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,JUNE 30, 1997.
-----------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
- ---
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
- --- ______________ TO --------------- --------------.______________
Commission File No. 0-1093
KAMAN CORPORATION
(Exact Name of Registrant)
Connecticut 06-0613548
(State of Incorporation) (I.R.S. Employer Identification No.)
1332 Blue Hills Avenue
Bloomfield, Connecticut 06002
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (860)243-7100
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,July 31, 1997:
Class A Common 18,212,70118,279,885
Class B Common 667,814
Page 1 of 15 Pages
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets(InSheets
(In thousands)
March 31,June 30, December 31,
Assets 1997 1996
------ ---------------- ----------------- ------------------
Current assets:
Cash $ 5,22057,188 $ 5,445
Accounts receivable (net of allowance
for doubtful accounts of $3,234$4,291 in
1997, $2,574 in 1996) 205,697201,870 185,516
Inventories:
Raw materials $ 7,1516,519 $ 9,278
Work-in-process 71,07175,552 75,056
Finished goods 21,82518,764 19,008
Merchandise for resale 108,987 209,034104,870 205,705 110,126 213,468
------- --------------- --------
Other current assets 36,38237,694 29,702
------- --------------- --------
Total current assets 456,333502,457 434,131
Property, plant & equip.,and equipment, at cost 187,628188,218 191,323
Less accumulated depreciation and
amortization 114,693115,390 114,930
------- --------------- --------
Net property, plant &and equipment 72,93572,828 76,393
Other assets 11,12310,708 11,212
-------- --------
$ 540,391 $ 521,736$585,993 $521,736
======== ========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Notes payable $ 79,83784,126 $ 63,002
Accounts payable 53,07954,699 61,334
Accrued liabilities 40,71541,837 41,087
Customer Advances 49,448 -
Other current liabilities 45,55831,629 30,215
------- ---------------
Total current liabilities 219,189261,739 195,638
Deferred credits 15,28015,795 14,028
Long-term debt, excl.excluding current
portion 84,52982,024 83,940
Shareholders' equity:
Series 2 preferred stock $ 57,167 $ 57,167
Other shareholders' equity 164,226 221,393169,268 226,435 170,963 228,130
-------- -------- -------- --------
$540,391$585,993 $521,736
======== ========
- 2 -
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 For the Six Months
Ended March 31,June 30, Ended June 30,
-------------------- ------------------
1997 1996 1997 1996
---- ---- ---- ----
Revenues $ 252,157 $ 240,033$250,245 $246,525 $502,402 $486,558
Costs and expenses:
Cost of sales 189,069 177,464188,445 185,716 377,514 363,180
Selling, general and
administrative expense 51,033 51,01353,675 48,532 104,708 99,545
Loss (credit) on closuresale of
amplifier business 15,000(4,600) - 10,400 -
Interest expense 2,479 2,4292,614 2,377 5,093 4,806
Other expense (income) (350) 155, net 223 134 (127) 289
-------- -------
257,231 231,061
-------- --------------- --------
240,357 236,759 497,588 467,820
-------- -------- -------- --------
Earnings (loss) before income taxes (5,074) 8,9729,888 9,766 4,814 18,738
Income taxes (benefit) (667) 3,7703,178 4,354 2,511 8,124
-------- --------------- -------- --------
Net earnings (loss) $ (4,407)6,710 $ 5,2025,412 $ 2,303 $ 10,614
======== =============== ======== ========
Preferred stock dividend
requirement $ (929) $ (929) $ (1,858) $ (1,858)
======== =============== ======== ========
Earnings (loss) applicable to
common stock $ (5,336)5,781 $ 4,2734,483 $ 445 $ 8,756
======== =============== ======== ========
Net earnings (loss) per common share:
Primary $ (.28).30 $ .23.24 $ .02 $ .47
Fully diluted $ (.28).28 $ .22.23 $ .02 $ .45
======== =============== ======== ========
Dividends declared per share:
Series 2 preferred stock $ 3.25 $ 3.25 $ 6.50 $ 6.50
Common stock $ .11 $ .11 $ .22 $ .22
======== =============== ======== ========
- 3 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Condensed Consolidated Statements of Cash Flows
(In thousands)
For the ThreeSix Months
Ended March 31,
--------------------June 30,
-------------------
1997 1996
--------- -------------- ------
Cash flows from operating activities:
Net earnings(loss)earnings $ (4,407)2,303 $ 5,20210,614
Depreciation and amortization 3,048 2,9806,011 5,990
