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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
- --- SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED September 30, 2002.
------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
- --- SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM TO
--------------- --------------
Commission File No. 0-1093
KAMAN CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Connecticut 06-0613548
- -------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1332 Blue Hills Avenue
Bloomfield, Connecticut 06002
----------------------------------------
(Address of principal executive offices)
(860) 243-7100
--------------------------------------------------
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (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 October 31, 2002:
Class A Common 21,770,424
Class B Common 667,814
Page 1 of 30 Pages
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets(In thousands)
Assets September 30, 2002 December 31, 2001
------ ------------------ -------------------
Current assets:
Cash and cash equivalents $ 7,755 $ 30,834
Accounts receivable (net of
allowance for doubtful
accounts of $3,914 in
2002, $3,939 in 2001) 218,917 186,798
Inventories:
Contracts and other
work in process $ 57,814 65,676
Finished goods 5,494 45,315
Merchandise for resale 85,619 148,927 86,409 197,400
------- -------
Income taxes receivable 1,713 342
Deferred income taxes 39,237 16,938
Other current assets 11,916 10,339
------- -------
Total current assets 428,465 442,651
Property, plant & equip., at cost 161,847 173,900
Less accumulated depreciation
and amortization 98,511 113,131
------- -------
Net property, plant & equipment 63,336 60,769
Goodwill 34,560 12,165
Other assets, net 5,960 6,361
------- -------
$532,321 $521,946
======= =======
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Notes payable $ 11,605 $ 4,038
Accounts payable 46,215 52,044
Accrued contract loss 18,495 -
Accrued restructuring costs 7,770 -
Other accrued liabilities 27,324 25,332
Advances on contracts 28,327 30,781
Other current liabilities 21,895 29,065
------- -------
Total current liabilities 161,631 141,260
Long-term debt, excl. current portion 54,906 23,226
Other long-term liabilities 27,331 23,879
Shareholders' equity 288,453 333,581
------- -------
$532,321 $521,946
======= =======
- 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 Nine Months
Ended September 30, Ended September 30,
--------------------- --------------------
2002 2001 2002 2001
---- ---- ---- ----
Revenues $218,767 $219,419 $651,508 $658,752
Costs and expenses:
Cost of sales* 160,961 164,243 552,444 514,800
Selling, general and
administrative expense 48,191 43,352 149,681 139,671
Restructuring costs** - - 8,290 -
Interest (income)/expense, net 713 215 1,580 207
Other (income)/expense, net 355 208 (709) (2,323)
-------- -------- -------- --------
210,220 208,018 711,286 652,355
-------- -------- -------- --------
Earnings (loss)before
income taxes 8,547 11,401 (59,778) 6,397
Income taxes (benefit) 2,975 2,875 (20,325) 1,625
-------- -------- -------- --------
Net earnings (loss) $ 5,572 $ 8,526 $(39,453) $ 4,772
======== ======== ======== ========
Net earnings (loss)per share:
Basic $ .25 $ .38 $ (1.76) $ .21
Diluted*** $ .25 $ .37 $ (1.76) $ .21
======== ======== ======== ========
Dividends declared per share $ .11 $ .11 $ .33 $ .33
======== ======== ======== ========
* Cost of sales for the nine months ended September 30, 2002 includes the
write-off of K-MAX assets of $50,000 and Moosup facility assets of $2,679
which are associated with the charge taken in the Aerospace segment.
**Restructuring costs for the nine months ended September 30, 2002 relate
to the closure of the Moosup facility in 2003 and are associated with the
charge taken in the Aerospace segment.
***The calculated diluted per share amounts for the nine months ended
September 30, 2002 and 2001 are anti-dilutive, therefore, amounts shown
are equal to the basic per share calculation.
- 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 Nine Months
Ended September 30,
-------------------
2002 2001
------- -------
Cash flows from operating activities:
Net earnings (loss) $(39,453) $ 4,772
Depreciation and amortization 8,520 8,558
Net gain on sale of product line and other assets (1,852) (2,643)
Restructuring costs 8,290 -
Non-cash write-down of assets 52,679 -
Deferred income taxes (22,250) (4,875)
Other, net 2,430 1,263
Changes in current assets and liabilities,
excluding effects of acquisition/divestiture:
Accounts receivable (29,072) 9,320
Inventory 713 7,983
Accounts payable - trade (8,380) (16,262)
Accrued contract loss 18,495 -
Accrued restructuring cost (520) -
Advances on contracts (3,277) (5,549)
Income taxes (1,409) (4,116)
Changes in other current assets and liabilities (9,303) (7,634)
------- -------
Cash provided by (used in) operating activities (24,389) (9,183)
------- -------
Cash flows from investing activities:
Proceeds from sale of product line and other assets 7,685 4,043
Expenditures for property, plant & equipment (4,637) (5,627)
Acquisition of businesses, less cash acquired (35,302) (8,270)
Other, net (144) (213)
------- -------
Cash provided by (used in) investing activities (32,398) (10,067)
------- -------
Cash flows from financing activities:
Additions to notes payable 7,283 508
Additions/(reductions) to long-term debt 31,680 (1,660)
Purchase of treasury stock (5) (806)
Dividends paid (7,379) (7,370)
Proceeds from exercise of employee stock plans 1,150 1,213
Other 979 -
------- -------
Cash provided by (used in) financing activities 33,708 (8,115)
------- -------
Net increase (decrease) in cash and cash equivalents (23,079) (27,365)
Cash and cash equivalents at beginning of period 30,834 48,157
------- -------
Cash and cash equivalents at end of period $ 7,755 $ 20,792
======= =======
- 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, 2001 condensed consolidated balance sheet
amounts have been derived from the previously audited
consolidated balance sheet of Kaman Corporation and subsidiaries.
