ITEM 1. BUSINESS
Kaman Corporation, incorporated in 1945, reports information for itself and its subsidiaries (collectively, the "corporation") in the following business segments: Aerospace, Industrial Distribution, and Music Distribution.
The Aerospace segment serves commercial, U.S. defense and foreign government markets. Its principal programs consist of its SH-2G maritime helicopter, K-MAX (Registered Trademark) medium-to-heavy lift helicopter, subcontract work involving aircraft structures and the manufacture of components such as self-lubricating bearings and advanced technology products. The Industrial Distribution segment serves nearly every sector of U.S. industry with industrial repair and OEM products as well as support services. The Music Distribution segment serves domestic and foreign markets with a wide variety of musical instruments and accessories and manufactures guitars and other music products for professional and amateur musicians.
AEROSPACE
The Aerospace segment consists of several operating subsidiaries of Kaman Aerospace Group, Inc., including Kaman Aerospace Corporation, Kaman Aerospace International Corporation, K-MAX Corporation, and Kamatics Corporation.
The segment's largest program is the SH-2G Super Seasprite helicopter, an advanced, intermediate-weight, multi-mission, maritime aircraft that increases a ship's effectiveness by expanding its surveillance capability, providing over-the-horizon warning and targeting of potential threats, and contributing to the ship's combat capabilities. At present, the program generally involves retrofit of the corporation's SH-2F helicopters (in storage) to the SH-2G configuration.
The corporation currently has commercial contracts with the Commonwealth of Australia and the Government of New Zealand for the supply of SH-2G helicopters. The aircraft is also in service with the Egyptian Air Force and the U.S. Navy Reserves.
The program for New Zealand involves five (5) SH-2G(NZ) aircraft, and support, for New Zealand defense forces. The contract has an anticipated value of $180 million (US). Work is proceeding on this program and deliveries are scheduled to begin early in the second quarter of 2001.
The program for Australia involves eleven (11) SH-2G(A) aircraft with support, including a support services facility, for the Royal Australian Navy. The total contract has an anticipated value of about $680 million (US) and the helicopter production portion of the work is valued at $559 million (US). The Australian SH-2G(A) will contain an integrated tactical avionics system ("ITAS") that will provide the most sophisticated, integrated cockpit and weapons system available in an intermediate-weight helicopter. With expanded surveillance capability that provides over-the- horizon warning and targeting of potential threats, the SH-2G is well adapted for foreign allies that have structured their navies around smaller ships.
Litton Guidance and Control Systems, a division of Litton Systems, Inc. and Litton Industries, Inc., has been a major subcontractor for both the Australia and New Zealand programs, being responsible for providing avionics system hardware and integration software. In addition, Litton has been the designer and integrator of the ITAS system specific to the Australia program. Litton had stated that it was incurring additional costs to perform its fixed price contract with the corporation for the Australia program and submitted claims for such costs to the corporation during 2000. The corporation's evaluation of the matter was different from Litton's and the corporation had, in turn, submitted claims to Litton. In an effort to resolve the entire matter, the parties conducted a mediation in early February 2001. As a result of that process, the parties arrived at an agreement in principle under which the corporation will make certain milestone payments to Litton as it completes work on hardware and certain software contemplated under the fixed price contract and Litton will release its claims against the corporation. In return, Litton will transfer to the corporation a software integration laboratory, software and intellectual property rights and the corporation will release its claims against Litton. In addition, upon performance of the items described above, Litton's significant program responsibilities for the Australia program will end and the corporation will assume responsibility for several remaining elements of the project. The corporation has already begun to work with identified subcontractors (who must be acceptable to the Australian government) to negotiate contracts to perform those elements. As these contracts are developed, the overall impact of resolution of the Litton matter upon costs and profitability for the Australia program will become better understood. There will be a delay in delivery of the full ITAS system to the Australian government, although deliveries of helicopters without the full ITAS system are scheduled to begin during the first quarter of 2001 and the corporation is working with the Royal Australian Navy to coordinate these deliveries.
During 2000, the corporation continued to provide on-site support in the Republic of Egypt for ten (10) SH-2G helicopters that were delivered in 1998 under that country's foreign military sale agreement with the U.S. Navy.
The SH-2 is an aircraft that was originally manufactured for the U.S. Navy. This is no longer done, however, there are currently five (5) aircraft maintained in the U.S. Navy Reserve's active fleet. While these aircraft remain in service, the corporation will continue providing logistics and spare parts support for the aircraft. The corporation has taken a consignment of the U.S. Navy's inventory of SH-2 spare parts and has executed a longer term agreement with the Department of the Navy. The overall objective is for the corporation to provide further support of U.S. Naval Reserve requirements while having the ability to utilize certain inventory for support of other SH-2G programs.