Gain on sale of assets (505) (213)(509) (295)
Loss on closuresale of amplifier business 15,00010,400 -
Changes in current assets and liabilities (30,344) (24,753)(31,161) (23,428)
Customer advances 49,448 -
Other, net 518 6452,136 652
-------- --------
Cash provided by (used in) operating
activities (16,690) (16,139)38,628 (6,467)
-------- --------
Cash flows from investing activities:
Proceeds from sale of assets 3,623 1,6693,661 1,758
Expenditures for property, plant &
equipment (2,133) (1,794)(5,049) (3,992)
Other, net (76) (170)(100) (240)
-------- --------
Cash provided by (used in) investing
activities 1,414 (295)(1,488) (2,474)
-------- --------
Cash flows from financing activities:
AdditionsAdditions(reductions) to notes payable 16,835 15221,124 (5,719)
Additions to long-term debt 589- 20,000
Dividends paid (3,002) (2,970)(6,012) (5,946)
Other, net 629 349(509) 806
-------- --------
Cash provided by (used in) financing
activities 15,051 17,53114,603 9,141
-------- --------
Net increase (decrease) in cash (225) 1,09751,743 200
Cash at beginning of period 5,445 4,078
-------- --------
Cash at end of period $ 5,22057,188 $ 5,1754,278
======== ========
- 4 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Notes to Condensed Consolidated Financial Statements
(In Thousands)
Basis of Presentation
- ----------------------
The December 31, 1996 condensed consolidated balance sheet amounts
have been derived from the previously audited consolidated balance
sheet of Kaman Corporation and subsidiaries.
The balance of the condensed financial information reflects all
adjustments which are, in the opinion of management, necessary for
a fair presentation of the financial position, results of
operations and cash flows for the interim periods presented and are
of a normal recurring nature unless otherwise disclosed in this
report.
The statements should be read in conjunction with the notes to the
consolidated financial statements included in Kaman Corporation's
1996 Annual Report.
Loss on Closure of Amplifier BusinessCustomer Advances
- ------------------------------------------------------
The corporation recorded a pre-tax chargehas received two advance payments from the
Commonwealth of $15,000Australia in connection with the purchase of eleven
(11) SH-2G helicopters. The first quarterpayment of $49,500 was received
on June 30 and the second payment of $49,500 was received on July
14, 1997. In accordance with contract requirements, the
corporation fully secured these payments, upon their receipt,
through the issuance of an irrevocable letter of credit. It is
anticipated that the letter of credit amount will be reduced as
various contract milestones are achieved. Substantially all of the
advance payments were applied to pay down bank debt during the
month of July.
Revolving Credit Agreement
- --------------------------
The Corporation's revolving credit agreement dated January 29,
1996, was amended and restated as of July 3, 1997, as a resultin order to
address the corporation's requirement for issuance of management's decisionletters of
credit to close Kaman
Music's Trace Elliot amplifier manufacturing businesssecure advance payments by foreign governments in
Great
Britain. The closure is expected to be substantially completed byconnection with the endsale of 1997.
Cash Flow Items
- ---------------
Cash payments for interest were $2,984 and $2,717 for the three
months ended March 31, 1997 and 1996, respectively. Cash
payments for income taxes for the comparable periods were $1,033
and $1,158, respectively.SH-2 aircraft.
- 5 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Notes to Condensed Consolidated Financial Statements
(In Thousands)
Loss on Sale of Amplifier Business
- ----------------------------------
In April 1997, the corporation announced its decision to close
Kaman Music's Trace Elliot amplifier manufacturing business in
Great Britain. As a result of that decision, the corporation
recorded a pre-tax charge in the first quarter of 1997 equal to
$15,000 related to closure of Trace Elliot. The operation was
subsequently purchased by a Trace Elliot management group. As
a result of that sale, only $10,400 of the charge was necessary to
close out the corporation's interest in Trace Elliot, with the
balance offsetting other matters associated with Kaman Music's
operations.
