Jr.,
5,000 shares in 2001, 4,000 shares in 2000, and 4,000 in 1999;
W.R. Kozlow, 7,000 shares in 2001, 6,000 shares in 2000, and 2,500
shares in 1999. Dividends are paid on the restricted stock.
3. Amounts reported in this column consist of: P.R. Kuhn, $9,271
- - Senior executive life insurance program ("Executive
Life"), $4,250 - employer matching contributions to the Kaman
Corporation Thrift and Retirement Plan (the "Thrift Plan
employer match"); $2,109 - medical expense reimbursement program
(MERP); R.M. Garneau, $7,340 - Executive Life, $851 - Officer 162
Insurance Program, $4,250 - Thrift Plan employer match, $1,865 -
MERP, $10,750 - all supplemental employer contributions under the
Kaman Corporation Deferred Compensation Plan ("supplemental
employer contributions"); T. J. Cahill, $4,218 - Executive Life,
$4,250 - Thrift Plan employer match, $1,610 - MERP, $5,000
supplemental employer contributions; C.A. Clark, $1,912 - Executive
Life, $4,250 - Thrift Plan employer match, $1,352 -
MERP, $3,825 - supplemental employer contributions; R.H. Saunders,
Jr., $6,146 - Executive Life, $4,250 - Thrift Plan employer
match, $2,885 - MERP, $2,400 - supplemental employer
contributions; W.R. Kozlow, $13,444 - Executive Life, $4,250 -
Thrift Plan employer match, $4,171 - MERP.
4. P.R. Kuhn joined the corporation on August 2, 1999 as
President and Chief Executive Officer.
Page 25
C) OPTION/SAR GRANTS IN THE LAST FISCAL YEAR:
- ----------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term*
- ----------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
% of Total
Options/
SARs**
Options/ Granted to
SARs** Employees Exercise or
Granted in Fiscal Base Price Expiration
Name (#) Year ($/Sh) Date 5%($) 10%($)
- ----------------------------------------------------------------------------
P. R. Kuhn 25,000/ 7.46/ 16.3125 2/13/11 923,295.92 2,339,813.15
65,000 31.71
R. M. Garneau 12,500/ 3.73/ 16.3125 2/13/11 538,589.29 1,364,891.00
40,000 19.51
T. J. Cahill 9,000/ 2.69/ 16.3125 2/13/11 297,506.46 753,939.79
20,000 9.76
C. A. Clark 10,500/ 3.13/ 16.3125 2/13/11 107,717.86 272,978.20
0 0.00
R. H. Saunders 8,000/ 2.39/ 16.3125 2/13/11 235,953.40 597,952.25
15,000 7.32
W. R. Kozlow 10,500/ 3.13/ 16.3125 2/13/11 312,894.73 792,936.68
20,000 9.76
*The information provided herein is required by Securities and
Exchange Commission rules and is not intended to be a projection
of future common stock prices.
**Stock Appreciation Rights (SARs) are payable in cash only,
not in shares of common stock.
Options and SARs relate to the corporation's Class A common
stock and vest at the rate of 20% per year, beginning one
year after the grant date.
Page 26
D) AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR, AND
FISCAL YEAR-END OPTION/SAR VALUES.
Number of
Shares under- Value of
lying Unexercised
Unexercised in-the-money
options options*
Shares at FY-end (#) at FY-end ($)
acquired on Value exercisable/ exercisable/
Name Exercise(#) realized unexercisable unexercisable
(a) (b) (c) (d) (e)
- -------------------------------------------------------------------
P. R. Kuhn none - 44,000/101,000 80,150/173,100.00
R. M. Garneau 3,000 26,625 44,600/30,900 172,172.50/52,940.00
T. J. Cahill 8,500 85,850 32,400/23,100 105,277.50/34,560.00
C. A. Clark 500 4,531 16,900/23,100 53,790.00/38,035.00
R. H. Saunders none - 12,000/19,000 30,300.00/30,750.00
W. R. Kozlow 3,000 22,140 69,000/0 210,600.00/0
Page 27
Value of
Number of Unexercised
Unexercised in-the-money
SARs SARs*
SARs at FY-end (#) at FY-end ($)
acquired on Value exercisable/ exercisable/
Name Exercise(#) realized unexercisable unexercisable
(a) (b) (c) (d) (e)
- ------------------------------------------------------------------
P. R. Kuhn none none 82,000/213,000 159,075/370,800
R. M. Garneau " " 105,500/107,000 232,925/193,700
T. J. Cahill " " 53,500/54,000 116,452.50/96,850
C. A. Clark " " 0/0 0/0
R. H. Saunders " " 4,000/26,000 12,775/45,600
W. R. Kozlow 55,000 271,487.50 70,000/0 69,000/0
*Difference between the 12/31/01 Fair Market Value ($15.60 per share)
and the exercise price(s).
Page 28
E) LONG TERM INCENTIVE PLAN AWARDS: Except as described above,
no long term incentive plan awards were made to any named
executive officer in the last fiscal year.
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 32,889 44,071 54,596 65,778 65,778
150,000 40,389 54,121 67,046 80,778 80,778
175,000 47,889 64,171 79,496 95,778 95,778
200,000 55,389 74,221 91,946 110,778 110,778
225,000 62,889 84,271 104,396 125,778 125,778
250,000 70,389 94,321 116,846 140,778 140,778
300,000 85,389 114,421 141,746 170,778 170,778
350,000 100,389 134,521 166,646 200,778 200,778
400,000 115,389 154,621 191,546 230,778 230,778
450,000 130,389 174,721 216,446 260,778 260,778
500,000 145,389 194,821 241,346 290,778 290,778
750,000 220,389 295,321 365,846 440,778 440,778
1,000,000 295,389 395,821 490,346 590,778 590,778
1,250,000 370,389 496,321 614,846 740,778 740,778
1,500,000 445,389 596,821 739,346 890,778 890,778
1,750,000 520,389 697,321 863,846 1,040,778 1,040,778
2,000,000 595,389 797,821 988,346 1,190,778 1,190,778
*Remuneration: Average of the highest five consecutive years of
"Covered Compensation" out of the final ten years of service.
Page 29
"Covered Compensation" means "W-2 earnings" or "base
earnings", if greater, as defined in the Pension Plan. W-2
earnings for pension purposes consist of salary (including 401(k)
and Section 125/129 Plan contributions but not deferrals under a
non-qualified Deferred Compensation Plan), bonus and taxable income
attributable to restricted stock awards, stock appreciation
rights, and the cash out of employee stock options. Salary and
bonus amounts for the named Executive Officers for 2001 are as
shown on the Summary Compensation Table. Compensation deferred
under the corporation's non-qualified deferred compensation plan
is included in Covered Compensation here because it is covered by
the corporation's unfunded supplemental employees' retirement
plan for the participants in that plan.
Current Compensation covered by the Pension Plan for any
named executive whose Covered Compensation differs by more than
10% from the compensation disclosed for that executive in the
Summary Compensation Table: Mr. Kuhn, $1,571,390; Mr. Garneau,
$874,543; Mr. Cahill, $520,994; Ms. Clark, $442,863; Mr. Saunders,
$384,848; Mr. Kozlow, $839,582.
Federal law imposes certain limitations on annual pension
benefits under the Pension Plan. For the named executive
officers who are participants, the excess will be paid under the
Corporation's unfunded supplemental employees' retirement plan.
The Executive Officers named in Item 11(b) are participants
in the plan and as of December 31, 2001, had the number of
years of credited service indicated: Mr. Kuhn - 6.0; Mr. Garneau -
20.48 years; Mr. Cahill - 26.7 years; Ms. Clark - 17.0; Mr.
Saunders - 7.0; Mr. Kozlow - 41.7.
Benefits are computed generally in accordance with the
benefit formula described above.
G) COMPENSATION OF DIRECTORS. In general, effective January 1,
2002, non-employee members of the Board of Directors of the
corporation receive an annual retainer of $25,000 and a fee of
$1,200 for attending each meeting of the Board and each meeting of
a Committee of the Board, except that the Chairman of each
committee receives a fee of $1,600 for attending each meeting of
that Committee. The Vice Chairman is entitled to a fee of $2,500
per meeting when serving as the Chairman. Such fees may be received
on a deferred basis. In addition, each non-employee
director will receive a Restricted Stock Award for 500 shares
(issued pursuant to the corporation's Stock Incentive Plan),
providing for immediate vesting upon election as a director at the
corporation's 2002 Annual Meeting of Shareholders.
Page 30
H) EMPLOYMENT CONTRACTS AND TERMINATION, SEVERANCE AND CHANGE
OF CONTROL ARRANGEMENTS. The corporation has an arrangement
with Mr. C. H. Kaman that provides for him to receive an amount
equal to his then current annual base salary for the remainder of
his life as a result of his becoming disabled during active
employment. Mr. Kaman became so disabled effective December 31,
2000.
In addition, the corporation has entered into Employment
Agreements and Change in Control Agreements with certain
executive officers, copies of which were filed as exhibits to the
following filings made by the corporation with the Securities and
Exchange Commission: Form 10-Q (Document 54381-99-14) filed on
November 12, 1999; Form 10-K (Document No. 54381-00-03 filed on
March 21, 2000; and Form 10-Q (Document 54381-00-500006) filed on
November 14, 2000. Form 10-Q filed August 14, 2001 (Document No.
0000054381-01-500011 and Form 10-Q filed November 14, 2001
(Document No. 0000054381-01-500016. The employment agreements do
not have a fixed term and generally provide for a severance payment
to be made to any such officer if he or she is terminated
from employment (other than for willful failure to perform proper
job responsibilities or violations of law) or if he or she leaves
employment for good reason (e.g., due to a diminution in job
responsibilities). The change in control agreements generally
provide that, for a three year period following a change in control
of Kaman Corporation or, in certain cases, a subsidiary
thereof, a severance payment will be made to any such officer if
his or her employment ends following the change in control (unless
the termination was for cause, the officer dies or becomes
disabled or if he or she leaves employment without good reason).
The change in control agreements do not have a fixed term.
Admiral Hardisty's consulting agreement with the Corporation has
been renewed for a period of one year effective March 1, 2002 at a
per diem rate of $1,000.00. A copy of such agreement is attached
as Exhibit 10(f)(I).
The corporation has also entered into an agreement with
Walter Kozlow retaining him as a consultant for a
period of two years following his retirement from regular
employment effective December 31, 2001 at an annual rate of
$242,500. A copy of such agreement was attached to the
corporation's Form 10-Q filed with the Securities and Exchange
Commission on August 14, 2001.
Page 31
Except as disclosed in Item 13, and except as described above
and in connection with the corporation's Pension Plan and the
corporation's non-qualified Deferred Compensation Plan, the
corporation has no other 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.
1) The following persons served as members of the Personnel
and Compensation Committee of the Corporation's Board of Directors
during the last fiscal year: Frank C. Carlucci, Brian E. Barents,
Eileen S. Kraus, and Walter H. Monteith, Jr.
None of these individuals was an officer or employee of the
corporation or any of its subsidiaries during either the last
fiscal year or any portion thereof in which he or she served as a
member of the Personnel and Compensation Committee.
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.
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.
Page 32
- -----------------------------------------------------------------
Number of Shares
Class of Beneficially Owned
Common Name and Address as of February 1, Percentage
Stock Beneficial Owner 2002 of Class
- -----------------------------------------------------------------
Class B Charles H. Kaman 258,375(1),(2) 38.69%
Kaman Corporation
1332 Blue Hills Avenue
Bloomfield, CT 06002
Holders of Mr. Kaman's see above
Power of Attorney
c/o John C. Yavis, Jr.
Murtha Cullina LLP
CityPlace I
185 Asylum Street
Hartford, CT 06105
Class B Newgate Associates 199,802(3),(4) 29.91%
Limited Partnership
c/o Murtha Cullina, LLP
CityPlace I
185 Asylum Street
Hartford, CT 06103
Voting Trustees pursuant see above
to a Voting Trust
Agreement, dated as of
August 14, 2000
c/o John C. Yavis, Jr.
Murtha Cullina LLP
CityPlace I
185 Asylum Street
Hartford, CT 06105
Class B C. William Kaman, II 64,446(5) 9.65%
c/o AirKaman of
Jacksonville, Inc.
Jacksonville International Airport
14700 Yonge Drive
Jacksonville, FL 32218
Page 33
Class B Robert D. Moses 51,177(6) 7.66%
Farmington Woods
Avon, CT 06001
(1) Excludes 1,471 shares held by Mrs. Kaman. Mr. Kaman shares
beneficial ownership of these shares with the holders of a
Power of Attorney, as described in note (2) below.
(2) The power to vote Mr. Kaman's shares of Class B common stock
is shared through a durable power of attorney (the "Power of
Attorney") with certain individuals who have the authority to
vote Mr. Kaman's shares by majority vote. These individuals
are: John S. Murtha, a director emeritus of the corporation
and of counsel to Murtha Cullina LLP, counsel to the
corporation, Robert M. Garneau, Executive Vice President and
Chief Financial Officer of the corporation, Roberta C. Kaman,
Mr. Kaman's wife, C. William Kaman II, Mr. Kaman's son and a
director and Vice Chairman of the Board of the corporation,
Steven W. Kaman, Mr. Kaman's son, and Cathleen H. Kaman-Wood,
Mr. Kaman's daughter.
(3) These shares are subject to a voting trust agreement dated
August 14, 2000 (the "Voting trust"), as described in note
(4) below. Newgate shares beneficial ownership of such
shares with the voting trustees of such trust, as described
in note (4) below.
(4) The power to vote the shares of Newgate Associates Limited
Partnership is vested in eleven voting trustees (the "Voting
Trustees") under the Voting Trust, which has a term of ten
(10) years, subject to renewal. The Voting Trustees
consist of the six (6) individuals identified in footnote
(2) above and the following five (5) individuals: T. Jack
Cahill, President of Kaman Industrial Technologies
Corporation, a subsidiary of the corporation, Paul R. Kuhn,
Chairman, President, and Chief Executive Officer of the
corporation, Huntington Hardisty and Eileen S. Kraus,
directors of the corporation, and John C. Yavis, Jr., a
partner in the Hartford, Connecticut law firm, Murtha
Cullina LLP, counsel to the corporation.
(5) Excludes 4,800 shares held as trustee for the benefit of
certain family members.
(6) Includes 39,696 shares held by a partnership controlled by
Mr. Moses.