In the opinion of management, the balance of the condensed
financial information reflects all adjustments which are
necessary for a fair presentation of the financial position,
results of operations and cash flows for the interim periods
presented and are of a normal recurring nature, unless otherwise
disclosed in this report.
The statements should be read in conjunction with the notes to
the consolidated financial statements included in Kaman
Corporation's 2001 Annual Report.
Acquisitions
- ------------
On July 1, 2002, the Corporation completed its acquisition of
Dayron (a division of DSE, Inc.), a weapons fuze manufacturer,
located in Orlando, Florida. In late July, the Corporation
acquired RWG Frankenjura-Industrie Flugwerklager GmbH (RWG), a
German aerospace bearing manufacturer. The Corporation used
approximately $32,200 for these acquisitions.
Restructuring Costs
- --------------------
The Corporation's Aerospace segment recorded pre-tax
restructuring costs of $8,290 in the second quarter of 2002 for
the cost of phasing out the company's aircraft manufacturing
plant in Moosup, Connecticut in 2003. The charges represent
severance costs of $3,290 at the Moosup and Bloomfield, Conn.
locations of approximately 409 employees (to date there have been
99 such separations) and the cost of closing the facility of
$5,000. An additional $8,300 of ongoing pre-tax costs are
expected to be incurred in the remainder of 2002 and later
periods, mostly in 2003, for moving machinery to other company
facilities and for recertifying products and processes.
- 5 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Notes to Condensed Consolidated Financial Statements
(In thousands)
Asset Write-Downs/Write-Offs
- ----------------------------
During the second quarter of 2002, as a result of management's
current evaluation of the K-MAX program, the Aerospace segment
wrote-down its K-MAX helicopter program assets, including
$46,665 for inventories and $3,335 for fixed assets. In addition,
the segment wrote-off Moosup facility assets of $2,679, as a
result of the previously described facility closure. These
charges are included in cost of sales for 2002.
Restructuring Costs and Asset Write-Downs/Write-Offs
- ----------------------------------------------------
The following table displays the activity and balances of these
pre-tax charges as of September 30, 2002:
Deductions
----------
Total Cash Non-Cash Balance at
Charge Payments Charges Sept. 30, 2002
------ -------- -------- --------------
Restructuring costs
- -------------------
Employee termination
benefits $ 3,290 $ 520 $ - $ 2,770
Facility closings 5,000 - - 5,000
------ ------ ------ ------
Total restructuring costs 8,290 - - 7,770
------ ------ ------ ------
Asset write-downs/write-offs
- ----------------------------
Inventory 46,665 - 46,665 -
Fixed assets 6,014 - 6,014 -
------ ------ ------ ------
Total asset write-downs 52,679 - 52,679 -
------ ------ ------ ------
Total $60,969 $ 520 $52,679 $ 7,770
====== ====== ====== ======
- 6 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Notes to Condensed Consolidated Financial Statements
(In thousands except share amounts)
Accrued Contract Loss
- ---------------------
During the second quarter of 2002, the Corporation's Aerospace
segment recorded a pre-tax charge of $25,000 for estimated cost
growth on the Australia SH-2G(A) helicopter program, which has
put the contract in a loss position. Accordingly, the Company
has eliminated the $6,505 profit element of previously recorded
sales and has recognized pre-tax loss accruals of $18,495 for
anticipated cost growth associated with completion of the
aircraft, final integration and testing of the aircraft's
advanced Integrated Tactical Avionic System (ITAS) software.
In the second quarter of 2001, the Aerospace segment recorded a
sales and pre-tax earnings adjustment of $31,181, substantially
all of which was associated with a change in estimated costs to
complete the SH-2G(A) helicopter program.
Amendment to Revolving Credit Agreement
- ---------------------------------------
During the second quarter of 2002, the Corporation's Revolving
Credit Agreement was amended to exclude the non-cash portion of
the 2002 second quarter charges, up to $52,500, from the
financial covenant calculations under the Agreement.
Net Gain on Sale of Product Line and Other Assets
- -------------------------------------------------
Included in "Other (income)/expense, net" for the 2002 nine
months results is a pre-tax $1,928 gain from the sale of the
Company's microwave products line in the second quarter. The
2001 nine months results included gains totaling $2.7 million
from the sale of two facilities in the first half of the year.
Cash Flow Items
- ---------------
Cash payments for interest were $2,137 and $2,056 for the nine
months ended September 30, 2002 and 2001, respectively. Cash
payments for income taxes for the comparable periods were
$2,714 and $11,930, respectively.
Comprehensive Income/(Loss)
- ---------------------------
Comprehensive income (loss) was $(39,606) and $4,634 for the
nine months ended September 30, 2002 and 2001, respectively.
Comprehensive income was $5,350 and $8,428 for the three months
ended September 30, 2002 and 2001, respectively. The changes
to net earnings (loss)used to determine comprehensive income
(loss) are foreign currency translation adjustments.
- 7 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Notes to Condensed Consolidated Financial Statements
(In thousands except share amounts)
Shareholders' Equity
- --------------------
Changes in shareholders' equity were as follows:
Balance, January 1, 2002 $333,581
Net earnings (loss) (39,453)
Foreign currency translation adjustment (153)
--------
Comprehensive income/(loss) (39,606)
Dividends declared (7,399)
Purchase of treasury stock (5)
Employee stock plans 1,882
--------
Balance, September, 30, 2002 $288,453
========
Recent Accounting Standards
- ---------------------------
In June 2002, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 146,
"Accounting for Costs Associated with Exit or Disposal
Activities" ("SFAS 146"). This statement provides guidance on
the recognition and measurement of liabilities associated with
disposal activities and is effective for the Corporation on
January 1, 2003, at which time it will be adopted.