Cash Flow Items
- ---------------
Cash payments for interest were $5,530 and $4,582 for the six
months ended June 30, 1997 and 1996, respectively. Cash payments
for income taxes for the six months ended June 30, 1997 and 1996
were $5,294 and $6,675, respectively.
Recently Issued Accounting StandardStandards
- -----------------------------------------------------------------------
Effective for periods ending on or after December 15, 1997, the
computation, presentation, and disclosure requirementsprovisions of StatementStatements of Financial Accounting Standards No. 128
Earnings"Earnings per Share,Share", and No. 129 "Disclosure of Information About
Capital Structure" will apply to the corporation. The corporation
does not anticipate any material adjustmentimpact to its consolidated
financial statements as a result of the new statement.statements.
Effective for periods beginning after December 15, 1997, the
provisions of Statements of Financial Accounting Standards No. 130
"Reporting Comprehensive Income" and No. 131 "Disclosures About
Segments of an Enterprise and Related Information" will apply to
the corporation. The corporation anticipates that adoption of
these statements may have an effect on presentation of certain
financial information.
- 6 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
- ---------------------
Consolidated revenues for the three monthsmonth and six month periods
ended March 31,June 30, 1997 were relatively even and up 5%slightly,
respectively, compared to the same periods of 1996.
Diversified Technologies segment revenues for the three month
period ended June 30, 1997 were even with the same period of last
year; for the six month period ended June 30, 1997 revenues were up
7% compared to the same period of 1996. These results
reflect increased revenues in the Diversified Technologies segment.
For the quarter ended March 31, 1997, the corporation recorded a pre-tax charge of $15 million related to closure of Music
Distribution's amplifier manufacturing business located in Great
Britain. As a result, the corporation recorded a loss of $4.4
million for the first quarter compared to earnings of $5.2 million
for the same period of 1996. The loss applicable to common
shareholders was $5.3 million, or 28 cents per share primary and
fully diluted in 1997, compared to earnings of $4.3 million, or 23
cents per common share primary, 22 cents per common share fully
diluted in the same period last year. Excluding the charge, first
quarter earnings grew nearly 9% to $5.7 million, or 25 cents per
common share primary, 24 cents per common share fully diluted. The
first quarter charge reflects management's decision to cease the
amplifier manufacturing operation in Great Britain and thereby
reduce capital investment.
Diversified Technologies segment revenues increased by about 15%
for the quarter ended March 31, 1997 compared to the same period of
1996.year ago. The increase is
primarily attributabledue to increased demand for the corporation's scientific
services and specialty self-lubricating bearings and
scientific services.
Within thebearings.
The Diversified Technologies segment management continues
effortsbusinesses continue to adapt
the corporation's businesses to conditions inevolving defense and commercial aircraft markets. In this regard, management
believes that there is potentialThe
corporation has had some success in winning contracts for usethe sale
of its SH-2 aircraft bymulti-mission helicopter to foreign military services, particularly those using smaller ships
with landing platforms that are well- suited to this helicopter.governments. The
corporation is currently performing a contract for the Republic of
Egypt's acquisition of ten (10) SH-2G helicopters from the U.S.
Navy. This work which involves the retrofit of SH-2F helicopters,
alreadypreviously manufactured for the U.S. Navy and currently in storage,
into the SH-2G configuration,configuration. The contract is expected to have a
value of about $150 million over a three year period.period of which $110
million has been recognized as revenue. Deliveries are scheduled
to begin in the fourth quarter of this year. As it pursuesAdditionally, during
the second quarter of 1997, contracts were signed with the
Commonwealth of Australia and the Government of New Zealand for the
supply of retrofit SH-2G aircraft. The work for Australia involves
eleven (11) aircraft (incorporating a new cockpit and new weapons
and sensors) with support, including a support services facility,
for the Royal Australian Navy. This contract is valued at nearly
$600 million. The work for New Zealand involves four (4) aircraft,
and support, for New Zealand defense forces. This contract is
valued at nearly $180 million. It is expected that revenues and
earnings for the Australia and New Zealand programs will phase in
gradually, beginning in the second half of this year. Deliveries
under both programs are expected to begin in the 2000 - 2001 time
frame. The corporation continues to pursue other opportunities for
foreign sales as well, including countries in Southeast Asia and
the Middle East. In the U.S., there are currently sixteen (16)
SH-2G aircraft in the Naval Reserves and the corporation has maintained an office inexpects to
continue providing logistics and spare parts support for these
aircraft, even though it no longer manufactures this aircraft for
the U.S. government.
