UNITED STATES 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, 2004. -------------- 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 as specified in its charter) Connecticut 06-0613548 - -------------------------------- ------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 1332 Blue Hills Avenue Bloomfield, Connecticut 06002 ---------------------------------------- (Address of principal executive offices) (860) 243-7100 -------------------------------------------------- Registrant's telephone number, including area code Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2) Yes x No --- --- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of May 1, 2004: Class A Common 22,014,578 Class B Common 667,814 Page 1 of 35 Pages KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION Item 1. Financial Statements: Condensed Consolidated Balance Sheets(In thousands) Assets March 31, 2004 December 31, 2003 ------ ------------------ -------------------
See accompanying notes to condensed consolidated financial statements. - 3 -Current assets: Cash and cash equivalents $ 9,825 $ 7,130 Accounts receivable, net 209,442 193,243 Inventories: Contracts and other work in process $ 63,748 60,125 Finished goods 27,553 24,785 Merchandise for resale 97,901 189,202 94,042 178,952 ------- ------- Income taxes receivable - 1,043 Deferred income taxes 26,026 26,026 Other current assets 11,627 12,457 ------- ------- Total current assets 446,122 418,851 Property, plant & equip., at cost 155,098 154,031 Less accumulated depreciation and amortization 104,537 102,982 ------- ------- Net property, plant & equipment 50,561 51,049 Goodwill 38,794 38,638 Other intangible assets, net 14,682 14,709 Other assets, net 4,843 5,064 ------- ------- Total assets $555,002 $528,311 ======= ======= - 2 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION Item 1. Financial Statements: Condensed Consolidated Balance Sheets(In thousands) (continued) March 31, 2004 December 31, 2003 ------------------ ------------------- Liabilities and Shareholders' Equity ------------------------------------ Current liabilities: Notes payable, incl. current portion of long-term debt $ 10,857 $ 7,673 Accounts payable - trade 58,810 59,600 Accrued contract loss 23,805 23,611 Accrued restructuring costs 5,445 6,109 Other accrued liabilities 24,141 26,123 Advances on contracts 19,966 19,693 Other current liabilities 16,810 17,746 Income taxes payable 759 - ------- ------- Total current liabilities 160,593 160,555 Long-term debt, excl. current portion 62,620 36,624 Other long-term liabilities 28,491 27,949 Shareholders' equity 303,298 303,183 ------- ------- Total liabilities and Shareholders' Equity $555,002 $528,311 ======= ======= KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 1. Financial Statements, Continued: Condensed Consolidated Statements of Operations (In thousands except per share amounts) For the Three Months Ended March 31, -------------------- 2004 2003 ---- ----
See accompanying notes to condensed consolidated financial statements. - 4 -Net sales $245,678 $216,010 Costs and expenses: Cost of sales 183,023 159,956 Selling, general and administrative expense 59,427 49,137 Other operating (income)/expense, net (318) (273) Net gain on sale of product line and other assets - (16,849) Interest expense, net 795 768 Other expense, net 484 405 -------- -------- 243,411 193,144 -------- -------- Earnings before income taxes 2,267 22,866 Income taxes 975 8,900 -------- -------- Net earnings $ 1,292 $ 13,966 ======== ======== Net earnings per share: Basic $ .06 $ .62 Diluted $ .06 $ .60 ======== ======== Average shares outstanding: Basic 22,648 22,495 Diluted 23,660 23,480 ======== ======== Dividends declared per share $ .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, -------------------- 2004 2003 --------- --------
See accompanying notes to condensed consolidated financial statements. - 6 -Cash flows from operating activities: Net earnings $ 1,292 $13,966 Depreciation and amortization 2,238 2,626 Net gain on sale of product line and other assets - (16,849) Other, net 1,025 191 Changes in current assets and liabilities, excluding effects of divestiture: Accounts receivable (16,125) (24,209) Inventory (10,163) (7,108) Income taxes receivable 1,043 5,192 Accounts payable (807) 6,393 Advances on contracts 273 (747) Income taxes payable 763 5,260 Changes in other current assets and liabilities (2,598) (1,510) -------- -------- Cash provided by (used in) operating activities (23,059) (16,795) -------- -------- Cash flows from investing activities: Proceeds from sale of product line and other assets - 28,021 Expenditures for property, plant & equipment (1,586) (1,789) Other, net 370 (461) -------- -------- Cash provided by (used in) investing activities (1,216) 25,771 -------- -------- - 5 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 1. Financial Statements, Continued: Condensed Consolidated Statements of Cash Flows (continued) (In thousands) For the Three Months Ended March 31, -------------------- 2004 2003 --------- -------- Cash flows from financing activities: Changes to notes payable 3,158 1,926 Additions/(reductions) to long-term debt 25,996 (5,897) Dividends paid (2,489) (2,471) Purchases of treasury stock (4) (205) Proceeds from sale of stock 309 324 -------- -------- Cash provided by (used in) financing activities 26,970 (6,323) -------- -------- Net increase (decrease) in cash and cash equivalents 2,695 2,653 Cash and cash equivalents at beginning of period 7,130 5,571 -------- -------- Cash and cash equivalents at end of period $ 9,825 $ 8,224 ======== ======== 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, 2003 condensed consolidated balance sheet amounts have been derived from the previously audited consolidated balance sheet of Kaman Corporation and subsidiaries. In the opinion of management, the balance of the condensed financial information reflects all adjustments which are 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 corporation reports results based on fiscal quarters that generally consist of two four week months and one five week month, with the fiscal year beginning on January 1 and ending on December 31. The statements should be read in conjunction with the consolidated financial statements and notes included in the corporation's annual report on Form 10K for the year ended December 31, 2003. The results of operations for the interim period presented are not necessarily indicative of trends or of results to be expected for the entire year. Cash Flow Items - --------------- Cash payments for interest were $1,093 and $1,168 for the three months ended March 31, 2004 and 2003, respectively. Net cash payments (refunds) for income taxes for the comparable periods were $(791) and $(1,568), respectively. Comprehensive Income - -------------------- Comprehensive income was $2,104 and $14,023 for the three months ended March 31, 2004 and 2003, respectively. Comprehensive income includes net earnings plus foreign currency translation adjustments. - 7 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 1. Financial Statements, Continued: Notes to Condensed Consolidated Financial Statements (In thousands) Net Gain on Sale of Product Line - -------------------------------- On January 15, 2003, the corporation sold its electric motor and drive business to DRS Technologies, Inc. The results for the first quarter 2003 include an after-tax gain of $10,100 as a result of this transaction. Accounts Receivable - ------------------- Accounts receivable consist of the following: March 31, December 31, 2004 2003 -------- -----------