Page 34
(b) SECURITY OWNERSHIP OF MANAGEMENT. The following is
information concerning beneficial ownership of the corporation's
stock by each Director and Director Nominee 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.
Number of Shares
Class of Beneficially Owned Percentage
Name Common Stock as of February 1, 2002 of Class
- --------------------------------------------------------------------
Brian E. Barents Class A 2,500 *
T. Jack Cahill Class A 90,456(1) *
E. Reeves Callaway Class A 2,500 *
Frank C. Carlucci Class A 5,500(2) *
Laney J. Chouest Class A 4,423 *
Candace A. Clark Class A 46,700(3) *
Class B 1,042 *
John A. DiBiaggio Class A 2,500 *
Robert M. Garneau Class A 105,150(4) *
Class B 23,236 3.48%
Huntington Hardisty Class A ------(5) *
Edwin A. Huston TBD
C. William Kaman, II Class A 59,888(6) *
Class B 64,446(7) 9.65%
Walter R. Kozlow Class A 116,500(8) *
Class B 296 *
Paul R. Kuhn Class A 154,163(9) *
Class B 3,288 *
Eileen S. Kraus Class A 3,304 *
Joseph H. Lubenstein Class A 31,144(10) *
Walter H. Monteith, Jr. Class A 2,700 *
Wanda L. Rogers Class A 2,500 *
Robert H. Saunders, Jr. Class A 36,359(11) *
Class B 720 *
Richard J. Swift TBD
All Directors and
Executive Officers Class A 673,759(12) 3.12%
as a group ** Class B 93,148 13.90%
* Less than one percent.
** Excludes 21,900 Class A shares held by spouses of certain
Directors and Executive Officers.
Page 35
(1) Includes 40,200 shares subject to stock options exercisable
or which will become exercisable within 60 days.
(2) Includes 5,000 shares held jointly with Mrs. Carlucci.
(3) Includes 23,700 shares subject to stock options exercisable
or which will become exercisable within 60 days.
(4) Includes 54,400 shares subject to stock options exercisable
or which will become exercisable within 60 days.
(5) Excludes 21,900 shares held by Mrs. Hardisty.
(6) Excludes 89,891 shares held by Mr. Kaman as Trustee, in
which shares Mr. Kaman disclaims any beneficial ownership.
(7) Excludes 4,800 shares held by Mr. Kaman as Trustee in which
shares Mr. Kaman disclaims any beneficial ownership.
(8) Includes 69,000 shares subject to stock options exercisable
or which will become exercisable within 60 days.
(9) Includes 73,000 shares subject to stock options exercisable
or which will become exercisable within 60 days.
(10) Includes 6,144 shares subject to stock options exercisable
or which will become exercisable within 60 days.
(11) Includes 18,200 shares subject to stock options which will
become exercisable within 60 days.
(12) Includes 284,644 shares subject to stock options which will
become exercisable within 60 days.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2001, the corporation obtained legal services from
the Hartford, Connecticut law firm of Murtha Cullina LLP of
which Mr. John S. Murtha, is of counsel and Mr. John C. Yavis, Jr.
is a partner. Mr. Murtha, a director emeritus of the corporation,
is currently one of six holders of a power of attorney described
in footnote (2) to the table entitled
Page 36
"Security Ownership of Certain Beneficial Owners", and a voting
trustee of the Voting Trust described in footnote (4) of such
table. Mr. Yavis currently serves as a voting trustee of the
Voting Trust and as the general partner of Newgate Associates
Limited Partnership.
Also in 2000, the corporation utilized the services of K-Power,
S.A., a company controlled by Mr. Ivan Humberto Iraola Pellane as
a sales representative in connection with the sale of the
corporation's K-MAX and SH-2 helicopters for use in Peru. Mr.
Iraola Pellane is the son-in-law of Mr. Walter Kozlow, a
consultant to the corporation and formerly an Executive Officer of
the corporation. The corporation's agreement with K-Power, S.A.
with respect to the SH-2 helicopter provided for a fee
of $3,000 per month for in-country support and marketing
services and also provided for a commission of 2 1/2% on any
sale of the SH-2 helicopter which may ensue. To date no such
sales have occurred and in 2001 such agreement was terminated. The
corporation's agreement with K-Power, S.A. with respect to the
K-MAX helicopter provides for a commission arrangement of 5% on
such sales with an additional 1% as compensation for after market
support services. In December, 2000, the corporation was awarded a
contract valued at $21 million with the U.S. State Department for
the sale of five K-MAX helicopters for use in Peru. As of
December 31, 2001, a total of $1,208,152.31 has been paid to
K-Power, S.A.
Page 37
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.
(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: Form 8-K's filed with the
Securities and Exchange Commission on March 12, 2001
as Document No. 0000054381-01-500002; September 25,
2001 as Document No. 0000054381-01-500014; and
December 11, 2001 as Document No. 0000054381-01-500019.
Page 38
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 14th day of March, 2002.
KAMAN CORPORATION
(Registrant)
By Paul R. Kuhn, Chairman, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature: Title: Date:
- ---------------------------------------------------------------
Paul R. Kuhn Chairman, President, and March 14, 2002
Chief Executive Officer
and Director
Robert M. Garneau Executive Vice President March 14, 2002
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
Paul R. Kuhn March 14, 2002
Attorney-in-Fact for:
Brian E. Barents Director
E. Reeves Callaway, III Director
Frank C. Carlucci Director
Laney J. Chouest Director
John A. DiBiaggio Director
Huntington Hardisty Director
C. William Kaman, II Director
Eileen S. Kraus Director
Walter H. Monteith, Jr. Director
Wanda L. Rogers Director
Page 39
KAMAN CORPORATION AND SUBSIDIARIES
Index to Financial Statement Schedules
Report of Independent Auditors
Financial Statement Schedules:
Schedule V - Valuation and Qualifying Accounts
Page 40
REPORT OF INDEPENDENT AUDITORS
KPMG LLP
Certified Public Accountants
One Financial Plaza
Hartford, Connecticut 06103
The Board of Directors and Shareholders
Kaman Corporation:
Under date of January 28, 2002, we reported on the consolidated
balance sheets of Kaman Corporation and subsidiaries as of
December 31, 2001 and 2000 and the related consolidated
statements of operations, changes in shareholders' equity and
cash flows for each of the years in the three-year period ended
December 31, 2001, as contained in the 2001 annual report to
shareholders. These consolidated financial statements and our
report thereon are included in the annual report on Form 10-K
for 2001. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related
consolidated financial statement schedule as listed in the
accompanying index. This financial statement schedule is the
responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such schedule, when considered in relation to
the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set
forth therein.
/s/ KPMG LLP
Hartford, Connecticut
January 28, 2002
Page 41
KAMAN CORPORATION AND SUBSIDIARIES
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
YEAR ENDED DECEMBER 31, 1999
Additions
BALANCE CHARGED TO BALANCE
JANUARY 1, COSTS AND DECEMBER 31,
DESCRIPTION 1999 EXPENSES OTHERS DEDUCTIONS 1999
Allowance for
doubtful accounts $4,047 $1,355 $----- $ 883(A) $4,519
====== ====== ====== ====== ======
Accumulated
amortization $1,488 $ 110 $----- $----- $1,598
of goodwill ====== ====== ====== ====== ======
YEAR ENDED DECEMBER 31, 2000
Additions
BALANCE CHARGED TO BALANCE
JANUARY 1, COSTS AND DECEMBER 31,
DESCRIPTION 2000 EXPENSES OTHERS DEDUCTIONS 2000
Allowance for
doubtful accounts $4,519 $1,490 $----- $1,373(A) $4,636
====== ====== ====== ====== ======
Accumulated
amortization $1,598 $ 110 $----- $----- $1,708
of goodwill ====== ====== ====== ====== ======
YEAR ENDED DECEMBER 31, 2001
Additions
BALANCE CHARGED TO BALANCE
JANUARY 1, COSTS AND DECEMBER 31,
DESCRIPTION 2001 EXPENSES OTHERS DEDUCTIONS 2001
Allowance for
doubtful accounts $4,636 $ 868 $277(B) $1,842(A) $3,939
====== ====== ====== ====== ======
Accumulated
amortization $1,708 $ 109 $----- $----- $1,817
of goodwill ====== ====== ====== ====== ======
(A) Write-off of bad debts, net of recoveries.
(B) Additions to allowance for doubtful accounts attributable to
acquisitions.
Page 42
KAMAN CORPORATION
INDEX TO EXHIBITS
Exhibit 3a The Amended and Restated by reference
Certificate of Incorporation
of the corporation, as amended,
has been filed with the Securities
and Exchange Commission on form
S-8POS on May 11, 1994, as
Document No. 94-20.
Exhibit 3b The By-Laws of the corporation by reference
as amended on February 9, 1999
has been filed with the Securities
and Exchange Commission on Form
10-K on March 16, 1999, as
Document No. 99-03.
Exhibit 4a Indenture between the corporation by reference
and Manufacturers Hanover Trust
Company, as Indenture Trustee,
with respect to the Corporation's
6% Convertible Subordinated Debentures,
has been filed as Exhibit 4.1 to
Registration Statement No. 33 -
11599 on Form S-2 of the corporation
filed with the Securities and Exchange
Commission on January 29, 1987
and is incorporated in this
report by reference.
Exhibit 4b Revolving Credit Agreement by reference
between the corporation and The
Bank of Nova Scotia and Fleet
National Bank as Co-Administrative
Agents and Bank One, N.A. as the
Documentation Agent and The Bank of
Nova Scotia and Fleet Securities, Inc.
as the Co-Lead Arrangers and Various
Financial Institutions dated as of
November 13, 2000 filed as Exhibit 4
to form 10-Q filed with the Securities
and Exchange Commission on November 14,
2000, Document No. 54381-00-500006.
Page 43
Exhibit 4c The corporation is party to certain by reference
long-term debt obligations, such
as real estate mortgages, copies
of which it agrees to furnish to
the Commission upon request.
Exhibit 10a The Kaman Corporation 1993 Stock by reference
Incentive Plan as amended effective
November 18, 1997 has been filed
as an exhibit to the Corporation's
Form 10-K Document No. 0000054381-98-09
filed with the Securities and
Exchange Commission on March 16,
1998 as amended by Document
No. 0000054381-98-13 filed on March 27,
1998; by Document No. 0000054381-00-500006
filed on November, 14, 2000) and as
an exhibit to the Corporation's
Form 10-K Document No. 0000054381-00-500005
filed on March 15, 2001.
Exhibit 10b The Kaman Corporation Employees by reference
Stock Purchase Plan as amended
effective November 19, 1997 has been
filed as an exhibit to the Corporation's
Form 10-K Document No. 0000054381-98-09
filed with the Securities and
Exchange Commission on March 16, 1998
(as amended by Document No. 0000054381-98-13
on March 27, 1998) and is incorporated
in this report by reference.
Exhibit 10c Kaman Corporation Supplemental by reference
Employees' Retirement Plan,
as amended
Exhibit 10d Fifth Amendment to Kaman Corporation attached
Deferred Compensation Plan (As Amended
and Restated Effective as of
January 1, 1994).
Exhibit 10e Kaman Corporation Cash Bonus Plan attached
(Amended and Restated Effective as
of January 1, 2002) and First
Amendment thereto.
Page 44
Exhibit 10f Employment Agreements and Change in by reference
Control Agreements with certain
executive officers have been filed
as exhibits to the following
filings by the corporation with the
Securities and Exchange Commission:
Form 10-Q (Document No. 54381-99-14)
filed November 12, 1999; Form 10-K
(Document No. 54381-00-03) filed
March 21, 2000; Form 10-Q
(Document No. 54381-00-500006)
Filed November 14, 2000; and Form 10-Q
(Document No. 54381-01-500015) filed
November 14, 2001.
Exhibit 10f(I) Agreement between Kaman Aerospace attached
Corporation and Huntington
Hardisty effective March 1, 2002.
Exhibit 10g Notice of change of control by reference
filed as Exhibit 99 to the
corporation's Form 8-K dated
August 16, 2000 as Document
No. 54381-00-000010.
Exhibit 11 Statement regarding computation attached
of per share earnings.
Exhibit 13 Portions of the Corporation's attached
2001 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.
Page 45
EXHIBIT 10d
FIFTH AMENDMENT
TO
KAMAN CORPORATION DEFERRED COMPENSATION PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1994)
THIS AMENDMENT made this 6th day of November, 2001, by Kaman
Corporation, hereinafter referred to as the "Corporation", for the
purpose of amending certain provisions of the Deferred Compensation
Plan,
WITNESSETH:
WHEREAS, the Corporation amended and restated the Kaman
Corporation Deferred Compensation Plan (hereinafter referred to as
the "Plan") by written Plan instrument adopted generally effective
as of January 1, 1994, and further amended the same by a First
Amendment thereto effective January 1, 1997, a Second Amendment
thereto effective September 9, 1997, a Third Amendment thereto
effective January 1, 2000, and a Fourth Amendment thereto effective
November 14, 2000; and
WHEREAS, the Corporation reserved the right to amend the Plan
in Section 8 thereof; and
WHEREAS, the Corporation desires to amend the Plan in the
following particular;
NOW, THEREFORE, the Corporation hereby amends the Plan as
follows:
1. Section 5.1 is amended to read as follows, effective
November 6, 2001:
"5.1 Distributions After Lapse of Years. (a) In
connection with each Deferral Election, a Participant may
also elect to receive a distribution of that portion of
his Account Balance equal to the Deferral Amount for that
Plan Year plus any interest credited thereon after the lapse
of seven or more Plan Years as specified in the Election Form.
(b) Any such distribution shall be made in a lump sum no
later than ninety (90) days after the lapse of the number of
Plan Years specified in the Election Form. Notwithstanding
any provision herein to the contrary, no interest shall be
credited on the Account Balance for any period subsequent to
the last day of the last Plan Year in the lapse period.
Page 1
(c) Effective November 6, 2001, a Participant who has
made a "lapse of years" election pursuant to this Section 5.1
may change his election to an election to have his Account
Balance distributed upon Retirement under Section 4.2, in a
lump sum or in installments as permitted thereunder. As part
of such election, the Participant shall indicate whether he
wishes the lump sum payment to be made or the installment
payments to commence (i) on the fist day of the third month
following the date the Participant Retires, or (ii) on the
later of (A) the first day of the third month following the
date the Participant Retires or (B) on the second day of the
January next following the date the Participant Retires. The
election shall be made on the form prescribed by the
Committee. The following additional rules shall apply:
(i) Any such election to change a "lapse of years"
election shall only be effective if filed with the
Committee prior to the beginning of the final Plan Year
of the original specified period.