- 7 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Australia to coordinate work on competitions in Australia, New
Zealand, and Malaysia. During the first quarter of 1997, the
corporation was notified by the Australian government that it had
been selected as the "preferred tenderer" in a competition to
supply eleven (11) multi-mission helicopters to go aboard Royal
Australian Navy ANZAC frigates. Contract negotiations have begun
and are expected to take several months to complete. The retrofit
aircraft for Australia will incorporate a new cockpit and new
weapons and sensors. Therefore, while the contract value is
presently undetermined, management expects that it will be
significantly larger in dollar value than the program for Egypt.
It is also anticipated that revenues and earnings will phase in
gradually, with deliveries expected to begin in 2001. In the first
quarter, Kaman was also chosen by the government of New Zealand as
the "preferred tenderer" for that country's procurement of four (4)
retrofitted aircraft. Contract negotiations should begin shortly
and are expected to take several months to complete. Although the
contract value and delivery schedule will not be determined until
those negotiations are finalized, it is anticipated that the
program will have a value in the range of the program for Egypt.
The corporation continues to pursue other opportunities for foreign
sales as well, including Malaysia and other countries in Southeast
Asia and the Middle East. In the U.S., the corporation is not
manufacturing further aircraft for the U.S. Navy, however there are
sixteen aircraft currently in the Naval Reserves and the
corporation expects to continue to provide logistics and spare
parts support for these aircraft.
As to its advanced technology defense programs, management believes
that it is well positioned to compete in a defense environment that
is increasingly emphasizing advanced technology "smart weapons"
programs in its strategic planning. The corporation has
significant expertise in the field of high-technology programs,
having performed a multitude of government contracts over the
years. These contracts have involved products and systems, as well
as services such as computer software development, intelligence
analysis, and research and development. The corporation continues
to be successful in maintaining revenues from this type of
business, however competition in this area is increasing.
The corporation also performs aerospace subcontracting work for
several airframe manufacturing programs. This business hasprograms and manufactures various
niche market products, including self-lubricating bearings for use
in aircraft, marine vessels, and hydro-power plants; and flexible
couplings for use in helicopters. These businesses have shown some
improvement due to renewed health in the domestic aviation market,
examples of which include work associated with the Boeing 777 and
the McDonnell Douglas C-17.
- 8 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Management continues to take a conservative approach to production
of its K-MAX (registered trademark) helicopter, a medium to heavy
lift 'aerial truck' for use in logging, fire fighting,
reforestation, utility power line work, and other applications.
Management believes that this approach will give the aircraft's
markets time to develop and expects that sales and profitability
will take some time to achieve. Management also recognizes that
the market has been affected by the availability of military
surplus aircraft released to the public at lower cost than new
aircraft. Another potential application for the K-MAX is the task
of vertical replenishment ("VERTREP"), a non-combat role in the
military. Since 1995, the K-MAX has been chosen by the U.S. Navy
Military Sealift Command ("MSC") to provide two separate
demonstrations of its VERTREP capabilities under charter/lease
arrangements. A third demonstration opportunity was recently awarded tois currently being conducted
by another provider. Management does not consider it unusual that
the government would choose to award the latest project to another
provider in order to provide comparative performance data.