The corporation continues efforts to build and enhance familiarization with the SH-2's capabilities among various governments around the world. This market is highly competitive, takes time to develop, and is influenced by economic and political conditions. The corporation continues to actively pursue this business, including possible further orders from current customers.
The corporation also manufactures the K-MAX medium-to-heavy lift helicopter which has a variety of potential applications, including logging, power line and oil rig construction, fire fighting, and other commercial applications. The K-MAX program, which began in late 1994, is based on the corporation's intermeshing rotor technology with servo-flap control. Constructed with fewer components and less airframe weight, the K-MAX has increased payload capacity and lower manpower, maintenance and spare parts inventory requirements, resulting in a cost-effective tool for industries requiring medium-to-heavy repetitive lift capabilities. The corporation has been conservative in its production of this aircraft since inception. During 2000, the Corporation sold four (4) helicopters to commercial customers operating in the U.S., Europe, and Taiwan, principally for logging and construction. In December, 2000, the corporation was awarded a $21 million contract from the U.S. State Department for the purchase of five (5) helicopters, equipment and spare parts to be used in Peru in support of anti-drug efforts. The corporation recognized revenue from two (2) of these aircraft in 2000 and the contract is expected to be completed during the second quarter of 2001. The corporation continues its efforts to refocus sales development on global market opportunities in industry and government. The K-MAX program has experienced significant market difficulties during the past few years, due in part to conditions in the
commercial logging industry, the aircraft's principal application to date. Overall, management expects that successful sales development as well as profitability for the entire program will take some time to achieve.
The corporation is a subcontractor on a number of commercial and defense aviation programs, including production of wing structures and other components for virtually all Boeing commercial aircraft as well as components for the Boeing C-17 transport, the Comanche helicopter and the fighter. The corporation also manufactures self-lubricating bearings for use principally in aircraft flight controls, turbine engines and landing gear, which are used extensively in today's commercial jetliners, as well as driveline couplings for use principally in helicopters. Although this business experienced some softness in the market during the year, there are signs that the commercial aircraft market is strengthening. The corporation has been pursuing opportunities and won several significant contracts during 2000. Specifically, MD Helicopters selected the corporation to supply fuselages for its entire line of single-engine helicopters, including the MD600N, MD520N, MD530F and MD 500E helicopters. This multi-year program has an estimated potential value of $100 million. MD Helicopters also selected the corporation to supply composite rotor systems for its MD Explorer helicopter under a multi-year contract with an estimated potential value, including options, of $75 million. Boeing, an important customer of the Aerospace segment, awarded the corporation a three-year follow-on contract to supply structural parts for Boeing's line of commercial aircraft, including fixed trailing edge kits for Boeing 777 and 767 aircraft and other parts and subassemblies for those aircraft as well as the 737, 747 and 757 aircraft. The Boeing contract has an estimated potential value of $98 million and contains a three-year option.
Among its smaller programs, the Aerospace segment develops and manufactures advanced technology products, including high- reliability memory systems used in many airborne, shipboard and ground-based programs; safe, arm and fuzing devices used in a wide range of missiles, including the Tomahawk Missile; high- precision non-contact measuring systems and high-performance microwave cable assemblies with commercial and military applications; and high-power permanent magnet motors used commercially in the oil service industry and militarily for a variety of uses. In 2000, the corporation was chosen by Litton Ingalls Shipbuilding as part of a Newport News Shipbuilding-led team to begin preliminary design of electric propulsion motors and drive electronics in an industry competition for the U.S. Navy's proposed next-generation DD21 destroyer.
The Aerospace segment is continuing to implement "lean-thinking" strategies throughout the organization in order to further enhance efficiency and reduce costs.
INDUSTRIAL DISTRIBUTION
The Industrial Distribution segment consists of Kaman Industrial Technologies Corporation and its Canadian subsidiary, Kaman Industrial Technologies, Ltd.
This segment is one of the nation's largest industrial distributors, supplying nearly every sector of North American industry with electrical and mechanical power transmission and bearing, motion control and material handling components through its network of branches and distribution centers across the U.S. and in British Columbia, Canada. The company offers more than one million individual items in various product groups, ranging from virtually every type of bearing made, from simple nylon sleeve bearings to super-precision ceramic hybrids; hydraulic and pneumatic products and services; power transmission components and materials handling equipment; electrical products and components, including AC/DC electric motors, AC/DC adjustable speed drives, controls and sensors; linear motion components and subsystems, including linear bearings, bushings, shafts, rails and ball screws; to accessories and maintenance items such as lubricants, adhesives, sealants, chemicals, specialty tools, and other products. The products that the segment purchases for distribution are for the most part derived from traditional technologies, although the segment is increasingly selling products with the higher technological content required to support automated production processes.