Subsequent Event
- ----------------
During October 2002, the Corporation completed its acquisition
of Latin Percussion, Inc., a privately held distributor of
Latin percussion instruments, headquartered in Garfield, NJ.
Latin Percussion's revenues for 2002 are projected to be about
$20 million.
- 8 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Notes to Condensed Consolidated Financial Statements
(In thousands except share amounts)
Business Segments
- -----------------
Summarized financial information by business segment is as
follows:
For the Three Months For the Nine Months
Ended September 30, Ended September 30
-------------------- ------------------
2002 2001 2002 2001
---- ---- ---- ----
Net sales:
Aerospace $ 65,226 $ 77,095 $201,253 $223,807
Industrial Distribution 120,259 109,577 358,734 345,681
Music Distribution 32,781 32,430 90,513 88,441
------- ------- ------- -------
$218,266 $219,102 $650,500 $657,929
======== ======== ======== ========
Operating profit (loss):
Aerospace $ 7,180 $ 8,052 $(61,694) $ (2,688)
Industrial Distribution 3,003 2,676 9,060 11,336
Music Distribution 2,289 2,278 4,351 4,160
------- ------- ------- -------
12,472 13,006 (48,283) 12,808
Interest, corporate and
other expense, net (3,925) (1,605) (11,495) (6,411)
-------- -------- -------- --------
Earnings (loss)
before income taxes $ 8,547 $ 11,401 $(59,778) $ 6,397
======= ======= ======= =======
September 30 December 31,
2002 2001
-------- --------
Identifiable assets:
Aerospace $322,646 $302,076
Industrial Distribution 141,701 134,974
Music Distribution 51,652 45,783
Corporate 16,322 39,113
-------- --------
$532,321 $521,946
======== ========
- 9 -
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 quarter ended September 30, 2002
were $218.8 million compared to $219.4 million the previous year.
Consolidated revenues for the first nine months of 2002 were
$651.5 million compared to $658.8 million for the same period of
2001. Revenue in the nine-month period ended September 30, 2002
was reduced by $6.5 million as a result of the $25 million
Australia SH-2G program adjustment taken in the second quarter.
The 2001 nine-month period revenues were reduced by $31.2
million, reflecting a sales and pre-tax earnings adjustment taken
in that year's second quarter relating principally to cost growth
for the Australia program.
Aerospace segment net sales for the third quarter of 2002 were
$65.2 million (including $6.6 million from acquisitions made
during the past year), compared to $77.1 million in the previous
year. Sales for the 2002 nine-month period were $201.3 million
(including $12.1 million from acquisitions made during the past
year) compared to $223.8 million for the period last year.
Excluding the impact of the Australia program adjustments, 2002
nine-month sales would have been $207.8 million compared to
$255.0 million for 2001. These results reflect reduced helicopter
program revenues as the Australia and New Zealand SH-2G programs
taper off.
In the second quarter of 2002, the corporation recorded pre-tax
charges totaling $86.0 million(of which $52.7 million was
non-cash) in the Aerospace segment to cover the write-down of
K-MAX helicopter assets, principally inventories; for cost growth
associated with the Australian SH-2G(A) program; and to phase
out operations at the corporation's Moosup, Connecticut plant.
The Aerospace segment's programs include helicopter manufacturing
along with spare parts and support; aerostructure and helicopter
subcontract work as well as manufacture of components such as
self-lubricating bearings and driveline couplings for aircraft
applications; and advanced technology products.
The corporation's helicopter programs include the SH-2G multi-
mission maritime helicopter and the K-MAX medium-to-heavy
external lift helicopter. For the third quarter, these programs
generated sales of $20.3 million (approximately 31 percent of
Aerospace segment sales) compared to 2001 third quarter sales of
$33.5 million (approximately 43 percent of Aerospace segment
sales), virtually all of which represent SH-2G remanufactured
helicopter sales. The percentage change reflects reduced
revenues from the SH-2G helicopter programs for Australia and New
Zealand as those programs mature, the absence of new SH-2G
helicopter sales, and the lack of K-MAX helicopter sales.
- 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)
The 2002 second quarter pre-tax charges include the impact of
$25.0 million of additional cost growth in the Australia SH-2G
helicopter program, which has put the contract in a loss
position. Accordingly, the corporation has eliminated the $6.5
million profit element of previously recorded sales and
recognized pre-tax loss accruals of $18.5 million for anticipated
cost growth associated with completion of the aircraft, and final
integration and testing of the aircraft's advanced Integrated
Tactical Avionics System (ITAS) software. This program involves
eleven (11) helicopters with support, including a support
services facility, for the Royal Australian Navy. The total
contract has an anticipated value of about $700 million (US). The
helicopter production portion of the work is valued at $580
million, of which about 90% has been recorded as revenue through
September 30, 2002, including the 2002 second quarter adjustment.
Ten of the aircraft are substantially complete. All of the
aircraft presently lack the full ITAS software because the
corporation was required to select new subcontractors to complete
ITAS software development as a result of a contract dispute
settlement with the original software supplier. One result of
the new subcontractor arrangements is that Kaman now has
responsibility for aircraft system integration (previously a
subcontracted task). Work with the new subcontractors is
proceeding and the corporation continues its discussions with the
Royal Australian Navy to develop an acceptable plan for
completion of aircraft deliveries with the full ITAS software,
which plan is expected to include phased acceptance of the
aircraft. The corporation anticipates that the fully completed
ITAS software will be installed and operational on all of the
Australian aircraft by the end of 2004. Management believes that
when it is equipped with the full ITAS, the SH-2G(A)helicopter
will have the most sophisticated, integrated cockpit and weapons
system available in an intermediate weight helicopter.