(ii) Notwithstanding the foregoing, if the
Participant retires within one (1) year of a change made
under this paragraph (c), that change shall be null and
void.
(iii) If a Participant makes an election under
this paragraph (c) to change from a "lapse of years"
election to an election to have his Account Balance
distributed upon Retirement under Section 4.2, and
the Participant thereafter wants to make one or
more subsequent changes thereto, any subsequent change
shall be governed by and in accordance with the
provisions of Section 4.2, including the provision that
if the event which triggers the distribution occurs
within one (1) year of such change, that change shall be
totally null and void."
2. As hereinabove modified and amended, the Plan as amended
shall remain in full force and effect.
3. This Amendment is effective as of November 6, 2001.
IN WITNESS WHEREOF, the Corporation has caused this Amendment
to be executed by one of its duly authorized officers.
WITNESS KAMAN CORPORATION
/s/ Marie A. Okun /s/ Paul R. Kuhn
Its president and CEO
Page 2
EXHIBIT 10e
KAMAN CORPORATION
CASH BONUS PLAN
(Amended and Restated Effective as of January 1, 2002)
1. Plan Name, Objective and Administration.
a. Plan Name. The name of this Plan is the Kaman Corporation
Cash Bonus Plan (the "Bonus Plan"). This plan supersedes and
replaces that certain Cash Bonus Plan which was amended and
restated by the Board of Directors of Kaman Corporation (the
"Board") as of September 21, 1999, which was subsequently
amended by a First Amendment thereto.
b. Objective. The objective of the Bonus Plan is to provide
an incentive for certain employees of Kaman Corporation ("Kaman")
and its subsidiaries (each subsidiary being referred to as a
"Business Unit" and collectively with Kaman, the "Company") to
perform at levels beyond those ordinarily associated with
competent fulfillment of the roles and responsibilities of
their positions.
c. Administration. The Bonus Plan will be administered by a
committee (the "Plan Administrators") consisting of the Chief
Executive Officer, Chief Financial Officer, and Chief Legal
Officer.
2. Eligibility to Participate.
a. The employees eligible to participate ("Participant" or
collectively, "Participants") in the Bonus Plan for a
particular Award Year shall be determined annually and shall
be those persons designated as Key Management Personnel under
the Kaman Corporation Compensation Administration Plan.
3. Initial Target Bonus Opportunity.
a. Each year, the Plan Administrators assign a target bonus
opportunity percentage ("TBO") to each salary grade. A
Participant's Initial Target Bonus Opportunity is determined
by multiplying the applicable TBO times the Participant's base
annual salary.
4. Fund Determinations.
a. Initial Target Bonus Pool. The sum of the individual
Initial Target Bonus Opportunities determined under Section 3
will determine the Initial Target Bonus Pool.
Page 1
b. Modified Target Bonus Pool. The Initial Target Bonus
Pool shall be modified by the then estimated satisfaction of the
performance objectives described in Sections 6 and 7 hereof
for the Award Year. Kaman will budget an appropriate
estimated amount and accrue it over the course of the Award
Year. Following the conclusion of the Award Year, the
Modified Target Bonus Pool will be adjusted to reflect the
actual Performance Ratings of Kaman and the various Business
Units.
c. Maximum Target Bonus Pool. Subject to the provisions of
this Bonus Plan, the Maximum Target Bonus Pool shall not
exceed two times (200%) the Initial Target Bonus Pool.
d. Special Circumstances. The Board shall have the authority
and discretion to evaluate significant or extraordinary
circumstances affecting the business of Kaman and/or any Business
Unit during an Award Year and, if the Board deems it appropriate,
to (i) establish a maximum bonus fund which is greater than would
otherwise be authorized under the formula described in this Section
4; and (ii) use the fund to pay cash bonus awards to some or all of
the Participants as it determines.
5. Award Year.
a. Fiscal Year. The Award Year shall be, and shall coincide
with, Kaman's fiscal year, commencing January 1 of each year and
concluding on December 31 of each year.
b. Circumstances Affecting Participation. Should any
Participant have been employed for less than a full Award Year or
cease to be in the Company's service for any reason prior to the
end of the Award Year, neither the Participant nor, in the case of
death or incompetency, such individual's personal representatives,
heirs, executors, administrators or assigns shall be entitled to
any distribution of a cash bonus award for the Award Year except
and to such extent, if any, as the Plan Administrators and the
Personnel and Compensation Committee of the Board shall determine
to be fair and equitable.
6. Performance Objectives for Business Unit Participants.
a. Applicability. The provisions of this Section 6 shall
apply to Business Unit Participants, i.e. Participants who are
employed by a subsidiary of Kaman Corporation. Furthermore, the
provisions of Section 7 hereof shall not apply to Business Unit
Participants.
b. In General. The Modified Target Bonus Opportunity for
Business Unit Participants shall be calculated solely based upon
the performance of the Business Unit the Participant works for,
Page 2
using growth in operating profit ("OP Growth") of the Business
Unit, return on total capital ("ROI") of the Business Unit, and
such other factors as the Personnel and Compensation Committee may
determine to be applicable to the Business Unit, as the financial
performance goals. This Section 6 describes the approach to be
followed in determining the Modified Target Bonus Opportunity for
Business Unit Participants. Without limiting the authority
provided by Section 10(b), the Plan Administrators are authorized
to prescribe reasonable rules of operation and to resolve any
ambiguities or matters of interpretation, provided such rules and
interpretations are consistent with the approach provided herein.
Furthermore, the Personnel and Compensation Committee is authorized
to include or exclude special items in determining a Business
Unit's OP Growth and/or ROI performance, provided that the approach
taken is followed consistently from year to year.
c. OP Growth. The OP Growth for a Business Unit for the
Award Year will be calculated. The Personnel and Compensation
Committee shall determine the appropriate percentage weighting that
OP Growth should have, and shall determine the number of points
earned based upon whether the goal was achieved or exceeded and
based upon the percentage weighting assigned to OP Growth.
d. Return on Total Capital. The ROI for a Business Unit
shall be measured on a pre-tax operating profit basis. The target
ROI for a Business Unit shall be the moving average of the ROI for
the Business Unit for the prior three years, as determined by the
Personnel and Compensation Committee. Such three-year moving
averages shall be computed with reference to minimum and maximum
performance levels, as established by the Personnel and
Compensation Committee. The Personnel and Compensation Committee
shall determine the appropriate percentage weighting that ROI shall
have in total, and that the various comparison measurements of ROI
shall have. Such comparison measurements include comparing
budget versus target, actual performance versus budget, and actual
performance versus target. Points shall be earned based upon
whether goals are achieved or exceeded, and with reference to the
percentage weightings assigned. The number of points earned for
any level of ROI shall be determined by the Personnel and
Compensation Committee.
e. Other Factors. The Personnel and Compensation Committee
is authorized to utilize other factors in addition to OP Growth and
ROI as financial performance goals. Any goals established with
respect to such other factors will be given a percentage weighting
by the Personnel and Compensation Committee. Points shall be
Page 3
earned based upon whether such goal was achieved or exceeded, and
with reference to the percentage weighting assigned to the goal.
The number of points earned for achieving or exceeding any such
goal shall be determined by the Personnel and Compensation
Committee.
f. Conversion of Points to Target Award Earned. The total
points earned under paragraphs (c), (d) and (e) above shall convert
to the percent of Target Award Earned, as determined by the
Personnel and Compensation Committee. The percent of the Target
Award Earned for a Business Unit may range from 0% to 200%.
g. Computation of Modified Target Bonus Opportunity. The
percent of the Target Award Earned shall be multiplied by the
Participant's Initial Target Bonus Opportunity, and the result
shall equal the Participant's Modified Target Bonus Opportunity.
h. Initial Factor Weightings and Point Ranges. Attachment A
sets forth the factor weightings and point ranges established by
the Personnel and Compensation Committee for the 2002 Award Year.
Attachment A is subject to modification from time to time by the
Personnel and Compensation Committee as the Committee carries out
the provisions of this Section 6.
7. Performance Objectives for Corporate Participants.
a. Applicability. The provisions of this Section 7 shall
apply to Corporate Participants, i.e. Participants who are employed
by Kaman Corporation at its headquarters location. Furthermore,
the provisions of Section 6 hereof shall not apply to Corporate
Participants.
b. In General. The Modified Target Bonus Opportunity for
Corporate Participants shall be calculated solely based upon the
consolidated performance of the Company, using growth in earnings
per share ("EPS Growth") and return on total capital ("ROI") as the
financial performance goals. Financial performance is determined
by comparing the EPS Growth and ROI performance of the Company for
the applicable Award Year with comparable numbers for the Standard
& Poor's 600 and the Russell 2000 indices averaged over the prior 5
year period. For example, for Award Year 2002, the numbers for the
Company for EPS Growth and ROI will be compared to comparable
numbers for EPS Growth and ROI for the Standard and Poor's 600 and
the Russell 2000 indices averaged for 1997 - 2001. This Section 7
describes the approach to be followed in determining the Modified
Target Bonus Opportunity for Corporate Participants. Without
limiting the authority provided by Section 10(b), the Plan
Page 4
Administrators are authorized to prescribe reasonable rules of
operation and to resolve any ambiguities or matters of
interpretation, provided such rules and interpretations are
consistent with the approach provided herein. Furthermore, the
Personnel and Compensation Committee is authorized to include or
exclude special items in determining the Company's EPS Growth
and/or ROI performance, provided that the approach taken is
followed consistently from year to year.
c. EPS Growth. The EPS Growth for the Company for the Award
Year will be calculated. Calculations of average EPS Growth for
the S&P 600 and the Russell 2000 for the prior five (5) years shall
also be made, and shall be averaged together, giving equal weight
to both indices. Percentile rankings shall be developed. The
Personnel and Compensation Committee shall establish percentages of
initial target bonus opportunity earned for EPS Growth
corresponding to the various percentile rankings. The percent of
the Initial Target Bonus Opportunity earned for EPS Growth for an
Award Year shall be determined by the Plan Administrators based
upon the percentile ranking of the Company.
d. Return on Total Capital. The ROI for the Company for the
Award Year will be calculated. Calculations of average ROI for the
S&P 600 and the Russell 2000 for the prior five (5) years shall
also be made, and shall be averaged together, giving equal weight
to both indices. Percentile rankings shall be developed. The
Personnel and Compensation Committee shall establish percentages of
initial target bonus opportunity earned for ROI corresponding to
the various percentile rankings. The percent of the Initial Target
Bonus Opportunity earned for ROI for an Award Year shall be
determined by the Plan Administrators based upon the percentile
ranking of the Company.
e. Percentile Calculations. The percentile ranking of the
Company must be at least 25th for EPS Growth in order to generate a
percentage of initial target bonus opportunity earned for EPS
Growth. The percentile ranking of the Company must be at least
25th for ROI in order to generate a percentage of initial target
bonus opportunity earned for ROI. If the Company is in at least
the 75th percentile for either category (EPS Growth or ROI), it
will generate the maximum award with respect to that category. The
Personnel and Compensation Committee may, but shall not be required
to, extend the maximum award earned for either EPS Growth or ROI,
from 100% to a larger percentage. In making calculations and
determinations hereunder, in no event will the 25th percentile for
EPS Growth or ROI for either the S&P 600 5 year average or the
Russell 2000 5 year average be considered to be less than zero.
Page 5
f. Computation of Modified Target Bonus Opportunity. The
percentages of Initial Target Bonus Opportunity earned for EPS
Growth and ROI, determined in accordance with the foregoing, shall
be added together. This combined percentage may be greater than
100%. This combined percentage, when multiplied by a Corporate
Participant's Initial Target Bonus Opportunity, shall equal the
Corporate Participant's Modified Target Bonus Opportunity.
8. Participant Actual Cash Bonus Award Determinations.
a. The Modified Target Bonus Opportunity for each Participant
shall be further modified, positively or negatively, to reflect the
individual's performance. The Plan Administrators will evaluate
each Participant's individual performance in consultation with his
or her supervisory management and based thereon, shall make
recommendations to the Personnel and Compensation Committee of the
Board for Actual Cash Bonus Awards, which will approve or
disapprove the recommendations based upon its review thereof. The
Personnel and Compensation Committee will evaluate the performance
of the Plan Administrators and based thereon shall determine the
Actual Cash Bonus Awards for those individuals. Final approval of
all Actual Cash Bonus Awards shall be made by the Board.
9. Form, Method, and Timing of Payments.
a. All bonus awards are to be paid in cash (i.e., payroll
check) no later than March 15 next following the end of the
applicable Award Year.
10. General.
a. Amendment, Suspension or Termination. On the
recommendation of the Plan Administrators and the Personnel and
Compensation Committee of the Board, the Board may amend, suspend,
or terminate the Bonus Plan, or any part thereof, at any time,
provided however, that no amendment, suspension or termination
shall apply to the payment to any Participant of an award made
prior to the effective date of such amendment, suspension or
termination.
b. Administration; Interpretation. The Plan Administrators
shall be responsible for the interpretation and administration of
the Bonus Plan, provided that the determination of the Personnel
and Compensation Committee of the Board on any question concerning
the interpretation or administration of the Bonus Plan, or with
respect to the officers and employees participating or entitled to
participate in the Bonus Plan, or as to any payment made or to be
made pursuant thereto, shall be final and conclusive.
Page 6
c. No Rights to Employment. The Bonus Plan does not confer
upon any employee any right to payment of a cash bonus or any right
to continued employment with Kaman or any Business Unit, nor does
it interfere in any way with the right of Kaman or a Business Unit
to terminate, or amend the terms of, the employment of any of its
employees, at any time, in accordance with the "at will" employment
relationship.
11. Effective Date.
The Effective Date of this Amendment and Restatement is
January 1, 2002. This Amendment and Restatement shall apply to
Award Years beginning on or after January 1, 2002.
IN WITNESS WHEREOF, Kaman Corporation hereby executes this
Amendment and Restatement as of the 6th day of November, 2001.