In addition to providing products, the segment can also monitor processes for efficiency and improvement opportunity, and provide inventory management, just-in-time delivery, and cost savings analysis (called Documented Savings). The segment's state-of-the-art computer system provides electronic data interchange and direct links to customers' and suppliers' purchasing departments, handling the process from invoice creation and proposal requests to purchase orders while its technologically advanced warehouse management system and strategically located distribution centers provide the segment the ability to provide same day or next day delivery of a great majority of products offered. In addition, during 2000 the segment implemented its internet e-Commerce site which contains a complete catalog of product offerings and provides an important new channel for both current and new customers to transact business with the segment.
The segment benefited during 2000 from healthy market conditions and internal initiatives implemented early in the year in order to increase efficiency and service to customers. These initiatives included consolidation of branch operations, a reorganization of the sales, marketing and field management structure, and enhanced inventory controls. Since the segment's customers include nearly every sector of U.S. industry, this business tends to be influenced by industrial production levels. Sales in the fourth quarter of the year were affected by some weakness in industrial production and management is monitoring the economic situation during 2001.
MUSIC DISTRIBUTION
The Music Distribution segment consists of Kaman Music Corporation, KMI Europe, Inc., and a Canadian subsidiary, B & J Music Ltd.
This segment is the largest independent distributor of musical instruments and accessories in the U.S., offering more than 10,000 musical instruments and accessories world-wide for use by amateurs and professionals. Products range from the segment's proprietary products, including Ovation (Registered Trademark) and Hamer (Registered Trademark) guitars, as well as the Takamine (Registered Trademark) guitar line to a full line of distributed fretted instruments, percussion instruments, and music accessories. The segment's product line was expanded in 2000 when it was selected by Fred Gretsch Enterprises to manage global sales and marketing for Gretsch (Registered Trademark) brand professional quality drum products. To enhance its service to customers, the segment maintains a state-of-the-art supply chain management software system that enables it to offer customers such services as inventory management, just-in-time delivery, Internet access, and electronic data interchange. The segment has also implemented a business to business e-Commerce site and continues to look for ways to reduce costs and improve efficiency.
FINANCIAL INFORMATION
Information concerning each segment's performance for the last three fiscal years is included in the corporation's 2000 Annual Report to Shareholders (Exhibit 13 to this Form 10-K) and is incorporated by reference.
PRINCIPAL PRODUCTS AND SERVICES
Following is information for the three preceding fiscal years concerning the percentage contribution of each business segment's products and services to the corporation's consolidated net sales:
RESEARCH AND DEVELOPMENT EXPENDITURES
Government sponsored research expenditures by the Aerospace segment were $10.2 million in 2000, $11.3 million in 1999, and $13.2 million in 1998. Independent research and development expenditures were $5.5 million in 2000, $4.9 million in 1999, and $8.5 million in 1998.
BACKLOG
Program backlog of the Aerospace segment was approximately $439.9 million at December 31, 2000, $580.1 million at December 31, 1999, and $757.1 million at December 31,1998. The Aerospace segment's award of the commercial contracts with the governments of Australia and New Zealand resulted in a significant increase in backlog during 1997. As the Aerospace segment completes its work on these programs, the segment's backlog is decreasing and returning to more historic levels.
The corporation anticipates that approximately 56% of its backlog at the end of 2000 will be performed in 2001. Approximately 15.1% of the backlog at the end of 2000 is related to U.S. government contracts or subcontracts which are included in backlog to the extent that funding has been appropriated by Congress and allocated to the particular contract by the relevant procurement agency. Virtually all of these funded government contracts have been signed.
GOVERNMENT CONTRACTS
During 2000, approximately 87.4% of the work performed by the corporation directly or indirectly for the U.S. government was performed on a fixed-price basis and the balance was performed on a cost-reimbursement basis. Under a fixed-price contract, the price paid to the contractor is negotiated at the outset of the contract and is not generally subject to adjustment to reflect the actual costs incurred by the contractor in the performance of the contract. Cost reimbursement contracts provide for the reimbursement of allowable costs and an additional negotiated fee.