- 11 -Trade receivables, net of allowance for doubtful accounts of $3,698 in 2004, $3,340 in 2003 $ 84,028 $ 74,816 U.S. Government contracts: Billed 10,279 9,355 Recoverable costs and accrued profit - not billed 9,452 10,014 Commercial and other government contracts: Billed 22,369 19,711 Recoverable costs and accrued profit - not billed 83,314 79,347 -------- -------- Total $209,442 $193,243 ======== ======== - 8 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 1. Financial Statements, Continued: Notes to Condensed Consolidated Financial Statements (In thousands) Shareholders' Equity - -------------------- Changes in shareholders' equity were as follows: Balance, January 1, 2004 $303,183 Net earnings 1,292 Foreign currency translation adjustment 812 -------- Comprehensive income 2,104 Dividends declared (2,493) Purchase of treasury stock (4) Employee stock plans 508 -------- Balance, March 31, 2004 $303,298 ======== Restructuring Costs - ------------------- The following table displays the activity and balances of these pre-tax charges as of and for the three months ended March 31, 2004: Deductions ---------- Balance at Cash Non-Cash Balance at December 31, 2003 Payments Charges March 31, 2004 ----------------- -------- -------- -------------- Restructuring costs - ------------------- Employee termination benefits $ 1,109 $ 501 $ - $ 608 Facility closings 5,000 163 - 4,837 ------ ------ ------ ------ Total restructuring costs $ 6,109 $ 664 $ - $ 5,445 ====== ====== ====== ====== - 9 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 1. Financial Statements, Continued: Notes to Condensed Consolidated Financial Statements (In thousands) Pension Cost - ------------ Components of net pension cost are as follows: For the Three Months Ended March 31, ---------------------- 2004 2003 ------- ------- Service cost for benefits earned during the quarter $ 2,558 $ 2,500 Interest cost on projected benefit obligation 6,163 6,087 Expected return on plan assets (7,169) (7,862) Net amortization and deferral 2 2 ------- ------- Net pension cost $ 1,554 $ 727 ======= ======= - 10 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 1. Financial Statements, Continued: Notes to Condensed Consolidated Financial Statements (In thousands) Business Segments - ----------------- Summarized financial information by business segment is as follows: For the Three Months Ended March 31, ------------------------- 2004 2003 --------- --------- Net sales: Aerospace $ 59,730 $ 61,724 Industrial Distribution 145,607 120,266 Music 40,341 34,020 -------- -------- $245,678 $216,010 ======== ======== Operating profit: Aerospace $ 3,553 $ 7,210 Industrial Distribution 5,030 2,797 Music 1,981 1,847 -------- -------- 10,564 11,854 Corporate and other expense, net (7,502) (5,069) Interest expense, net (795) (768) Gain on sale of product line and other assets - 16,849 -------- -------- Earnings before income taxes $ 2,267 $ 22,866 ======== ======== March 31, December 31, 2004 2003 -------- -------- Identifiable assets: Aerospace $306,261 $294,345 Industrial Distribution 159,713 150,115 Music 66,607 65,704 Corporate 22,421 18,147 -------- -------- $555,002 $528,311 ======== ======== KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 1. Financial Statements, Continued: Notes to Condensed Consolidated Financial Statements (In thousands except per share amounts) Stock Option Accounting - ----------------------- The following table reflects pro forma net earnings and earnings per share had the corporation elected to record employee stock option expense based on the fair value methodology: For the Three Months Ended March 31, ------------------------- 2004 2003 -------- --------
These pro forma amounts may not be representative of future disclosures since the estimated fair value of stock options is amortized to expense over the vesting period, and additional options may be granted in future years. The pro forma amounts assume that the corporation had been following the fair value approach since the beginning. - 12 -Net earnings: As reported $ 1,292 $13,966 Less stock option expense, net of tax effect (170) (193) ------ ------ Pro forma net earnings $ 1,122 $13,773 ====== ====== Earnings per share - basic: As reported 0.06 0.62 Pro forma after option expense 0.05 0.61 Earnings per share - diluted: As reported 0.06 0.60 Pro forma after option expense 0.05 0.60 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 - --------------------- Overview Kaman Corporation is composed of three business segments: Aerospace, Industrial Distribution, and Music. The Aerospace segment's programs are conducted through three principal businesses, consisting of Aircraft Structures and Components, Advanced Technology Products, and Helicopter Programs. The Aircraft Structures and Components business involves aerostructure and helicopter subcontract work as well as manufacture of components such as self-lubricating bearings and driveline couplings for aircraft applications. For the first quarter of 2004, this business constituted about 56 percent of Aerospace segment sales, compared to about 52 percent for the same period of 2003. The aerostructure subcontract element of this business continues to be an area of strategic emphasis for the corporation. The Advanced Technology Products business manufactures products involving systems, devices and assemblies for a variety of military and commercial applications, including safe, arm and fuzing devices for several missile and bomb programs; precision non-contact measuring systems for industrial and scientific use; electro-optical target detection and designation systems; and high reliability memory systems for airborne, shipboard, and ground- based programs. For the first quarter of 2004, this business constituted about 19 percent of segment sales, the same as the comparable period of 2003. The Advanced Technology Products business is also an area of strategic emphasis for the corporation. Helicopter Programs include prime helicopter production along with spare parts and support. The helicopters produced by this business are the SH-2G multi-mission maritime helicopter and the K-MAX medium to heavy external lift helicopter. For the first quarter of 2004, this business constituted about 25 percent of segment sales, compared to about 29 percent in the same period of 2003. The Industrial Distribution segment is the