x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
FOR
THE FISCAL YEAR ENDED December
31, 2005.
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934 FOR THE TRANSITION PERIOD FROM _________ TO
_________
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Connecticut
|
06-0613548
|
|
(State
or other jurisdiction
|
(I.R.S.
Employer
|
|
of
incorporation or organization)
|
Identification
No.)
|
-
Common Stock, Par Value $1.00
|
-
6% Convertible Subordinated Debentures Due
2012
|
Common
Stock
|
23,911,138
|
$1
par value per share
|
Document
|
Parts
Into Which Incorporated
|
|
Annual
Report to Shareholders for the Fiscal Year Ended December 31, 2005
(Annual
Report)
|
Parts
II and IV
|
|
Proxy
Statement for the Annual Meeting of Shareholders to be held April
18, 2006
(Proxy Statement)
|
Part
III
|
Page
#
|
||
Part
I
|
||
Item
1
|
Business
|
4 |
Item
1A
|
Risk
Factors
|
14 |
Item
1B
|
Unresolved
Staff Comments
|
17 |
Item
2
|
Properties
|
17 |
Item
3
|
Legal
Proceedings
|
18 |
Item
4
|
Submission
of Matters to a Vote of Security Holders
|
18 |
Part
II
|
||
Item
5
|
Market
for Registrant’s Common Equity and Related Shareholder Matters
|
19 |
Item
6
|
Selected
Financial Data
|
20 |
Item
7
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
20 |
Item
7A
|
Quantitative
and Qualitative Disclosures About Market Risk
|
20 |
Item
8
|
Financial
Statements and Supplementary Data
|
21 |
Item
9
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
21 |
Item
9A
|
Controls
and Procedures
|
21 |
Item
9B
|
Other
Information
|
22 |
Part
III
|
||
Item
10
|
Directors
and Executive Officers of the Registrant
|
23 |
Item
11
|
Executive
Compensation
|
24 |
Item
12
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
24 |
Item
13
|
Certain
Relationships and Related Transactions
|
24 |
Item
14
|
Principal
Accounting Fees and Services
|
24 |
Part
IV
|
||
Item
15
|
Exhibits
and Financial Statement Schedules
|
24 |
· |
On
November 3, 2005, the company was successful in completing a
recapitalization of its capital stock, replacing the company's previously
existing dual class common stock structure (consisting of Class A
non-voting common stock and Class B voting common stock) with one
class of
voting common stock. Each share of Class A non-voting common stock
became
one share of voting common stock while each share of Class B voting
common
stock was reclassified into 3.58 shares of voting common stock, or
alternatively, at the election of the holder of such shares, 1.84
shares
of voting common stock and an amount in cash equal to $27.10. The
company
paid $13.9 million to shareholders electing the part cash/part stock
option. A total of 1,498,851 shares of common stock were issued in
exchange for 667,814 shares of Class B voting common
stock.
|
· |
The
company's consolidated net sales for calendar year 2005 increased
10.7
percent to $1.1 billion compared to $995.2 million in 2004. Net earnings
for calendar year 2005 were $13.0 million, or $0.57 per share diluted,
compared to a net loss of $11.8 million, or a loss of $0.52 per share
diluted, in 2004. Results for 2005 include the benefit of $7.7 million
in
pretax income arising primarily from MD Helicopters, Inc. (“MDHI”)
recoveries described below offset by $16.8 million in pretax charges
for
the Australia SH-2G(A) helicopter program. The 2005 results also
include
the impact of $8.3 million of primarily nondeductible expenses for
stock
appreciation rights triggered by a significant increase in the company’s
stock price in 2005 and $3.3 million in nondeductible expenses for
legal
and financial advisory fees related to the company’s recapitalization. The
2004 loss was primarily attributable to $41.6 million of previously
disclosed negative adjustments taken in the Aerospace segment.
|
· |
Calendar
year 2005 was the first full year of Aerospace segment operations
utilizing the division realignment that created the Aerostructures,
Fuzing, and Helicopters Divisions as operating units of Kaman Aerospace
Corporation. The reorganization has provided meaningful enhancement
to
management visibility and accountability within the segment and each
operating unit reported positive operating results for 2005. During
2005,
the Helicopters Division also continued to work on its SH-2G(A) helicopter
program for the government of Australia and the company recorded
the
additional charges described above related to cost growth associated
with
this program. The first fully functional aircraft is targeted for
delivery
in mid-2006.
|
· |
In
the fourth quarter of 2005, we entered into a multi-year agreement
with
MDHI for the production of rotor blades and other components, primarily
for the MD Explorer helicopter. During 2005, the company recorded
$7.7
million of pretax income largely representing recovery of past due
MDHI
receivables that the company had written off in
2004.
|
· |
The
Music segment acquired MBT Holdings Corp. (now known as Musicorp)
in
August 2005. Musicorp had been the second largest U.S. distributor
of
musical instruments and accessories after the company. This acquisition
is
expected to allow us to take advantage of economies of scale needed
to
continue to succeed in a highly competitive industry.
|
· |
In
August 2005, the company replaced its then maturing $150 million
revolving
credit agreement with a new $150 million revolving credit agreement
that
expires in August 2010. Standard and Poors issued the company a BBB-
investment grade rating (with negative outlook which was changed
to
“stable” when the recapitalization was completed) in connection with the
new revolver.
|
Years
Ended December 31
|
|||||
2003
|
2004
|
2005
|
|||
Aerospace
|
28.1%
|
25.4%
|
26.1%
|
||
Industrial
Distribution
|
55.7%
|
58.5%
|
56.5%
|
||
Music
|
16.2%
|
16.1%
|
17.4%
|
||
Total
|
100.0%
|
100.0%
|
100.0%
|
Aerospace
|
1,533
|
|
Industrial
Distribution
|
1,538
|
|
Music
|
546
|
|
Corporate
Headquarters
|
95
|
|
Total
|
3,712
|
U.S.
PATENTS
|
FOREIGN
PATENTS
|
||||||
Segment
|
Issued
|
Pending
|
Issued
|
Pending
|
|||
Aerospace
|
37
|
5
|
8
|
3
|
|||
Industrial
Distribution
|
0
|
0
|
0
|
0
|
|||
Music
|
27
|
1
|
30
|
41
|
|||
Total
|
64
|
6
|
38
|
44
|
· |
accounting
for start-up costs;
|
· |
the
effect of non-recurring work ;
|
· |
delay
in contract start-up;
|
· |
transition
of work from the customer or other
vendors;
|
· |
claims
or unapproved change orders ;
|
· |
product
warranty issues;
|
· |
delay
in completion of certain programs for which inventory has been built
up;
and
|
· |
accrual
of contract losses.
|
· |
Assimilating
operations and products may be unexpectedly
difficult;
|
· |
Management’s
attention may be diverted from other business
concerns;
|
· |
The
company may enter markets in which it has limited or no direct experience;
|
· |
The
company may lose key employees of an acquired business;
and
|
· |
The
company may not realize the value of the acquired assets relative
to the
price paid.
|
· |
changes
in demand for our products;
|
· |
introduction,
enhancement or announcement of products by us or our
competitors;
|
· |
market
acceptance of our new products;
|
· |
the
growth rates of certain market segments in which we
compete;
|
· |
size
and timing of significant orders;
|
· |
budgeting
cycles of customers;
|
· |
mix
of distribution channels;
|
· |
mix
of products and services sold;
|
· |
mix
of international and North American
revenues;
|
· |
fluctuations
in currency exchange rates;
|
· |
changes
in the level of operating expenses;
|
· |
changes
in our sales incentive plans;
|
· |
inventory
obsolescence;
|
· |
additional
contract losses;
|
· |
completion
or announcement of acquisitions by us or our competitors;
and
|
· |
general
economic conditions in regions in which we conduct
business.
|
· |
longer
payment cycles;
|
· |
greater
difficulties in accounts receivable
collection;
|
· |
unexpected
changes in regulatory requirements;
|
· |
export
restrictions, tariffs and other trade
barriers;
|
· |
difficulties
in staffing and managing foreign
operations;
|
· |
seasonal
reductions in business activity during the summer months in Europe
and
certain other parts of the world;
|
· |
economic
instability in emerging markets;
|
· |
potentially
adverse tax consequences; and
|
· |
cultural
and legal differences in the conduct of
business.
|
SEGMENT
|
SQUARE
FEET
|
(in
thousands as of 12/31/05)
|
|
Aerospace
|
1,817
|
Industrial
Distribution
|
1,455
|
Music
|
883
|
Corporate
Headquarters
|
40
|
Total
|
4,195
|
QUARTERLY
COMMON STOCK INFORMATION
|
|||||||
High
|
Low
|
Close
|
Dividend
|
||||
2005
|
|||||||
First
|
$
13.38
|
$
10.95
|
$
12.45
|
$
.11
|
|||
Second*
|
18.17
|
11.54
|
18.04
|
.125
|
|||
Third
|
24.48
|
17.47
|
20.45
|
.125
|
|||
Fourth
|
23.95
|
17.10
|
19.69
|
.125
|
|||
2004
|
|||||||
First
|
$
15.23
|
$
12.57
|
$
14.88
|
$
.11
|
|||
Second
|
15.49
|
10.91
|
13.99
|
.11
|
|||
Third
|
13.96
|
10.92
|
11.94
|
.11
|
|||
Fourth
|
12.93
|
10.71
|
12.65
|
.11
|
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
|
||||
10/01/05-
|
||||||||
10/31/05
|
-
|
-
|
269,611
|
1,130,389
|
||||
11/01/05-
|
||||||||
11/30/05
|
-
|
-
|
269,611
|
1,130,389
|
||||
12/01/05-
|
||||||||
12/31/05
|
-
|
-
|
269,611
|
1,130,389
|
T.
Jack Cahill
|
Mr.
Cahill, 57, has been President of Kaman Industrial Technologies
Corporation, a subsidiary of the company, since 1993. He has held
various
positions with the company since 1975.
|
Candace
A. Clark
|
Ms.
Clark, 51, has been Senior Vice President, Chief Legal Officer and
Secretary since 1996. Ms. Clark has held various positions with the
company since 1985.
|
Ronald
M. Galla
|
Mr.
Galla, 54, has been Senior Vice President and Chief Information Officer
since 1995. Mr. Galla has been director of the company's Management
Information Systems since 1984.
|
Robert
M. Garneau
|
Mr.
Garneau, 61, has been Executive Vice President and Chief Financial
Officer
since 1995. Mr. Garneau has held various positions with the company
since
1981.
|
Russell
H. Jones
|
Mr.
Jones, 61, has been Senior Vice President, Chief Investment Officer,
and
Treasurer since 2003. Prior to that he served as Vice President and
Treasurer. He has held various positions with the company since
1973.
|
John
C. Kornegay
|
Mr.
Kornegay, 56, has been President of Kamatics Corporation, a subsidiary
of
the company, since 1999. He has held various positions with Kamatics
Corporation since 1988.
|
Paul
R. Kuhn
|
Mr.