The program for New Zealand involves five (5) aircraft, and
support, for the Royal New Zealand Navy. The contract has an
anticipated value of about $189 million (US), of which about 97%
has been recorded as revenue through September 30,2002. Four
SH-2G(NZ) helicopters have been accepted and are in operational
service with the New Zealand Defence Force. The fifth aircraft,
ordered on option under the original contract, is scheduled for
delivery on or about the end of this year.
The corporation is continuing work on a small contract to
refurbish four existing SH-2G aircraft previously in service with
the U.S. Navy Reserves to operate aboard two Polish Navy frigates
in multi-mission roles such as surface surveillance and anti-
submarine warfare. Two helicopters have completed the
reactivation process and been accepted by the Government of
- 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)
Poland. Reactivation of the other two aircraft is underway and
is scheduled for completion by the end of the year. The
corporation expects to receive a follow-on contract to provide
for pilot and mechanic training.
The corporation is also participating in a competition to supply
up to six search and rescue helicopters to Egypt, proposing to
supply remanufactured SH-2Gs for that requirement. The
corporation's involvement in this process began in early 1999.
At this point, political conditions in that region are making it
difficult to estimate when the government might act on the
procurement. Given the lack of other new SH-2G helicopter
programs, receipt of an award for this program is important to
maintaining the Aerospace segment's third quarter 2002 profit
levels. If this program award is not received in 2003,
management believes that the Aerospace segment will be required
to engage in significant expense reductions in order to attempt
to maintain this level of profitability.
The corporation is actively pursuing other opportunities for the
SH-2G helicopter in the international defense market. This
market is highly competitive and heavily influenced by economic
and political conditions, however management believes that the
aircraft is in a good competitive position to meet the
specialized needs of navies around the world that operate smaller
ships for which the SH-2G is ideally sized.
The corporation also maintains a consignment of the U.S. Navy's
inventory of SH-2 spare parts under a multi-year agreement that
provides the ability to utilize certain inventory for support of
the corporation's SH-2G programs.
The K-MAX helicopter program, for which the corporation has
maintained a substantial inventory, has experienced significant
market difficulties in the past several years. There have been
no sales of this helicopter since the first quarter of 2001. In
the second quarter of 2002, management made the determination,
following a market evaluation of the program, that it would
produce further aircraft only upon firm order by a customer and
would pursue both a sale and short-term lease program for
existing new and used K-MAX aircraft inventory. To date, two
K-MAXs have been leased under that program, one each
to a new and an existing customer. In connection with the
decision made in the second quarter, the corporation wrote down
the value of existing aircraft, excess spare parts and equipment
inventories ($46.7 million for inventories and $3.3 million for
fixed assets). Development costs for the aircraft were previously
written off. On a going forward basis, the corporation intends
to maintain adequate inventories and personnel to support the
fleet.
- 12 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Also included in the second quarter 2002 pre-tax charges was
$11.0 million for the cost of phasing out the corporation's
aircraft manufacturing plant in Moosup, Connecticut, in 2003. The
work performed at that facility, the corporation's oldest and
least efficient, will be relocated to other company facilities.
The charge represents severance costs of about $3.3 million at
the Moosup and Bloomfield, Conn. locations which is expected to
involve the separation from service of approximately 409
employees (to date there have been 99 such separations); asset
write-offs of about $2.7 million; and $5.0 million for the
cost of closing the facility. An additional $8.3 million of
ongoing pre-tax costs are expected to be incurred in the
remainder of 2002 and later periods, mostly in 2003, for moving
machinery and re-certifying products and processes.
The Aerospace segment also performs aerostructure and helicopter
subcontract work for a variety of aerospace manufacturing
programs as well as manufacture of proprietary self-lubricating
bearings. This work generated sales of $31.2 million for the
third quarter of 2002 (48% of Aerospace segment sales) compared
to $31.4 million a year ago (about 41% of Aerospace segment
sales). Boeing is an important customer of the aerostructures
subcontracting and self-lubricating bearings manufacturing
operations and management expects some reduction in sales to
Boeing in future periods as a result of its projected declines in
commercial aircraft production.
Aerostructures subcontract work involves commercial and military
aircraft programs. Current programs include production of
wing structures for virtually all Boeing commercial aircraft
and the C-17 military transport. In September, the corporation
received a follow-on contract from Boeing for C-17 structural
components; the contract runs through June 2007 and has a
potential value of $67.5 million. During the second quarter,
the corporation received a new contract from Boeing related to
the production and fabrication of an additional group of
subassemblies that will become part of aircraft fuselages, wings
and tail structures for Boeing 747, 757, 767 and 777 families of
commercial airplanes. Under this new contract, the Aerospace
segment will receive and assemble parts from other suppliers and
ship higher-level assemblies to Boeing. Helicopter subcontract
work involves commercial and military helicopter programs.
Current work includes the production of fuselages and rotor
systems for various MD Helicopters, Inc. programs. This work is
expected to continue to run at significantly lower sales rates
than originally anticipated due to a reduction in demand.
Management considers the aircraft structures and components
operations to be an area of strategic emphasis for the business.
In December 2001, the Corporation acquired Plastic Fabricating
Company, Inc., a Wichita, Kansas manufacturer of composite parts
- 13 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
and assemblies for aerospace applications. This acquisition
provides the segment with a presence in one of the largest
aerospace manufacturing areas in the United States and
complements its existing composites and metal bonding operations.
