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. - 12 - 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. - 13 - 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. - 13 - 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 - 14 - 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 - 15 -15-