Kuhn, 64, has been a Director since 1999. He has been President and
Chief
Executive Officer of the company since August 1999 and was appointed
to
the additional position of Chairman in 2001.
|
Robert
H. Saunders, Jr.
|
Mr.
Saunders, 64, has been President of Kaman Music Corporation, a subsidiary
of the company, since 1998. He has held various positions with the
company
since 1995.
|
|
|
KAMAN
CORPORATION
(Registrant)
|
By:
|
/s/ Paul
R. Kuhn
|
|
|
Paul
R. Kuhn
|
|
|
Chairman,
President and
|
|
|
Chief
Executive Officer
|
Signature
|
Title:
|
Date:
|
|
/s/ Paul
R. Kuhn
|
|||
Paul
R. Kuhn
|
Chairman,
President and
Chief
Executive Officer
|
February
27, 2006
|
|
/s/ Robert
M. Garneau
|
|||
Robert
M. Garneau
|
Executive
Vice President
and
Chief Financial Officer
(Principal
Financial and
Accounting
Officer)
|
February
27, 2006
|
|
/s/ Paul
R. Kuhn
|
|||
Paul
R. Kuhn
|
February
27, 2006
|
||
Attorney-in-Fact
for:
|
|||
Brian
E. Barents
|
Director
|
||
E.
Reeves Callaway III
|
Director
|
||
John
A. DiBiaggio
|
Director
|
||
Edwin
A. Huston
|
Director
|
||
Eileen
S. Kraus
|
Director
|
||
Wanda
L. Rogers
|
Director
|
||
Richard
J. Swift
|
Director
|
YEAR
ENDED DECEMBER 31, 2005
|
|||||||||
Additions
|
|||||||||
DESCRIPTION
|
BALANCE
JANUARY 1,
2005
|
CHARGED
TO COSTS AND EXPENSES
|
OTHERS
|
DEDUCTIONS
|
BALANCE
DECEMBER
31, 2005
|
||||
Allowance
for doubtful accounts
|
$
5,520
|
$
944
|
$
167 (B)
|
$
3,231 (A)
|
$
3,400
|
YEAR
ENDED DECEMBER 31, 2004
|
|||||||||
Additions
|
|||||||||
DESCRIPTION
|
BALANCE
JANUARY 1,
2004
|
CHARGED
TO COSTS AND EXPENSES
|
OTHERS
|
DEDUCTIONS
|
BALANCE
DECEMBER 31,
2004
|
||||
Allowance
for doubtful accounts
|
$
3,340
|
$
3,768
|
-
|
$
1,588 (A)
|
$
5,520
|
YEAR
ENDED DECEMBER 31, 2003
|
|||||||||
Additions
|
|||||||||
DESCRIPTION
|
BALANCE
JANUARY 1,
2003
|
CHARGED
TO COSTS AND EXPENSES
|
OTHERS
|
DEDUCTIONS
|
BALANCE
DECEMBER 31,
2003
|
||||
Allowance
for doubtful accounts
|
$
2,853
|
$
1,507
|
$
150 (B)
|
$
1,170 (A)
|
$
3,340
|
YEAR
ENDED DECEMBER 31, 2005
|
|||||||
Additions
|
|||||||
DESCRIPTION
|
BALANCE
JANUARY 1,
2005
|
CURRENT
YEAR PROVISION (BENEFIT)
|
OTHERS
|
BALANCE
DECEMBER 31,
2005
|
|||
Valuation
allowance on deferred tax assets
|
$
2,163
|
$
786
|
$
(66)
|
$
2,883
|
YEAR
ENDED DECEMBER 31, 2004
|
|||||||
Additions
|
|||||||
DESCRIPTION
|
BALANCE
JANUARY 1,
2004
|
CURRENT
YEAR PROVISION (BENEFIT)
|
OTHERS
|
BALANCE
DECEMBER 31,
2004
|
|||
Valuation
allowance on deferred tax assets
|
$
2,005
|
$
109
|
$49
|
$
2,163
|
YEAR
ENDED DECEMBER 31, 2003
|
|||||||
Additions
|
|||||||
DESCRIPTION
|
BALANCE
JANUARY 1,
2003
|
CURRENT
YEAR PROVISION (BENEFIT)
|
OTHERS
|
BALANCE
DECEMBER 31,
2003
|
|||
Valuation
allowance on deferred tax assets
|
$
1,082
|
$
799
|
$
124
|
$
2,005
|
Exhibit
3a
|
The
Amended and Restated Certificate of Incorporation of the company,
was
filed as Exhibit 3.1 to Form 8-K with the Securities and Exchange
Commission on November 4, 2005, Document
No. 0001341004-05-000188.
|
by
reference
|
Exhibit
3b
|
The
Amended and Restated Bylaws of the company were filed as Exhibit
3.2 to
Form 8-K with the Securities and Exchange Commission on November
4, 2005,
Document
No. 0001341004-05-000188.
|
by
reference
|
Exhibit
4a
|
Indenture
between the company and Manufacturers Hanover Trust Company, as Indenture
Trustee, with respect to the company's 6% Convertible Subordinated
Debentures was filed as Exhibit 4.1 to Registration Statement No.
33 11599
on Form S-2 of the company filed with the Securities and Exchange
Commission on January 29, 1987.
|
by
reference
|
Exhibit
4b
|
Revolving
Credit Agreement between the company 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
August 5, 2005 was filed as Exhibit 1 to Form 8-K filed with the
Securities and Exchange Commission on August 8, 2005, Document
No. 0000054381-05-000051.
|
by
reference
|
Exhibit
4c
|
Credit
Agreement between the company, RWG Frankenjura-Industrie Flugwerklager
GmbH, and Wachovia Bank, N.A., dated July 29, 2002 was filed as Exhibit
4c
to Form 10-K filed with the Securities and Exchange Commission on
March
26, 2003, Document
No. 0000054381-03-000079. Amendments to the Agreement were filed as
Exhibit 4.2 to Form 10-Q, Document
No. 0000054381-03-000124, filed on November 5, 2003, Exhibit 4b to
Form 8-K, Document No. 0000054381-04-000070,
filed on October 21, 2004. Schedules and Exhibits to the Credit Agreement,
which are listed in its Table of Contents, are omitted but will be
provided to the Commission upon request.
|
by
reference
|
Exhibit
10a
|
The
Kaman Corporation 2003 Stock Incentive Plan effective November 1,
2003, as
amended effective February 17, 2004, was filed as Exhibit 10a to
the
company’s Form 10-K, Document
No. 0000054381-04-000032 filed with the Securities and Exchange
Commission on March 5, 2004.
|
by
reference
|
Exhibit
10b
|
The
Kaman Corporation Employees Stock Purchase Plan as amended effective
November 18, 1997 was filed as a Exhibit 10b to the company's Form
10-K Document
No. 0000054381-98-09 filed with the Securities and Exchange Commission
on March 16, 1998.
|
by
reference
|
Exhibit
10c
|
The
Kaman Corporation Supplemental Employees' Retirement Plan was filed
as
Exhibit 10c to the company's Forms 10-K, Document
No. 0000054381-01-000005 filed with the Securities and Exchange
Commission on March 15, 2001, and the Plan as amended was filed as
Exhibit
10c to the company’s Form 10-K, Document
No. 0000054381-04-000032 filed with the Securities and Exchange
Commission on March 5, 2004.
|
by
reference
|
Exhibit
10d
|
The
Kaman Corporation Amended and Restated Deferred Compensation Plan
(Effective as of November 12, 2002, except where otherwise indicated
was
filed as a Exhibit 10d to the company's Form 10-K Document
No. 0000054381-03-000079 filed with the Securities and Exchange
Commission on March 26, 2003. Amendments to the Plan were filed as
Exhibit
10d to the company’s Form 10-K, Document
No. 0000054381-04-000032 filed with the Securities and Exchange
Commission on March 5, 2004, and Exhibit 10(a) on the company’s Form 10-Q,
Document
No. 0000054381-04-000059 filed with the Securities and Exchange
Commission on August 3, 2004.
|
by
reference
|
Exhibit
10e(i)
|
Kaman
Corporation Cash Bonus Plan (Amended and Restated Effective as of
January
1, 2002) and First Amendment thereto were filed as Exhibit 10e to
the
company's Form 10-K Document
No. 0000054381-02-000005, filed with the Securities and Exchange
Commission on March 14, 2002. Amendments to the Plan were filed as
Exhibit
10e(ii) to the company's Form 10-K Document
No. 0000054381-03-000079 filed with the Securities and Exchange
Commission on March 26, 2003 and Exhibit 10(b) on the company’s Form 10-Q,
Document
No. 0000054381-04-000059 filed with the Securities and Exchange
Commission on August 3, 2004.
|
by
reference
|
Exhibit
10g
|
Employment
Agreements and Change in Control Agreements with certain executive
officers have been filed as exhibits to the following filings by
the
company 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. 54381-01-500016) filed November 14, 2001.
|
by
reference
|
Exhibit
10g (i)
|
Amendment
No. 1 to Amended and Restated Employment Agreement between Paul R.
Kuhn
and Kaman Corporation, dated as of September 11, 2001, was filed
as an
exhibit to the company’s Form 10-K, Document No. 0000054381-04-000032
filed with the Securities and Exchange Commission on March 5,
2004.
|
by
reference
|
Exhibit
10g(ii)
|
Amendment
No. 2 to Amended and Restated Employment Agreement between Paul R.
Kuhn
and Kaman Corporation, dated as of February 17, 2004, was filed as
an
exhibit to the company’s Form 10-K, Document
No. 0000054381-04-000032 filed with the Securities and Exchange
Commission on March 5, 2004.
|
by
reference
|
Exhibit
10g(iii)
|
Second
Amended and Restated Change in Control Agreement between Paul R.
Kuhn and
Kaman Corporation, dated as of November 11, 2003, was filed as an
exhibit
to the company’s Form 10-K, Document
No. 0000054381-04-000032 filed with the Securities and Exchange
Commission on March 5, 2004.
|
by
reference
|
Exhibit
10g(iv)
|
Amendment
No. 1 to Amended and Restated Employment Agreement between Candace
A.
Clark and Kaman Corporation, dated as of February 17, 2004, was filed
as
an exhibit to the company’s Form 10-K, Document
No. 0000054381-04-000032 filed with the Securities and Exchange
Commission on March 5, 2004.
|
by
reference
|
Exhibit
10g (v)
|
Amendment
No. 1 to Amended and Restated Employment Agreement between Ronald
M. Galla
and Kaman Corporation, dated as of February 17, 2004, was filed as
an
exhibit to the company’s Form 10-K, Document
No. 0000054381-04-000032 filed with the Securities and Exchange
Commission on March 5, 2004.
|
by
reference
|
Exhibit
10g (vi)
|
Amendment
No. 1 to Amended and Restated Employment Agreement between Robert
M.