In its advanced technology defense programs, management believes
that its business is well positioned to compete in a defense
environment that is increasingly emphasizing advanced technology
"smart weapons" programs. The corporation has significant
expertise in the field of high-technology programs, having
performed a multitude of government contracts over the years,
involving products and systems, as well as services such as
computer software development, intelligence analysis, and research
and development. The corporation has continued to be successful in
maintaining revenues from this type of business, however
competition in this area is increasing due to widespread
consolidation in the defense sciences industry, and an increasing
tendency for defense sciences contracts to become larger in size
and longer in duration. Based upon its view of longer term trends
in this area of business, the corporation announced on July 24,
1997, that it is exploring the possible sale of Kaman Sciences
Corporation, its defense related sciences subsidiary. Lazard
Freres & Co. will be assisting in the process, which is expected to
take several months and there are no guarantees that any
transaction will result from this process.
- 8 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Overall, Distribution segment revenues were relatively flat for the
quarter and six months ended March 31,June 30, 1997 compared to the same
periodperiods of 1996. These results reflect an increaseincreases of 3%9% and 6%
respectively, in Industrial Distribution revenues (which
constitutes 78%79% of the segment's revenues) offset by a decreasedecreases of
about 13% for16% and 14% respectively, in Music Distribution.
The Industrial Distribution business continues to benefit from
efforts to enhance operating efficiencies, expand partnering
relationships with suppliers, address the needs of customers who
want to consolidate their vendor base, and provide value added
services in areas such as electrical and electronic systems,
materials handling, and precision positioning systems. For certain
of its larger customers, the company also performs an "integrated
supply" function, involving management of parts inventories and
associated personnel as well as selection of suppliers for the
customer's facility. SalesThe company also continues some expansion of
its geographical presence in response to customer demand. However,
sales for this business are made to nearly every sector of U.S.
industry, however, so demand for products tends to be influenced by
industrial production levels. During the first quarterhalf of 1997,
the Music Distribution business washas been affected by softness in
both foreign and domestic markets for its products. For the
quarter ended March 31, 1997, the corporation recorded a pre-tax
charge of $15 million related to closure of the Music Distribution
company's Trace Elliot amplifier manufacturing business in Great
Britain. The charge reflects management's decision to cease that
operation and thereby reduce capital investment. The operation
was subsequently purchased by a Trace Elliot management group. As
a result of the sale, only $10.4 million of the charge was
necessary to close out the corporation's interest in Trace Elliot.
For the second quarter, the credit resulting from reversal of the
balance of the charge that was not utilized in connection with the
Trace Elliot sale offset the effects of a decline in Music
Distribution revenues as well as costs associated with receivable
and inventory carrying values and streamlining Music Distribution
operations. The decline in Music revenues in the second quarter
reflects continued contraction and changes in the worldwide music
market as well as reduced revenue from the loss of sales of Trace
Elliot products and discontinued product lines.
Total operating profits for the segments for the second quarter of
1997 increased by approximately 6% compared to the same period of
1996. For the six months ended June 30, 1997, total operating
profits declined substantially due to the first quarter charge and
loss of sales in the Music Distribution portion of the Distribution
- 9 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Total operating profits for the segments for the first quarter of
1997 declined substantially compared to the same period of 1996 due
to the pre-tax charge in the Distribution segment.segment business. Operating profits for Diversified Technologies
increased about 4%19% for the quarter overended June 30, 1997, and almost
11% for the samesix month period, lastcompared to the prior year, primarily
attributabledue to demand for specialty bearings and scientific services. As a result of the
pre-tax charge, theThe
Distribution segment experienced an operating loss for the threesix
month period ended March 31, 1997.June 30, 1997, due to the first quarter pre-tax
charge and loss of sales of Trace Elliot products and other
discontinued product lines. Management
has come to believe that certain structural changes in consumer
music markets may be occurring and it is continuing to evaluate
its strategic direction in thisthe Music business.
Interest expense for the first quarterhalf of 1997 increased 2%6% compared
to the same period of 1996, primarily due to increases in average
borrowings.
The corporation recorded an income tax benefit at an overall rate
of 13.1% as a result of the pre-tax charge and the loss for the
first three months of 1997. The tax benefit rate would have been
larger but for the fact that the tax benefit is limited for losses
associated with operations in Great Britain. The consolidated effective income tax rate was 42.0% for the comparablefirst six months
of 1997 was 52.2%, reflecting adjustments for the tax benefits
associated with the Trace Elliot matter. For the same period of
1996, the rate was 43.4%.