ATTEST: KAMAN CORPORATION
/s/Candace A. Clark /s/ Robert M. Garneau
Secretary Its Executive Vice President
& CFO
Page 7
ATTACHMENT A
FACTOR WEIGHTING AND POINT RANGE
Minimum Target Maximum
--------------- --------------- ---------------
Points Per- Points Per- Points
Weight- Perform- Earned form- Earned form- Earned
Factor Measurement ing ance ance ance
- ------ ----------- ------ -------- ------ ----- ------ ----- ------
Budget % of budget 20% 50% Budget 0 100% 20 125% 40
vs vs target vs Target Budget Budget
Target- vs vs
ROI Target Target
Perform- % of actual 20% 50% Perf. 0 100% 20 125% 40
ance ROI vs. vs Budget Perf. Perf.
vs budgeted vs vs
Budget- ROI Budget Budget
ROI
Perform- Actual 40% 50% Perf. 0 100% 40 125% 80
ance ROI - vs Target Perf. Perf.
vs for example vs vs
Target- KIT Target Target
ROI
Growth % growth 20% 0% Profit 0 8% 20 12% 40
in in oper. Growth Profit Profit
Earnings- profit Growth Growth
Operating
Profit
Other Other 20% 0 20 20
Range of points based on % accomplishment of goal (0-200%)
Page 8
Conversion Chart Example
------------------------
Total Points Percent of Target
Earned Award Earned
------------ -----------------
Below 50 0
50 20
60 30
70 45
80 60
90 80
100 100
--- ---
110 120
120 140
130 160
140 180
150 & above 200
Page 9
FIRST AMENDMENT TO
KAMAN CORPORATION
CASH BONUS PLAN
(Amended and Restated as of January 1, 2002)
The Kaman Corporation Cash Bonus Plan is hereby amended by a
First Amendment. The Effective Date of this Amendment is
February 12, 2002.
1. Paragraph c of Section 1 is amended by deletion of the
words "Chief Legal Officer" and substitution of the phrase "Vice
President - Human Resources of Kaman."
2. Except as modified and amended by this document, the Kaman
Corporation Cash Bonus Plan shall remain in full force and effect.
IN WITNESS WHEREOF, Kaman Corporation hereby executes this Amendment as
of the 12th day of February, 2002.
ATTEST: KAMAN CORPORATION
/s/ Candace A. Clark /s/ Robert M. Garneau
Secretary Its Executive Vice President & CFO
Page 10
EXHIBIT 10(f)(I)
CONSULTANT'S AGREEMENT
THIS AGREEMENT, effective this 1st day of March 2002 by and
between Kaman Aerospace Corporation, a corporation organized and
existing under the laws of the State of Delaware and having its
office and principal place of business in Bloomfield,
Connecticut (hereinafter called "Kaman"), and Admiral Huntington
Hardisty, U.S. Navy (Retired) of 45 Bloomfield Avenue, Hartford,
Connecticut 06105, Social Security Number ###-##-#### (hereinafter
called "Consultant").
WITNESSETH:
WHEREAS, Kaman's business relates to aerospace products and
technology; and
WHEREAS, Consultant has special qualifications in the areas of
aerospace management, strategic planning, contracting and marketing
activities, and related disciplines; and
WHEREAS, the parties hereto have agreed to utilize Admiral
Hardisty's services as Consultant to the President to advise and
consult in connection with Kaman's business in such fields upon
conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the premises, the parties
hereto mutually agree as follows:
1. Consultant shall furnish to Kaman during the term of this
Agreement such services commensurate with his knowledge and
experience as Kaman from time to time may reasonably require. The
term of this Agreement shall be for a period of one (1) year
commencing on the effective date of this Agreement and expiring 28
February 2003.
2. Consultant's services shall be performed at such locations
as Kaman may reasonably request to participate in management
briefings, strategic planning sessions, or other consultations as
required. All services to be performed under this Agreement will be
specifically directed by Kaman's President or his designee.
3. For his services, the Consultant shall be paid at the per
diem rate of One Thousand Dollars ($1,000.00) for each day of
service required by Kaman and performed by Consultant. Kaman will
Page 1
guarantee payment to Consultant for a minimum of sixty (60) days
per year during the term of this Agreement. Consultant will be paid
on a payment schedule of Five Thousand Dollars ($5,000.00) per
month through the term of this Agreement to support the minimum
annual guarantee of Sixty Thousand Dollars ($60,000.00) (equivalent
of sixty (60) days of service per year). In the event that the
Consultant provides services in excess of the minimum annual
guarantee of sixty (60) days, Kaman will pay Consultant his per
diem rate. Payments shall be made monthly at the end of each month
during the term of this Agreement.
4. Consultant shall be reimbursed by Kaman for Consultant's
out-of-pocket business expenses incurred in rendering his services,
provided such expenses are directly incident to the performance of
his services under this Agreement and that such expenses have been
approved in advance by Kaman's designated representative. Such
expenses shall include airlines fare, hotel bills, entertainment
expenses, and other reasonable and proper expenses incurred in
performing consulting work for Kaman. Consultant agrees to provide
receipts for said expenses.
5. Consultant shall keep such time records as Kaman may
reasonably require. Kaman shall provide Consultant with Internal
Revenue Service Form 1099 "U.S. Information Return" annually within
the time provided by law for any calendar year coming within the
term of this Agreement. Consultant agrees that he is obligated to
pay all appropriate federal, state and local income taxes and sales
or other taxes relating to this Agreement and to comply with all
federal, state and local laws regarding same and further agrees to
indemnify and hold Kaman harmless from any and all liability which
may result from Consultant's failure to do so or from Kaman's not
withholding amounts for sales or income tax or FICA. It is
expressly agreed by and between Consultant and Kaman that the
applicable Consultant's fee shall be the total compensation due
Consultant and Consultant is not eligible for any Kaman benefits
including but not limited to insurance programs, workers
compensation benefits, medical benefits, vacation pay and personal
time. It is understood and agreed that Consultant shall maintain
his own insurance coverage, as appropriate, to cover medical,
automobile and general liability (and workers compensation, if
applicable) in generally acceptable amounts and Consultant shall
provide Kaman with certificate or certificates evidencing such
coverage at Kaman's request.
Page 2
6. Consultant shall use his best efforts to perform
successfully the tasks assigned to him by Kaman and shall not,
without the prior written consent of Kaman, directly or indirectly,
divulge information concerning or touching upon the work performed
by him for Kaman. It understood that disclosure of information
relating to work under Government contracts of a restricted nature
to any person not entitled to receive the same, or failure to
safeguard all classified matter which may come to the knowledge of
Consultant in connection with such work, may subject Consultant to
criminal liability under the laws of the United States.
7. Consultant represents that there are no agreements or
understandings between Consultant and any other person, partnership
or corporation which prohibits the execution of the Agreement or
the performance of the obligations hereunder.
8. Consultant may terminate this Agreement with or without
cause at any time. In any event, Consultant agrees to provide at
least thirty (30) days prior written notice of his intent to
terminate this Agreement, if such termination is to be earlier than
28 February 2003. It is expressly agreed that upon termination of
this Agreement, all rights and obligations of the parties hereunder
shall cease and terminate except for: 1) the payment of
Consultant's fees and reimbursements of business expenses arising
hereunder prior to the effective date of such termination, and 2)
the obligation of confidentiality set forth in paragraph 6 above.
9. The parties intend and agree that Consultant is
acting and will act as an independent contractor and not as an
employee of Kaman in performance of his services under this
Agreement. During the term of this Agreement, Consultant shall
not in any manner be engaged in or concerned with any business
competitive with any business related to the consulting activities
performed hereunder.
10. This Agreement shall be interpreted under the laws of the
State of Connecticut. Any controversy or claim arising out of or
relating to this Agreement, or breach hereof shall be settled by
arbitration to be held at Hartford, Connecticut in accordance with
the rules of the American Arbitration Association and judgment upon
the award rendered thereunder by the arbitrator(s) may be entered
in any court having jurisdiction thereof.
Page 3
11. This Agreement constitutes the entire agreement of the
parties and shall be binding on or inure to the benefit of the
parties hereto. It is understood and agreed that this Agreement is
personal to the Consultant and cannot be assigned or otherwise
alienated in any manner.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement in duplicate the day and year first above written.
KAMAN AEROSPACE CORPORATION
Richard Forsberg
Witness By Joseph H. Lubenstein
Its President
February 4, 2002 February 4, 2002
Date Date
ADMIRAL HUNTINGTON HARDISTY
U.S. NAVY (RETIRED)
Janet Whitehead
Witness By Huntington Hardisty
Consultant
January 25, 2002 January 25, 2002
Date Date
Page 4
EXHIBIT 11
KAMAN CORPORATION AND SUBSIDIARIES
EARNINGS PER COMMON SHARE COMPUTATION
The computations and information required to be furnished in this Exhibit
appear in the Corporation's Annual Report to Shareholders, which is filed
herein as Exhibit 13 to this report, and is incorporated herein by
reference.
FIVE-YEAR SELECTED FINANCIAL DATA
Kaman Corporation and Subsidiaries
(In thousands except per share amounts, shareholders and employees)
2001 2000 1999 1998 1997
- ---------------------------------------------------------------------------
OPERATIONS:
Revenues $ 876,945 $1,032,326 $ 997,177 $1,018,589 $1,056,289
Cost of sales 673,782 774,264 751,291 756,057 801,088
Selling, general and
administrative
expense 188,752 202,319 201,807 210,969 207,120
Restructuring costs -- (1,680) 4,132 -- --
Operating income 14,411 57,423 39,947 51,563 48,081
Net gain on sale of
businesses -- -- -- -- 80,351
Interest expense
(income), net 623 (1,660) (1,614) (353) 7,894
Other expense
(income), net (1,876) 1,363 1,088 1,558 234
Earnings before
income taxes 15,664 57,720 40,473 50,358 120,304
Income taxes 3,950 20,800 15,400 20,350 49,800
Net earnings 11,714 36,920 25,073 30,008 70,504
FINANCIAL POSITION:
Current assets $ 442,651 $ 482,000 $ 460,111 $ 516,504 $ 535,304
Current liabilities 141,260 173,342 168,374 228,975 259,525
Working capital 301,391 308,658 291,737 287,529 275,779
Property, plant and
equipment, net 60,769 63,705 64,332 65,773 57,625
Total assets 521,946 553,830 534,203 587,230 598,161
Long-term debt 23,226 24,886 26,546 28,206 29,867
Shareholders' equity 333,581 332,046 316,377 309,494 290,010
PER SHARE AMOUNTS:
Net earnings per
common share - basic $ .52 $ 1.61 $ 1.07 $ 1.28 $ 3.53
Net earnings per
common share - diluted .52 1.57 1.05 1.23 2.86
Dividends declared -
Series 2 preferred stock -- -- -- -- 13.00
Dividends declared -
common stock .44 .44 .44 .44 .44
Shareholders' equity -
common stock 14.97 14.92 13.68 13.07 12.25
Market price range 19.50 17.75 16.13 20.38 20.38
10.90 8.77 10.06 13.00 12.00
Page 1
FIVE-YEAR SELECTED FINANCIAL DATA
Kaman Corporation and Subsidiaries
(In thousands except per share amounts, shareholders and employees)
AVERAGE COMMON SHARES OUTSTANDING:
Basic 22,364 22,936 23,468 23,407 18,941
Diluted 23,649 24,168 24,810 25,235 25,108
GENERAL STATISTICS:
Registered shareholders 5,869 6,136 6,522 6,921 7,291
Employees 3,780 3,825 4,016 4,276 4,318
=============================================================================
Page 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Kaman Corporation and Subsidiaries
RESULTS OF OPERATIONS
Consolidated revenues were $876.9 million for 2001, compared to
approximately $1.0 billion for 2000 and 1999. Results for 2001 were
adversely impacted by a second quarter sales and pre-tax earnings
adjustment of $31.2 million attributable to the Aerospace segment
and the phase-down of the Australia and New Zealand SH-2G
helicopter programs, as well as a yearlong national economic
decline that affected each of the corporation's business segments,
but particularly the Industrial Distribution segment.
Substantially all of the Aerospace segment adjustment is
associated with a change in estimated costs to complete the
SH-2G(A) helicopter program for Australia. This adjustment has had
the effect of lowering the profit rate on the Australia program.
The cost growth is related to a contract dispute settlement with
Litton Guidance and Control Systems (now part of Northrop Grumman)
regarding development of an advanced Integrated Tactical Avionics
System (ITAS) that is unique to this particular contract. The
corporation has replaced Litton with two subcontractors for the
balance of the ITAS software development work.
For 2000, all segments had increased revenues. In the
Aerospace segment, helicopter programs and the aerostructure and
helicopter subcontracting businesses were significant revenue
contributors. The Industrial Distribution segment benefited from
healthy market conditions and internal efficiency initiatives and
Music Distribution segment results reflected improvement in
domestic markets and some increase in demand internationally.
Results for 1999 reflected the Aerospace segment's ongoing
performance of Australia and New Zealand SH-2G contracts,
offset by lower revenues in the K-MAX helicopter program and
in the aerostructure and helicopter subcontracting businesses.
Aerospace segment net sales decreased 21.0% in 2001
compared to an increase of 2.7% in 2000 and a decrease of 2.9% in
1999. The decrease in 2001 is due to the sales and pre-tax
earnings adjustment described above, the tapering off of
revenues from the SH-2G program as the Australia and New
Zealand programs mature, and lower K-MAX program sales.
Page 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Kaman Corporation and Subsidiaries
The Aerospace segment's programs include the SH-2G
multi-mission maritime helicopter and the K-MAX medium-to-heavy
external lift helicopter, along with spare parts and support
(which together currently constitute about 40% of segment sales),
aerostructure and helicopter subcontract work as well as
manufacture of components such as self-lubricating bearings and
driveline couplings for aircraft applications (currently about 40%
of segment sales) and advanced technology products (currently
about 20% of segment sales).
The SH-2G helicopter represents virtually all of the
segment's helicopter program sales and generally consists of
retrofit of the corporation's SH-2F helicopters to the SH-2G
configuration or refurbishment of existing SH-2G
helicopters. The SH-2, including its F and G configurations, was
originally manufactured for the U.S. Navy. The SH-2G aircraft is
currently operational with the Egyptian Air Force and the
corporation is performing retrofit work under
commercial contracts with the governments of Australia and
New Zealand.
The program for New Zealand involves five (5) aircraft,
and support, for the Royal New Zealand Navy. The contract has an
anticipated value of about $186 million (US), of which about 94%
has now been recorded as revenue. The corporation has delivered
three SH-2G(NZ) helicopters, two of which have been provisionally
accepted, and a fourth will be shipped pending completion of
testing at the corporation's facilities in Bloomfield, CT, with
final acceptance of all four aircraft expected to follow
thereafter. The fifth aircraft, which represents the exercise of
an option under the contract, is currently scheduled for delivery
before the end of 2002.