Garneau and Kaman Corporation, dated as of February 17, 2004, was
filed as
an exhibit to the company’s Form 10-K, Document
No. 0000054381-04-000032 filed with the Securities and Exchange
Commission on March 5, 2004.
|
by
reference
|
Exhibit
10g (vii)
|
Amendment
No. 1 to Amended and Restated Employment Agreement between T. Jack
Cahill
and Kaman Industrial Technologies Corporation, dated as of February
17,
2004, was filed as an exhibit to the company’s Form 10-K, Document
No. 0000054381-04-000032 filed with the Securities and Exchange
Commission on March 5, 2004.
|
by
reference
|
Exhibit
10g (viii)
|
Amendment
No. 2 to Amended and Restated Employment Agreement between Joseph
H.
Lubenstein and Kaman Aerospace Corporation, dated as of February
17, 2004,
was filed as an exhibit to the company’s Form 10-K, Document
No. 0000054381-04-000032 filed with the Securities and Exchange
Commission on March 5, 2004.
|
by
reference
|
Exhibit
10g (ix)
|
Amendment
No. 1 to Amended and Restated Employment Agreement between Robert
H.
Saunders, Jr. and Kaman Music Corporation, dated as of February 17,
2004,
was filed as an exhibit to the company’s Form 10-K, Document
No. 0000054381-04-000032 filed with the Securities and Exchange
Commission on March 5, 2004.
|
by
reference
|
Exhibit
10g (x)
|
Second
Addendum to Change in Control Agreement between Candace A. Clark
and Kaman
Corporation, dated as of November 11, 2003, was filed as an exhibit
to the
company’s Form 10-K, Document
No. 0000054381-04-000032 filed with the Securities and Exchange
Commission on March 5, 2004.
|
by
reference
|
Exhibit
10g (xi)
|
Second
Addendum to Change in Control Agreement between Ronald M. Galla and
Kaman
Corporation, dated as of November 11, 2003, was filed as an exhibit
to the
company’s Form 10-K, Document
No. 0000054381-04-000032 filed with the Securities and Exchange
Commission on March 5, 2004.
|
by
reference
|
Exhibit
10g (xii)
|
Second
Addendum to Change in Control Agreement between Robert M. Garneau
and
Kaman Corporation, dated as of November 11, 2003, was filed as an
exhibit
to the company’s Form 10-K, Document
No. 0000054381-04-000032 filed with the Securities and Exchange
Commission on March 5, 2004.
|
by
reference
|
Exhibit
10g (xiii)
|
Second
Addendum to Change in Control Agreement between T. Jack Cahill and
Kaman
Industrial Technologies Corporation, dated as of November 11, 2003,
was
filed as an exhibit to the company’s Form 10-K, Document
No. 0000054381-04-000032 filed with the Securities and Exchange
Commission on March 5, 2004.
|
by
reference
|
Exhibit
10g (xiv)
|
Second
Addendum to Change in Control Agreement between Joseph H. Lubenstein
and
Kaman Aerospace Corporation, dated as of November 11, 2003, was filed
as
an exhibit to the company’s Form 10-K, Document
No. 0000054381-04-000032 filed with the Securities and Exchange
Commission on March 5, 2004.
|
by
reference
|
Exhibit
10g (xv)
|
Second
Addendum to Change in Control Agreement between Robert H. Saunders,
Jr.
and Kaman Music Corporation, dated as of November 11, 2003, was filed
as
an exhibit to the company’s Form 10-K, Document
No. 0000054381-04-000032 filed with the Securities and Exchange
Commission on March 5, 2004.
|
by
reference
|
Exhibit
10g (xvi)
|
Employment
Agreement between Russell H. Jones and Kaman Corporation, dated as
of
February 17, 2004, was filed as an exhibit to the company’s Form 10-K, Document
No. 0000054381-04-000032 filed with the Securities and Exchange
Commission on March 5, 2004.
|
by
reference
|
Exhibit
10g (xvii)
|
Change
in Control Agreement between Russell H. Jones and Kaman Corporation,
dated
as of November 11, 2003, was filed as an exhibit to the company’s Form
10-K, Document
No. 0000054381-04-000032 filed with the Securities and Exchange
Commission on March 5, 2004.
|
by
reference
|
Exhibit
10h (i)
|
Form
of Incentive Stock Option Agreement under the Kaman Corporation 2003
Stock
Incentive Plan was filed as an Exhibit 10h(i) to the company’s Form 10-K,
Document
No. 0000054381-05-000024 filed with the Securities and Exchange
Commission on March 16, 2005.
|
by
reference
|
Exhibit
10h (ii)
|
Form
of Non-Statutory Stock Option Agreement under the Kaman Corporation
2003
Stock Incentive Plan was filed as an Exhibit 10h(ii) to the company’s Form
10-K, Document
No. 0000054381-05-000024 filed with the Securities and Exchange
Commission on March 16, 2005.
|
by
reference
|
Exhibit
10h (iii)
|
Form
of Stock Appreciation Right Agreement under the Kaman Corporation
2003
Stock Incentive Plan was filed as an Exhibit 10h(iii) to the company’s
Form 10-K, Document
No. 0000054381-05-000024 filed with the Securities and Exchange
Commission on March 16, 2005.
|
by
reference
|
Exhibit
10h (iv)
|
Form
of Restricted Stock Agreement under the Kaman Corporation 2003 Stock
Incentive Plan.
|
attached
|
Exhibit
10h(v)
|
Form
of Long Term Performance Award Agreement (Under the Kaman Corporation
2003
Stock Incentive Plan) was filed as an Exhibit 10.2 to the company’s Form
8-K, Document
No. 0000054381-05-000090 filed with the Securities and Exchange
Commission on November 10, 2005.
|
by
reference
|
Exhibit
10h(vi)
|
Deferred
Compensation Agreement between Kaman Corporation and John A. DiBiaggio
dated June 26, 1984 and First Amendment dated July 3,
1991.
|
attached
|
Exhibit
10h(vii)
|
Deferred
Compensation Agreement between Kaman Corporation and Eileen S. Kraus
dated
August 8, 1995 and First Amendment dated December 8, 2005
|
attached
|
Exhibit
11
|
Statement
regarding computation of per share earnings.
|
attached
|
Exhibit
13
|
Portions
of the company's 2005 Annual Report to Shareholders as required by
Items
6, 7, and 8.
|
attached
|
Exhibit
14
|
Kaman
Corporation Code of Business Conduct was filed as Exhibit 14 to the
company’s Form 10-K, Document
No. 0000054381-04-000032 filed with the Securities and Exchange
Commission on March 5, 2004.
|
by
reference
|
Exhibit
21
|
List
of Subsidiaries
|
attached
|
Exhibit
23
|
Consent
of Independent Registered Public Accounting Firm
|
attached
|
Exhibit
24
|
Power
of attorney under which this report was signed on behalf of certain
directors.
|
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
|
Participant
|
KAMAN
CORPORATION
|
||
|
By
|
|
|
Dated:
|
Its
|
KAMAN
CORPORATION
|
||||
/s/
Ruth Carenzo
|
By:
|
/s/
Harvey S. Levenson
|
||
Harvey
S. Levenson
|
||||
Its
Senior Vice President
|
||||
Duly
Authorized
|
||||
/s/
Carol Flynn
|
/s/
John A. DiBiaggio (L.S.)
|
|||
John
A. DiBiaggio
|
||||
Director
|
Witness
|
||||
(L.S.)
|
||||
Director
|
||||
KAMAN
CORPORATION
|
||||
/s/
Candace A. Clark
|
By:
|
/s/
Harvey S. Levenson
|
||
Harvey
S. Levenson
|
||||
Its
Senior Vice President
|
||||
Duly
Authorized
|
||||
/s/
Carol Flynn
|
/s/
John A. DiBiaggio (L.S.)
|
|||
John
A. DiBiaggio
|
||||
Director
|
Attention:
|
Mr.
Robert M. Garneau, Senior Vice
President
|
KAMAN
CORPORATION
|
||||
/s/
Marie A. Okun
|
By:
|
/s/
Candace A. Clark
|
||
Candace
A. Clark
|
||||
Its
Vice President
|
||||
Duly
Authorized
|
||||
/s/
Marie A. Okun
|
/s/
Eileen S.Kraus
|
|||
Director
|
KAMAN
CORPORATION
|
||||
12/12/05
|
By:
|
/s/
Candace A. Clark
|
||
Date
|
Its
SVP & CLO
|
|||
12/12/05
|
/s/
Eileen S.Kraus
|
|||
Eileen
S. Kraus
|
20051,2,4
|
20045
|
20034,6
|
20024,7
|
20014,8
|
||||||||||||
OPERATIONS
|
||||||||||||||||
Net
sales
|
$
|
1,101,196
|
$
|
995,192
|
$
|
894,499
|
$
|
880,776
|
$
|
875,869
|
||||||
Cost
of sales
|
814,385
|
770,285
|
671,591
|
723,176
|
673,004
|
|||||||||||
Selling,
general and administrative expense
|
256,241
|
239,368
|
206,416
|
199,520
|
189,530
|
|||||||||||
Net
(gain) loss on sale of product lines and other assets
|
27
|
(199
|
)
|
(18,163
|
)
|
(2,299
|
)
|
(2,637
|
)
|
|||||||
Restructuring
costs
|
—
|
—
|
—
|
8,290
|
—
|
|||||||||||
Other
operating income
|
(2,214
|
)
|
(1,731
|
)
|
(1,448
|
)
|
(1,302
|
)
|
(1,076
|
)
|
||||||
Operating
income (loss)
|
32,757
|
(12,531
|
)
|
36,103
|
(46,609
|
)
|
17,048
|
|||||||||
Interest
expense, net
|
3,046
|
3,580
|
3,008
|
2,486
|
623
|
|||||||||||
Other
expense, net
|
860
|
1,053
|
1,265
|
1,831
|
761
|
|||||||||||
Earnings
(loss) before income taxes
|
28,851
|
(17,164
|
)
|
31,830
|
(50,926
|
)
|
15,664
|
|||||||||
Income
tax benefit (expense)
|
(15,823
|
)
|
5,342
|
(12,425
|
)
|
17,325
|
(3,950
|
)
|
||||||||
Net
earnings (loss)
|
13,028
|
(11,822
|
)
|
19,405
|
(33,601
|
)
|
11,714
|
|||||||||
FINANCIAL
POSITION
|
||||||||||||||||
Current
assets
|
$
|
458,808
|
$
|
450,335
|
$
|
418,851
|
$
|
414,245
|
$
|
442,651
|
||||||
Current
liabilities
|
223,276
|
226,105
|
160,555
|
157,094
|
141,260
|
|||||||||||
Working
capital
|
235,532
|
224,230
|
258,296
|
257,151
|
301,391
|
|||||||||||
Property,
plant and equipment, net
|
51,592
|
48,958
|
51,049
|
61,635
|
60,769
|
|||||||||||
Total
assets
|
598,497
|
562,331
|
528,311
|
535,540
|
521,946
|
|||||||||||
Long-term
debt
|
62,235
|
18,522
|
36,624
|
60,132
|
23,226
|
|||||||||||
Shareholders’
equity
|
269,754
|
284,170
|
303,183
|
291,947
|
333,581
|
|||||||||||
PER
SHARE AMOUNTS
|
||||||||||||||||
Net
earnings (loss) per share - basic
|
$
|
.57
|
$
|
(.52
|
)
|
$
|
