SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE - - --- SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1994. ------------------ OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE - - --- SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO ______________ Commission File No. 0-1093 KAMAN CORPORATION (Exact Name of Registrant) Connecticut 06-0613548 (State of Incorporation) (I.R.S. Employer Identification No.) Blue Hills Avenue Bloomfield, Connecticut 06002 (Address of Principal Executive Offices) Registrant's telephone number, including area code: (203) 243-7100 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of April 30, 1994: Class A Common 17,513,994 Class B Common 667,814 Page 1 of 12 Pages KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION Item 1. Financial Statements: Condensed Consolidated Balance Sheets(In thousands) March 31, December 31, Assets 1994 1993 ------ ----------------- -----------------
- 2 - PAGECurrent assets: Cash and cash equivalents $ 2,863 $ 3,845 Accounts receivable (net of allowance for doubtful accounts of $1,681 in 1994, $1,576 in 1993) 162,505 165,615 Inventories: Raw materials $ 10,937 $ 10,715 Work-in-process 42,816 28,241 Finished goods 1,283 1,131 Merchandise for resale 96,545 151,581 90,364 130,451 ------ ------ Other current assets 16,851 16,690 ------- ------- Total current assets 333,800 316,601 Property, plant & equip., at cost 177,922 175,770 Less accumulated depreciation and amortization 96,841 94,059 ------ ------- Net property, plant & equipment 81,081 81,711 Other assets 42,207 41,884 ------- -------- $457,088 $440,196 ======== ======== Liabilities and Shareholders' Equity ------------------------------------ Current liabilities: Notes payable $ 27,358 $ 31,865 Accounts payable 52,025 51,246 Accrued liabilities 30,984 28,586 Other current liabilities 71,194 55,068 ------ ------- Total current liabilities 181,561 166,765 Deferred credits 7,293 7,141 Long-term debt, excl. current portion 38,164 37,977 Shareholders' equity: Series 2 preferred stock $ 57,167 $ 57,167 Other shareholders' equity 172,903 230,070 171,146 228,313 -------- ------- -------- ------- $457,088 $440,196 ======== ======== KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 1. Financial Statements, Continued: Condensed Consolidated Statements of Earnings (In thousands except per share amounts) For the Three Months Ended March 31, -------------------- 1994 1993 ---- ----
- 3 -Revenues $ 197,980 $ 197,903 Costs and expenses: Cost of sales 145,629 144,297 Selling, general and administrative expense 44,238 44,966 Interest expense 870 1,853 Other expense 104 35 -------- -------- 190,841 191,151 -------- -------- Earnings before income taxes 7,139 6,752 Income taxes 2,899 2,740 -------- ------- Net earnings $ 4,240 $ 4,012 ======== ======= Preferred stock dividend requirement $ (929) $ - ======== ======= Earnings applicable to common stock $ 3,311 $ 4,012 ======== ======= Net earnings per common share: Primary $ .18 $ .22 Fully diluted $ .18 $ .22 ======== ======= Dividends declared per share: Series 2 preferred stock $ 3.25 $ - Common stock $ .11 $ .11 ======== ======= KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 1. Financial Statements, Continued: Condensed Consolidated Statements of Cash Flows (In thousands) For the Three Months Ended March 31, ------------------- 1994 1993 --------- --------
- 4 -Cash flows from operating activities: Net earnings $ 4,240 $ 4,012 Depreciation and amortization 3,138 3,353 Changes in current assets and liabilities 1,122 (23,086) Other, net 240 163 -------- -------- Cash provided by (used in) operating activities 8,740 (15,558) -------- -------- Cash flows from investing activities: Expenditures for property, plant & equipment (2,267) (2,645) Other, net (746) (157) ------- -------- Cash provided by (used in) investing activities (3,013) (2,802) ------- -------- Cash flows from financing activities: Additions(reductions)to notes payable (4,507) 21,264 Dividends paid (2,926) (1,984) Other, net 724 (1,470) --------- -------- Cash provided by (used in) financing activities (6,709) 17,810 --------- -------- Net increase (decrease) in cash and cash equivalents (982) (550) Cash and cash equivalents at beginning of period 3,845 2,455 --------- -------- Cash and cash equivalents at end of period $ 2,863 $ 1,905 ========== ======== KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 1. Financial Statements, Continued: Notes to Condensed Consolidated Financial Statements (In Thousands) Basis of Presentation - - ---------------------- The December 31, 1993 condensed consolidated balance sheet amounts have been derived from the previously audited consolidated balance sheet of Kaman Corporation and subsidiaries. The balance of the condensed financial information reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented and are of a normal recurring nature unless otherwise disclosed in this report. The statements should be read in conjunction with the notes to the consolidated financial statements included in Kaman Corporation's 1993 Annual Report. Earnings Per Common Share Calculations - - -------------------------------------- The primary net earnings per common share computation is based on net earnings less the preferred stock dividend requirement (in 1994) divided by the weighted average number of shares of common stock outstanding which includes the common stock equivalency of options granted under the 1983 and 1993 stock incentive plans. The fully diluted net earnings per common share computation assumes, in addition to the above, that the 6% convertible subordinated debentures and Series 2 preferred stock (in 1994) were converted into common stock at the beginning of each period. The resultant reduction in interest costs net of tax and the preferred stock dividend requirement (in 1994) are added back to net earnings. Cash Flow Items - - --------------- Cash payments for interest were $1,424 and $3,314 for the three months ended March 31, 1994 and 1993, respectively. Cash payments for income taxes for the comparable periods were $1,555 and $1,462, respectively. - 5 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - - --------------------- Consolidated revenues for the three month period ended March 31, 1994 were level with the same period of 1993. While Distribution segment sales increased for the period, the increase was offset by lower sales in the Diversified Technologies segment. Diversified Technologies revenues for the first quarter of 1994 were down 11.8% from the comparable period of 1993, reflecting the adverse influence of conditions in the defense market and the commercial aircraft industry. For some time now, defense expenditures have been declining as changes in U.S. defense planning and spending priorities continue to evolve. These circumstances, coupled with ongoing political pressures upon the federal budget, suggest that reductions in defense expenditures are likely to continue in future periods. Military hardware programs, in particular, are increasingly subject to risks of one form or another, whether it be lack of funding, contract cancellation, or simply the ending of a program. The corporation is feeling the effects of these risks, principally with respect to its SH-2 helicopter. The corporation expects to finish its contract to retrofit certain SH-2Fs to the SH-2G configuration sometime this year. Management does not believe that the U.S. government will have further requirements for retrofits of this helicopter because the Navy is reducing the size of its fleet. And, as fleet size decreases, so does the number of our helicopters remaining in service. The corporation will continue to provide logistics and spare parts support for the SH-2, but at lower levels than in the past. As the federal government responds to the fact that the form of military threat throughout the world has changed and that the American public has grown more intolerant of the loss of lives in military conflict, defense planning and spending priorities are shifting toward greater emphasis on more cost effective advanced technology "smart" weapons which are intended to limit loss of life and unnecessary destruction of property. The corporation has significant expertise in this area, having performed a multitude of government contracts for advanced technology programs over the years. Management believes that the corporation is particularly well positioned to compete in a defense environment that emphasizes advanced technology products and systems, as well as advanced technology services such as computer software development, intelligence analysis, and research and development. - 6 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued The Diversified Technologies segment continues to perform work on a number of commercial airframe manufacturing programs, although reductions in commercial air travel and consolidation in the domestic aircraft industry have caused a slowdown in aircraft production rates, which has in turn affected the segment's subcontract work. An important aspect of the Diversified Technologies segment commercial diversification efforts is the K-MAX helicopter program. The K-MAX is a medium to heavy lift 'aerial truck' helicopter with special operating characteristics that distinguish it from other helicopters for use in logging, fire fighting, and other utility applications. The program is proceeding according to plan, with receipt of Federal Aviation Administration certification anticipated by mid 1994. The production phase for the first five (5) helicopters has begun and units are expected to be delivered to initial customers shortly after certification is