third largest U.S. industrial distributor servicing the bearing, electrical/mechanical power transmission, fluid power, motion control and materials handling markets in the United States. This segment offers more than 1.5 million items, as well as value-added services to a base of more than 50,000 customers spanning nearly every sector of U.S. industry from about 200 branches and regional distribution centers in the U.S., Canada, and Mexico. - 13 - 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 Music segment is America's largest independent distributor of music instruments and accessories, and is involved in some combination of designing, manufacturing, marketing and distributing more than 15,000 products from five facilities located in the United States and Canada, to retailers of all sizes for musicians at all skill levels. In general, results for the first quarter of 2004 reflect improvement in market conditions for the corporation's Industrial Distribution segment, continued resilience in consumer spending patterns for the Music segment and the strength of military and commercial aftermarket sales in the Kamatics specialty bearing business (part of the Aerospace segment), offset by continued weakness in other operations of the Aerospace segment. Aerospace segment results reflect the impact of adverse conditions in the commercial aerospace market, competitive conditions in the market for detail parts manufacturing and assembly work, the stop-work mode of the MD Helicopters, Inc. ("MDHI") subcontract program, the delay experienced in final qualification of the Joint Programmable Fuze ("JPF") program, and cost and operational issues associated with the segment's expanded facility in Jacksonville, Florida (the facility to which most of the work formerly conducted at the Moosup, Connecticut facility was moved in 2003). For discussion of the activities of, and factors affecting, each of these business segments, please refer to the specific discussions below. TABULAR PRESENTATION OF FINANCIAL RESULTS - ----------------------------------------- The following table summarizes certain financial results of the corporation and its business segments for the first quarter of 2004 compared to the same period of 2003: - 14 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Segment Information (In millions) For the Three Months Ended March 31, 2004 2003 - ----------------------------------- ---- ----
- 15 -Net sales: Aerospace $ 59.8 $ 61.7 Industrial Distribution 145.6 120.3 Music 40.3 34.0 - ------------------------------------------------------------ $ 245.7 $ 216.0 ============================================================ Operating profit: Aerospace $ 3.6 $ 7.2 Industrial Distribution 5.0 2.8 Music 2.0 1.9 - ------------------------------------------------------------ 10.6 11.9 Corporate and other expense, net (7.5) (5.0) Interest expense, net (.8) (.8) Gain on sale of product line and other assets - 16.8 - ------------------------------------------------------------ Earnings before income taxes 2.3 22.9 Income taxes 1.0 8.9 - ------------------------------------------------------------ Net earnings $ 1.3 $ 14.0 ============================================================ KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) DISCUSSION AND ANALYSIS OF NET SALES BY BUSINESS SEGMENT - -------------------------------------------------------- AEROSPACE SEGMENT Aerospace segment net sales decreased 3.2% for the first quarter of 2004 compared to the same period of 2003. Performance was adversely affected by several factors at the Kaman Aerospace subsidiary. These factors are discussed below. Aircraft Structures and Components First quarter 2004 sales for Aircraft Structures and Components were $33.5 million compared to $32.2 million in the 2003 period. This business involves commercial and military aircraft programs, including production of aircraft subassemblies and other parts for Boeing commercial airliners and the C-17 military transport, as well as helicopter subcontract work. This has become a core business area for the corporation and a focal point for future growth. The business is being affected by the current weak market for commercial airliners which has resulted in order stretch-outs, pricing pressures, and a lower volume of deliveries than anticipated for Boeing commercial aircraft programs. In addition, the market for detail parts manufacturing and assembly work remains very competitive industry wide and in this environment new business awards have been difficult to achieve. These conditions will make it more difficult for the Jacksonville facility to develop an optimal business base, at least until the commercial aviation market improves. In this environment, military work, including the C-17, which is one of the operation's largest programs, has been an important contributor. Helicopter subcontract work involves commercial and military helicopter programs. Commercial programs include multi-year contracts for production of fuselages for the MDHI 500 and 600 series helicopters and composite rotor blades for the MD Explorer helicopter. Total orders from MDHI have run at significantly lower rates than originally anticipated due to lower than expected demand. The corporation's investment in these contracts consists principally of $4.3 million in billed receivables and $16.2 million in recoverable costs - not billed (including start-up costs and - 16 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) other program expenditures) as of March 31, 2004. In 2003, the corporation received payments totaling $4.4 million, primarily for items shipped during 2003. The corporation received nominal payments in the first quarter of 2004. The recoverability of unbilled costs will depend to a significant extent upon MDHI's future requirements through 2013, the year to which both contracts extend. The corporation stopped production on these contracts in the second quarter of 2003, but continues to work closely with the customer to resolve overall payment issues and establish conditions under which production could be resumed, including the timing thereof. Based upon MDHI's projected future requirements and inventory on hand at both MDHI and the corporation, this would not be expected to occur until late in the second half of 2004 at the earliest. Although the outcome is not certain, the corporation understands that MDHI management is pursuing strategies to improve its current financial and operational circumstances. The segment's Kamatics operation manufactures proprietary self- lubricating bearings used in commercial airliners operated by the major and regional airlines, and increasingly, in military programs. This business had increased sales in the first quarter of 2004, with military and commercial aftermarket sales helping to offset continued softness in commercial and regional aircraft manufacturing. Boeing is Kamatics' largest commercial customer. Advanced Technology Products First quarter 2004 sales for Advanced