.86
|
$
|
(1.50
|
)
|
$
|
.52
|
||||
Net
earnings (loss) per share - diluted
|
.57
|
(.52
|
)
|
.86
|
(1.50
|
)
|
.52
|
|||||||||
Dividends
declared
|
.485
|
.44
|
.44
|
.44
|
.44
|
|||||||||||
Shareholders’
equity
|
11.28
|
12.48
|
13.40
|
13.00
|
14.97
|
|||||||||||
Market
price range
|
24.48
|
15.49
|
14.91
|
18.81
|
19.50
|
|||||||||||
10.95
|
10.71
|
9.40
|
9.42
|
10.90
|
||||||||||||
AVERAGE
SHARES OUTSTANDING3
|
||||||||||||||||
Basic
|
23,038
|
22,700
|
22,561
|
22,408
|
22,364
|
|||||||||||
Diluted
|
23,969
|
22,700
|
23,542
|
22,408
|
23,649
|
|||||||||||
GENERAL
STATISTICS
|
||||||||||||||||
Registered
shareholders
|
4,779
|
5,192
|
5,509
|
5,634
|
5,869
|
|||||||||||
Employees
|
3,712
|
3,581
|
3,499
|
3,615
|
3,780
|
1: | Cost of sales for 2005 includes $16,810 of accrued contract loss for the Australia SH-2G(A) helicopter program. |
2: | Results for 2005 included $8,265 of expense for the company’s stock appreciation rights, $3,339 for legal and financial advisory fees associated with the recapitalization and $7,698 recorded for recovery of previously written off amounts for MD Helicopters, Inc. (MDHI). |
3: | Average shares outstanding during 2005 increased principally due to the completion of the recapitalization in November 2005. |
4: | Includes the activity of certain significant entities from date of acquisition as further described in Note 3 in the Financial Statements including: MBT Holdings Corp.-2005; Industrial Supplies, Inc.-2003; Latin Percussion, Inc., RWG Frankenjura-Industrie Flugwerklager GmbH, Dayron, equity interest in Delamac de Mexico S.A. de C.V.-2002; Plastic Fabricating Company, Inc. and A-C Supply, Inc.-2001 |
5: | The 2004 results are net of non-cash adjustments, of approximately $41,600 for certain programs with MDHI, Royal Australian Navy, Boeing Harbour Pointe and the University of Arizona, which are further described in Note 4 and 9 in the Financial Statements. |
6: | The company sold its Electromagnetics Development Center during first quarter 2003 as further described in Note 3 in the Financial Statements. |
7: | Cost of sales for 2002 includes the write-off of K-MAX inventories and fixed assets of $50,000, Moosup facility assets of $2,679, and $20,908 of accrued contract loss for the Australia SH-2G(A) helicopter program, all of which are associated with the Aerospace segment |
8: | Results for 2001 were adversely impacted by a second quarter sales and pre-tax earnings adjustments of $31,181 attributable to the Australia SH-2G(A) helicopter program in the Aerospace segment. |
I. |
Overview
of Business
|
II. |
Executive
Summary/Highlights
|
III. |
Results
of Operations
|
IV. |
Critical
Accounting Estimates
|
V. |
Liquidity
and Capital Resources
|
VI. |
Contractual
Obligations and Off-Balance Sheet
Arrangements
|
VII. |
Recent
Accounting Standards
|
I. |
OVERVIEW
OF
BUSINESS
|
II. |
EXECUTIVE
SUMMARY
|
· |
In
November 2005, the company successfully completed our recapitalization.
A
single class of voting common stock replaced the former dual class
structure, which featured Class A non-voting stock and Class B voting
stock. All of our shareholders now have the advantage of our new
“one-share, one-vote” capital structure. We believe that, with this new
structure, our shareholders will have greater opportunity to realize
the
underlying value of the company’s assets and
businesses.
|
· |
We
have completed the first full year of operations for the newly realigned
Aerospace segment with each operating unit within the segment reporting
positive operating results for
2005.
|
· |
Operations
at the Jacksonville facility continue to improve and we are now focused
on
our growth strategies including an emphasis on subcontracting exemplified
by our contract to manufacture cockpits for several models of the
Sikorsky
BLACK HAWK helicopter.
|
· |
During
2005, we recorded an additional $16.8 million charge related to an
increase in anticipated costs to complete the SH-2G(A) program for
the
RAN. We continue to work on this complex program and believe that
we will
deliver the first fully functional aircraft in mid-2006.
|
· |
The
Music segment acquired MBT Holdings Corp. and its subsidiaries (now
known
as Musicorp) in August 2005. This acquisition will allow us to take
advantage of logistical and operating efficiencies needed to continue
to
compete effectively.
|
· |
In
August 2005, we replaced our maturing credit facility with a new
five-year
$150 million revolving credit facility. This new facility will support
the
segments growth strategies.
|
· |
In
the fourth quarter of 2005, we entered into a multi-year agreement
with MD
Helicopters, Inc. ("MDHI") for the production of rotor blades and
other
components, primarily for the MD Explorer helicopter. During 2005,
the
company recorded $7.7 million of pretax income related to previously
written off sales and accounts receivable.
|
· |
We
recorded $8.3 million in stock appreciation rights expense as a result
of
a significant increase in our stock price during 2005.
|
· |
As
a direct result of the recapitalization, we recorded $3.3 million
in legal
and financial advisory expenses.
|
· |
We
increased our quarterly dividend by 13.6 percent to $0.125 per share.
This
will result in an annual dividend of $0.50 per share as compared
to our
previous dividend of $0.44 per share.
|
· |
Net
sales for 2005 increased 10.7 percent to $1.1 billion, compared to
$995.2
million in 2004.
|
· |
For
2005, the company had net earnings of $13.0 million, or $0.57 per
share
diluted, compared to a net loss of $11.8 million, or $0.52 loss per
share
diluted, in 2004.
|
III. |
RESULTS
OF OPERATIONS
|
In
millions, except per share data
|
2005
|
2004
|
2003
|
|||||||
Net
sales
|
||||||||||
Aerospace
|
$
|
288.0
|
$
|
252.4
|
$
|
251.2
|
||||
Industrial
Distribution
|
621.9
|
581.8
|
497.9
|
|||||||
Music
|
191.3
|
161.0
|
145.4
|
|||||||
Total
net sales
|
$
|
1,101.2
|
$
|
995.2
|
$
|
894.5
|
||||
%
change
|
10.7
|
%
|
11.3
|
%
|
1.6
|
%
|
||||
Selling,
general & administrative expenses (S,G&A)
|
$
|
256.2
|
$
|
239.4
|
$
|
206.4
|
||||
%
of net sales
|
23.3
|
%
|
24.1
|
%
|
23.1
|
%
|
||||
Operating
income (loss)
|
$
|
32.8
|
$
|
(12.5
|
)
|
$
|
36.1
|
|||
%
of net sales
|
3.0
|
%
|
(1.3
|
)%
|
4.0
|
%
|
||||
Interest
expense, net
|
(3.0
|
)
|
(3.6
|
)
|
(3.0
|
)
|
||||
Other
expense, net
|
(0.9
|
)
|
(1.1
|
)
|
(1.3
|
)
|
||||
Net
earnings (loss)
|
$
|
13.0
|
$
|
(11.8
|
)
|
$
|
19.4
|
|||
Net
earnings (loss) per share - basic
|
$
|
.57
|
$
|
(.52
|
)
|
$
|
.86
|
|||
Net
earnings (loss) per share - diluted
|
.57
|
(.52
|
)
|
.86
|
In
millions
|
2005
|
2004
|
2003
|
|||||||
Net
sales
|
$
|
288.0
|
$
|
252.4
|
$
|
251.2
|
||||
%
change
|
14.1
|
%
|
0.5
|
%
|
(9.0
|
)%
|
||||
S,G&A
expenses
|
$
|
40.3
|
$
|
48.5
|
$
|
40.5
|
||||
S,G&A
as a % of net sales
|
14.0
|
%
|
19.2
|
%
|
16.1
|
%
|
||||
Operating
income
|
$
|
33.3
|
$
|
(14.3
|
)
|
$
|
14.8
|
|||
Operating
income as a % of net sales
|
11.6
|
%
|
(5.7
|
)%
|
5.9
|
%
|
In
millions
|
2005
|
2004
|
2003
|
|||||||
Net
sales
|
$
|
621.9
|
$
|
581.8
|
$
|
497.9
|
||||
%
change
|
6.9
|
%
|
16.9
|
%
|
4.3
|
%
|
||||
S,G&A
|
$
|
128.1
|
$
|
123.4
|
$
|
110.8
|
||||
S,G&A
as a % of net sales
|
20.6
|
%
|
21.2
|
%
|
22.3
|
%
|
||||
Operating
income
|
$
|
29.4
|
$
|
19.3
|
$
|
12.7
|
||||
Operating
income as a % of net sales
|
4.7
|
%
|
3.3
|
%
|
2.6
|
%
|
In
millions
|
2005
|
2004
|
2003
|
|||||||
Net
sales
|
$
|
191.3
|
$
|
161.0
|
$
|
145.4
|
||||
%
change
|
18.8
|
%
|
10.7
|
%
|
13.9
|
%
|
||||
S,G&A
|
$
|
44.6
|
$
|
38.3
|
$
|
35.7
|
||||
S,G&A
as a % of net sales
|
23.3
|
%
|
23.8
|
%
|
24.6
|
%
|
||||
Operating
income
|
$
|
13.0
|
$
|
11.1
|
$
|
9.5
|
||||
Operating
income as a % of net sales
|
6.8
|
%
|
6.9
|
%
|
6.5
|
%
|
In
millions
|
2005
|
2004
|
2003
|
|||||||
Total
cash provided by (used in)
|
||||||||||
Operating
activities
|
$
|
44.7
|
$
|
25.5
|
$
|
26.6
|
||||
Investing
activities
|
(40.6
|
)
|
(10.4
|
)
|
9.9
|
|||||
Financing
activities
|
(3.5
|
)
|
(10.0
|
)
|
(35.0
|
)
|
||||
Increase
(decrease) in cash
|
0.6
|
5.1
|
1.5
|
PAYMENTS
DUE BY PERIOD (IN MILLIONS)
|
||||||||||||||||
|
MORE
|
|||||||||||||||
|
WITHIN
|
1-3
|
3-5
|
THAN
5
|
||||||||||||
Contractual
Obligations
|
TOTAL
|
1
YEAR
|
YEARS
|
YEARS
|
YEARS
|
|||||||||||
Long-term
debt
|
$
|
63.9
|
$
|
1.7
|
$
|
3.5
|
$
|
48.8
|
$
|
9.9
|
||||||
Interest
payments on debt (A)
|
29.1
|
6.1
|
10.3
|
9.8
|
2.9
|
|||||||||||
Operating
leases
|
45.2
|
14.9
|
17.9
|
9.3
|
3.1
|
|||||||||||
Purchase
obligations (B)
|
141.4
|
85.6
|
21.3
|
17.3
|
17.2
|
|||||||||||
Other
long-term obligations (C)
|
17.2
|
3.8
|
5.5
|
1.6
|
6.3
|
|||||||||||
Planned
funding of pension and SERP (D)
|
45.5
|
10.7
|
15.9
|
9.6
|
9.3
|
|||||||||||
Total
|
$
|
342.3
|
$
|
122.8
|
$
|
74.4
|
$
|
96.4
|
$
|
48.7
|
(A) |
The
following assumptions have been used to derive the disclosed amounts:
Interest payments on debt within one year are based upon the long-term
debt that existed at December 31, 2005. After one year interest payments
are based upon average estimated long-term debt balances outstanding
each
year.