Net earnings for the quarter ended June 30, 1997 were $6.7 million,
compared to $5.4 million a year ago. Earnings applicable to common
shareholders were $5.8 million, or 30 cents per common share
primary, 28 cents per common share fully diluted, compared to $4.5
million, or 24 cents per common share primary, 23 cents per common
share fully diluted, for the second quarter of 1996. A lower
effective tax rate was a principal factor contributing to the
increase in earnings for the quarter.
Net earnings for the six months ended June 30, 1997 were $2.3
million, compared to $10.6 million a year ago. Earnings applicable
to common shareholders were $445,000 or 2 cents per common share
primary and fully diluted, compared to $8.8 million, or 47 cents
per common share primary, 45 cents per common share fully diluted,
in 1996. As explained above, earnings were affected by the first
quarter pre-tax charge.
Effective for periods ending on or after December 15, 1997, the
computation, presentation, and disclosure requirementsprovisions of StatementStatements of Financial Accounting Standards No. 128
Earnings"Earnings per Share,Share", and No. 129 "Disclosure of Information About
Capital Structure" will apply to the corporation. The corporation
does not anticipate any material adjustmentimpact to its consolidated
financial statements as a result of the new statement.statements.
Effective for periods beginning after December 15, 1997, the
provisions of Statements of Financial Accounting Standards No. 130
"Reporting Comprehensive Income" and No. 131 "Disclosures About
- 10 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Segments of an Enterprise and Related Information" will apply to
the corporation. The corporation anticipates that adoption of
these statements may have an effect on presentation of certain
financial information.
Management is aware of the potential software logic anomalies
associated with the year 2000 date change and does not currently
anticipate any material effect upon its operations as a result
thereof.
Liquidity and Capital Resources
- -------------------------------
The corporation's cash flow from operations has generally been
sufficient to finance a significant portion of its working capital
and other capital requirements. During the past few years,
however, the corporation's capital requirements have continued to
increase, and this resulted in financing more of its requirements
from bank borrowings.
- 10 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
During the firstsecond quarter, operating activities required additional
cash principally due to working capital requirements, including
increases in accounts receivable for the Industrial Distribution
business and for work on the SH-2 program for Egypt, specialty
bearings, and scientific services, and reductions in accounts
payable in the Diversified Technologies segment.services.
Cash used in investing activities has traditionally been for the
acquisition of machinery and computer equipment used forin
manufacturing and distribution. During the first quarter,half of the year,
these customary requirements were supplemented by proceeds from the
sale of assets, principally the disposition of a small fixed base
operation subsidiary in the Distribution segment.
Cash provided by financing activities was primarily used to support
the previously discussed increase in working capital requirements.
For this purpose, the corporation maintains a revolving credit
agreement involving twelve domestic and foreign banks. This
facility was established in January 1996 and provides a maximum unsecured line of credit of $250
million. It replaces two previous
revolving credit arrangements and involves many of the same lenders
that participated in those arrangements. The agreement has a term of five years ending in January
2001, and contains various covenants, including debt to
capitalization, consolidated net worth requirements, and
limitations on other loan indebtedness that the corporation may
incur. The agreement was amended and restated as of July 3, 1997,
in order to address the corporation's requirement for issuance of
letters of credit to secure advance payments by foreign governments
in connection with the sale of SH-2 aircraft. Specifically, the
corporation has received two advance payments from the
- 11 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Commonwealth of Australia in connection with the SH-2G contract
previously described. The first payment of $49.5 million was
received on June 30 and the second payment of $49.5 million was
received on July 14, 1997. The corporation fully secured these
payments, upon their receipt, through the issuance of an
irrevocable letter of credit. It is anticipated that the letter of
credit amount will be reduced as various contract milestones are
achieved.
Cash used by financing activities was primarily attributable to the
payment of dividends.
Under its revolving credit agreement, the corporation has the
ability to borrow funds on both a short-term and long-term basis.