The program for Australia involves eleven (11)
helicopters with support, including a support services facility,
for the Royal Australian Navy. The total contract has an
anticipated value of about $700 million (US). The helicopter
production portion of the work is valued at $580 million, of which
about 85% has now been recorded as revenue. Six aircraft are
currently in-country; two are operational and the others are in
the final stages of assembly. These aircraft were shipped without
the full ITAS software.
Page 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Kaman Corporation and Subsidiaries
One result of the process of negotiating new subcontracts for
production of the full ITAS software has been that Kaman will have
responsibility for aircraft integration testing (a task previously
subcontracted to Litton). This new responsibility along with the
estimated time frame for the subcontractors' development of the
full ITAS software suggests that there will be a longer
delay than previously anticipated in delivery of the full ITAS
software to Australia. The corporation is working with the Royal
Australian Navy to develop a process that will allow for phased
acceptance and delivery of the aircraft without the full ITAS,
and subsequent installation of the full software. When so
equipped, the SH-2G(A) helicopter will have the most
sophisticated, integrated cockpit and weapons system available
in an intermediate weight helicopter.
The corporation is actively pursuing opportunities for
the SH-2G helicopter in the international defense market,
enhancing familiarization with the SH-2G's capabilities among
various governments around the world. The corporation is
currently in discussions with the Egyptian government concerning
a requirement for six search and rescue helicopters and with the
United States government about a program for refurbishment of four
existing SH-2G aircraft for the Polish Navy, along with future
training and support. Management believes that the aircraft is in
a good competitive position to meet the specialized needs of navies
around the world that operate smaller ships for which the SH-2G is
ideally sized, while also recognizing that this market is highly
competitive and influenced by economic and political conditions.
The corporation also maintains a consignment of the U.S.
Navy's inventory of SH-2 spare parts under a multi-year agreement
that provides the ability to utilize certain inventory for support
of the corporation's other SH-2 programs.
The K-MAX helicopter program, which began in 1994 and for
which the corporation maintains a substantial inventory, has
experienced significant market difficulties in the past several
years, due partly to conditions in the commercial logging industry,
the aircraft's principal application to date. While the corporation
continues to pursue a strategy of refocusing K-MAX sales
development on global market opportunities in industry and
government, those efforts have met with limited success. There
were no sales of the K-MAX helicopter during 2001, other than
three aircraft that were part of the five aircraft order received
from the U.S. State Department in late 2000. Management is in the
process of evaluating the amount of time and further investment
that could be required to achieve successful sales development and
profitability for the program.
Page 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Kaman Corporation and Subsidiaries
The Aerospace segment also performs aerostructure and
helicopter subcontract work for a variety of aerospace
manufacturing programs. Aerostructure subcontract work
focuses on commercial and military aircraft programs, including
wing structures and components for commercial airliners, major
structural assemblies for military transports, aircraft thrust
reversers, business jet subassembly components; and the
manufacture of proprietary self-lubricating bearings for use in
aircraft flight controls, turbine engines and landing gear, as well
as driveline couplings for helicopters. Helicopter subcontract work
includes helicopter airframes, composite rotor blades, and
component work. Current aerostructure and helicopter subcontract
programs include production of wing structures and various
components for virtually all Boeing commercial aircraft, fuselages
and rotor blades for MD Helicopters, and components for military
aircraft such as the C-17 military transport, the F-22 fighter and
the Comanche helicopter. As Boeing is the largest customer of the
segment's subcontract business, management is monitoring the drop
off in commercial aircraft orders and the impact this may have on
production in the next two years.
In December 2001 the corporation acquired Plastic
Fabricating Company, Inc., a Wichita, Kansas manufacturer of
composite parts and assemblies for aerospace applications. This
acquisition provides the segment with a presence in one of the
largest aerospace manufacturing areas in the United States and
complements its existing composites and metal bonding operations.
The Aerospace segment also produces advanced technology
products, including safe, arm and fuzing devices for several
missile programs; high reliability memory systems for airborne,
shipboard, and ground-based programs; precision non-contact
measuring systems for industrial and scientific use; high-
performance microwave cable assemblies for aircraft electronic
warfare devices and other applications; and high-power permanent
magnet motors used commercially in the oil service and
transportation industries and for military uses.
In late 2001, Kaman Aerospace Corporation, the subsidiary
that accounted for 80% of Aerospace segment net sales in 2001,
undertook a realignment of its product line management structure in
an effort to increase market development of its core capabilities
while improving efficiency, enhancing customer service and reducing
costs.
Page 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Kaman Corporation and Subsidiaries
The Aerospace segment also continues implementation of
`Lean-Thinking' strategies throughout the organization in order to
further enhance efficiency and reduce costs.
Industrial Distribution segment net sales decreased 12.9%
in 2001, compared to an increase of 3.1% in 2000 and a decrease of
1.8% in 1999. Results for 2001 are consistent with the effect of
the manufacturing recession on the industrial distribution
industry. Since the segment's customers include nearly every sector
of U.S. industry, this business is influenced by industrial
production levels and was adversely affected in 2001 by a weakened
manufacturing sector that brought the industrial production index
(the key economic indicator for this business) down to levels not
seen since the early 1980s. The segment was also impacted by
specific events affecting particular customer industries,
such as the effect the energy crisis in the West had on the
aluminum industry. The corporation had taken steps to implement
workforce adjustments and control costs in late 2000 and as
economic conditions worsened in 2001, the corporation
implemented further reductions and efficiencies. These efforts,
along with good results with business retention efforts and certain
new national account awards helped the segment to remain profitable
despite lower sales.
At the end of the third quarter of 2001, the Industrial
Distribution segment acquired the industrial distribution business
of A-C Supply, Inc. of Milwaukee, Wisconsin. This acquisition
strengthens the segment's presence in key industrial markets in the
upper Midwest, where it has had limited presence, and will
facilitate service to national account customers with operating
plants in that region. This acquisition also represents an
incremental step in the corporation's overall strategy of building
the value of its businesses through acquisitions and internal
growth.
During 2001, the segment continued to develop the
e-business infrastructure that it began in 2000 with
implementation of its Internet e-business site. This site contains
a complete catalog of product offerings (with more than one million
industrial products) and provides an important new channel for both
current and new customers to transact business with the segment.
Page 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Kaman Corporation and Subsidiaries
Music Distribution segment net sales decreased 6.2% in
2001 compared to an increase of 8.6% in 2000 and a decrease of 1.4%
in 1999. Results for 2001 were affected by weakened consumer
markets both domestically and abroad; although a better than
expected Christmas season helped to mitigate some of the
year's sales shortfall.
In 2001, the segment continued its focus on `Lean-
Thinking' strategies and was able to enhance operating efficiencies
and improve customer service as a result. The segment completed the
consolidation of two warehouses into one state-of-the-art facility
and also implemented an electronic data exchange program that
allows the sharing of data and information directly with customers.
In 2001, the segment also completed the first year of its
exclusive distribution and sales license with Fred Gretsch
Enterprises, successfully launching its high quality Gretsch drum
kit lines in domestic and foreign markets.
The corporation's segments, in total, had operating
profits of $26.3 million for 2001 compared to $74.6 million for
2000. These results reflect the $31.2 million sales and pre-tax
earnings adjustment in the Aerospace segment (described previously)
as well as lower revenues in the Australia and New Zealand SH-2G
helicopter programs which are now in their later phases, and lower
sales in the Industrial Distribution segment due to economic
conditions. Excluding the Aerospace segment adjustment, operating
profits for all the corporation's segments would have been $57.5
million for 2001. Results for 2000 reflect good earnings
performance on the part of each business segment. Total
operating profits for all the corporation's business segments in
1999 were $52.6 million.
Operating profits for the Aerospace segment were $6.5
million in 2001, a decrease from $44.2 million the prior year,
reflecting the sales and pre-tax earnings adjustment in the
Aerospace segment and lower revenues in the Australia and New
Zealand SH-2G helicopter programs as previously described.
Operating profits for the Industrial Distribution segment were
$13.2 million in 2001 compared to $22.9 million the previous year.
Operating profits for 2000 in the Industrial Distribution segment
included the addition of $1.7 million in the fourth quarter which
was the unused portion of a $12.4 million pre-tax charge taken in
1999. Operating profits for the Music Distribution segment were
$6.6 million in 2001, compared to $7.4 million the previous year.
Page 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Kaman Corporation and Subsidiaries
Operating profits for the Aerospace segment in 2000 were
$44.2 million compared to $44.0 million for 1999, the SH-2G
helicopter programs and aircraft structures and components business
being the primary contributors. This performance was offset by a
loss in the K-MAX program which continues to require investment for
technical work and market development. Also included in operating
profits for 1999 was a reversal of a reserve in the amount of $2.5
million that was associated with the Raymond Engineering (now part
of Kaman Aerospace) operation. Operating profits for the Industrial
Distribution segment in 2000 were $22.9 million compared to $2.9
million in 1999, due to healthy market conditions during most of
the year and internal initiatives undertaken early in the year to
improve efficiency and service to customers. The 1999 performance
reflects market weakness in several important customer industries
and a $12.4 million pre-tax charge taken in the fourth quarter of
that year as a result of a reorganization of operations, including
a closure of certain facilities and the write-off of excess
inventory. Of the charge, $1.7 million was unused and added back to
operating profits for 2000. Operating profits for the Music
Distribution segment in 2000 were $7.4 million compared to $5.6
million in 1999, due to improvements in domestic and international
markets and increased efficiency.
Net earnings for 2001 were $11.7 million compared to $36.9
million for 2000 and $25.1 million in 1999. Net earnings per share
for 2001 were $0.52 per diluted share compared to $1.57 per diluted
share in 2000. Results for 2001 include pre-tax gains of $2.7
million from the sale of two facilities in the first half of the
year and an effective tax rate of about 25%, which includes
reduced tax considerations for the Australia SH-2G program. Net
earnings for 2001 were adversely affected by the adjustment taken
in the Aerospace segment and the phase down of the Australia and
New Zealand SH-2G contracts as well as by economic conditions.
Excluding the sales and pre-tax earnings adjustment, along with
reduced tax considerations related to the Australian SH-2G program,
net earnings for 2001 were $30.5 million, or $1.33 per diluted
share.
Net earnings for 2000 were $36.9 million compared to $25.1
million in 1999. Net earnings per share were $1.57 per diluted
share in 2000 compared to $1.05 per diluted share in 1999. Net
earnings for 2000 were affected positively by the add-back of $1.7
million of the 1999 charge in the Industrial Distribution segment
that was unused. Net earnings for 1999 were affected positively by
the reversal of a $2.5 million reserve in the Aerospace segment and
negatively by the $12.4 million charge in the Industrial
Distribution segment, both of which are described above.
Page 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Kaman Corporation and Subsidiaries
For the year ended December 31, 2001, interest expense
exceeded interest income from the investment of surplus cash, as
interest expense decreased 7.2% while interest income decreased
60.8%. For the years ended December 31, 2000 and December 31, 1999,
interest income earned from investment of surplus cash more than
offset interest expense.
The consolidated effective income tax rate was 25.2% for
2001, 36.0% for 2000, and 38.1% for 1999. The rate for 2001 is due
to the reversal of prior years' tax accruals as a result of the
corporation's ongoing assessment of its open tax years and includes
reduced tax considerations for the Australia SH-2G program.
Effective July 1, 2001 and January 1, 2002, the Financial
Accounting Standards Board ("FASB") issued Statements of Financial
Accounting Standards No. 141, "Business Combinations" ("SFAS 141")
and No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"),
respectively. SFAS 141 requires all business combinations initiated
after June 30, 2001 to use the purchase method of accounting. SFAS
142 discontinues the amortization of goodwill, including goodwill
recorded in past business combinations, upon adoption of this
standard. All goodwill and intangible assets with indefinite useful
lives will be evaluated on an ongoing basis for impairment in
accordance with the provisions of SFAS 142. The corporation has
adopted these statements in accordance with their terms and that
adoption did not have a material impact on the corporation's
consolidated results of operations or financial position.
During 2001, the FASB also issued Statement of Financial
Accounting Standards No. 143, "Accounting for Obligations
Associated with the Retirement of Long-Lived Assets" ("SFAS 143"),
and Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144"). SFAS 143 establishes accounting standards for the
recognition and measurement of an asset retirement obligation and
its associated asset retirement cost. It also provides accounting
guidance for legal obligations associated with the retirement of
tangible long-lived assets. SFAS 143 is effective in fiscal years
beginning after June 15, 2002. The corporation expects that the
provisions of SFAS 143 will not have a material impact on its
consolidated results of operations or financial position upon
adoption. SFAS 144 establishes a single accounting model for the
impairment or disposal of long-lived assets, including discontinued
operations. SFAS 144 is effective in fiscal years beginning after
Page 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Kaman Corporation and Subsidiaries
December 15, 2001, and in general is to be applied prospectively.
The corporation will adopt SFAS 144 effective January 1, 2002 and
that adoption is not expected to have a material impact on its
consolidated results of operations or financial position.
LIQUIDITY AND CAPITAL RESOURCES
On an annual basis, 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 calendar year 2001, operating activities provided cash
in the amount of $20.1 million. These results were due primarily to
net reductions in accounts receivable in the Aerospace and
Industrial Distribution segments, including the $31.2 million sales
and pre-tax earnings adjustment in the Aerospace segment, and
reductions in inventories in the distribution segments. This was
offset by decreases in accounts payable in the Aerospace and Music
Distribution segments, and accrued expenses and payables throughout
each of the segments and by a reduction in advances on contracts in
the Aerospace segment. Other items include a reduction in income
taxes payable as well as an increase in other current assets, which
relate primarily to the tax benefits associated with the adjustment
and a net pension income item, respectively. During the year 2001,
cash was used in investing activities for the A-C Supply asset
acquisition, the H.I.G. Aerospace Group, Inc. (Plastic Fabricating
Company, Inc.) stock acquisition, and for the purchase of items
such as machinery and computer equipment, which usage was offset
somewhat by proceeds from the sale of assets. Cash used by
financing activities was primarily attributable to the payment of
dividends to common shareholders, and to a lesser degree the
sinking fund requirement for the corporation's debentures
(described below) and repurchase of the corporation's Class A
common stock pursuant to a repurchase program for use in
administration of the corporation's stock plans and general
corporate purposes.
The corporation had $30.8 million in surplus cash at
December 31, 2001 with an average balance of $34.0 million for the
year. These funds have been invested in high quality, short-term
instruments.