|
(B) |
This
category includes purchase commitments with suppliers for materials
and
supplies as part of the ordinary course of business, consulting
arrangements and support services. Only obligations in the amount
of at
least fifty thousand dollars are
included.
|
(C) |
This
category includes obligations under the company's long-term incentive
plan, deferred compensation plan and a supplemental disability income
arrangement for one former company
officer.
|
(D) |
This
category includes planned funding of the company’s supplemental employees’
retirement plan and qualified defined benefit pension plan. Projected
funding for the qualified defined benefit pension plan beyond one
year has
not been included as there are several significant factors, such
as the
future market value of plan assets and projected investment return
rates,
which could cause actual funding requirements to differ materially
from
projected funding.
|
PAYMENTS
DUE BY PERIOD (IN MILLIONS)
|
||||||||||||||||
OFF-BALANCE
SHEET ARRANGEMENTS
|
TOTAL
|
WITHIN
1
YEAR
|
1-3
YEARS
|
3-5
YEARS
|
MORE
THAN 5 YEARS
|
|||||||||||
Outstanding
letters of credit under the
Revolving
Credit Agreement
|
$
|
30.5
|
$
|
30.5
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Other
outstanding letters of credit
|
2.3
|
2.3
|
-
|
-
|
-
|
|||||||||||
Acquisition
earn-outs 1
|
20.0
|
2.3
|
4.1
|
1.5
|
12.1
|
|||||||||||
Total
|
$
|
52.8
|
$
|
35.1
|
$
|
4.1
|
$
|
1.5
|
$
|
12.1
|
FIRST
QUARTER
|
SECOND
QUARTER3,4
|
THIRD
QUARTER2,3,5
|
FOURTH
QUARTER1,2,6
|
TOTAL
YEAR
|
||||||||||||
NET
SALES
|
||||||||||||||||
2005
|
$
|
263,306
|
$
|
271,263
|
$
|
278,111
|
$
|
288,516
|
$
|
1,101,196
|
||||||
2004
|
245,151
|
247,509
|
246,306
|
256,226
|
995,192
|
|||||||||||
GROSS PROFIT | ||||||||||||||||
2005
|
$
|
70,895
|
$
|
70,690
|
$
|
62,212
|
$
|
83,014
|
$
|
286,811
|
||||||
2004
|
61,739
|
55,417
|
50,362
|
57,389
|
224,907
|
|||||||||||
NET
EARNINGS (LOSS)
|
||||||||||||||||
2005
|
$
|
4,705
|
$
|
2,757
|
$
|
(3,612
|
)
|
$
|
9,178
|
$
|
13,028
|
|||||
2004
|
1,173
|
(1,702
|
)
|
(11,786
|
)
|
493
|
(11,822
|
)
|
||||||||
PER SHARE - BASIC | ||||||||||||||||
2005
|
$
|
.21
|
$
|
.12
|
$
|
(.16
|
)
|
$
|
.39
|
$
|
.57
|
|||||
2004
|
.05
|
(.07
|
)
|
(.52
|
)
|
.02
|
(.52
|
)
|
||||||||
PER SHARE - DILUTED | ||||||||||||||||
2005
|
$
|
.21
|
$
|
.12
|
$
|
(.16
|
)
|
$
|
.38
|
$
|
.57
|
|||||
2004
|
.05
|
(.07
|
)
|
(.52
|
)
|
.02
|
(.52
|
)
|
1:
|
Fourth
quarter 2005 includes $5,103 recorded for the recovery of previously
written off amounts for MDHI.
|
2:
|
Third
and fourth quarter 2005 include net sales and gross profit of MBT
Holdings
Corp. and its subsidiaries which was acquired in August
2005.
|
3:
|
Second
and third quarter 2005 include $3,938 and $4,416 of stock appreciation
rights expense, respectively.
|
4:
|
Second
quarter 2004 includes a non-cash adjustment for the Boeing Harbour
Pointe
contract in the amount of $7,086.
|
5:
|
Third
quarter 2004 includes a non-cash sales and pre-tax earnings charge
of
$20,083 related to the MDHI
program.
|
6:
|
Fourth
quarter 2004 includes a $3,471 non-cash sales and pre-tax earnings
adjustment for the curtailment of the University of Arizona
contract.
|
The
calculated per share-diluted amounts for each quarter ended 2004
and for
the year ended December 31, 2004 are anti-dilutive, therefore, amounts
shown are equal to the basic per share
calculation.
|
The
quarterly per share amounts for 2005 do not equal the “Total Year” figure
due to the third quarter loss causing the modified earnings per share
calculation to be anti-dilutive.
|
/s/ Paul
R. Kuhn
|
/s/ Robert
M. Garneau
|
|
Paul
R. Kuhn
|
Robert
M. Garneau
|
|
Chairman,
President and
|
Executive
Vice President and
|
|
Chief
Executive Officer
|
Chief
Financial Officer
|
|
December
31
|
2005
|
2004
|
|||||
ASSETS
|
|||||||
CURRENT
ASSETS
|
|||||||
Cash
and cash equivalents
|
$
|
12,998
|
$
|
12,369
|
|||
Accounts
receivable, net
|
176,285
|
190,141
|
|||||
Inventories
|
220,714
|
196,718
|
|||||
Deferred
income taxes
|
31,652
|
35,837
|
|||||
Other
current assets
|
17,159
|
15,270
|
|||||
Total
current assets
|
458,808
|
450,335
|
|||||
PROPERTY,
PLANT AND EQUIPMENT, NET
|
51,592
|
48,958
|
|||||
GOODWILL
|
54,693
|
40,933
|
|||||
OTHER
INTANGIBLE ASSETS, NET
|
19,836
|
14,605
|
|||||
DEFERRED
INCOME TAXES
|
7,908
|
4,086
|
|||||
OTHER
ASSETS
|
5,660
|
3,414
|
|||||
TOTAL
ASSETS
|
$ |
598,497
|
$
|
562,331
|
|||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
CURRENT
LIABILITIES
Notes
payable
|
$
|
915
|
$
|
7,255
|
|||
Current
portion of long-term debt
|
1,660
|
17,628
|
|||||
Accounts
payable - trade
|
94,716
|
74,809
|
|||||
Accrued
salaries and wages
|
22,170
|
20,264
|
|||||
Accrued
pension costs
|
13,150
|
6,354
|
|||||
Accrued
contract losses
|
19,950
|
37,533
|
|||||
Accrued
restructuring costs
|
3,026
|
3,762
|
|||||
Advances
on contracts
|
14,513
|
16,721
|
|||||
Other
accruals and payables
|
46,753
|
38,967
|
|||||
Income
taxes payable
|
6,423
|
2,812
|
|||||
Total
current liabilities
|
223,276
|
226,105
|
|||||
LONG-TERM
DEBT, EXCLUDING CURRENT PORTION
|
62,235
|
18,522
|
|||||
OTHER
LONG-TERM LIABILITIES
|
43,232
|
33,534
|
|||||
COMMITMENTS
AND CONTINGENCIES (Note 16)
|
-
|
-
|
|||||
SHAREHOLDERS'
EQUITY
Capital
stock, $1 par value per share:
|
|||||||
Preferred
stock, 200,000 and 700,000 shares authorized in 2005 and 2004,
respectively:
|
|
|
|||||
Series
2 preferred stock, 6½%
cumulative convertible, 500,000 shares authorized, none outstanding
in
2004 and cancelled in 2005
|
-
|
-
|
|||||
Common
stock:
|
|||||||
Common
stock, 50,000,000 shares authorized, voting,
24,565,111
shares issued in 2005
|
24,565
|
-
|
|||||
Class
A, 48,500,000 shares authorized, nonvoting; $.10 per common
share
dividend
preference; 23,066,260 shares issued in 2004
|
-
|
23,066
|
|||||
Class
B, 1,500,000 shares authorized, voting; 667,814 shares issued in
2004
|
-
|
668
|
|||||
Additional
paid-in capital
|
58,637
|
76,468
|
|||||
Retained
earnings
|
199,383
|
197,586
|
|||||
Unamortized
restricted stock awards
|
(454
|
)
|
(893
|
)
|
|||
Accumulated
other comprehensive loss
|
(4,145
|
)
|
(684
|
)
|
|||
277,986
|
296,211
|
||||||
Less
660,382 shares of common stock in 2005 and 971,653 shares of
Class
A common stock in 2004, held in treasury, at cost
|
(8,232
|
)
|
(12,041
|
)
|
|||
Total
shareholders’ equity
|
269,754
|
284,170
|
|||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
598,497
|
$
|
562,331
|
Year
ended December 31
|
2005
|
2004
|
2003
|
|||||||
NET
SALES
|
$
|
1,101,196
|
$
|
995,192
|
$
|
894,499
|
||||
COSTS
AND EXPENSES
|
||||||||||
Cost
of sales
|
814,385
|
770,285
|
671,591
|
|||||||
Selling,
general and administrative expense
|
256,241
|
239,368
|
206,416
|
|||||||
Net
(gain) loss on sale of product lines and other assets
|
27
|
(199
|
)
|
(18,163
|
)
|
|||||
Other
operating income
|
(2,214
|
)
|
(1,731
|
)
|
(1,448
|
)
|
||||
Interest
expense, net
|
3,046
|
3,580
|
3,008
|
|||||||
Other
expense, net
|
860
|
1,053
|
1,265
|
|||||||
1,072,345
|
1,012,356
|
862,669
|
||||||||
EARNINGS
(LOSS) BEFORE INCOME TAXES
|
28,851
|
(17,164
|
)
|
31,830
|
||||||
INCOME
TAX BENEFIT (EXPENSE)
|
(15,823
|
)
|
5,342
|
(12,425
|
)
|
|||||
NET
EARNINGS (LOSS)
|
$ |
13,028
|
$
|
(11,822
|
)
|
$
|
19,405
|
|||
PER
SHARE
|
||||||||||
Net
earnings (loss) per share:
|
||||||||||
Basic
|
$
|
.57
|
$
|
(.52
|
)
|
$
|
.86
|
|||
Diluted
|
.57
|
(.52
|
)
|
.86
|
||||||
Dividends
declared
|
.485
|
.44
|
.44
|