received. The corporation intends to lease the first group under a special lease program in order to maintain active involvement in the product's introduction to the marketplace. Although management believes that this program is an important part of the corporation's defense conversion effort, in the shorter term the program is not expected to materially offset the effects of reduced defense spending. Distribution segment revenues for the three month period ended March 31, 1994 increased 9.0% over the same period a year ago. These results are primarily attributable to the industrial technologies business (which comprises about 75% of the Distribution segment) and reflect improving economic conditions in North America as well as, to some extent, the effects of certain marketing and other internal company initiatives. Although total segment revenues remained level, total operating profits for the segments of the corporation were down slightly for the first quarter of 1994 compared to the same period of 1993. In part, these results are attributable to reductions in the higher profit margin Diversified Technologies' hardware programs and increases in lower profit margin Distribution revenues. Specifically, Diversified Technologies operating profits were down 13.4%, for several reasons, including program reductions due to lower defense spending; increased competition for the awarding of defense contracts which has resulted in downward pressures on margins; ongoing research and development costs for defense conversion programs, notably the K-MAX helicopter; and a continuing shift in business mix from hardware programs to research and development type products and services with somewhat lower profit margins. Distribution segment operating profits were up 24.6% for the first quarter of 1994 compared to the same period a year ago. These results are primarily attributable to the industrial technologies business and reflect improvements in the domestic economy. - 7 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued Interest expense for the first three months of 1994 declined 53% from the same period a year ago. This reduction is primarily a result of the corporation's exchange of $61.8 million of its 6% convertible subordinated debentures for $57.2 million of its preferred stock during the fourth quarter of 1993. The consolidated effective income tax rate for the three month period was 40.6% in both 1994 and 1993. Net earnings were $4.2 million for the first quarter of 1994, compared to $4.0 million for the same period of 1993. After giving effect to the preferred stock dividend requirements, earnings available to common shareholders were $3.3 million, compared to $4.0 million in 1993. Liquidity and Capital Resources - - ------------------------------- The corporation's cash flow from operations has generally been sufficient to finance a significant portion of its working capital and other capital requirements. For general borrowing purposes, the corporation has revolving credit agreements involving several banks located in the U.S., Canada, and Europe. These agreements currently provide unsecured lines of credit totaling $145 million and contain various covenants, including working capital and tangible net worth requirements. Eighty million dollars of the total revolving credit commitment is scheduled to end in January, 1996, with the balance expiring in September, 1996, at which times borrowings may be converted to term loans. There were no borrowings under these agreements during the first three months of 1994 or the same period of 1993. The corporation also maintains other short-term credit arrangements with various banks. As of March 31, 1994, these borrowings were at $26.7 million. For the first quarter of 1994, average bank borrowings against these short-term lines were approximately $30.7 million, compared to $32.3 million for the same period of 1993. As of March 31, 1994, the corporation had repurchased 653,000 Class A shares under its stock repurchase program (which was renewed in 1992 with an authorization to purchase up to 700,000 Class A shares). The purpose of the program is to meet the needs of the Employees Stock Purchase Plan and Stock Incentive Plan. Management believes that the corporation's cash flow from operations and available unused bank lines of credit under its revolving credit agreements will be sufficient to finance working capital and other capital requirements for the foreseeable future. - 8 - KAMAN CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION Item 4. Submission of Matters to Vote of Security Holders The annual meeting of the shareholders of the corporation was held at the offices of the corporation on April 18, 1994. Following is a brief description of each matter voted upon at the meeting: 1. Election of Directors --------------------- The following twelve (12) individuals were elected directors of the corporation to serve until the next annual meeting and until their successors have been elected: Frank C. Carlucci Hartzel Z. Lebed John A. DiBiaggio Harvey S. Levenson Edythe J. Gaines Walter H. Monteith, Jr. Huntington Hardisty John S. Murtha Charles H. Kaman Robert L. Newell C. William Kaman II Wanda Lee Rogers For each director, the Class B shareholders voted 634,934 shares in favor; 14 shares against; no abstentions; and no broker non-votes. 