Page 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Kaman Corporation and Subsidiaries
For calendar year 2000, operating activities provided cash
in the amount of $8.4 million. Such activities were significantly
impacted by increases in accounts receivable for the Aerospace
segment's SH-2G helicopter programs. Increases in accounts payable
in the Aerospace and Music Distribution businesses offset this
impact to some degree. For the year, cash used in investing
activities was for items such as acquisition of machinery and
computer equipment used in manufacturing and distribution. Cash
used in financing activities was primarily attributable to the
payment of dividends to common shareholders, repurchase of Class A
common stock pursuant to the repurchase program noted above, and
the sinking fund requirement for the corporation's debentures
(described below).
For calendar year 1999, operating activities provided cash
in the amount of $42.5 million. In the Aerospace segment this was
primarily a result of earnings from operations together with the
receipt of additional payments on accounts receivable, offset to
some extent by growth in K-MAX inventories, payments on accounts
payable, and ongoing reductions in the advances on the SH-2G
contracts. In the Industrial Distribution segment, this result
largely reflected reductions in inventories. For 1999, cash used in
investing activities was primarily for the acquisition of machinery
and computer equipment used in manufacturing and distribution. Cash
used by financing activities was primarily attributable to the
payment of dividends to common shareholders and repurchase of Class
A common stock pursuant to a repurchase program for use in
administration of the corporation's stock plans and general
corporate purposes and the sinking fund requirement for the
corporation's debentures (described below).
At December 31, 2001, the corporation had $24.9 million of
its 6% convertible subordinated debentures outstanding. The
debentures are convertible into shares of Class A common stock at
any time on or before March 15, 2012 at a conversion price of
$23.36 per share, generally at the option of the holder.
Pursuant to a sinking fund requirement that began March 15, 1997,
the corporation redeems approximately $1.7 million of the
outstanding principal of the debentures each year.
In November, 2000, the corporation's board of directors
approved a replenishment of the corporation's stock repurchase
program, providing for repurchase of an aggregate of 1.4 million
Class A common shares for use in administration of the
corporation's stock plans and for general corporate purposes. A
total of almost 212,000 shares were repurchased during 2001.
Page 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Kaman Corporation and Subsidiaries
The corporation maintains a revolving credit agreement
involving a group of financial institutions. The agreement has a
maximum unsecured line of credit of $225 million which consists of
a $150 million commitment for 5 years and a $75 million commitment
under a "364 day" arrangement which is renewable annually for an
additional 364 days. The $75 million commitment was so renewed
in November, 2001. The most restrictive of the covenants contained
in the agreement requires the corporation to have EBITDA, as
defined, at least equal to 300% of net interest expense and a ratio
of consolidated total indebtedness to total capitalization of not
more than 55%.
Letters of credit are generally considered borrowings for
purposes of the revolving credit agreement. A total of $51.6
million in letters of credit are currently outstanding under the
agreement, most of which is related to the Australia and New
Zealand SH-2G programs. Reductions to the Australia and New
Zealand letters of credit are anticipated as agreed upon
performance milestones are reached and as the corporation and the
Australian government agree upon a phased acceptance and delivery
schedule for the SH-2G(A) aircraft.
For 2001, average bank borrowings were $2.5 million,
compared to $2.3 million for 2000, and $3.3 million for 1999.
Management believes that the corporation's cash flow from
operations and available unused bank lines of credit under its
revolving credit agreement will be sufficient to finance its
working capital and other recurring capital requirements for the
foreseeable future.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking information relating to the
corporation's business and prospects, including the SH-2G and K-MAX
helicopter programs, aerostructures, helicopter structures, and
components, the industrial and music distribution businesses,
operating cash flow, and other matters that involve a number of
uncertainties that may cause actual results to differ materially
from expectations. Those uncertainties include, but are not limited
to: 1) the successful conclusion of competitions and thereafter
contract negotiations with government authorities, including
foreign governments; 2) political developments in countries where
the corporation intends to do business; 3) standard government
contract provisions permitting renegotiation of terms and
termination for the convenience of the government; 4) economic and
Page 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Kaman Corporation and Subsidiaries
competitive conditions in markets served by the corporation,
including industry consolidation in the United States and global
economic conditions; 5) timing of satisfactory completion of the
Australian SH-2G(A) program; 6) timing, degree and scope of
market acceptance for products such as a repetitive lift
helicopter; 7) U.S. industrial production levels; 8) changes in
supplier sales policies; 9) the effect of price increases or
decreases; 10) currency exchange rates, taxes, laws and
regulations, inflation rates, general business conditions and other
factors; 11) effects of the September 11, 2001 attacks on the World
Trade Center in New York and the Pentagon in Washington, D.C. Any
forward-looking information should be considered with these factors
in mind.
Page 14
SELECTED QUARTERLY FINANCIAL DATA
KAMAN CORPORATION AND SUBSIDIARIES
(In thousands except per share amounts
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
- ------------------------------------------------------------------------
NET SALES:
2001 $244,489 $ 194,338 $ 219,102 $217,940 $ 875,869
2000 263,204 259,610 255,160 253,260 1,031,234
GROSS PROFIT:
2001 $ 61,797 $ 26,473 $ 54,860 $ 58,957 $ 202,087
2000 64,452 63,482 63,620 65,416 256,970
NET EARNINGS:
2001 $ 8,741 $ (12,495) $ 8,526 $ 6,942 $ 11,714
2000 8,556 9,271 9,535 9,558 36,920
PER SHARE - BASIC:
2001 $ .39 $ (.56) $ .38 $ .31 $ .52
2000 .37 .40 .41 .43 1.61
PER SHARE - DILUTED:
2001 $ .38 $ (.56) $ .37 $ .31 $ .52
2000 .36 .39 .40 .42 1.57
=============================================================================
The quarterly per share-diluted amounts for 2001 do not equal the
"Total Year" figure due to the calculation being anti-dilutive in
the second quarter.
Page 15
CONSOLIDATED BALANCE SHEETS
KAMAN CORPORATION AND SUBSIDIARIES
(In thousands except share and per share amounts)
December 31 2001 2000
- -----------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 30,834 $ 48,157
Accounts receivable 186,798 212,374
Inventories 197,400 196,148
Deferred income taxes 16,938 18,550
Other current assets 10,681 6,771
- -----------------------------------------------------------------------------
Total current assets 442,651 482,000
- -----------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, NET 60,769 63,705
GOODWILL 12,165 2,301
OTHER ASSETS 6,361 5,824
- -----------------------------------------------------------------------------
TOTAL ASSETS $ 521,946 $ 553,830
=============================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 2,378 $ 2,060
Current portion of long-term debt 1,660 1,660
Accounts payable - trade 52,044 58,057
Accrued salaries and wages 7,252 9,824
Accrued vacations 6,031 5,954
Advances on contracts 30,781 41,905
Other accruals and payables 41,114 49,766
Income taxes payable -- 4,116
- ----------------------------------------------------------------------------
Total current liabilities 141,260 173,342
- -----------------------------------------------------------------------------
LONG-TERM DEBT, EXCLUDING CURRENT PORTION 23,226 24,886
OTHER LONG-TERM LIABILITIES 23,879 23,556
Page 16
CONSOLIDATED BALANCE SHEETS
KAMAN CORPORATION AND SUBSIDIARIES
(In thousands except share and per share amounts)
December 31 2001 2000
- -----------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Capital stock, $1 par value
per share:
Preferred stock, authorized
700,000 shares:
Series 2 preferred stock,
6 1/2% cumulative convertible,
authorized 500,000 shares,
none outstanding -- --
Common stock:
Class A, authorized 48,500,000
shares, nonvoting; $.10 per
common share dividend preference;
issued 23,066,260 shares in
2001 and 2000 23,066 23,066
Class B, authorized 1,500,000
shares, voting; issued 667,814
shares in 2001 and 2000 668 668
Additional paid-in capital 77,389 77,298
Retained earnings 253,403 251,526
Unamortized restricted stock awards (2,206) (1,643)
Accumulated other comprehensive
income (loss) (919) (749)
- -----------------------------------------------------------------------------
351,401 350,166
Less 1,455,214 shares and 1,485,427
shares of Class A common stock in
2001 and 2000, respectively, held in
treasury, at cost (17,820) (18,120)
- -----------------------------------------------------------------------------
Total shareholders' equity 333,581 332,046
- -----------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 521,946 $ 553,830
=============================================================================
See accompanying notes to consolidated financial statements.
Page 17
CONSOLIDATED STATEMENTS OF OPERATIONS
KAMAN CORPORATION AND SUBSIDIARIES
(In thousands except per share amounts)
Year ended December 31 2001 2000 1999
- ----------------------------------------------------------------------------
REVENUES:
Net sales $ 875,869 $ 1,031,234 $ 995,404
Other 1,076 1,092 1,773
- -----------------------------------------------------------------------------
876,945 1,032,326 997,177
- -----------------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of sales 673,782 774,264 751,291
Selling, general and
administrative expense 188,752 202,319 201,807
Restructuring costs -- (1,680) 4,132
Interest expense (income), net 623 (1,660) (1,614)
Other expense (income), net (1,876) 1,363 1,088
- -----------------------------------------------------------------------------
861,281 974,606 956,704
- -----------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 15,664 57,720 40,473
INCOME TAXES 3,950 20,800 15,400
- -----------------------------------------------------------------------------
NET EARNINGS $ 11,714 $ 36,920 $ 25,073
=============================================================================
PER SHARE:
Net earnings per share:
Basic $ .52 $ 1.61 $ 1.07
Diluted .52 1.57 1.05
Dividends declared .44 .44 .44
=============================================================================
See accompanying notes to consolidated financial statements.
Page 18
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
KAMAN CORPORATION AND SUBSIDIARIES
(In thousands except share amounts)
Year ended December 31 2001 2000 1999
- -----------------------------------------------------------------------------
SERIES 2 PREFERRED STOCK $ -- $ -- $ --
- -----------------------------------------------------------------------------
CLASS A COMMON STOCK 23,066 23,066 23,066
- -----------------------------------------------------------------------------
CLASS B COMMON STOCK 668 668 668
- -----------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL:
Balance - beginning of year 77,298 78,422 78,899
Employee stock plans (234) (897) (463)
Restricted stock awards 325 (227) (14)
- -----------------------------------------------------------------------------
Balance - end of year 77,389 77,298 78,422
- -----------------------------------------------------------------------------
RETAINED EARNINGS:
Balance - beginning of year 251,526 224,702 209,920
Net earnings 11,714 36,920 25,073
Dividends declared (9,837) (10,096) (10,291)
- -----------------------------------------------------------------------------
Balance - end of year 253,403 251,526 224,702
- -----------------------------------------------------------------------------
UNAMORTIZED RESTRICTED STOCK AWARDS:
Balance - beginning of year (1,643) (1,944) (1,500)
Stock awards issued (1,585) (516) (1,288)
Amortization of stock awards 1,022 817 844
- -----------------------------------------------------------------------------
Balance - end of year (2,206) (1,643) (1,944)
- -----------------------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS):
Balance - beginning of year (749) (625) (774)
Foreign currency translation
adjustment* (170) (124) 149
- -----------------------------------------------------------------------------
Balance - end of year (919) (749) (625)
- -----------------------------------------------------------------------------
Page 19
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
KAMAN CORPORATION AND SUBSIDIARIES
(In thousands except share amounts)
Year ended December 31 2001 2000 1999
- -----------------------------------------------------------------------------
TREASURY STOCK:
Balance - beginning of year (18,120) (7,912) (785)
Shares acquired in 2001 -
211,550; 2000 - 1,126,888;
1999 - 802,721 (2,760) (13,660) (10,596)
Shares reissued under
various stock plans 3,060 3,452 3,469
- -----------------------------------------------------------------------------
Balance - end of year (17,820) (18,120) (7,912)
- -----------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY $ 333,581 $ 332,046 $ 316,377
=============================================================================
*Comprehensive income is $11,544, $36,796 and $25,222 for 2001,
2000 and 1999, respectively.
See accompanying notes to consolidated financial statements.
Page 20
CONSOLIDATED STATEMENTS OF CASH FLOWS
Kaman Corporation and Subsidiaries
(In thousands)
Year ended December 31 2001 2000 1999
- -----------------------------------------------------------------------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net earnings $ 11,714 $ 36,920 $ 25,073
Adjustments to reconcile
net earnings to cash
provided by (used in)
operating activities:
Depreciation and amortization 11,441 11,630 11,998
Net gain on sale of assets (2,637) -- --
Restructuring costs -- (1,680) 4,132
Deferred income taxes (375) (75) (800)
Other, net 2,152 6,551 3,690
Changes in current assets
and liabilities,
net of effects of
businesses acquired:
Accounts receivable 32,411 (56,201) 52,077
Inventories 5,407 3,583 8,166
Other current assets (3,680) 87 2,591
Accounts payable - trade (9,284) 9,297 (2,811)
Advances on contracts (11,124) (8,338) (51,133)
Accrued expenses and
payables (11,813) 6,400 (8,449)
Income taxes payable (4,081) 179 (1,992)
- -----------------------------------------------------------------------------
Cash provided by (used in)
operating activities 20,131 8,353 42,542
- -----------------------------------------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of assets 4,047 56 538
Expenditures for property, plant
and equipment (8,033) (11,044) (10,964)
Acquisition of businesses,
less cash acquired (20,845) -- --
Other, net (253) (963) 194
- -----------------------------------------------------------------------------
Cash provided by (used in)
investing activities (25,084) (11,951) (10,232)
- -----------------------------------------------------------------------------
Page 21
CONSOLIDATED STATEMENTS OF CASH FLOWS
Kaman Corporation and Subsidiaries
(In thousands)
Year ended December 31 2001 2000 1999
- -----------------------------------------------------------------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Changes in notes payable 318 (794) (287)
Reduction of long-term debt (1,660) (1,660) (1,660)
Proceeds from exercise of
employee stock plans 1,566 1,813 1,704
Purchases of treasury
stock (2,760) (13,660) (10,596)
Dividends paid (9,834) (10,193) (10,352)
- -----------------------------------------------------------------------------
Cash provided by
(used in) financing
activities (12,370) (24,494) (21,191)
- -----------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS (17,323) (28,092) 11,119
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 48,157 76,249 65,130
- -----------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 30,834 $ 48,157 $ 76,249
=============================================================================
See accompanying notes to consolidated financial statements.
Page 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAMAN CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
(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.