The segment's proprietary self-lubricating bearings are used in
aircraft flight controls, turbine engines and landing gear as
well as driveline couplings for helicopters. This business
continues to be affected by the drop-off in commercial and
regional aircraft manufacturing, although the effect has been
offset to some degree by increases in commercial aftermarket and
military programs. In late July, the corporation acquired RWG
Frankenjura-Industrie Flugwerklager GmbH ("RWG"), a German
aerospace bearing manufacturer that complements the corporation's
proprietary line of bearings and provides a presence in European
aerospace markets. RWG had sales of about US $10 million in 2001
and its largest customer is Airbus Industries.
The Aerospace segment also produces advanced technology products
which generated sales of $13.7 million in the third quarter of
2002 (about 21% of Aerospace segment sales) compared to $12.2
million a year ago (approximately 16% of Aerospace segment
sales). This portion of the segment's business is benefiting
from increased defense spending. The corporation manufactures a
mix of products for military and commercial markets, including
safe, arm and fuzing devices for several missile and bomb
programs; electromagnetic motors used commercially in the oil
service and transportation industries and for military uses;
electro-optic systems; high reliability memory systems for
airborne, shipboard, and ground-based applications; and precision
non-contact measuring systems for industrial and scientific use.
In the third quarter, the corporation was selected to participate
on a Northrop-Grumman led team for a U.S. Navy program to design
and develop the Rapid Airborne Mine Clearance System, a
helicopter-borne clearance capability system for near surface and
surface moored sea mines that will provide airborne mine defense
for carrier battle groups and amphibious ready groups. The
corporation will be responsible for the laser-based target sensor
subsystem development. The 36-month subcontract is valued at
approximately $7.6 million. In October, the corporation was
selected to participate with the University of Arizona to build a
collimator used for testing large optical systems in a vacuum
environment. The corporation's portion of the five-year contract
is valued at about $12.8 million, with the majority of the work
expected to occur in 2003.
The corporation is also part of the industry team selected by the
U.S. Navy to design the integrated electric drive system for the
- 14 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Navy's DD(X) next generation surface vessel. The corporation's
role will be the design and development of the active
electromagnetic components and drive electronics for the
propulsion motor in conjunction with Northrop-Grumman Newport
News and Power Technology, Incorporated. The value of the
corporation's three-year DD(X) effort could exceed $50 million.
The corporation has received letter authorization to begin
detailed design of the propulsion motor and drive. The contract
is expected to be finalized by early next year.
On July 1, the corporation completed its acquisition of Dayron,
(a division of DSE, Inc.) a weapons fuze manufacturer, located in
Orlando, Florida. Dayron manufactures bomb fuzes for a variety
of munitions programs, and has the contract to develop a fuze for
the Air Force Joint Programmable Fuze (JPF) program. The
corporation expects to receive the results of qualification
testing for the JPF program in the March/April 2003 time frame.
Once the JPF program is qualified and deployed, the corporation
expects that it will be the leading fuze supplier for precision-
guided munitions for the U.S. Air Force and Navy.
Industrial Distribution segment net sales for the third quarter
of 2002 were $120.3 million (including $10.1 million from
acquisitions made during the past year) compared to $109.6 in the
2001 quarter. For the nine-month period, segment net sales were
$358.7 million (including $27.4 million from acquisitions made
during the past year) compared to $345.7 million the previous
year.
Since the segment's customers include nearly every sector of U.S.
industry, this business is influenced by industrial production
levels and has been adversely affected by conditions in the
manufacturing sector that have existed since late 2000. These
difficult economic conditions are continuing, however cost
reduction activity has helped the segment to remain profitable to
date. Management believes that when economic recovery occurs,
this segment will be in a good position to benefit due to its
lean operating posture.
The Industrial Distribution segment's 2002 results include A-C
Supply of Milwaukee, Wisconsin, which was acquired in September
2001 and Delamac de Mexico S.A. de C.V. ("Delamac"), a leading
distributor of industrial products headquartered in Mexico City,
in which the corporation acquired a sixty percent interest in the
first quarter of 2002. These acquisitions expand the segment's
presence into new geographical areas and improve its ability to
serve national account customers. These acquisitions also
represent incremental steps in the corporation's overall strategy
of building the value of its businesses through acquisitions and
internal growth.
- 15 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
In the past, the Industrial Distribution segment has been one of
numerous defendants in a few "John Doe" type legal proceedings,
and generally relating to parts allegedly supplied to the U.S.
Navy's shipyard in San Diego, California by a predecessor company
over 25 years ago, that may have contained asbestos. The
corporation settled those few claims for nominal amounts with
contribution by insurance carriers. During the past quarter,
however, the corporation has experienced an increase in such
claims. Management believes that the Industrial Distribution
segment has good defenses to these claims, which it intends to
assert and does not currently expect that this situation will
have a material adverse effect on the corporation.
Music Distribution segment net sales were $32.8 million for the
third quarter of 2002 compared to $32.4 million the previous
year. Net sales for the first nine months of 2002 were $90.5
million, compared to $88.4 million in the 2001 period. The
segment had a good quarter despite sluggishness in both domestic
and international markets. On October 18, 2002, this segment
acquired Latin Percussion, Inc., a leading global distributor of
a wide range of Latin percussion instruments. Latin Percussion's
revenues for 2002 are projected to be about $20 million.
In the third quarter, one of the Music Distribution segment's
larger chain store customers, Mars Music, filed for Chapter 11
bankruptcy protection. The corporation's exposure as an
unsecured creditor has been reserved for. Management believes
that it is too early to determine what effect this bankruptcy
will have on the overall music market.
The corporation's segments, in total, had operating profits of
$12.5 million for the quarter ended September 30, 2002 compared
to $13.0 million last year.