The corporation's United States government contracts and subcontracts contain the usual required provisions permitting termination at any time for the convenience of the government with payment for work completed and associated profit at the time of termination.
COMPETITION
The Aerospace segment operates in a highly competitive environment with many other organizations which are substantially larger and have greater financial and other resources. The corporation competes with other helicopter manufacturers on the basis of price, performance, and mission capabilities; and also on the basis of its experience as a manufacturer of helicopters, the quality of its products and services, and the availability of facilities, equipment and personnel to perform contracts. Consolidation in the industry has increased the level of international competition for helicopter programs. The corporation is also affected by the political and economic circumstances of its potential foreign
customers. The corporation's FAA certified K-MAX helicopters compete with military surplus helicopters and other commercial helicopters used for lifting, as well as with alternative methods of meeting lifting requirements. The corporation competes for its subcontract aircraft structures and components business on the basis of price and quality; product endurance and special performance characteristics; proprietary knowledge; and the reputation of the corporation.
Industrial distribution operations are subject to a high degree of competition from several other national distributors, two of which are substantially larger than the corporation; and from many regional and local firms. Competitive forces are intensifying as the major competitors grow through consolidation.
Music distribution operations compete with domestic and foreign distributors. Certain musical instrument products manufactured by the corporation are subject to competition from U.S. and foreign manufacturers as well. The corporation competes in these markets on the basis of service, price, performance, and inventory variety and availability. The corporation also competes on the basis of quality and market recognition of its music products and has established certain trademarks and trade names under which certain of its music products are produced, as well as under private label manufacturing in a number of foreign countries.
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, aircraft structures and components, the industrial and music distribution businesses, 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) political developments in countries where the corporation intends to do business; 2) standard government contract provisions permitting renegotiation of terms and termination for the convenience of the government; 3) economic and competitive conditions in markets served by the corporation, including industry consolidation in the United States and global economic conditions; 4) timing of satisfactory completion of the Australian SH-2G(A) program; 5) the timing, degree and scope of market acceptance for products such as a repetitive lift helicopter; 6) U.S. industrial production levels; 7) currency exchange rates, taxes, laws and regulations, inflation rates, general business conditions and other factors. Any forward-looking information should be considered with these factors in mind.
EMPLOYEES
As of December 31, 2000, the Corporation employed 3,825 individuals throughout its business segments and corporate headquarters as follows:
PATENTS AND TRADEMARKS
The corporation holds patents reflecting scientific and technical accomplishments in a wide range of areas covering both basic production of certain products, including aerospace products and musical instruments, as well as highly specialized devices and advanced technology products in defense related and commercial fields.
Although the corporation's patents enhance its competitive position, management believes that none of such patents or patent applications is singularly or as a group essential to its business as a whole. The corporation holds or has applied for U.S. and foreign patents with expiration dates that range through the year 2020.
These patents are allocated among the corporation's business segments as follows:
Trademarks of Kaman Corporation include Adamas, Applause, Hamer, KAflex, KAron, K-MAX, Magic Lantern, and Ovation. In all, the corporation maintains 210 U.S. and foreign trademarks with 23 applications pending, most of which relate to music products in the Music Distribution segment.
COMPLIANCE WITH ENVIRONMENTAL PROTECTION LAWS
In the opinion of management, based on the corporation's knowledge and analysis of relevant facts and circumstances, compliance with any environmental protection laws is not likely to have a material adverse effect upon the capital expenditures, earnings or competitive position of the corporation or any of its subsidiaries.
The corporation is subject to the usual reviews, inspections and enforcement actions by various federal and state environmental and enforcement agencies and has entered into agreements and consent decrees at various times in connection with such reviews. One such matter, Rocque vs. Kaman, is discussed in Item 3 (Legal Proceedings). Also on occasion the corporation has been identified as a potentially responsible party ("PRP") by the U.S. Environmental Protection Agency ("EPA") in connection with the EPA's investigation of certain third party facilities. In each instance, the corporation has provided appropriate responses to all requests for information that it has received, and the matters have been resolved either through de minimis settlements, consent agreements, or through no further action being taken by the EPA or the applicable state agency with respect to the corporation. With respect to any such matters which may currently be pending, the corporation has been able to determine, based on its current knowledge, that resolution of such matters is not likely to have a material adverse effect on the future financial condition of the corporation.