Year
ended December 31
|
2005
|
2004
|
2003
|
|||||||
PREFERRED
STOCK
|
$
|
-
|
$
|
-
|
$
|
-
|
||||
CLASS
A COMMON STOCK
|
||||||||||
Balance-beginning
of year
|
23,066
|
23,066
|
23,066
|
|||||||
Recapitalization
|
(23,066
|
)
|
-
|
-
|
||||||
Balance-end
of year
|
-
|
23,066
|
23,066
|
|||||||
CLASS
B COMMON STOCK
|
||||||||||
Balance-beginning
of year
|
668
|
668
|
668
|
|||||||
Recapitalization
|
(668
|
)
|
-
|
-
|
||||||
Balance-end
of year
|
-
|
668
|
668
|
|||||||
COMMON
STOCK
|
||||||||||
Balance-beginning
of year
|
-
|
-
|
-
|
|||||||
Recapitalization
|
24,565
|
-
|
-
|
|||||||
Balance-end
of year
|
24,565
|
-
|
-
|
|||||||
ADDITIONAL
PAID-IN CAPITAL
|
||||||||||
Balance-beginning
of year
|
76,468
|
76,744
|
77,267
|
|||||||
Employee
stock plans
|
(3,116
|
)
|
(298
|
)
|
(398
|
)
|
||||
Restricted
stock awards
|
6
|
22
|
(125
|
)
|
||||||
Debentures
|
2
|
-
|
-
|
|||||||
Recapitalization
|
(14,723
|
)
|
-
|
-
|
||||||
Balance-end
of year
|
58,637
|
76,468
|
76,744
|
|||||||
RETAINED
EARNINGS
|
||||||||||
Balance-beginning
of year
|
197,586
|
219,401
|
209,932
|
|||||||
Net
earnings (loss)
|
13,028
|
(11,822
|
)
|
19,405
|
||||||
Dividends
declared
|
(11,231
|
)
|
(9,993
|
)
|
(9,936
|
)
|
||||
Balance-end
of year
|
199,383
|
197,586
|
219,401
|
|||||||
UNAMORTIZED
RESTRICTED STOCK AWARDS
|
||||||||||
Balance-beginning
of year
|
(893
|
)
|
(1,727
|
)
|
(2,094
|
)
|
||||
Stock
awards issued
|
(116
|
)
|
(133
|
)
|
(529
|
)
|
||||
Amortization
of stock awards
|
555
|
967
|
896
|
|||||||
Balance-end
of year
|
(454
|
)
|
(893
|
)
|
(1,727
|
)
|
||||
ACCUMULATED
OTHER COMPREHENSIVE LOSS
|
||||||||||
Balance-beginning
of year
|
(684
|
)
|
(1,311
|
)
|
(1,099
|
)
|
||||
Other
comprehensive income (loss)
|
(3,461
|
)
|
627
|
(212
|
)
|
|||||
Balance-end
of year
|
(4,145
|
)
|
(684
|
)
|
(1,311
|
)
|
||||
TREASURY
STOCK
|
||||||||||
Balance-beginning
of year
|
(12,041
|
)
|
(13,658
|
)
|
(15,793
|
)
|
||||
Shares
acquired in 2005 - 4; 2004 - 757; 2003 - 20,000
|
-
|
(9
|
)
|
(205
|
)
|
|||||
Shares
reissued under various stock plans
in
2005 - 311,275; 2004 - 132,740; 2003 - 190,455
|
3,809
|
1,626
|
2,340
|
|||||||
Balance-end
of year
|
(8,232
|
)
|
(12,041
|
)
|
(13,658
|
)
|
||||
TOTAL
SHAREHOLDERS’ EQUITY
|
$
|
269,754
|
$
|
284,170
|
$
|
303,183
|
COMPREHENSIVE
INCOME (LOSS)
|
||||||||||
Net
earnings (loss)
|
$
|
13,028
|
$
|
(11,822
|
)
|
$
|
19,405
|
|||
Foreign
currency translation adjustments
|
503
|
627
|
(212
|
)
|
||||||
Supplemental
employees’ retirement plan adjustment, net of tax benefit of $2,430 in
2005
|
(3,964
|
)
|
-
|
-
|
||||||
Other
comprehensive income (loss)
|
(3,461
|
)
|
627
|
(212
|
)
|
|||||
TOTAL
COMPRESHENSIVE INCOME (LOSS)
|
$
|
9,567
|
$
|
(11,195
|
)
|
$
|
19,193
|
Year
ended December 31
|
2005
|
2004
|
2003
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
Net
earnings (loss)
|
$
|
13,028
|
$
|
(11,822
|
)
|
$
|
19,405
|
|||
Adjustments
to reconcile net earnings (loss)
to
cash provided by (used in) operating activities:
Depreciation
and amortization
|
9,555
|
8,969
|
10,019
|
|||||||
Provisions
for (recovery of) losses on accounts receivable
|
(2,120
|
)
|
2,180
|
487
|
||||||
Net
(gain) loss on sale of product lines and other assets
|
27
|
(199
|
)
|
(18,163
|
)
|
|||||
Non-cash
write-down of assets
|
-
|
962
|
-
|
|||||||
Non-cash
sales adjustment for costs - not billed
|
-
|
21,332
|
-
|
|||||||
Deferred
income taxes
|
3,183
|
(11,421
|
)
|
5,994
|
||||||
Other,
net
|
4,086
|
7,418
|
2,376
|
|||||||
Changes
in current assets and liabilities,
excluding
effects of acquisitions/divestitures:
Accounts
receivable
|
20,487
|
(20,179
|
)
|
2,744
|
||||||
Inventories
|
(9,825
|
)
|
(18,175
|
)
|
(9,806
|
)
|
||||
Income
taxes receivable
|
-
|
1,043
|
4,149
|
|||||||
Other
current assets
|
(1,435
|
)
|
(2,695
|
)
|
2,267
|
|||||
Accounts
payable - trade
|
12,898
|
15,149
|
10,106
|
|||||||
Accrued
contract losses
|
(17,550
|
)
|
13,458
|
(2,956
|
)
|
|||||
Accrued
restructuring costs
|
(736
|
)
|
(2,347
|
)
|
(1,485
|
)
|
||||
Advances
on contracts
|
(2,208
|
)
|
(2,972
|
)
|
(1,846
|
)
|
||||
Accrued
expenses and payables
|
11,638
|
21,962
|
3,352
|
|||||||
Income
taxes payable
|
3,660
|
2,807
|
-
|
|||||||
Cash
provided by (used in) operating activities
|
44,688
|
25,470
|
26,643
|
|||||||
CASH
FLOWS FROM INVESTING ACTIVITIES
Proceeds
from sale of product lines and other assets
|
346
|
376
|
28,339
|
|||||||
Expenditures
for property, plant and equipment
|
(9,866
|
)
|
(7,539
|
)
|
(9,069
|
)
|
||||
Acquisition
of businesses, less cash acquired
|
(31,875
|
)
|
(2,435
|
)
|
(7,748
|
)
|
||||
Other,
net
|
788
|
(770
|
)
|
(1,638
|
)
|
|||||
Cash
provided by (used in) investing activities
|
(40,607
|
)
|
(10,368
|
)
|
9,884
|
|||||
CASH
FLOWS FROM FINANCING ACTIVITIES
Changes
in notes payable
|
(6,341
|
)
|
1,197
|
(2,664
|
)
|
|||||
Changes
in debt
|
27,745
|
(2,134
|
)
|
(23,508
|
)
|
|||||
Recapitalization
|
(13,892
|
)
|
-
|
-
|
||||||
Proceeds
from exercise of employee stock plans
|
585
|
1,218
|
1,287
|
|||||||
Purchases
of treasury stock
|
-
|
(9
|
)
|
(205
|
)
|
|||||
Dividends
paid
|
(10,747
|
)
|
(9,979
|
)
|
(9,917
|
)
|
||||
Debt
issuance costs
|
(824
|
)
|
-
|
-
|
||||||
Other
|
-
|
(305
|
)
|
-
|
||||||
Cash
provided by (used in) financing activities
|
(3,474
|
)
|
(10,012
|
)
|
(35,007
|
)
|
||||
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
607
|
5,090
|
1,520
|
|||||||
EFFECT
OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
|
22
|
149
|
39
|
|||||||
CASH
AND CASH EQUIVALENTS AT BEGINNING OF YEAR
|
12,369
|
7,130
|
5,571
|
|||||||
CASH
AND CASH EQUIVALENTS AT END OF YEAR
|
$
|
12,998
|
$
|
12,369
|
$
|
7,130
|
2005
|
2004
|
2003
|
||||||||
Net
earnings (loss):
As
reported
|
$
|
13,028
|
$
|
(11,822
|
)
|
$
|
19,405
|
|||
Stock
compensation
expense
reported in
net
earnings (loss),
net
of tax effect
|
5,468
|
1,330
|
918
|
|||||||
Less
stock compensation
expense,
net of tax effect
|
(6,215
|
)
|
(2,069
|
)
|
(1,685
|
)
|
||||
Pro
forma net earnings (loss)
|
$
|
12,281
|
$
|
(12,561
|
)
|
$
|
18,638
|
|||
Earnings
(loss) per share - basic:
As
reported
|
.57
|
(.52
|
)
|
.86
|
||||||
Pro
forma
|
.53
|
(.55
|
)
|
.83
|
||||||
Earnings
(loss) per share - diluted:
As
reported
|
.57
|
(.52
|
)
|
.86
|
||||||
Pro
forma
|
.53
|
(.55
|
)
|
.83
|
2005
|
2004
|
2003
|
||||||||
Expected
dividend yield
|
3.8
|
%
|
3.1
|
%
|
4.4
|
%
|
||||
Expected
volatility
|
40
|
%
|
45
|
%
|
47
|
%
|
||||
Risk-free
interest rate
|
4.2
|
%
|
4.1
|
%
|
3.9
|
%
|
||||
Expected
option lives
|
8
years
|
8
years
|
8
years
|
|||||||
Per
share fair value of
options
granted
|
$
|
3.73
|
$
|
5.36
|
$
|
3.33
|
|
Musicorp
|
|||
Tangible
assets acquired
|
$
|
22,284
|
||
Goodwill
|
12,739
|
|||
Intangible
assets, subject to amortization
|
5,603
|
|||
Acquisition
costs
|
(3,500
|
)
|
||
Liabilities
assumed
|
(8,123
|
)
|
||
Purchase
price
|
$
|
29,003
|
December
31
|
2005
|
2004
|
|||||
Trade
receivables
|
$
|
96,776
|
$
|
87,158
|
|||
U.S.
Government contracts:
Billed
|
16,140
|
15,360
|
|||||
Costs
and accrued profit - not billed
|
956
|
5,062
|
|||||
Commercial
and other government
contracts:
Billed
|
19,569
|
25,057
|
|||||
Costs
and accrued profit - not billed
|
46,244
|
63,024
|
|||||
Less
allowance for doubtful accounts
|
(3,400
|
)
|
(5,520
|
)
|
|||
Total
|
$
|
176,285
|
$
|
190,141
|
December
31
|
2005
|
2004
|
|||||
Merchandise
for resale
|
$
|
124,936
|
$
|
103,117
|
|||
Contracts in process: | |||||||
U.S.