Technology Products were $11.3 million compared to $11.8 million in the 2003 period. This business manufactures products for military and commercial markets, including safe, arm and fuzing devices for a number of major missile and bomb programs as well as precision measuring systems, mass memory systems and electro-optic systems. The Kaman Dayron operation, acquired in 2002, manufactures fuzes for a variety of munitions programs and has the contract to develop a fuze for the U.S. Air Force and Navy JPF program. Securing the JPF program was the principal motivation for making the Dayron acquisition. Final qualification testing conducted by the company as the prime contractor was completed in the fourth quarter of 2003 and final qualification testing conducted by the Air Force was completed in April 2004. The company has recently received written notification from the Air Force that it has successfully met the testing criteria established in its contract and the Air Force has - 17 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) authorized production deliveries as provided in the contract. Production unit sales had been delayed during 2003 and the first quarter of 2004 due to issues with earlier final qualification testing results. Since 2001, the company's Electro-Optics Development Center ("EODC") has been teamed with the University of Arizona to build a 6.5-meter aperture collimator that will be used for testing large optical systems in a vacuum environment. EODC has been working under a $12.8 million fixed-price contract to design and fabricate the structural, electrical, mechanical and software control systems for the collimator. EODC has experienced significant cost growth in its portion of the program as a result of changes in the scope of the project and management believes that there is a valid basis to recover these amounts. As a result, in April 2004, the company submitted a claim in the amount of $6.3 million to the University to recover these additional costs. Helicopter Programs First quarter 2004 sales for Helicopter Programs were $15.0 million compared to $17.7 million in the 2003 period. The segment's helicopter products include the SH-2G multi-mission maritime helicopter and the K-MAX medium-to-heavy external lift helicopter. SH-2G-related sales were the predominant source of sales in the first quarter. The SH-2G helicopter program 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 in service with the Egyptian Air Force and the New Zealand and Polish navies. Work continues on the SH-2G(A) program for Australia which involves eleven helicopters with support, including a support services facility, for the Royal Australian Navy ("RAN"). The total contract has a current anticipated value of about $734 million. The helicopter production portion of the program is valued at approximately $598 million, of which about 97% has been recorded as sales through March 31, 2004. As previously reported, this contract is now in a loss position due to increases in anticipated costs to complete the program. The in-service support center contract has a current anticipated value of about $136 million of which about 25% has been recorded as sales through March 31, 2004. - 18 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Production of the eleven SH-2G(A) aircraft for the program is essentially complete. As previously reported, the aircraft lack the full Integrated Tactical Avionics System ("ITAS") software and progress is continuing on this element of the program. In September 2003, the RAN began the process of provisional acceptance of these aircraft. Since that time, four of the aircraft have completed the provisional acceptance process. The corporation expects to be able to deliver the full capability of the ITAS weapons system software in late 2004 with final acceptance anticipated in 2005. While management believes that the corporation's reserves are sufficient to cover estimated costs to complete the program, final development of the software by subcontractors and its integration, which is the corporation's responsibility, are underway, and these are complex tasks. The corporation continues to pursue other opportunities for the SH-2G helicopter in the international defense market. This market is highly competitive and heavily influenced by economic and political conditions. However, management continues to believe 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. 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 corporation the ability to utilize certain inventory for support of its SH-2G programs. With respect to its K-MAX helicopter program, the segment continues to pursue both a sale and short-term lease program for existing K-MAX aircraft inventory that was written down to estimated fair market value in 2002. There were no sales or new leases of K-MAX helicopters in the first quarter of 2004. During April 2004, a short-term K-MAX lease transaction was implemented. There are six aircraft remaining available for sale, including three aircraft currently leased to customers. Kaman Aerospace Subsidiary Reorganization To establish clear lines of responsibility and improve decision- making, the Aerospace subsidiary recently initiated a reorganization to address differences between its various businesses and their specific requirements. Three divisions are - 19 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) being created to replace portions of the existing structure: Kaman Aerostructures, having production facilities in Jacksonville and Wichita, Kans., will be responsible for fixed-wing aircraft subcontract programs; Kaman Fuzing, having production facilities in Middletown, Conn. and Orlando, Fla., will be responsible for fuze operations; and Kaman Helicopters, having production facilities in Bloomfield, Conn., will be responsible for prime and subcontract helicopter programs, including the SH-2G, K-MAX and MDHI programs. By placing purchasing, operations, finance, contracts and human resources personnel within each division, management expects that each will be better able to effectively manage expenses for the services and/or functions they require, and achieve optimal customer service. It is expected that the reorganization will be completed by the end of 2004. It is also expected that the Kamatics operation will remain a separate business within the segment. INDUSTRIAL DISTRIBUTION SEGMENT Industrial Distribution segment net sales increased about 21% in the first quarter of 2004 compared to the same period of 2003. Sales for the first quarter included $7.2 million from the former Industrial Supplies, Inc. which was acquired in the fourth quarter of 2003. Results for the quarter largely reflect an improvement in the U.S. economic environment and to some extent, the inclusion of four extra sales days in the first quarter of 2004 compared to the same period of 2003. Management also believes that pent up demand from those customers who have delayed purchases because of economic