In arriving at this conclusion, the corporation has taken into consideration site-specific information available regarding total costs of any work to be performed, and the extent of work previously performed. Where the corporation has been identified as a PRP at a particular site, the corporation, using information available to it, also has reviewed and considered a number of other factors, including: (i) the financial resources of other PRPs involved in each site, and their proportionate share of the total volume of waste at the site; (ii) the existence of insurance, if any, and the financial viability of the insurers; and (iii) the success others have had in receiving reimbursement for similar costs under similar policies issued during the periods applicable to each site.
FOREIGN SALES
Twenty-three and four tenths percent (23.4%) of the sales of the corporation made in 2000 were to customers located outside the United States. In 2000, the corporation continued its efforts to develop international markets for its products and foreign sales (including sales for export); and during 2000 the corporation continued to perform work under contracts with the Commonwealth of Australia and the Government of New Zealand for the supply of retrofit SH-2G helicopters. Additional information required by this item is included in the corporation's 2000 Annual Report to Shareholders (Exhibit 13 to this Form 10-K)and is incorporated herein by reference.
ITEM 2.
ITEM 2. PROPERTIES
The corporation occupies approximately 3.26 million square feet of space throughout the United States and in Canada and Australia, distributed as follows:
The Aerospace segment's principal facilities are located in Arizona, Connecticut, and Massachusetts; other facilities including offices and smaller manufacturing and assembly operations are located in several other states. These facilities are used for manufacturing, research and development, engineering and office purposes. The U.S. Government owns 154 thousand square feet of the space occupied by Kaman Aerospace Corporation in Bloomfield, Connecticut in accordance with a Facilities Lease Agreement with a five (5) year term expiring in March 2003. The corporation also occupies a facility in Nowra, New South Wales, Australia under a contract providing for a ten (10) year term expiring in June, 2010.
The Industrial Distribution segment's facilities are located throughout the United States with principal facilities located in California, Connecticut, New York, Kentucky and Utah. Additional Industrial Distribution segment facilities are located in British Columbia, Canada. These facilities consist principally of regional distribution centers, branches and office space with a portion used for fabrication and assembly work.
The Music Distribution segment's facilities in the United States are located in Connecticut, California, and Tennessee. An additional Music Distribution facility is located in Ontario, Canada. These facilities consist principally of regional distribution centers, source centers and office space. Also included are facilities used for manufacturing musical instruments.
The corporation occupies a 40 thousand square foot Corporate headquarters building in Bloomfield, Connecticut.
The corporation's facilities are suitable and adequate to serve its purposes and substantially all of such properties are currently fully utilized. Many of the properties, especially within the Industrial Distribution segment, are leased.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the corporation or any of its subsidiaries is a party or to which any of their property is subject. Legal proceedings or enforcement actions relating to environmental matters are discussed in the section entitled Compliance with Environmental Protection Laws. On August 3, 2000, Arthur J. Rocque, Jr., Commissioner of Environmental Protection for the State of Connecticut instituted suit in state court naming Kaman Aerospace Corporation, Kamatics Corporation and the Ovation Division of Kaman Music Corporation as defendants. The complaint alleges certain regulatory violations (the majority of which are administrative in nature) at facilities located in Connecticut related to routine inspections which took place between 1988 and 1998. The complaint seeks civil penalties and injunctive relief. Management believes that in all cases where corrective action was required at the time of such inspections, such action was promptly taken at the time and management does not anticipate that the resolution of this matter will be material to the business or financial condition of the corporation.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the fourth quarter of 2000.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
CAPITAL STOCK AND PAID-IN CAPITAL
Information required by this item is included in the corporation's 2000 Annual Report to Shareholders (Exhibit 13 to this Form 10-K) and is incorporated herein by reference. INVESTOR SERVICES PROGRAM
Shareholders of Kaman Class A common stock are eligible to participate in the Mellon Investor Services Program administered by Mellon Bank, N.A. which offers a variety of services including dividend reinvestment. A booklet describing the program may be obtained by writing to the program's Administrator, Mellon Bank, N.A., P. O. Box 3338, South Hackensack, NJ 07606-1938.
NASDAQ market quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.
ANNUAL MEETING
The Annual Meeting of Shareholders of the corporation will be held on Tuesday, April 10, 2001 at 11:00 a.m. in the offices of the corporation, 1332 Blue Hills Avenue, Bloomfield, Connecticut 06002. Holders of all classes of Kaman securities are invited to attend, however it is expected that matters on the agenda for the meeting will require the vote of Class B shareholders only.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this item is included in the corporation's 2000 Annual Report to Shareholders (Exhibit 13 to this Form 10-K) and is incorporated herein by reference.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Information required by this item is included in the corporation's 2000 Annual Report to Shareholders (Exhibit 13 to this Form 10-K) and is incorporated herein by reference.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item is included in the corporation's 2000 Annual Report to Shareholders (Exhibit 13 to this Form 10-K) and is incorporated herein by reference.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Following is information concerning each Director and Executive Officer of Kaman Corporation including name, age, position with the corporation, and business experience during the last five years:
Brian E. Barents Mr. Barents, 57, has been a Director since 1996. He is President and Chief Executive Officer of Galaxy Aerospace Company L.P. Prior to that he was President and Chief Executive Officer of Learjet, Inc.