For the third quarter 2002, the Aerospace segment had operating
profits of $7.2 million compared to $8.1 million last year. For
the nine months ended September 30, 2002, the Aerospace segment
had an operating loss of $61.7 million, primarily due to the 2002
pre-tax charges. Excluding the 2002 second-quarter charges,
Aerospace segment operating profits would have been $24.3 million
for the nine-month period. In the 2001 nine-month period, this
segment had an operating loss of $2.7 million. Excluding the 2001
sales and earnings adjustment, segment operating profits would
have been $28.5 million in the first nine months. The 2002
results are reflective of reduced revenues in the segment's
helicopter programs.
Operating profits for the Industrial Distribution segment were
$3.0 million for the third quarter and $9.1 million for the nine-
month period, compared to $2.7 million and $11.3 million in the
- 16 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
comparable 2001 time periods. Results reflect intense pricing
pressures in the marketplace and very difficult economic
conditions that continue to affect the segment's customer base.
Consistent with last year, supplier discounts continue to be an
important contributor to segment operating profits.
Operating profits for the Music Distribution segment were $2.3
million in the third quarter and $4.4 million for the nine months
ended September 30, 2002 compared to $2.3 million and $4.2
million for the comparable periods of 2001.
Selling, general and administrative expenses for the quarter and
the nine-month periods of 2002 were higher than the same period
of last year, principally due to acquisitions.
For the nine months ended September 30, 2002, interest expense
was about $1.8 million compared to about $1.7 million during the
same period of 2001. For the nine months ended September 30,
2002, interest income was $264 thousand, compared to about $1.5
million the previous year. These amounts are netted together on
the Condensed Consolidated Statements of Operations.
Other income for the nine-months ended September 30, 2002
includes a pre-tax $1.9 million gain from the sale of the
corporation's microwave products line. The 2001 nine-month period
included gains from the sale of facilities of $2.7 million.
The tax benefit for the 2002 nine-month period is calculated at
approximately 34% and represents the combined estimated federal
and state tax effect attributable to the second quarter loss. In
the 2001 period, the corporation adjusted its estimated tax rate
to 25 percent, primarily due to reduced tax considerations on the
Australian helicopter program.
The corporation has not been required to make a contribution to
its tax-qualified defined benefit pension plan since 2000. As a
result of market conditions, management expects that the
corporation will be required to make a contribution for 2003, the
size of which will depend upon the asset value of the pension
trust fund as of December 31, 2002.
Net earnings for the quarter ended September 30, 2002 were $5.6
million compared to $8.5 million in the same quarter last year.
Earnings per share diluted were $0.25 for the quarter compared to
$0.37 in the same period a year ago. As a result of the second
quarter $86.0 million pre-tax charges, for the nine months ended
September 30, 2002, the corporation's segments, in total,
experienced a net loss of $39.5 million (or $1.76 net loss per
share diluted) compared to net earnings of $4.8 million (or $0.21
per share diluted) in the same period last year. The 2002 nine
month results also include a pre-tax $1.9 million gain from the
- 17 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
sale of the corporation's microwave products line in the second
quarter. 2001 nine-month results included a $31.2 million
adjustment to sales and pre-tax earnings in the second quarter
related to a change in estimated costs to complete the Australia
SH-2G helicopter program; results also included gains totaling
$2.7 million from the sale of two facilities in the first half of
that year. Excluding the 2002 second-quarter pre-tax charges,
nine-month earnings would have been $16.2 million ($0.72 per
share diluted). Excluding the $31.2 million adjustment largely
attributable to the Australia SH-2G program, 2001 nine-month net
earnings would have been $24.4 million ($1.06 per share diluted).
These results reflect a weak economy, maturation of the New
Zealand and Australia helicopter programs, the absence of new
SH-2G programs, and the lack of K-MAX helicopter sales.
In June 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 146, "Accounting
for Costs Associated with Exit or Disposal Activities" ("SFAS
146"). This statement provides guidance on the recognition and
measurement of liabilities associated with disposal activities
and is effective for the corporation on January 1, 2003, at which
time it will be adopted.
Critical Accounting Policies
- ----------------------------
The preparation of consolidated financial statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Significant
accounting policies are disclosed in the Notes to Consolidated
Financial Statements in the corporation's Annual Report on Form
10-K for the year ended December 31, 2001. The most significant
current areas involving management judgments and estimates are
described below. Actual results could differ from those
estimates.
Long-Term Contracts - Revenue Recognition
- -----------------------------------------
Sales and estimated profits under long-term contracts are
principally recognized on the percentage-of-completion method of
accounting, generally using either a ratio that costs incurred
bear to estimated total costs, after giving effect to estimates
of costs to complete based upon most recent information for each
contract, or units-of-delivery as the measurement basis for
effort accomplished. Reviews of contracts are made regularly
- 18 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
throughout their lives and revisions in profit estimates are
recorded in the accounting period in which the revisions are
made. Any anticipated contract losses are charged to operations
when first indicated.
Inventories
- -----------
Inventory of merchandise for resale is stated at cost (using the
average costing method) or market, whichever is lower. Contracts
and work in process, and finished goods are valued at production
cost represented by material, labor and overhead, including
general and administrative expenses where applicable. Contracts
and work in process, and finished goods are not recorded in
excess of net realizable values.
Goodwill Accounting
- -------------------
The corporation adopted Statement of Financial Accounting
Standard ("SFAS") No. 142, "Goodwill and Other Intangible
Assets", effective January 1, 2002. Goodwill is no longer
required to be amortized but rather is evaluated at least
annually for impairment. The corporation utilizes discounted
cash flow models to determine fair value used in the goodwill
impairment evaluation. Management's estimates of fair value are
based upon factors such as projected sales and cash flows and
other elements requiring significant judgments. The corporation
utilizes the best available information to prepare its estimates
and perform impairment evaluations, however, actual results could
differ significantly, resulting in the future impairment of
recorded goodwill balances.