conditions was a factor in the segment's increased sales for the first quarter and it is not currently expected that the level of increase will recur in future periods. This segment is the third largest U.S. industrial distributor servicing the bearing, electrical/mechanical power transmission, fluid power, motion control and materials handling markets in the United States. The segment offers more than 1.5 million items, as well as value-added services, to a base of more than 50,000 customers spanning nearly every sector of U.S. industry. Because the segment's customers include a broad spectrum of U.S. industry, this business is directly affected by national macroeconomic variables such as the percentage of plant capacity utilization within the U.S. industrial base, and the business tends to track the U.S. Industrial Production Index with a short lag. - 20 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Success in the segment's markets requires a combination of competitive pricing and value-added services that save the customer money while helping it become more efficient and productive. Over the past several years, large companies have increasingly centralized their purchasing, focusing on suppliers that can service all of their plant locations across a wide geographic area. To meet these requirements, the segment has expanded its geographic presence through the selective opening of new branches and acquisitions in key markets of the upper Midwest, the South, and Mexico. The segment's footprint of nearly 200 branches and regional distribution centers now covers 70 of the top 100 industrial markets in the United States. Management's goal is to grow the Industrial Distribution segment by expanding into additional areas that enhance its ability to compete for large regional and national customer accounts. MUSIC SEGMENT Music segment net sales increased 18.6% for the first quarter of 2004 compared to the same period in 2003. Results reflect improvement in U.S. economic conditions. Sales increased to both independent retailers and large chain store accounts, however sales to the large chain store accounts were particularly strong. The segment is America's largest independent distributor of music instruments and accessories and is involved in some combination of designing, manufacturing, marketing and distributing more than 15,000 products from five facilities in the U.S. and Canada to retailers of all sizes for musicians of all skill levels. The segment's array of instruments includes premier and proprietary products, such as the Ovation (registered trademark) and Hamer (registered trademark) guitars, and Takamine (registered trademark) guitars under an exclusive distribution agreement. The segment has also significantly extended its line of percussion products and accessories over the past few years, augmenting its CB, Toca (registered trademark) and Gibraltar (registered trademark) lines to include an exclusive distribution agreement with Gretsch (registered trademark) drums and acquiring Latin Percussion (a leading distributor of hand percussion instruments) and Genz Benz (an amplification equipment manufacturer). The segment continues to seek opportunities to add exclusive premier brand product lines that would build upon the segment's market position. - 21 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) DISCUSSION AND ANALYSIS OF OPERATING PROFITS - CONSOLIDATED - ----------------------------------------------------------- As would be expected with any commercial business, operating profits is a key indicator utilized by management in its evaluation of the performance of its business segments. The net operating profit of the corporation's segments, in total, for the first quarter of 2004 decreased 11% compared to the same period of 2003. Both the Industrial Distribution and Music segment experienced increased operating profits for the quarter, however those increases were more than offset by continued difficulties in the Aerospace segment. Another key performance indicator for management is each business segment's return on investment. Management defines "return on investment" as operating profits divided by average investment for each segment. Average investment is computed by combining equity, intercompany borrowings plus letters of credit and, for foreign subsidiaries, outside debt financings. The corporation's goals for return on investment are expressed as a range, with 15% at the lower end of the range. For the first quarter of 2004, the Industrial Distribution segment performed above the minimum percentage, the Music segment performed slightly below the minimum, and the Aerospace segment performed substantially below the minimum. DISCUSSION AND ANALYSIS OF OPERATING PROFITS BY BUSINESS SEGMENT - ---------------------------------------------------------------- AEROSPACE SEGMENT Kamatics was the source of a significant portion of total segment operating profits for the first quarter of 2004 on the strength of military and commercial aftermarket sales. First quarter results include $0.2 million in ongoing relocation and re-certification costs related to the transfer of operations in 2003 from the company's Moosup facility to the Jacksonville facility and $0.8 million in underutilized facility costs primarily associated with the absence of new helicopter orders at the Bloomfield facility. - 22 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) For the Kaman Aerospace subsidiary, results for the first quarter of 2004 reflect the continuing effects of adverse conditions in the commercial aerospace market, competitive conditions in the market for detail parts manufacturing and assembly work, the stop-work mode of the MDHI subcontract program, the delay experienced in final qualification of the JPF program, and cost and operational issues associated with the segment's expanded Jacksonville facility. The Jacksonville facility is operational and ready to accept new business, although the plant's capabilities are taking time to develop. Production man-hour performance is improving, however on certain programs it continues to be well below the levels that had existed at the Moosup facility in large part due to the continuing process of training a new labor force. Management is working to improve this measure of performance. As it pursues that goal, it is also working to reestablish the level of product quality and customer quality rankings that had been maintained at the Moosup facility, and believes that, overall, progress is being made. As the Jacksonville plant continues to develop its capabilities, operating costs have also increased due to manpower and third-party processing costs that have been required to expedite deliveries along with the standard FAA and customer requirements to requalify manufacturing and quality processes made necessary by the move. Management believes that these conditions are temporary and continues to expect that the move from Moosup to Jacksonville will ultimately provide a