As of March 31,June 30, 1997, the corporation's aggregate borrowings were
$130.1$132.0 million, most of which was borrowed under the revolving
credit facility. Average borrowings were $129.3$129.5 million for the
first threesix months of 1997, compared to $116.9$118.9 million for the
same period last year. Substantially all of the advance payments
described above were applied to pay down bank debt during the month
of July.
Management believes that the corporation's cash flow from
operations and available unused bank lines of credit under its
revolving credit agreement will be sufficient to finance its
working capital and other capital requirements for the foreseeable
future.
- 11 -
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 prospects, including future contract awards
and negotiations, the SH-2G and K-MAX
helicopter programs, the potential sale of Kaman Sciences
Corporation, 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 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) competitive conditions in markets
served by the corporation; 5) the degree of acceptance of new
products in the marketplace; 6) currency exchange rates, taxes,
laws and regulations inflation rates, general business conditions
and other factors.factors; and 7) the corporation's ability to structure a
sale of Kaman Sciences on acceptable terms. Any forward-looking
information should be considered with these factors in mind.
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KAMAN CORPORATION AND SUBSIDIARIES
Part II - OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders
The annual meeting of the shareholders of the corporation was
held at the offices of the corporation on April 15, 1997.
Following is a brief description of each matter voted upon at the
meeting:
1. Election of Directors
---------------------
The following fourteen (14) individuals were elected directors
of the corporation to serve until the next annual meeting and until
their successors have been elected:
Brian E. Barents Eileen S. Kraus
E. Reeves Callaway III Hartzel Z. Lebed
Frank C. Carlucci John A. DiBiaggio
Laney J. Chouest Walter H. Monteith, Jr.
Edythe J. Gaines John S. Murtha
Huntington Hardisty Wanda Lee Rogers
Charles H. Kaman
C. William Kaman II
For each director, the Class B shareholders voted 606,800
shares in favor; 20 shares against; no abstentions; and no broker
non-votes.
2. Authorization to Elect One Additional Director
----------------------------------------------
A proposal to authorize the Board of Directors to elect one
(1) additional director during the ensuing year was adopted by the
Class B shareholders who voted 605,120 shares in favor; 1,680
shares against; 20 shares abstaining; and no broker non-votes.
3. Appointment of KPMG Peat Marwick LLP
------------------------------------
A proposal to appoint KPMG Peat Marwick LLP as independent
auditors for the corporation during the ensuing year was adopted by
the Class B shareholders, who voted 606,800 shares in favor; 20
shares against; no abstentions; and no broker non-votes.
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KAMAN CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits to Form 10-Q:
(4) Amended and Restated Revolving Credit Agreement
(amending and restating the Revolving Credit
Agreement, dated as of January 29, 1996)
between the Corporation and The Bank of Nova
Scotia and Fleet National Bank, as the
Co-Administrative Agents, dated as of
July 3, 1997.
(11) Earnings per common share computationPer Common Share Computation
(27) Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed duringin the second quarter ended March 31, 1997.of
1997:
(1) A report on Form 8-K dated April 15, 1997 was
filed on April 16, 1997, which report described
the corporation's announcement of a pre-tax
charge of $15 million taken in the first
quarter 1997 as a result of management's
decision to close Kaman Music Corporation's
Trace Elliot amplifier manufacturing business
in Great Britain.
(c) Reports on Form 8-K filed subsequent to the second
quarter of 1997:
(1) A report on Form 8-K was filed on July 3, 1997
relating to the sale of the Trace Elliot
amplifier manufacturing business in Great
Britain.
(2) A report on Form 8-K was filed on July 24, 1997
announcing the possible sale of Kaman Sciences
Corporation.
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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: MayAugust 13, 1997 By Charles H. Kaman
ChairmanPresident and
Chief Executive Officer
(Duly Authorized Officer)
Date: MayAugust 13, 1997 By Robert M. Garneau
Executive Vice President and
Chief Financial Officer
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KAMAN CORPORATION AND SUBSIDIARIES
Index to Exhibits
Exhibit 4 Amended and Restated Revolving
Credit Agreement, dated as of
July 3, 1997 Attached
Exhibit 11 Earnings Per Common Share
Computation Attached
Exhibit 27 Financial Data Schedule Attached
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