Liquidity and Capital Resources
- -------------------------------
During the first nine months of 2002 operating activities used
$24.4 million in cash, principally due to increased accounts
receivable in the Aerospace and Industrial Distribution segments.
Aerospace accounts receivable increased principally as a result
of the Australian SH-2G helicopter program and the MD helicopter
subcontract work, while Industrial Distribution receivables were
higher as a result of increased sales compared to the
traditionally weaker fourth quarter of the prior year. Cash was
also used as accounts payable and other liabilities decreased
during the nine months of 2002, principally in the Aerospace
segment. Cash flow for the nine-month period was generally not
affected by the $86.0 million second quarter charges previously
described because $52.7 million of the charges were non-cash in
nature and $6.5 million consisted of a write-down of receivables.
Additionally, $8.3 million of the Moosup restructuring and the
- 19 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
$18.5 million loss accrual attributable to the Australia SH-2G
program are expected to be spent in later 2002 and future
periods; as of September 30, 2002, $520 thousand had been spent
in connection with the Moosup restructuring. The second quarter
charges are expected to result in a tax benefit of about
34 percent although most of the cash aspect of this benefit will
not be realized until 2003 and future periods.
During the first nine months of 2002, cash was used by investing
activities principally due to the acquisitions of Delamac,
Dayron, and RWG and by the purchase of items such as machinery
and computer equipment. This was offset to some degree by the
sale of the microwave products line. Latin Percussion, Inc. was
acquired after September 30, 2002. Cash provided by financing
activities was primarily attributable to bank borrowings to fund
the acquisitions. This was partially offset by the payment of
dividends to shareholders and to a lesser degree the sinking fund
requirement for the corporation's debentures (described below).
At September 30, 2002, the corporation had $23.2 million of its
6% convertible subordinated debentures outstanding. The
debentures are convertible into shares of Class A common stock at
any time on or before March 15, 2012 at a conversion price of
$23.36 per share, generally at the option of the holder.
Pursuant to a sinking fund requirement that began March 15, 1997,
the corporation redeems approximately $1.7 million of the
outstanding principal of the debentures each year.
In November, 2000, the corporation's board of directors approved
a replenishment of the corporation's stock repurchase program,
providing for repurchase of an aggregate of 1.4 million Class A
common shares for use in administration of the corporation's
stock plans and for general corporate purposes. As of September
30, 2002, a total of about 212,000 shares have been repurchased
under the program.
The corporation maintains a revolving credit agreement involving
a group of financial institutions. The agreement has a maximum
unsecured line of credit of $225 million which consists of a $150
million commitment for 5 years and a $75 million commitment under
a "364 day" arrangement which is renewable annually for an
additional 364 days, upon the consent of the banks. The entire
facility expires in 2005. The $75 million commitment was so
renewed effective November 6, 2002. The most restrictive of the
covenants contained in the agreement requires the corporation
to have EBITDA, as defined, at least equal to 300% of net
interest expense and a ratio of consolidated total indebtedness
to total capitalization of not more than 55%, on the basis of a
rolling four quarters. In view of the weak earnings environment,
management is closely monitoring the EBITDA to interest expense
- 20 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
ratio requirement. Late in the second quarter of 2002, an
amendment to the revolving credit agreement was entered into,
under which the non-cash portion of the 2002 second quarter
charges, up to $52.5 million, were excluded from the financial
covenant calculations.
Letters of credit are generally considered borrowings for
purposes of the revolving credit agreement. A total of $51.0
million in letters of credit are currently outstanding under the
agreement, most of which is related to the Australia SH-2G
program. Reductions to the Australia letters of credit are
anticipated as agreed upon performance milestones are reached and
as the corporation and the Australian government agree upon a
process for completion of delivery of the SH-2G(A) aircraft with
the full ITAS software.
Total average bank borrowings were $12.9 million and $2.2 million
for the nine months ended September 30, 2002 and 2001,
respectively. During the third quarter, cash in the amount of
approximately $32.2 million was used for the acquisitions of
Dayron and RWG. In connection with the acquisition of RWG, in
July the corporation established a 9.5 million Euro term loan and
revolving credit facility with one of its revolving credit
agreement lenders having offices in London. In general, the term
of this facility will expire at the same time as the five-year
revolving credit facility described previously.
Management believes that the corporation's annual cash flow from
operations and available unused bank lines of credit under its
revolving credit agreement will be sufficient to finance its
working capital and other recurring capital requirements for the
foreseeable future.
Forward-Looking Statements
- --------------------------
This report contains forward-looking information relating to the
corporation's business and prospects, including the SH-2G and
K-MAX helicopter programs, aerostructures, helicopter structures,
and components, advanced technology products, including fuzes for
the JPF program and components for the DD(X) program, the
industrial and music distribution businesses, operating cash
flow, and other matters that involve a number of uncertainties
that may cause actual results to differ materially from
expectations. Those uncertainties include, but are not limited
to: 1) the successful conclusion of competitions and thereafter
contract negotiations with government authorities, including
foreign governments, including specifically the Egypt helicopter
competition; 2) political developments in countries where the
corporation intends to do business; 3) standard government
contract provisions permitting renegotiation of terms and
termination for the convenience of the government; 4) economic
- 21 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
and competitive conditions in markets served by the corporation,
including industry consolidation in the United States and global
economic conditions; 5) timing of satisfactory completion of the
Australian SH-2G(A) program; 6) ultimate level of sales under the
MD Helicopters subcontract program; 7) actual costs for moving
equipment and re-certifying products and processes in connection
with phase out of the Moosup, Connecticut facility; 8) JPF
program qualification test results; 9) successful completion of
contract negotiations for the DD(X) program; 10) successful sale
or lease of existing K-MAX inventory; 11) profitable integration
of acquired businesses into the corporation's operations; 12)
value of the corporation's pension trust fund assets at December
31, 2002; 13) U.S. industrial production levels; 14) changes in
supplier sales policies; 15) the effect of price increases or
decreases; and 16) currency exchange rates, taxes, changes in
laws and regulations, interest rates, inflation rates, general
business conditions and other factors. Any forward-looking
information should be considered with these factors in mind.