lower cost structure from which to compete. These factors have led to lower sales volume, as discussed earlier, which in turn has resulted in overhead and general and administrative expenses being absorbed at higher rates by active segment programs. These circumstances have led to generally lower profitability or losses for these programs. Aerospace segment management continues to evaluate ways to grow in a competitive global business environment that requires progressively lower costs. In addition to actions taken to shift production to other U.S. locations expected to provide lower cost structures, such as Jacksonville, the segment is also continuing to adjust its employment levels and is taking other actions, as appropriate, to help bring its cost structure in line with the reduced business base. - 23 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Despite current circumstances, to date, management has elected to continue expenditures for longer-term competitiveness in the commercial aircraft market and to maintain its prime helicopter program capabilities. In this regard, management is considering exercising its contract option to purchase the facility located on its Bloomfield campus that it has leased from the Navy for several decades. Finally, with respect to the $11.0 million charge taken in 2002 for the cost of phasing out the corporation's Moosup facility, $3.3 million represents severance costs at the Moosup and Bloomfield locations, which is expected to involve the separation from service of approximately 400 employees. A total of about $2.7 million had been paid for 324 such separations as of March 31, 2004. INDUSTRIAL DISTRIBUTION SEGMENT Operating profits in this segment for the first quarter of 2004 increased about 80% compared to the same period of 2003, primarily due to increased sales which have resulted from improvement in the U.S. economy. The operating profits increase also reflects the impact of the company's `lean-thinking' practices and maintenance of cost controls that were implemented by the segment during the difficult economic times of the past few years. In addition, vendor incentives in the form of rebates (i.e., vendors provide inventory purchase rebates to distributors at specified volume- purchasing levels) continue to be an important contributor to operating profits. MUSIC SEGMENT Operating profits in this segment for the first quarter of 2004 increased 7% compared to the same period of 2003 primarily as a result of increased sales that were substantially offset by lower gross profit margins. The gross profit rate was lower for the quarter, due to the addition of several lower margin products to the segment's catalog, a shift in sales mix toward lower margin products, increased guitar manufacturing costs in the U.S., and increased sales of products to some larger customers that carry a lower gross profit rate. - 24 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) NET EARNINGS AND CERTAIN EXPENSE ITEMS - -------------------------------------- Net earnings for the quarter ended March 31, 2004 were $1.3 million, or $0.06 per share diluted, compared to $14.0 million, or $0.60 per share diluted, the previous year. First quarter 2003 results include an after-tax gain of $10.1 million, or $0.45 per share, from the sale of the corporation's Electromagnetics Development Center. Selling, general and administrative expenses for the first quarter of 2004 were higher than last year, for several reasons, including increased sales, the ISI acquisition in the Industrial Distribution segment, increases in Aerospace segment general and administrative expenses and increases in corporate expenses, principally attributable to pension and stock appreciation rights expense. Management is also monitoring the effects of rising steel prices and energy costs, which could impact each of the segments. For the quarter ended March 31, 2004, interest expense increased 3.0% due to higher average borrowings. The consolidated effective income tax rate for the quarter ended March 31, 2004 was 43.0% compared to 38.9% the previous year. For a discussion of Financial Accounting Standards Board Statements applicable to the corporation, please refer to the corporation's annual report on Form 10-K for the year ended December 31, 2003. CRITICAL ACCOUNTING ESTIMATES - ----------------------------- There have been no significant changes in the corporation's critical accounting estimates in the quarter ended March 31, 2004. Please see the corporation's annual report on Form 10-K for the year ended December 31, 2003 for discussion of the most significant areas currently involving management judgments and estimates. - 25 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Discussion and Analysis of Cash Flows Management assesses the corporation's liquidity in terms of its ability to generate cash to fund operating, investing and financing activities. Cash flow generation is another key performance indicator reviewed by management in evaluating business segment performance. Significant factors affecting the management of liquidity might include cash flows generated from or used by operating activities, capital expenditures, investments in the business segments and their programs, acquisitions, dividends, adequacy of available bank lines of credit, and factors which might otherwise affect the corporation's business and operations generally, as described below under the heading "Forward-Looking Statements". Management believes that the corporation's annual 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 next twelve-month period. Management is aware that earnings for the first quarter of 2004 were weak and the principal source of that weakness is in the Aerospace segment which has been adversely affected by conditions in the commercial aerospace market and certain operational issues discussed above. Aerospace management is working to address these issues through its sales efforts as well as ongoing evaluation of its current cost structure with the goal of improving operating profits and cash flow generation. Operating activities used cash in the amount of $23.1 million in the first quarter of 2004, principally due to increases in accounts receivable and inventories in both the Aerospace and Industrial Distribution segments. The increases in accounts receivable were attributable to higher sales in the Industrial Distribution segment and largely to the Australia SH-2G program in the Aerospace segment. In the Industrial Distribution segment, the inventory increase was due to ongoing purchases while in the Aerospace segment, the majority of the increase was attributable to the fuzing operation. Investing activities used cash in the amount of $1.2 million in the first quarter of 2004, principally due to capital expenditures for property, plant and equipment. Cash provided by financing - 26 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) activities for the quarter ended March 31, 2004 consisted largely of an increase