Government, net of progress payments
of $18,951 and $11,325 in
2005 and 2004, respectively
|
44,710
|
29,600
|
|||||
Commercial and other government contracts |
14,554
|
21,173
|
|||||
Other
work in process (including
certain
general stock materials)
|
21,750
|
21,284
|
|||||
Finished goods |
14,764
|
21,544
|
|||||
Total
|
$
|
220,714
|
$
|
196,718
|
December
31
|
2005
|
2004
|
|||||
Land
|
$
|
4,302
|
$
|
4,251
|
|||
Buildings
|
30,165
|
29,423
|
|||||
Leasehold
improvements
|
14,449
|
13,800
|
|||||
Machinery,
office furniture
and
equipment
|
118,583
|
111,125
|
|||||
Total
|
167,499
|
158,599
|
|||||
Less
accumulated depreciation
and
amortization
|
115,907
|
109,641
|
|||||
Property,
plant and equipment, net
|
$
|
51,592
|
$
|
48,958
|
December
31
|
2005
|
2004
|
||||||
Goodwill:
|
||||||||
Aerospace
|
$ |
35,578
|
$ |
34,010
|
||||
Industrial
Distribution
|
4,081
|
4,252
|
||||||
Music
|
15,034
|
2,671
|
||||||
$
|
54,693
|
$
|
40,933
|
|||||
December
31
|
2005
|
2004
|
||||||
Other
intangible assets:
|
||||||||
Other intangible assets - subject to amortization: | ||||||||
Customer
relationships
|
$
|
3,400
|
$
|
-
|
||||
Trade
names
|
2,000
|
-
|
||||||
Patents
|
1,937
|
1,882
|
||||||
Total
|
7,337
|
1,882
|
||||||
Less
accumulated amortization
|
(1,320
|
)
|
(1,096
|
)
|
||||
Other
intangible assets - subject to amortization, net
|
6,017
|
786
|
||||||
Trade
name - not subject to amortization
|
13,819
|
13,819
|
||||||
Other
intangible assets, net
|
$
|
19,836
|
$
|
14,605
|
2004
|
ADDITIONS
|
CASH
PAYMENTS,NET
|
2005
|
||||||||||
Restructuring
costs:
Facility
closings
|
$
|
3,762
|
$
|
815
|
$
|
(1,551
|
)
|
$
|
3,026
|
||||
Total
|
$
|
3,762
|
$
|
815
|
$
|
(1,551
|
)
|
$
|
3,026
|
2005
|
2004
|
2003
|
||||||||
Balance
at January 1
|
$
|
37,533
|
$
|
24,076
|
$
|
27,032
|
||||
Costs
incurred
|
(35,759
|
)
|
(10,542
|
)
|
(14,196
|
)
|
||||
Additions
to loss accrual
|
19,147
|
24,502
|
11,322
|
|||||||
Release
to income
|
(971
|
)
|
(503
|
)
|
(82
|
)
|
||||
Balance
at December 31
|
$
|
19,950
|
$
|
37,533
|
$
|
24,076
|
December
31
|
2005
|
2004
|
|||||
Revolving
credit agreement
|
$
|
—
|
$
|
—
|
|||
Other
credit arrangements
|
915
|
7,255
|
|||||
Total
|
$
|
915
|
$
|
7,255
|
December
31
|
2005
|
2004
|
|||||
Revolving
credit agreement1
|
$
|
45,518
|
$
|
5,000
|
|||
Other
credit arrangements
|
135
|
276
|
|||||
Euro
credit agreement
|
-
|
10,968
|
|||||
Convertible
subordinated debentures
|
18,242
|
19,906
|
|||||
Total
|
63,895
|
36,150
|
|||||
Less
current portion2
|
1,660
|
17,628
|
|||||
Total
excluding current portion
|
$
|
62,235
|
$
|
18,522
|
1: | The Revolving Credit Agreement dated August 5, 2005 includes a Euro feature, which amounted to $9,518 in borrowings at December 31, 2005. |
2: | In 2004, the previous Revolving Credit Facility was expiring within one year. Therefore, borrowings were reclassed to current as of December 31, 2004. |
2006
|
$
|
1,660
|
||
2007
|
1,795
|
|||
2008
|
1,660
|
|||
2009
|
1,660
|
|||
2010
|
47,178
|
|||
Thereafter
|
9,942
|
2005
|
2004
|
2003
|
||||||||
Balance
at January 1
|
$
|
3,827
|
$
|
151
|
$
|
400
|
||||
Warranty
costs incurred
|
(505
|
)
|
(274
|
)
|
(68
|
)
|
||||
Product
warranty accrual
|
3,404
|
3,950
|
69
|
|||||||
Release
to income
|
(2,422
|
)
|
-
|
(250
|
)
|
|||||
Balance
at December 31
|
$
|
4,304
|
$
|
3,827
|
$
|
151
|
2005
|
2004
|
2003
|
|||||||||
Current:
|
|||||||||||
Federal
|
$ |
9,561
|
$ |
3,203
|
$
|
5,205
|
|||||
State
|
1,646
|
1,770
|
429
|
||||||||
Foreign
|
1,448
|
1,102
|
797
|
||||||||
12,655
|
6,075
|
6,431
|
|||||||||
Deferred:
|
|||||||||||
Federal
|
3,083
|
(9,359
|
)
|
5,772
|
|||||||
State
|
74
|
(1,918
|
)
|
222
|
|||||||
Foreign
|
11
|
(140
|
)
|
-
|
|||||||
3,168
|
(11,417
|
)
|
5,994
|
||||||||
Total
|
$
|
15,823
|
$
|
(5,342
|
)
|
$
|
12,425
|
December
31
|
2005
|
2004
|
|||||
Deferred
tax assets:
Long-term
contracts
|
$
|
7,383
|
$
|
15,012
|
|||
Deferred
employee benefits
|
27,116
|
21,396
|
|||||
Inventory
|
8,077
|
7,712
|
|||||
Accrued
liabilities and other items
|
10,096
|
8,732
|
|||||
Total
deferred tax assets
|
52,672
|
52,852
|
|||||
Deferred
tax liabilities:
Depreciation
and amortization
|
(5,756
|
)
|
(7,033
|
)
|
|||
Intangibles
|
(3,666
|
)
|
(2,413
|
)
|
|||
Other
items
|
(1,183
|
)
|
(1,320
|
)
|
|||
Total
deferred tax liabilities
|
(10,605
|
)
|
(10,766
|
)
|
|||
Net
deferred tax asset
before
valuation allowance
|
42,067
|
42,086
|
|||||
Valuation
allowance
|
(2,883
|
)
|
(2,163
|
)
|
|||
Net
deferred tax asset
after
valuation allowance
|
$
|
39,184
|
$
|
39,923
|
2005
|
2004
|
2003
|
||||||||
Federal
tax (benefit) at 35% statutory rate
|
$
|
10,098
|
$
|
(6,007
|
)
|
$
|
11,141
|
|||
State
income taxes, net of federal benefit
|
1,118
|
(127
|
)
|
810
|
||||||
Tax
effect of:
|
||||||||||
Compensation
|
3,467
|
617
|
95
|
|||||||
Recapitalization
costs
|
1,169
|
93
|
-
|
|||||||
Meals
and entertainment
|
424
|
413
|
398
|
|||||||
Other,
net
|
(453
|
)
|
(331
|
)
|
(19
|
)
|
||||
Income
taxes (benefit)
|
$
|
15,823
|
$
|
(5,342
|
)
|
$
|
12,425
|
|
Qualified
Pension Plan
|
SERP
|
|||||||||||||||||
2005
|
2004
|
2003
|
2005
|
2004
|
2003
|
||||||||||||||
Service
cost for benefits
earned
during the year
|
$
|
11,492
|
$
|
10,233
|
$
|
10,000
|
$
|
1,408
|
$
|
1,262
|
$
|
696
|
|||||||
Interest
cost on projected
benefit
obligation
|
25,469
|
24,653
|
24,348
|
1,330
|
1,080
|
967
|
|||||||||||||
Expected
return on
plan
assets
|
(28,476
|
)
|
(28,675
|
)
|
(31,445
|
)
|
-
|
-
|
-
|
||||||||||
Net
amortization and deferral
|
1,674
|
6
|
6
|
223
|
2,663
|
605
|
|||||||||||||
Net
pension cost (income)
|
$
|
10,159
|
$
|
6,217
|
$
|
2,909
|
$
|
2,961
|
$
|
5,005
|
$
|
2,268
|
Qualified
Pension Plan
|
SERP
|
||||||||||||
December
31
|
2005
|
2004
|
2005
|
2004
|
|||||||||
Projected
benefit obligation
at
beginning of year
|
$
|
432,354
|
$
|
389,892
|
$
|
20,205
|
$
|
15,949
|
|||||
Service
cost
|
11,492
|
10,233
|
1,408
|
1,262
|
|||||||||
Interest
cost
|
25,469
|
24,653
|
1,330
|
1,080
|
|||||||||
Actuarial
liability loss
|
18,562
|
27,166
|
8,850
|
2,663
|
|||||||||
Benefit
payments
|
(20,731
|
)
|
(19,590
|
)
|
(749
|
)
|
(749
|
)
|
|||||
Projected
benefit obligation
at
end of year
|
$
|
467,146
|
$
|
432,354
|
$
|
31,044
|
$
|
20,205
|
|
Qualified
Pension Plan
|
SERP
|
|||||||||||
December
31
|
2005
|
2004
|
2005
|
2004
|
|||||||||
Fair
value of plan assets at
beginning
of year
|
$
|
407,182
|
$
|
386,848
|
$
|
-
|
$
|
-
|
|||||
Actual
return on plan assets
|
33,068
|
39,924
|
-
|
-
|
|||||||||
Employer
contribution
|
4,747
|
-
|
749
|
749
|
|||||||||
Benefit
payments
|
(20,731
|
)
|
(19,590
|
)
|
(749
|
)
|
(749
|
)
|
|||||
Fair
value of plan assets
at
end of year
|
$
|
424,266
|
$
|
407,182
|
$
|
-
|
$
|
-
|
|||||
December
31
|
2005
|
2004
|
2005
|
2004
|
|||||||||
Excess
(deficiency) of assets over
projected
benefit obligation
|
$
|
(42,880
|
)
|
$
|
(25,171
|
)
|
$
|
(31,044
|
)
|
$
|
(20,205
|
)
|
|
Unrecognized
prior service cost
|
558
|
564
|
-
|
-
|
|||||||||
Unrecognized
net (gain) loss
|
31,791
|
19,488
|
8,627
|
-
|
|||||||||
Additional
minimum liability
|
-
|
-
|
(6,394
|
)
|
-
|
||||||||
Prepaid
(accrued) pension cost including additional minimum
liability
|
$
|
(10,531
|
)
|
$
|
(