T. Jack Cahill Mr. Cahill, 52, has held various positions with Kaman Industrial Technologies Corporation, a subsidiary of the corporation, since 1975, and has been President of that subsidiary since 1993.
E. Reeves Callaway, III Mr. Callaway, 53, has been a Director since 1995. He is President of The Callaway Advanced Technology Corporation.
Frank C. Carlucci Mr. Carlucci, 70, has been a Director since 1989. Prior to that he served as U.S. Secretary of Defense. He is Chairman of The Carlyle Group, merchant bankers, and Chairman of Nortel Networks Corporation (formerly Northern Telecom). Mr. Carlucci is also a director of Ashland, Inc., Neurogen Corporation, Pharmacia & Upjohn, Inc., Quaker Oats Company, Sun Resorts, Ltd., N.V., and Texas Biotechnology Corporation.
Laney J. Chouest, M.D. Dr. Chouest, 47, has been a Director since 1996. He is Owner-Manager of Edison Chouest Offshore, Inc.
Candace A. Clark Ms. Clark, 46, has been Senior Vice President, Chief Legal Officer and Secretary since 1996. Prior to that she served as Vice President and Counsel. Ms. Clark has held various positions with the corporation since 1985.
John A. DiBiaggio Dr. DiBiaggio, 68, has been a Director since 1984. He is President and Chief Executive Officer of Tufts University. Prior to that he was President and Chief Executive Officer of Michigan State University.
Ronald M. Galla Mr. Galla, 50, has been Senior Vice President and Chief Information Officer since 1995. Prior to that he served as Vice President and director of the corporation's Management Information Systems, a position which he held since 1990. Mr. Galla has been director of the corporation's Management Information Systems since 1984.
Robert M. Garneau Mr. Garneau, 56, has been Executive Vice President and Chief Financial Officer since 1995. Previously he served as Senior Vice President, Chief Financial Officer and Controller. Mr. Garneau has held various positions with the corporation since 1981.
Huntington Hardisty Admiral Hardisty (USN-Ret.), 72, is the retired President of Kaman Aerospace International Corporation, a subsidiary of the corporation. He has been a Director since 1991 and serves as a consultant to the corporation. He retired from the U.S. Navy in 1991 having served as Commander-in-Chief for the U.S. Navy Pacific Command since 1988.
Charles H. Kaman Mr. Kaman, 81, has been Chairman of the Board of Directors since 1945. Until 1999 he was also President and Chief Executive Officer of the corporation. He is presently on disability leave.
C. William Kaman II Mr. Kaman, 49, has been a Director since 1992. He is Chairman and CEO of AirKaman of Jacksonville, Inc., an entity unaffiliated with the corporation. Previously he was Executive Vice President of the corporation and was President of Kaman Music Corporation, a subsidiary of the corporation. Mr. Kaman is the son of Charles H. Kaman, Chairman of the Board of Directors of the corporation.
John C. Kornegay Mr. Kornegay, 51, has been President of Kamatics Corporation, a subsidiary of the corporation, since 1999, and has held various positions with Kamatics Corporation since 1988.
Walter R. Kozlow Mr. Kozlow, 65, has been President of Kaman Aerospace Corporation, a subsidiary of the corporation, since 1986, and has held various positions with Kaman Aerospace Corporation since 1960.
Eileen S. Kraus Ms. Kraus, 62, has been a Director since 1995. She is the retired Chairman (Connecticut) of Fleet National Bank. Since 1979 she has held various positions at Shawmut Bank Connecticut and Shawmut National Corporation, predecessors of Fleet Bank, N.A. and its holding company, Fleet Financial Group. She is a director of The Stanley Works and Chairman of Connecticare Holding Company and Connecticare, Inc.
Paul R. Kuhn Mr. Kuhn, 59, was appointed President and Chief Executive Officer of the corporation and was elected a Director in 1999. From 1998 to 1999 he was Senior Vice President, Operations, Aerospace Engine Business, for Coltec Industries, Inc. Prior to that he was Group Vice President, Coltec Industries, Inc. and President of its Chandler Evans division. He is a director of the Connecticut Business and Industry Association.