2. Authorization to Elect One Additional Director ---------------------------------------------- A proposal to authorize the Board of Directors to elect one (1) additional director during the ensuing year was adopted by the Class B shareholders who voted 634,948 shares in favor; none against; no abstentions; and no broker non-votes. 3. Approval of 1993 Stock Incentive Plan ------------------------------------- A proposal to approve the corporation's 1993 Stock Incentive Plan (which plan is basically an extension of the corporation's 1983 Stock Incentive Plan which expired on October 31, 1993) was adopted by the Class A and Class B shareholders. The Class A shareholders voted 9,403,897 shares in favor; 592,889 against; 496,261 in abstention; with 196,036 broker non-votes. The Class B shareholders voted 601,474 shares in favor; none against; no abstentions; and 33,474 broker non-votes. 4. Approval of Employees Stock Purchase Plan Amendment --------------------------------------------------- A proposal to approve the amendment of the corporation's Employees Stock Purchase Plan to replenish the authorized shares under the plan to 1.5 million Class A shares was also adopted by the Class A and Class B shareholders. The Class A shareholders voted 9,731,526 shares in favor; 498,172 against; 459,385 in abstention; and no broker non-votes. The Class B shareholders voted 601,474 shares in favor; none against; no abstentions; and 33,474 broker non-votes. - 9 - KAMAN CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 5. Approval of Amended and Restated Certificate of Incorporation ------------------------------------------------------------- A proposal to amend and restate the corporation's certificate of incorporation, essentially in order to consolidate amendments which have been adopted during the last several years was adopted by the Class B shareholders, who voted 601,474 shares in favor; none against; no abstentions; and 33,474 broker non- votes. 6. Appointment of KPMG Peat Marwick -------------------------------- A proposal to appoint KPMG Peat Marwick as auditors for the corporation during the ensuing year was adopted by the Class B shareholders, who voted 634,948 shares in favor; none against; no abstentions; and no broker non-votes. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KAMAN CORPORATION Registrant Date: May 10, 1994 By Harvey S. Levenson /s/ --------------------------- Harvey S. Levenson President (Duly Authorized Officer) Date: May 10, 1994 By Robert M. Garneau /s/ ---------------------------- Robert M. Garneau Senior Vice President and Chief Financial Officer - 10 - KAMAN CORPORATION AND SUBSIDIARIES Index to Exhibits Page in Sequentially Numbered Copy -------------------- Exhibit 11 Earnings Per Share Computation 12 - 11 - KAMAN CORPORATION AND SUBSIDIARIES EXHIBIT 11 - EARNINGS PER COMMON SHARE COMPUTATION (In thousands except per share amounts) For the Three Months Ended March 31, -------------------- 1994 1993 ---- ----
- 12 -Primary: Net earnings $ 4,240 $ 4,012 ======== ======== Preferred stock dividend requirement $ (929) $ --- ======== ======== Net earnings applicable to common stock $ 3,311 $ 4,012 ======== ======== Weighted average number of common shares outstanding 18,127 18,069 Weighted average shares issuable on exercise of dilutive stock options 109 166 -------- -------- Total 18,236 18,235 ======== ======== Net earnings per common share - primary $ .18 $ .22 ======== ======== Fully diluted: Net earnings applicable to common stock $ 3,311 $ 4,012 Elimination of interest expense on 6% subordinated convertible debentures (net after taxes) * 847 Elimination of preferred stock dividend requirement * --- -------- -------- Net earnings(as adjusted) $ 3,311 $ 4,859 ======== ======== Weighted average number of shares outstanding including shares issuable on stock option exercises 18,236 18,235 Shares issuable on conversion of 6% subordinated convertible debentures * 4,067 Shares issuable on conversion of Series 2 preferred stock * --- Additional shares using ending market price instead of average market on treasury method use of stock option proceeds --- 13 -------- -------- Total 18,236 22,315 ======== ======== Net earnings per common share - fully diluted $ .18 $ .22 ======== ======== * Anti-dilutive and accordingly not included in the computation