Use of Estimates - The preparation of consolidated financial
statements in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents - Surplus funds are invested in cash
equivalents which consist of highly liquid investments with
original maturities of three months or less.
Long-Term Contracts - Revenue Recognition - Sales and estimated
profits under long-term contracts are principally recognized on the
percentage-of-completion method of accounting. This method uses the
ratio that costs incurred bear to estimated total costs, after
giving effect to estimates of costs to complete based upon most
recent information for each contract. Sales and estimated profits
on other contracts are recorded as products are shipped or services
are performed. Reviews of contracts are made periodically
throughout their lives and revisions in profit estimates are
recorded in the accounting period in which the revisions are made.
Any anticipated contract losses are charged to operations when
first indicated.
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.
Page 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAMAN CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
(In thousands except share and per share amounts)
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.
Research And Development - Research and development costs not
specifically covered by contracts are charged against income as
incurred. Such costs amounted to $4,673 in 2001, $5,463 in 2000 and
$4,877 in 1999.
Income Taxes - 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.
Recent Accounting Standards - In June 2001, the Financial
Accounting Standards Board ("FASB") issued Statements of Financial
Accounting Standards No. 141, "Business Combinations" ("SFAS
141"), and No. 142, "Goodwill and Other Intangible Assets"
("SFAS 142"), which apply to the corporation effective July 1,
2001 and January 1, 2002, respectively. SFAS 141 requires all
business combinations initiated after June 30, 2001 to use the
purchase method of accounting. SFAS 142 will discontinue the
amortization of goodwill, including goodwill recorded in past
business combinations, upon adoption of this standard. All goodwill
and intangible assets with indefinite useful lives will be
evaluated on an ongoing basis for impairment in accordance with the
provisions of the SFAS 142. The corporation has adopted these
statements in accordance with their terms and that adoption did not
have a material impact on the corporation's consolidated results of
operations or financial position.
The FASB also issued Statement of Financial Accounting
Standards No. 143, "Accounting for Obligations Associated with the
Retirement of Long-Lived Assets" ("SFAS 143"), and Statement of
Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"),
in 2001.
Page 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAMAN CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
(In thousands except share and per share amounts)
SFAS 143 establishes accounting standards for the recognition
and measurement of an asset retirement obligation and its
associated asset retirement cost. It also provides accounting
guidance for legal obligations associated with the retirement of
tangible long-lived assets. SFAS 143 is effective in fiscal years
beginning after June 15, 2002. The corporation expects that the
provisions of SFAS 143 will not have a material impact on its
consolidated results of operations or financial position upon
adoption.
SFAS 144 establishes a single accounting model for the
impairment or disposal of long-lived assets, including discontinued
operations. The provisions of SFAS 144 are effective in fiscal
years beginning after December 15, 2001, and in general are to be
applied prospectively. The corporation will adopt SFAS 144
effective January 1, 2002 and that adoption is not expected to have
a material impact on its consolidated results of operations or
financial position.
ACQUISITION OF BUSINESSES
In September 2001, the company purchased the majority of the
assets and liabilities of A-C Supply, Inc. for $8,500 in cash. The
assets acquired and liabilities assumed and results of operations
since the acquisition have been included in the Industrial
Distribution segment.
In December 2001, the company purchased the stock of H.I.G.
Aerospace Group, Inc., parent company of Plastic Fabricating
Company, Inc. for $12,500 in cash. The assets acquired and
liabilities assumed are included in the Aerospace
segment.
Both acquisitions have been accounted for as purchases with
the purchase price being allocated to the fair value of assets
acquired and liabilities assumed. The excess of the purchase price
over the estimated fair market value of net assets acquired is
$2,300 for A-C Supply, Inc. and $7,700 for Plastic Fabricating
Company, Inc. and has been assigned to goodwill. In accordance with
SFAS 142, the goodwill has not been amortized.
Page 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAMAN CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
(In thousands except share and per share amounts)
Assuming the acquisitions had taken place on January 1, 2001
and 2000, Kaman Corporation's pro forma revenue, net earnings and
net earnings per share for the years ended December 31, 2001 and
2000 would not have been materially affected.
RESTRUCTURING COSTS
In 1999, the Industrial Distribution segment took a pre-tax charge
of $12,382 ($7,670 after taxes or $.32 per share diluted) as part
of an initiative to streamline operational structure. The costs
associated with the reorganization of operations, consolidation of
branches, and the closure of other facilities totaled $4,132. The
write-off of excess inventory totaled $8,250 and is included
in cost of sales. In 2000, the segment completed all activities
under the restructuring plan. The financial impact of these
activities was less than anticipated in the segment's plan and a
favorable change in estimate of $1,680 was recorded.
ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
December 31 2001 2000
- ----------- ---- ----
Trade receivables, net of allowance
for doubtful accounts of $3,939
in 2001, $4,636 in 2000 $ 63,239 $ 72,248
U.S. Government contracts:
Billed 11,529 6,996
Recoverable costs and accrued
profit - not billed 15,169 22,954
Commercial and other government contracts:
Billed 18,835 33,510
Recoverable costs and accrued
profit - not billed 78,026 76,666
-------- --------
Total $186,798 $212,374
======== ========
Page 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAMAN CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
(In thousands except share and per share amounts)
Recoverable costs and accrued profit - not billed represent costs
incurred on contracts which will become billable upon future
deliveries, achievement of specific contract milestones or
completion of engineering and service type contracts. Management
estimates that approximately $16,900 of such costs and accrued
profits at December 31, 2001 will be collected after one year.
INVENTORIES
Inventories are comprised as follows:
December 31 2001 2000
- ----------- ---- ----
Merchandise for resale $ 86,409 $ 88,640
Contracts in process:
U.S. Government 3,686 3,723
Commercial 12,525 10,312
Other work in process (including
certain general stock materials) 49,465 51,883
Finished goods 45,315 41,590
-------- --------
Total $197,400 $196,148
======== ========
Included above in other work in process and finished goods at
December 31, 2001 and 2000 is K-MAX inventory of $76,189 and
$78,638, respectively.
The aggregate amounts of general and administrative costs
allocated to contracts in process during 2001, 2000 and 1999 were
$49,816, $53,387 and $49,752, respectively.
The estimated amounts of general and administrative costs
remaining in contracts in process at December 31, 2001 and 2000
amount to $2,225 and $2,115, 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:
Page 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAMAN CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
(In thousands except share and per share amounts)
December 31 2001 2000
- ----------- ---- ----
Land $ 6,058 $ 6,230
Buildings 31,881 34,637
Leasehold improvements 15,628 14,979
Machinery, office furniture
and equipment 120,333 115,049
------- -------
Total 173,900 170,895
Less accumulated depreciation
and amortization 113,131 107,190
-------- --------
Property, plant and equipment, net $ 60,769 $ 63,705
======== ========
CREDIT ARRANGEMENTS - SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Revolving Credit Agreement - On November 13, 2000, the corporation
entered into a five year revolving credit agreement (the
"Revolving Credit Agreement") with several banks to replace its
then existing revolving credit agreement. The agreement has a
maximum unsecured line of credit of $225,000 which consists of a
$150,000 commitment expiring in November 2005 and a $75,000
commitment under a "364 Day" arrangement which is renewable
annually for an additional 364 days. The $75,000 commitment was so
renewed in November, 2001. Outstanding letters of credit at
November 13, 2000, were transferred to the Revolving Credit
Agreement at that time and are considered to be indebtedness
thereunder.
Short-Term Borrowings - Under the Revolving Credit Agreement, the
corporation has the ability to borrow funds on both a short-term
and long-term basis. The corporation also has arrangements with
other banks, generally to borrow funds on a short-term basis with
interest at current market rates.
Short-term borrowings outstanding are as follows:
Page 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAMAN CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
(In thousands except share and per share amounts)
December 31 2001 2000
- ----------- ---- ----
Revolving credit agreement $ -- $ --
Other credit arrangements 2,378 2,060
------ ------
Total $2,378 $2,060
====== ======
Long-Term Debt - The corporation has long-term debt as follows:
December 31 2001 2000
- ----------- ---- ----
Revolving credit agreement $ -- $ --
Convertible subordinated debentures 24,886 26,546
------ ------
Total 24,886 26,546
Less current portion 1,660 1,660
------- -------
Total excluding current portion $23,226 $24,886
======= =======
Restrictive Covenants - The most restrictive of the covenants
contained in the Revolving Credit Agreement requires the
corporation to have EBITDA, as defined, at least equal to 300% of
interest expense and a ratio of consolidated total indebtedness to
total capitalization of not more than 55%.
Certain Letters of Credit - The face amounts of irrevocable letters
of credit issued under the Revolving Credit Agreement totaled
$51,577 and $41,195 at December 31, 2001 and 2000, respectively.
Convertible Subordinated Debentures - The corporation issued 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
Page 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAMAN CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
(In thousands except share and per share amounts)
requirement that began March 15, 1997, the corporation redeems
$1,660 of the outstanding principal amount of the debentures
annually. The debentures are subordinated to the claims of senior
debt holders and general creditors. These debentures have a fair
value of $23,891 at December 31, 2001 based upon latest market
price.
Long-Term Debt Annual Maturities - The aggregate amounts of annual
maturities of long-term debt for each of the next five years is
$1,660.
Interest Payments - Cash payments for interest were $2,235, $2,407
and $2,426 for 2001, 2000 and 1999, respectively.
ADVANCES ON CONTRACTS
Advances on contracts include customer advances together with
customer payments and billings associated with the achievement of
certain contract milestones in excess of costs incurred for SH-2G
helicopter contracts. The customer advances are fully secured by
letters of credit. It is anticipated that the advances on contracts
along with the face amounts of these letters of credit will be
reduced as performance milestones are reached and as the
corporation and the Australian government agree upon a phased
acceptance and delivery schedule for the SH-2G(A) aircraft.
INCOME TAXES
The components of income taxes are as follows:
2001 2000 1999
---- ---- ----
Current:
Federal $ 3,518 $ 17,690 $ 13,824
State 807 3,185 2,376
-------- -------- --------
4,325 20,875 16,200
-------- -------- --------
Deferred:
Federal (353) (65) (650)
State (22) (10) (150)
-------- -------- --------
(375) (75) (800)
-------- -------- --------
Total $ 3,950 $ 20,800 $ 15,400
======== ======== ========
Page 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAMAN CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
(In thousands except share and per share amounts)
The components of the deferred tax assets and deferred tax
liabilities are presented below:
December 31 2001 2000
- ----------- ---- ----
Deferred tax assets:
Long-term contracts $ 912 $ 1,547
Deferred employee benefits 14,766 14,539
Inventory 4,444 4,435
Accrued liabilities and other items 6,229 6,504
-------- --------
Total deferred tax assets 26,351 27,025
-------- --------
Deferred tax liabilities:
Depreciation and amortization (7,159) (6,540)
Other items (1,541) (3,910)
-------- --------
Total deferred tax liabilities (8,700) (10,450)
-------- --------
Net deferred tax asset $ 17,651 $ 16,575
======== ========
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 two 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.
The provisions for federal income taxes approximate the
amounts computed by applying the U.S. federal income tax rate to
earnings before income taxes after giving effect to state income
taxes. The consolidated effective tax rate was lower due to the
reversal of prior years' tax accruals of $2,972 and $1,534 in
2001 and 2000, respectively, as a result of the corporation's
ongoing assessment of its open tax years. The reduction in 2001
included reduced tax considerations related to the Australian SH-2G
program. Cash payments for income taxes were $8,589, $20,611 and
$18,204 in 2001, 2000 and 1999, respectively.
Page 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAMAN CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
(In thousands except share and per share amounts)
PENSION PLAN
The corporation has a non-contributory defined benefit pension plan
covering all of its full-time U.S. employees upon their completion
of hours of service requirements. Benefits under this plan are
generally based upon an employee's years of service and
compensation levels during employment with 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 $11,896 of Class A common stock of Kaman Corporation at
December 31, 2001).
The pension plan costs were computed using the projected unit
credit actuarial cost method and include the following components:
2001 2000 1999
---- ---- ----
Service cost for benefits
earned during the year $ 9,757 $ 9,528 $ 9,837
Interest cost on projected
benefit obligation 22,822 21,688 20,348
Expected return on plan assets (31,614) (29,050) (25,998)
Net amortization and deferral (3,589) (2,635) (1,909)
-------- -------- --------
Net pension cost (income) $ (2,624) $ (469) $ 2,278
======== ======== ========
Page 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAMAN CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
(In thousands except share and per share amounts)
The change in actuarial present value of the projected
benefit obligation is as follows:
December 31 2001 2000
- ----------- ---- ----
Projected benefit obligation at
beginning of year $ 312,273 $ 299,228
Service cost 9,757 9,528
Interest cost 22,822 21,688
Actuarial liability (gain) loss 413 (2,091)
Plan amendments 817 --
Benefit payments (16,914) (16,080)
--------- ---------
Projected benefit obligation at
end of year $ 329,168 $ 312,273
========= =========
The change in fair value of plan assets is as follows:
December 31 2001 2000
- ----------- ---- ----
Fair value of plan assets at
beginning of year $ 414,453 $ 415,358
Actual return on plan assets (10,897) 14,796
Employer contribution -- 379
Benefit payments (16,914) (16,080)
--------- ---------
Fair value of plan assets at end of year $ 386,642 $ 414,453
========= =========
Page 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAMAN CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
(In thousands except share and per share amounts)
December 31 2001 2000
- ----------- ---- ----
Excess of assets over projected
benefit obligation $ 57,474 $ 102,180
Unrecognized prior service cost 582 (290)
Unrecognized net gain (55,493) (100,097)
Unrecognized net transition asset -- (1,854)
--------- ---------
Accrued (prepaid) pension cost $ (2,563) $ 61
========= =========
The actuarial assumptions used in determining the funded
status of the pension plan are as follows:
December 31 2001 2000
- ----------- ---- ----
Discount rate 7.5% 7.5%
Expected return on plan assets 8.625% 8.625%
Average rate of increase in
compensation levels 4.5% 4.5%
===== =====
The corporation also has a thrift and retirement plan in which
all employees meeting the eligibility requirements may participate.
Employer matching contributions are currently made to the plan with
respect to a percentage of each participant's pre-tax contribution.
For each dollar that a participant contributes, up to 5% of
compensation, participating subsidiaries make employer
contributions of fifty cents ($.50), up from twenty five cents
($.25) in 1999. Employer contributions to the plan totaled $3,438,
$3,514 and $1,691 in 2001, 2000, and 1999, respectively.