Hartzel Z. Lebed Mr. Lebed, 73, has been a Director since 1982, and served as Vice Chairman of the Board of Directors from January, 1999 to September, 1999. He is the retired President of CIGNA Corporation.
Walter H. Monteith, Jr. Mr. Monteith, 70, has been a Director since 1987. He is the retired Chairman of Southern New England Telecommuni- cations Corporation.
Wanda L. Rogers Mrs. Rogers, 68, has been a Director since 1991. She is President and Chief Executive Officer of Rogers Helicopters, Inc. She is also a director of Clovis Community Bank.
Robert H. Saunders, Jr. Mr. Saunders, 59, became President of Kaman Music Corporation, a subsidiary of the corporation, in 1998. He served as Senior Vice President of the corporation since 1995 and also held the position of Senior Executive Vice President of Kaman Music Corporation during a portion of that period.
Each Director and Executive Officer has been elected for a term of one year and until his or her successor is elected. The terms of all Directors and Executive Officers are expected to expire as of the Annual Meeting of the Shareholders and Directors of the corporation to be held on April 10, 2001.
Section 16(a) Beneficial Ownership Reporting Compliance.
Based upon information provided to the corporation by persons required to file reports under Section 16(a) of the Securities Exchange Act of 1934, no Section 16(a) reporting delinquencies occurred in 2000.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
A) GENERAL. The following tables provide certain information relating to the compensation of the corporation's Chief Executive Officer and its four other most highly compensated executive officers.
B) SUMMARY COMPENSATION TABLE.
C) OPTION/SAR GRANTS IN THE LAST FISCAL YEAR:
D) AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR, AND FISCAL YEAR-END OPTION/SAR VALUES.
E) LONG TERM INCENTIVE PLAN AWARDS: Except as described above, no long term incentive plan awards were made to any named executive officer in the last fiscal year.
F) PENSION AND OTHER DEFINED BENEFIT DISCLOSURE. The following table shows estimated annual benefits payable at normal retirement age to participants in the corporation's Pension Plan at various compensation and years of service levels using the benefit formula applicable to Kaman Corporation. Pension benefits are calculated based on 60 percent of the average of the highest five consecutive years of "covered compensation" out of the final ten years of employment less 50 percent of the primary social security benefit, reduced proportionately for years of service less than 30 years:
"Covered Compensation" means "W-2 earnings" or "base earnings", if greater, as defined in the Pension Plan. W-2 earnings for pension purposes consist of salary (including 401(k) and Section 125/129 Plan contributions but not deferrals under a non-qualified Deferred Compensation Plan), bonus and taxable income attributable to restricted stock awards and the cash out of employee stock options. Salary and bonus amounts for the
named Executive Officers for 2000 are as shown on the Summary Compensation Table. Compensation deferred under the corporation's non-qualified deferred compensation plan is included in Covered Compensation here because it is covered by the corporation's unfunded supplemental employees' retirement plan for the participants in that plan.
Current Compensation covered by the Pension Plan for any named executive whose Covered Compensation differs by more than 10% from the compensation disclosed for that executive in the Summary Compensation Table: Mr. Cahill, $365,243.
Federal law imposes certain limitations on annual pension benefits under the Pension Plan. For the named executive officers who are participants, the excess will be paid under the Corporation's unfunded supplemental employees' retirement plan.
The Executive Officers named in Item 11(b) are participants in the plan and as of December 31, 2000, had the number of years of credited service indicated: Mr. Kaman - 55.1 years; Mr. Kuhn - 4.0; Mr. Garneau - 19.48 years; Mr. Kozlow - 40.7 years; Mr. Cahill - 25.7 years.
Benefits are computed generally in accordance with the benefit formula described above.
G) COMPENSATION OF DIRECTORS. In general, non-employee members of the Board of Directors of the corporation receive an annual retainer of $20,000 and a fee of $1,000 for attending each meeting of the Board and each meeting of a Committee of the Board, except that the Chairman of the Audit Committee receives a fee of $1,250 for attending each meeting of that Committee. Such fees may be received on a deferred basis. In addition, each non-employee director will receive a Restricted Stock Award for 500 shares (issued pursuant to the corporation's Stock Incentive Plan), providing for immediate vesting upon election as a director at the corporation's 2001 Annual Meeting of Shareholders.