5,119
|
)
|
$
|
(28,811
|
)
|
$
|
(20,205
|
)
|
Qualified
Pension Plan
|
SERP
|
||||||
2006
|
$
|
22,551
|
$
|
823
|
|||
2007 |
22,884
|
2,228 | |||||
2008
|
23,504
|
13,701
|
|||||
2009
|
24,477
|
8,729
|
|||||
2010
|
25,550
|
800
|
|||||
2011
- 2015
|
141,359
|
9,307
|
|
Qualified
Pension Plan
|
SERP
|
|||||||||||
December
31
|
2005
|
2004
|
2005
|
2004
|
|||||||||
Discount
rate
|
5.75
|
%
|
6.0
|
%
|
5.75
|
%
|
6.0
|
%
|
|||||
Average
rate of increase
in
compensation levels
|
3.5
|
%
|
3.5
|
%
|
3.5
|
%
|
3.5
|
%
|
|
Qualified
Pension Plan
|
SERP
|
||||||||||||||
December
31
|
2005
|
2004
|
2005
|
2004
|
||||||||||||
Discount
rate
|
6.0
|
%
|
6.5
|
%
|
6.0
|
%
|
6.5
|
%
|
||||||||
Expected
return on plan assets
|
8.0
|
%
|
8.0
|
%
|
-
|
-
|
||||||||||
Average
rate of increase
in
compensation levels
|
3.5
|
%
|
3.5
|
%
|
3.5
|
%
|
3.5
|
%
|
December
31
|
2005
|
2004
|
|||||
Equity
securities
|
64
|
%
|
64
|
%
|
|||
Fixed
income securities
|
36
|
%
|
36
|
%
|
|||
Total
|
100
|
%
|
100
|
%
|
December
31
|
2005
|
2004
|
|||||
Supplemental
employees’
retirement
plan
|
$
|
27,961
|
$
|
19,455
|
|||
Deferred
compensation
|
9,519
|
9,050
|
|||||
Minority
Interest
|
387
|
1,046
|
|||||
Other
|
5,365
|
3,983
|
|||||
Total
|
$
|
43,232
|
$
|
33,534
|
2006
|
$
|
14,935
|
||
2007
|
11,153
|
|||
2008
|
6,727
|
|||
2009
|
4,523
|
|||
2010
|
4,805
|
|||
Thereafter
|
3,122
|
|||
Total
|
$
|
45,265
|
2005
|
2004
|
2003
|
||||||||
Earnings
(loss)
per
share -
basic
Net
earnings (loss)
|
$
|
13,028
|
$
|
(11,822
|
)
|
$
|
19,405
|
|||
Weighted
average shares
outstanding
(000)
|
23,038
|
22,700
|
22,561
|
|||||||
Earnings
(loss)
per
share -
basic
|
$
|
.57
|
$
|
(.52
|
)
|
$
|
.86
|
|||
Earnings
(loss)
per
share -
diluted
Net
earnings (loss)
|
$
|
13,028
|
$
|
(11,822
|
)
|
$
|
19,405
|
|||
Plus:
After-tax
interest
savings
on convertible
debentures
|
546
|
-
|
806
|
|||||||
Net
earnings (loss)
assuming
conversion
|
$
|
13,574
|
$
|
(11,822
|
)
|
$
|
20,211
|
|||
Weighted
average
shares
outstanding (000)
|
23,038
|
22,700
|
22,561
|
|||||||
Plus
shares issuable on:
Conversion
of
6%
convertible
debentures
|
796
|
-
|
938
|
|||||||
Exercise
of
dilutive
options
|
135
|
-
|
43
|
|||||||
Weighted
average
shares
outstanding
assuming
conversion (000)
|
23,969
|
22,700
|
23,542
|
|||||||
Earnings
(loss)
per
share -
diluted 1
|
$
|
.57
|
$
|
(.52
|
)
|
$
|
.86
|
STOCK
OPTIONS OUTSTANDING:
|
OPTIONS
|
WEIGHTED-
AVERAGE
EXERCISE
PRICE
|
|||||
Balance
at January 1, 2003
|
1,218,800
|
$
|
14.08
|
||||
Options
granted
|
171,500
|
9.90
|
|||||
Options
exercised
|
(31,310
|
)
|
9.65
|
||||
Options
cancelled
|
(83,320
|
)
|
13.47
|
||||
Balance
at December 31, 2003
|
1,275,670
|
13.67
|
|||||
Options
granted
|
176,565
|
14.03
|
|||||
Options
exercised
|
(48,350
|
)
|
10.13
|
||||
Options
cancelled
|
(76,080
|
)
|
14.07
|
||||
Balance
at December 31, 2004
|
1,327,805
|
13.82
|
|||||
Options
granted
|
305,500
|
11.62
|
|||||
Options
exercised
|
(663,262
|
)
|
13.84
|
||||
Options
cancelled
|
(59,800
|
)
|
12.89
|
||||
Balance
at December 31, 2005
|
910,243
|
$
|
13.13
|
||||
Weighted
average contractual life
remaining
at December 31, 2005
|
6.9
years
|
||||||
Range
of exercise prices for options
|
$
|
9.90
|
- |
$
|
14.64
|
- | |
outstanding
at December 31, 2005
|
$
|
14.63
|
$
|
19.37
|
|||
Options
outstanding
|
745,619
|
164,624
|
|||||
Options
exercisable
|
185,807
|
116,024
|
|||||
Weighted
average contractual
remaining
life of
options
outstanding
|
7.4
years
|
4.5
years
|
|||||
Weighted
average exercise price:
Options
outstanding
|
$
|
12.36
|
$
|
16.58
|
|||
Options
exercisable
|
$
|
12.84
|
$
|
16.57
|
2005
|
2004
|
2003
|
||||||||
Net
sales:
|
||||||||||
Aerospace
|
$
|
287,945
|
$
|
252,348
|
$
|
251,161
|
||||
Industrial
Distribution
|
621,933
|
581,843
|
497,895
|
|||||||
Music
|
191,318
|
161,001
|
145,443
|
|||||||
$
|
1,101,196
|
$
|
995,192
|
$
|
894,499
|
|||||
Operating
income (loss):
|
||||||||||
Aerospace
|
$
|
33,285
|
$
|
(14,303
|
)
|
$
|
14,848
|
|||
Industrial
Distribution
|
29,415
|
19,338
|
12,672
|
|||||||
Music
|
13,016
|
11,085
|
9,510
|
|||||||
Net
gain (loss) on sale of product lines and other assets
|
(27
|
)
|
199
|
18,163
|
||||||
Corporate
expense
|
(42,932
|
)
|
(28,850
|
)
|
(19,090
|
)
|
||||
Operating
income (loss)
|
32,757
|
(12,531
|
)
|
36,103
|
||||||
Interest
expense, net
|
(3,046
|
)
|
(3,580
|
)
|
(3,008
|
)
|
||||
Other
expense, net
|
(860
|
)
|
(1,053
|
)
|
(1,265
|
)
|
||||
Earnings
(loss)
before
income taxes
|
$
|
28,851
|
$
|
(17,164
|
)
|
$
|
31,830
|
|||
Identifiable
assets:
|
||||||||||
Aerospace
|
$
|
266,369
|
$
|
289,343
|
$
|
294,345
|
||||
Industrial
Distribution
|
175,725
|
164,711
|
150,115
|
|||||||
Music
|
117,347
|
76,764
|
65,704
|
|||||||
Corporate
|
39,056
|
31,513
|
18,147
|
|||||||
$
|
598,497
|
$
|
562,331
|
$
|
528,311
|
|||||
Capital
expenditures:
|
||||||||||
Aerospace
|
$
|
5,445
|
$
|
3,615
|
$
|
7,321
|
||||
Industrial
Distribution
|
2,748
|
2,709
|
1,079
|
|||||||
Music
|
1,474
|
1,074
|
522
|
|||||||
Corporate
|
199
|
141
|
147
|
|||||||
$
|
9,866
|
$
|
7,539
|
$
|
9,069
|
|||||
Depreciation
and amortization:
|
||||||||||
Aerospace
|
$
|
5,596
|
$
|
5,468
|
$
|
6,138
|
||||
Industrial
Distribution
|
2,057
|
1,972
|
1,989
|
|||||||
Music
|
1,371
|
963
|
1,143
|
|||||||
Corporate
|
531
|
566
|
749
|
|||||||
$
|
9,555
|
$
|
8,969
|
$
|
10,019
|
2005
|
2004
|
2003
|
||||||||
Geographic
information - net sales:
United
States
|
$
|
943,159
|
$
|
859,539
|
$
|
760,444
|
||||
Australia/New
Zealand
|
26,106
|
44,278
|
52,453
|
|||||||
Canada
|
45,039
|
37,205
|
31,469
|
|||||||
Europe
|
40,198
|
29,857
|
27,400
|
|||||||
Mexico
|
18,469
|
13,462
|
13,652
|
|||||||
Japan
|
18,671
|
4,272
|
4,774
|
|||||||
Other
|
9,554
|
6,579
|
4,307
|
|||||||
$
|
1,101,196
|
$
|
995,192
|
$
|
894,499
|
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
Dayron, Inc.
|
Florida
|
RWG
Frankenjura-Industrie Flugwerklager GmbH
|
Germany
|
Kaman
Industrial Technologies Corporation
|
Connecticut
|
Kaman
Industrial Technologies, Ltd.
|
Canada
|
Delamac
de Mexico, S.A. de C.V. (90.82%)
|
Mexico
|
Kaman
Music Corporation
|
Connecticut
|
KMI
Europe, Inc.
|
Delaware
|
B
& J Music Ltd.
|
Canada
|
Genz
Benz Enclosures, Inc.
|
Arizona
|
Musicorp,
Inc. (name changed from Kaman MBT, Inc. effective
January 1, 2006)
|
Delaware
|
KPMG LLP | |||
One Financial Plaza | |||
Hartford, CT 06103-4103 |
KPMG
LLP, a U.S. limited liability partnership, is the U.S.
member
firm of KPMG International, a Swiss
cooperative.
|
Brian
E. Barents
|
Eileen
S. Kraus
|
E.
Reeves Callaway III
|
Paul
R. Kuhn
|
John
A. DiBiaggio
|
Wanda
L. Rogers
|
Edwin
A. Huston
|
Richard
J. Swift
|
|
|
|
|
|
Date:
February 27, 2006
|
By:
|
/s/ Paul
R. Kuhn
|
|
Paul
R. Kuhn
|
|
|
Chairman,
President and
|
|
|
Chief
Executive Officer
|
|
|
|
February
27, 2006
|
By:
|
/s/ Robert
M. Garneau
|
|
Robert
M. Garneau
|
|
|
Executive
Vice President and
|
|
|
Chief
Financial Officer
|
By: | /s/ Paul R. Kuhn | ||
|
Paul
R. Kuhn
|
||
|
Chairman,
President and
|
||
|
Chief
Executive Officer
|
||
February
27, 2006
|
|
|
|
|
By:
|
/s/ Robert
M. Garneau
|
||
|
Robert
M. Garneau
|
||
|
Executive
Vice President and
|
||
|
Chief
Financial Officer
|
||
February
27, 2006
|