in borrowings, offset somewhat by the payment of dividends to shareholders. Contractual Obligations Overall, there has been no substantial change in the corporation's contractual obligations as of March 31, 2004, except that there were increased borrowings during the quarter (long-term debt). Please see the corporation's annual report on Form 10-K for the year ended December 31, 2003 for a discussion of its contractual obligations. Off-Balance Sheet Arrangements There has been no substantial change in the corporation's off- balance sheet arrangements as of March 31, 2004. Please see the corporation's annual report on Form 10-K for the year ended December 31, 2003 for a discussion of such arrangements. Other Sources/Uses of Capital At March 31, 2004, the corporation had $19.9 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. As of March 31, 2004, a total of 269,150 shares had been repurchased since inception of this replenishment program. For a discussion of share repurchase activity during the first quarter of 2004, please refer to Part II, Item 2, of this report. - 27 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Financing Arrangements Total average bank borrowings for the quarter ended March 31, 2004 were $46.0 million compared to $39.9 million for same period last year. The corporation maintains a revolving credit agreement (the "Revolving Credit Agreement") with several banks that provides a $150 million five-year commitment scheduled to expire in November 2005 with interest at current market rates. Facility fees are charged on the basis of the corporation's credit rating from Standard & Poors which is a BBB investment grade rating. Management believes that this is a favorable rating for a corporation of its size and the rating was reaffirmed by Standard & Poors in April 2004. The rating is accompanied by the "negative outlook" which was assigned to the corporation and several other aerospace companies in the wake of the events of September 11, 2001 and the subsequent weakness in aerospace markets. Under the terms of the current Revolving Credit Agreement, if this rating should decrease, the effect would be to increase interest rates charged and facility fees. 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 net interest expense, on the basis of a rolling four quarters and a ratio of consolidated total indebtedness to total capitalization of not more than 55%. In connection with the acquisition of RWG in 2002, the corporation established a 9.5 million Euro term loan and revolving credit facility (the "Euro Credit Agreement") with Wachovia Bank, National Association ("Wachovia"), one of its Revolving Credit Agreement lenders having offices in London. In general, the Euro Credit Agreement contains the same financial covenants as the Revolving Credit Agreement described previously and the term of the Euro Credit Agreement expires at the same time as the Revolving Credit Agreement. Letters of credit are generally considered borrowings for purposes of the Revolving Credit Agreement. A total of $29.8 million in letters of credit were outstanding at March 31, 2004, a significant portion of which is related to the Australia SH-2G(A) program. The letter of credit for the production portion of the Australia program now has a balance of $20 million, which is expected to remain in place until final acceptance of the aircraft by the RAN. - 28 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) FORWARD-LOOKING STATEMENTS - -------------------------- This report contains forward-looking information relating to the corporation's business and prospects, including aerostructures and helicopter subcontract programs and components, advanced technology products, the SH-2G and K-MAX helicopter programs, the industrial distribution and music 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, particularly industrial production and commercial aviation, and global economic conditions; 5) satisfactory completion of the Australian SH- 2G(A)program, including successful completion and integration of the full ITAS software; 6) recovery of the corporation's investment in the MDHI contracts; 7) achievement of and actual costs for recertifying products and processes in connection with start-up of the expanded Jacksonville facility; 8) receipt of production orders for the JPF program; 9) satisfactory resolution of the EODC Collimator claim and completion of contract performance; 10) achievement of enhanced business base in the Aerospace segment in order to better absorb overhead and general and administrative expenses; 11) successful sale or lease of existing K-MAX inventory; 12) the condition of consumer markets for musical instruments; 13) profitable integration of acquired businesses into the corporation's operations; 14) changes in supplier sales or vendor incentive policies; 15) the effect of price increases or decreases; and 16) currency exchange rates, taxes, changes in laws and regulations, interest rates, inflation rates, general business conditions and other factors. Any forward-looking information should be considered with these factors in mind. - 29 - KAMAN CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION, Continued Item 3. Quantitative and Qualitative Disclosures About Market Risk There has been no significant change in the corporation's exposure to market risk during the quarter ended March 31, 2004. Please see the corporation's annual report on Form 10-K for the year ended December 31, 2003 for discussion of the corporation's exposure to market risk. Item 4. Controls and Procedures (a) Disclosure Controls and Procedures The corporation's management, with the participation of the corporation's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the corporation's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the corporation's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the corporation's disclosure controls and procedures were effective. We note, however, that even the most well designed and executed control systems are subject to inherent limitations and as a result, the control system can provide reasonable but not absolute assurance that its objectives will be met under all potential future conditions. The corporation's Chief Executive Officer and Chief Financial Officer have concluded that the corporation's disclosure controls and procedures are effective at a reasonable assurance level. (b) Internal Control Over Financial Reporting There have not been any changes in the corporation's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15 (f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the corporation's internal control over financial reporting. - 30 - KAMAN CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities (e)Purchases of Equity Securities 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. The following table provides information about purchases by the corporation during the quarter ended March 31, 2004 of equity securities that are registered by the corporation pursuant to Section 12 of the Exchange Act: Total Number of Shares Maximum Purchased as Number of Total Part of Shares That Number Average Publicly May Yet Be of Shares Price Paid Announced Purchased Under Period Purchased per Share Plan the Plan - ------- --------- ---------- ------------ ---------------