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
The corporation has various market risk exposures that arise
from its normal business operations, including currency exchange
rates, supplier price changes, and interest rates as well as
other factors described in the Forward-Looking Statements
section of this report.
The corporation's exposure to currency exchange rates is managed
at the corporate and subsidiary operations levels as an integral
part of the business.
The corporation's exposure to supplier sales policies and price
changes relates primarily to its distribution businesses and
the corporation seeks to manage this risk through its
procurement policies and maintenance of favorable relationships
with suppliers.
The corporation's exposure to interest rate risk relates
primarily to its financial instruments, and is managed through
the use of a combination of short-term investments with market
interest rates, long-term debt obligations with fixed interest
rates, and revolving credit facilities with variable interest
rates. Fees and interest rates charged on revolving credit
commitments and borrowings are based upon borrowing levels,
market interest rates, and the corporation's credit rating.
Letters of credit are generally considered borrowings for
purposes of the corporation's revolving credit agreement.
There has been some increase in the corporation's exposure to
these market risk factors during the third quarter of 2002, as
- 22 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 3. Quantitative and Qualitative Disclosures About
Market Risk (Continued)
bank borrowings have increased in the quarter, principally
due to planned acquisitions. Management believes that any near-
term change in the market risk factors described above should
not materially affect the consolidated financial position,
results of operations or cash flows of the corporation.
Item 4. Controls and Procedures
The corporation maintains controls and other procedures designed
to provide assurance that information required to be disclosed by
the corporation in the reports that it files or submits under the
Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported upon in a timely manner.
Several members of management form an integral part of this
process, including the Chief Executive Officer and the Chief
Financial Officer.
The Chief Executive Officer and the Chief Financial Officer have
evaluated these controls and procedures within the past 90 days
and as of October 18, 2002, they concluded that such controls and
procedures are effective. There have been no significant changes
in the corporation's internal controls or in other factors that
could significantly affect these controls and procedures
subsequent to October 18, 2002.
- 23 -
KAMAN CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
For a discussion of previously reported matters, please refer to
Part II, Item 1 of the Corporation's Form 10-Q for the quarter
ended June 30, 2002 filed on August 14, 2002 with File Number
333-66179.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits to Form 10-Q:
11 Earnings (Loss) Per Share Computation
99.1 Certification of Chief Executive Officer
99.2 Certification of Chief Financial Officer
(b) Report on Form 8-K filed in the third quarter of
2002:
(1) A report on Form 8-K was filed on July 24, 2002,
reporting that the Company has signed an
agreement to acquire the privately held German
aerospace bearing manufacturing company, RWG
Frankenjura-Industrie Flugwerklager GmbH,
headquartered in Dachsbach, Germany.
(2) A report on Form 8-K was filed on August 1,
2002, reporting the Company's financial results
for the second quarter and six months ended
June 30, 2002. In the quarter, the Company
recorded pre-tax charges totaling $86.0 million
(of which $52.7 million are non-cash) to cover
the write down of K-MAX helicopter assets,
principally inventories; for cost growth
associated with the Australian SH-2G(A)
helicopter program; and to phase out operations
at its Moosup, Conn. plant.
(c) Report on Form 8-K filed subsequent to the third
quarter of 2002:
(1) A report on Form 8-K was filed on October 21,
2002, announcing that the Company had acquired
Latin Percussion, Inc., a privately held
distributor of Latin percussion instruments,
headquartered in Garfield, NJ.
- 24 -
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: November 13, 2002 By: /s/ Paul R. Kuhn
-----------------------------
Paul R. Kuhn
Chairman, President and
Chief Executive Officer
(Duly Authorized Officer)
Date: November 13, 2002 By: /s/ Robert M. Garneau
-----------------------------
Robert M. Garneau
Executive Vice President and
Chief Financial Officer
- 25 -
KAMAN CORPORATION AND SUBSIDIARIES
CERTIFICATIONS
I, Paul R. Kuhn, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Kaman Corporation [the "Registrant"];
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
- 26 -
KAMAN CORPORATION AND SUBSIDIARIES
CERTIFICATIONS Continued
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: November 13, 2002 By: /s/ Paul R. Kuhn
-----------------------------
Paul R. Kuhn
Chairman, President and
Chief Executive Officer
- 27 -
KAMAN CORPORATION AND SUBSIDIARIES
CERTIFICATIONS Continued
I, Robert M. Garneau, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Kaman Corporation [the "Registrant"];
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
- 28 -
KAMAN CORPORATION AND SUBSIDIARIES
CERTIFICATIONS Continued
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: November 13, 2002 By: /s/ Robert M. Garneau
-----------------------------
Robert M. Garneau
Executive Vice President and
Chief Financial Officer
- 29 -
KAMAN CORPORATION AND SUBSIDIARIES
Index to Exhibits
Exhibit 11 Earnings (Loss) Per Share Computation Attached
Exhibit 99.1 Certification of Chief Executive Officer Attached
Exhibit 99.2 Certification of Chief Financial Officer Attached
- 30 -