Page 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAMAN CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
(In thousands except share and per share amounts)
COMMITMENTS AND CONTINGENCIES
Rent commitments under various leases for office space, warehouse,
land and buildings expire at varying dates from January 2002 to
December 2010. Certain annual rentals are subject to renegotiation,
with certain leases renewable for varying periods. Lease periods
for machinery and equipment vary from 1 to 5 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.
The following future minimum rental payments are required
under operating leases that have initial or remaining noncancelable
lease terms in excess of one year as of December 31, 2001:
2002 $ 13,092
2003 5,650
2004 3,840
2005 2,420
2006 952
Thereafter 1,786
--------
Total $ 27,740
========
Lease expense for all operating leases, including leases with
terms of less than one year, amounted to $15,113, $14,710 and
$15,413 for 2001, 2000 and 1999, 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.
Page 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAMAN CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
(In thousands except share and per share amounts)
COMPUTATION OF EARNINGS PER SHARE
The earnings per share - basic computation is based on the net
earnings divided by the weighted average number of shares of common
stock outstanding for each year.
The earnings per share - diluted computation includes the
common stock equivalency of options granted to employees under the
Stock Incentive Plan. The earnings per share - diluted computation
also assumes that at the beginning of the year the 6% convertible
subordinated debentures are converted into Class A common
stock with the resultant reduction in interest costs net of
tax. Excluded from the earnings per share - diluted
calculation are options granted to employees that are
anti-dilutive based on the average stock price for the year.
Page 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAMAN CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
(In thousands except share and per share amounts)
2001 2000 1999
---- ---- ----
Earnings per share - basic
Net earnings $11,714 $36,920 $25,073
======= ======= =======
Weighted average shares
outstanding (000) 22,364 22,936 23,468
======= ======= =======
Earnings per share - basic $ .52 $ 1.61 $ 1.07
======= ======= =======
Earnings per share - diluted
Net earnings $11,714 $36,920 $25,073
Plus:
After-tax interest savings
on convertible
debentures 1,093 1,031 1,046
------- ------- -------
Net earnings assuming
conversion $12,807 $37,951 $26,119
======= ======= =======
Weighted average shares
outstanding (000) 22,364 22,936 23,468
Plus shares issuable on:
Conversion of 6%
convertible debentures 1,080 1,151 1,221
Exercise of
dilutive options 205 81 121
------- ------- -------
Weighted average shares
outstanding assuming
conversion (000) 23,649 24,168 24,810
======= ======= =======
Earnings per share -
diluted $ .52 $ 1.57 $ 1.05
======= ======= =======
The calculated diluted per share amount for 2001 is anti-dilutive,
therefore, amount shown is equal to the basic per share
calculation.
Page 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAMAN CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
(In thousands except share and per share amounts)
STOCK PLANS
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. There are no charges or
credits to income in connection with the plan. During 2001, 106,921
shares were issued to employees at prices ranging from $10.41 to
$15.21 per share. During 2000, 145,485 shares were issued to
employees at prices ranging from $7.76 to $13.60 per share. During
1999, 140,620 shares were issued to employees at prices ranging
from $9.03 to $13.49 per share. At December 31, 2001, there were
approximately 980,600 shares available for offering under the plan.
Stock Incentive Plan - The corporation maintains a Stock Incentive
Plan which includes a continuation and extension of a predecessor
stock incentive program. The Stock Incentive 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. At December 31, 2001, there were
approximately 509,000 shares available for the granting of stock
options.
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. 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. These awards are
subject to forfeiture if a recipient separates from service with
the corporation.
Restricted stock awards were made for 100,000 shares at prices
ranging from $15.63 to $16.31 per share in 2001, 62,500 shares at
prices ranging from $10.31 to $10.75 per share in 2000 and 91,000
shares at prices ranging from $11.81 to $14.50 per share in 1999.
At December 31, 2001, there were 189,000 shares remaining subject
to restrictions pursuant to these awards.
Page 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAMAN CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
(In thousands except share and per share amounts)
Stock appreciation rights were issued for 205,000 shares at
prices ranging from $16.28 to $16.31 per share in 2001, 130,000
shares at $10.31 in 2000 and 270,000 shares at prices ranging from
$14.13 to $14.50 per share in 1999, to be settled only for cash.
The corporation recorded income of $575 in 2001, $1,732 of expense
in 2000 and income of $703 in 1999 due to fluctuations in the
market price of the shares.
Stock option activity is as follows:
WEIGHTED-
AVERAGE
EXERCISE
Stock options outstanding: OPTIONS PRICE
- -------------------------- ------- -----
Balance at January 1, 1999 794,820 12.32
Options granted 312,800 14.38
Options exercised (26,760) 9.56
Options cancelled (39,850) 14.25
----------- -----------
Balance at December 31, 1999 1,041,010 12.94
Options granted 225,500 10.31
Options exercised (75,360) 8.86
Options cancelled (121,170) 13.65
----------- -----------
Balance at December 31, 2000 1,069,980 12.59
Options granted 335,000 16.27
Options exercised (89,560) 9.96
Options cancelled (56,290) 13.57
----------- -----------
Balance at December 31, 2001 1,259,130 13.71
=========== ===========
Weighted average contractual life
remaining at December 31, 2001 6.4 years
=========
Range of exercise prices for options $ 9.50- $ 13.26-
outstanding at December 31, 2001 $ 13.25 $ 17.00
----------- -----------
Options outstanding 522,500 736,630
Options exercisable 354,700 222,750
Weighted average contractual remaining
life of options outstanding 4.9 years 7.5 years
Weighted average exercise price:
Options outstanding $ 10.86 $ 15.74
Options exercisable $ 10.95 $ 15.62
=========== ===========
Page 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAMAN CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
(In thousands except share and per share amounts)
As of December 31, 2000 and 1999, there were 472,210 and
438,720 options exercisable, respectively.
As permitted by the Statement of Financial Accounting
Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation," the corporation has elected to continue following
the guidance of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," for measurement and
recognition of stock-based transactions with employees.
Accordingly, no compensation cost has been recognized for its stock
plans other than for the restricted stock awards and stock
appreciation rights. Under the disclosure alternative of SFAS 123,
the pro forma net earnings and earnings per share information
presented below includes the compensation cost of stock options
issued to employees based on the fair value at the grant date and
includes compensation cost for the 15% discount offered to
participants in the employees stock purchase plan.
2001 2000 1999
---- ---- ----
Net earnings:
As reported $ 11,714 $ 36,920 $ 25,073
Pro forma 10,767 36,288 24,497
Earnings per share - basic:
As reported .52 1.61 1.07
Pro forma .48 1.58 1.04
Earnings per share - diluted:
As reported .52 1.57 1.05
Pro forma .48 1.55 1.03
Page 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAMAN CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
(In thousands except share and per share amounts)
The fair value of each option grant is estimated on the date
of grant by using the Black-Scholes option-pricing model. The
following weighted-average assumptions were used for grants in
2001, 2000 and 1999:
2001 2000 1999
---- ---- ----
Expected dividend yield 2.7% 4.3% 3.1%
Expected volatility 45% 38% 34%
Risk-free interest rate 5.1% 6.5% 5.3%
Expected option lives 8 years 8 years 8 years
Per share fair value of
options granted $6.84 $3.35 $4.75
SEGMENT INFORMATION
The corporation reports results in three business segments --
Aerospace, Industrial Distribution and Music Distribution.
The Aerospace segment consists primarily of aerospace related
business for global government and commercial markets, including
the retrofit of SH-2 helicopters from the SH-2F to the SH-2G
configuration as well as support services, logistics and spare
parts for that helicopter; manufacture of the K-MAX helicopter
together with spare parts and technical support; subcontract
work consisting of fabrication of aircraft structures; and
production of components, including self-lubricating bearings and
couplings. During 2001, the segment recorded a sales and pre-tax
earnings adjustment of $31,181, substantially all of which is
associated with a change in estimated costs to complete the SH-2G
(A) helicopter program for Australia. This adjustment has had
the effect of lowering the profit rate on the Australia program.
The cost growth for that program is related to a contract dispute
settlement with Litton Guidance and Control Systems (now part of
Northrup Grumman) regarding development of an advanced Integrated
Tactical Avionics System (ITAS) that is unique to this particular
contract. The corporation has replaced Litton with two
subcontractors for the balance of the ITAS software development
work.
Page 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAMAN CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
(In thousands except share and per share amounts)
The Industrial Distribution segment provides replacement
parts, including bearings, power transmission, motion control and
materials handling components to nearly every sector of industry in
North America, along with industrial engineering support services.
Operations are conducted from many locations across the United
States and British Columbia, Canada. In 1999, the segment took
a pre-tax charge of $12,382 to write-off inventory, streamline its
operational structure, and increase efficiency. During 2000, $1,680
of this pre-tax charge was unused and added back to operating
profit.
The Music Distribution segment consists of distribution of
musical instruments and accessories in the U.S. and abroad through
offices in the U.S. and Canada. Music operations also include some
manufacture of guitars.
Page 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAMAN CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
(In thousands except share and per share amounts)
Summarized financial information by business segment is as
follows:
2001 2000 1999
---- ---- ----
Net sales:
Aerospace $ 301,580 $ 381,932 $ 371,757
Industrial Distribution 453,718 520,779 505,261
Music Distribution 120,571 128,523 118,386
----------- ----------- -----------
$ 875,869 $ 1,031,234 $ 995,404
=========== =========== ===========
Operating profit:
Aerospace $ 6,542 $ 44,236 $ 44,023
Industrial Distribution 13,217 22,902 2,908
Music Distribution 6,580 7,441 5,627
----------- ----------- -----------
26,339 74,579 52,558
Interest, corporate and
other expense, net (10,675) (16,859) (12,085)
----------- ----------- -----------
Earnings before
income taxes $ 15,664 $ 57,720 $ 40,473
=========== =========== ===========
Identifiable assets:
Aerospace $ 302,076 $ 307,762 $ 251,443
Industrial Distribution 134,974 137,297 141,913
Music Distribution 45,783 53,444 53,714
Corporate 39,113 55,327 87,133
----------- ----------- -----------
$ 521,946 $ 553,830 $ 534,203
=========== =========== ===========
Capital expenditures:
Aerospace $ 5,107 $ 6,110 $ 6,631
Industrial Distribution 1,501 2,947 2,398
Music Distribution 1,018 812 1,773
Corporate 407 1,175 162
----------- ----------- -----------
$ 8,033 $ 11,044 $ 10,964
=========== =========== ===========
Depreciation and amortization:
Aerospace $ 6,175 $ 5,875 $ 5,963
Industrial Distribution 2,742 3,138 3,395
Music Distribution 1,430 1,490 1,508
Corporate 1,094 1,127 1,132
----------- ----------- -----------
$ 11,441 $ 11,630 $ 11,998
=========== =========== ===========
Page 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAMAN CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
(In thousands except share and per share amounts)
2001 2000 1999
---- ---- ----
Geographic information -
sales:
United States $ 726,756 $ 789,533 $ 737,023
Australia/New Zealand 100,121 186,537 200,796
Canada 27,162 29,455 28,724
Europe 12,319 12,765 11,590
Japan 6,154 6,862 10,172
Other 3,357 6,082 7,099
---------- ---------- ----------
$ 875,869 $1,031,234 $ 995,404
========== ========== ==========
Operating profit is total revenues less cost of sales and
selling, general and administrative expense other than general
corporate expense. The "Interest, corporate and other expense, net"
includes a pre-tax gain of $2,679 related to the sale of two
buildings.
Identifiable assets are year-end assets at their respective
net carrying value segregated as to segment and corporate use.
Corporate assets are principally cash and cash equivalents and net
property, plant and equipment.
Net sales by the Aerospace segment made under contracts with
U.S. Government agencies (including sales to foreign governments
through foreign military sales contracts with U.S. Government
agencies) account for $81,106 in 2001, $81,519 in 2000 and $72,285
in 1999.
Sales made by the Aerospace segment under a contract with one
customer were $76,865, $130,285 and $145,006 in 2001, 2000 and
1999, respectively.
Page 44
REPORT OF INDEPENDENT AUDITORS
KAMAN CORPORATION AND SUBSIDIARIES
KPMG LLP
Certified Public Accountants
One Financial Plaza
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, 2001 and
2000, and the related consolidated statements of operations,
changes in shareholders' equity and cash flows for each of the
years in the three year period ended December 31, 2001. 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 auditing standards
generally accepted in the United States of America. 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, 2001
and 2000 and the results of their operations and their cash flows
for each of the years in the three year period ended December 31,
2001 in conformity with accounting principles generally accepted in
the United States of America.
KPMG LLP
January 28, 2002
Page 45
EXHIBIT 21
KAMAN CORPORATION
SUBSIDIARIES
Following is a list of the Corporation's subsidiaries, each of which,
unless otherwise indicated, 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 Aerospace Group, Inc. Connecticut
Kaman Aerospace Corporation Delaware
K-MAX Corporation Connecticut
Kaman Aerospace International Corporation Connecticut
Kaman X Corporation Connecticut
Kamatics Corporation Connecticut
Kaman PlasticFab Group, Inc. Delaware
Plastic Fabricating Company, Inc. Delaware
Kaman Industrial Technologies Corporation Connecticut
Kaman Industrial Technologies, Ltd. Canada
Delamac de Mexico, S.A. de C.V. (60%) Mexico
Kaman Music Corporation Connecticut
KMI Europe, Inc. Delaware
B & J Music Ltd. Canada
Kaman Foreign Sales Corporation Barbados
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
KPMG LLP
Certified Public Accountants
One Financial Plaza
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 28, 2002, relating to the
consolidated balance sheets of Kaman Corporation and subsidiaries
as of December 31, 2001 and 2000 and the related consolidated
statements of operations, changes in shareholders' equity and cash
flows for each of the years in the three-year period ended
December 31, 2001, and the related schedule, which reports appear
or are incorporated by reference in the December 31, 2001 annual
report on Form 10-K of Kaman Corporation.
/s/ KPMG LLP
Hartford, Connecticut
March 14, 2002
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned
does hereby appoint and constitute Paul R. Kuhn and Robert M.
Garneau 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,
2001 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 12th day of February, 2002
Brian E. Barents C. William Kaman, II
E. Reeves Callaway, III Eileen S. Kraus
Frank C. Carlucci Paul R. Kuhn
Laney J. Chouest Walter H. Monteith, Jr.
John A. DiBiaggio Wanda L. Rogers
Huntington Hardisty