- 31 -01/01/04- 01/31/04 - - 268,850 1,131,150 02/01/04- 02/29/04 - - 268,850 1,131,150 03/01/04- 03/31/04 300 $14.11 269,150 1,130,850 KAMAN CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION, Continued 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 20, 2004. Following is a brief description of each matter voted upon at the meeting: 1. Election of Directors --------------------- The following ten (10) individuals were elected directors of the corporation to serve until the next annual meeting and until their successors have been elected: Brian E. Barents E. Reeves Callaway III John A. DiBiaggio Edwin A. Huston C. William Kaman II Eileen S. Kraus Paul R. Kuhn Walter H. Monteith, Jr. Wanda Lee Rogers Richard J. Swift For each director, the Class B shareholders voted 514,667 shares in favor and authority was withheld with respect to 51,177 shares. There were no abstentions or broker non-votes. 2. Approval of 2003 Stock Incentive Plan, as amended ------------------------------------------------- A proposal to approve the corporation's 2003 Stock Incentive Plan, as amended, was adopted by the Class B shareholders who voted 505,768 shares in favor, 8,899 shares opposed, and 51,177 shares abstaining. There were no broker non-votes. 3. Ratification of KPMG LLP Appointment ------------------------------------ A proposal to ratify the appointment of KPMG LLP as the corporation's auditors during the ensuing year was adopted by the Class B shareholders who voted 565,844 in favor, none against, with no abstentions and no broker non-votes. - 32 - KAMAN CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits to Form 10-Q: 11 Earnings Per Share Computation 31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14 under the Securities and Exchange Act of 1934 31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14 under the Securities and Exchange Act of 1934 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K: (1) A report on Form 8-K was filed on January 29, 2004, reporting that the corporation's 6% Convertible Subordinated Debentures where moved from the NASDAQ Small Cap Market listing to the OTC Bulletin Board. (2) A report on Form 8-K was filed on February 11 2004, reporting the corporation's financial results for the fourth quarter and year ended December 31, 2003. (3) A report on Form 8-K was filed on April 21, 2004, reporting the corporation's financial results for the quarter ended March 31, 2004, and describing actions taken at the shareholders' meeting on April 20, 2004. - 33 - KAMAN CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION 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 5, 2004 By: /s/ Paul R. Kuhn ----------------------------- Paul R. Kuhn Chairman, President and Chief Executive Officer Date: May 5, 2004 By: /s/ Robert M. Garneau ----------------------------- Robert M. Garneau Executive Vice President and Chief Financial Officer - 34 - KAMAN CORPORATION AND SUBSIDIARIES Index to Exhibits Exhibit 11 Earnings Per Share Computation Attached Exhibit 31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14 under the Securities and Exchange Act of 1934 Attached Exhibit 31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14 under the Securities and Exchange Act of 1934 Attached Exhibit 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Attached Exhibit 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Attached - 35 -
KAMAN CORPORATION AND SUBSIDIARIES EXHIBIT 11 - EARNINGS PER SHARE COMPUTATION (IN THOUSANDS EXCEPT PER SHARE AMOUNT) For the Three Months Ended March 31, --------------------- 2004 2003 -------- --------
Basic: Net earnings $ 1,292 $ 13,966 ======== ======== Weighted average number of shares outstanding 22,648 22,495 ======== ======== Net earnings per share - basic $ .06 $ .62 ======== ======== Diluted: Net earnings $ 1,292 $ 13,966 Elimination of interest expense on 6% subordinated convertible debentures (net after taxes) 182 213 -------- -------- Net earnings (as adjusted) $ 1,474 $ 14,179 ======== ======== Weighted average number of shares outstanding 22,648 22,495 Weighted average shares issuable on conversion of 6% subordinated convertible debentures 910 981 Weighted average shares issuable on exercise of diluted stock options 102 4 -------- -------- Total 23,660 23,480 ======== ======== Net earnings per share - diluted* $ .06 $ .60 ======== ======== * Excluded from the net earnings per share - diluted calculation are options granted to employees that are anti-dilutive based on the average stock price for the year.
Exhibit 31.1 Certification Pursuant to Rule 13a-14 under the Securities and Exchange Act of 1934 I, Paul R. Kuhn, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Kaman Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d- 15(e) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Intentionally omitted pursuant to the guidance contained in SEC Release 33-8238. (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 5, 2004 By: /s/ Paul R. Kuhn --------------------------- Paul R. Kuhn Chairman, President and Chief Executive Officer
Exhibit 31.2 Certification Pursuant to Rule 13a-14 under the Securities and Exchange Act of 1934 I, Robert M. Garneau, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Kaman Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Intentionally omitted pursuant to the guidance contained in SEC Release 33-8238. (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 5, 2004 By: /s/ Robert M. Garneau --------------------------- Robert M. Garneau Executive Vice President and Chief Financial Officer
Exhibit 32.1 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Quarterly Report of Kaman Corporation (the "Corporation") on Form 10-Q for the fiscal quarter ended March 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Paul R. Kuhn, Chairman, President and Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: 1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and 2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation. By: /s/ Paul R. Kuhn - ------------------------- Paul R. Kuhn Chairman, President and Chief Executive Officer May 5, 2004
Exhibit 32.2 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Quarterly Report of Kaman Corporation (the "Corporation") on Form 10-Q for the fiscal quarter ended March 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert M. Garneau, Executive Vice President and Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: 1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and 2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation. By: /s/ Robert M. Garneau - ------------------------- Robert M. Garneau Executive Vice President and Chief Financial Officer May 5, 2004