H) EMPLOYMENT CONTRACTS AND TERMINATION, SEVERANCE AND CHANGE OF CONTROL ARRANGEMENTS. The corporation has an arrangement with Mr. C. H. Kaman that (1) in the event he retires or dies during active employment with the corporation, he and/or Mrs. Kaman will be provided with medical/dental benefits for the remainder of their lives; and (2) in the event he becomes disabled during active employment, he will be assured of receiving an amount equal to his then current annual base salary for the remainder of his life.
In addition, the corporation has entered into Employment Agreements and Change in Control Agreements with certain executive officers,
copies of which were filed as exhibits to the following filings made by the corporation with the Securities and Exchange Commission: Form 10-Q (Document 54381-99-14) filed on November 12, 1999; Form 10-K (Document No. 54381-00-03 filed on March 21, 2000; and Form 10-Q (Document 54381-00-500006) filed on November 14, 2000. The employment agreements generally provide for a severance payment to be made to any such officer if he or she is terminated from employment (other than for willful failure to perform proper job responsibilities or violations of law) or if he or she leaves employment for good reason (e.g., due to a diminution in job responsibilities). The agreements have a two year term which began on September 21, 1999. The change in control agreements generally provide that, for a three year period following a change in control of Kaman Corporation or, in certain cases, a subsidiary thereof, a severance payment will be made to any such officer if his or her employment ends following the change in control (unless the termination was for cause, the officer dies or becomes disabled or if he or she leaves employment without good reason). The change in control agreements do not have a fixed term.
The corporation has also entered into an agreement with Admiral Hardisty providing him with certain payments in the amount of $370,000 and retaining him as a consultant for a period of two years following his retirement from regular employment effective March 1, 2000 at a per diem rate of $1,000.00. A copy of such agreement was attached as Exhibit 10d to the corporation's 1999 Form 10-K (Document 54381-99-3) filed with the Securities and Exchange Commission on March 21, 2000.
In addition, the corporation has an agreement with Mr. C. William Kaman, retaining him as a Senior Executive Advisor through December 31, 2001 at the annual rate of $245,000. A copy of such agreement appears as Exhibit 10(c) to the corporation's 1998 Form 10-K (Document 54381-99-3) filed with the Securities and Exchange Commission on March 16, 1999.
Except as disclosed in Item 13, and except as described above and in connection with the corporation's Pension Plan and the corporation's non-qualified Deferred Compensation Plan, the corporation has no other employment contract, plan or arrangement with respect to any named executive which relates to employment termination for any reason, including resignation, retirement or otherwise, or a change in control of the corporation or a change in any such executive officer's responsibilities following a change of control, which exceeds or could exceed $100,000.
I) Not Applicable.
J) COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS.
1) The following persons served as members of the Personnel and Compensation Committee of the Corporation's Board of Directors during the last fiscal year: Frank C. Carlucci, Brian E. Barents, Eileen S. Kraus, and Walter H. Monteith, Jr.
None of these individuals was an officer or employee of the corporation or any of its subsidiaries during either the last fiscal year or any portion thereof in which he or she served as a member of the Personnel and Compensation Committee.
2) During the last fiscal year no executive officer of the corporation served as a director of or as a member of the compensation committee (or other board committee performing equivalent functions) of another entity, one of whose executive officers served as a director of, or on the Personnel and Compensation Committee of the corporation.
K) Not Applicable. L) Not Applicable.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
Following is information about persons known to the corporation to be beneficial owners of more than five percent (5%) of the Corporation's voting securities. Ownership is direct unless otherwise noted.
(b) SECURITY OWNERSHIP OF MANAGEMENT. The following is information concerning beneficial ownership of the corporation's stock by each Director of the corporation, each Executive Officer of the corporation named in the Summary Compensation Table, and all Directors and Executive Officers of the corporation as a group. Ownership is direct unless otherwise noted.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2000, the corporation obtained legal services from the Hartford, Connecticut law firm of Murtha Cullina LLP of which Mr. John S. Murtha, who served as a Director of the corporation through April, 2000, is of counsel. The corporation also obtained video production services in the amount of $58,088 from Polykonn Corporation, a corporation controlled by Mr. Steven Kaman, son of Charles H. Kaman, Chairman of the corporation. In addition, in 2000 the corporation paid rental payments in the amount of
$92,809 under a lease arrangement with AirKaman of Jacksonville, Inc. for certain premises occupied by the corporation in Jacksonville, Florida. AirKaman of Jacksonville, Inc. is a corporation controlled by C. William Kaman, II, a director of the corporation. Such lease arrangement was in effect for a number of years prior to Mr. Kaman's acquisition of AirKaman of Jacksonville, Inc., was terminated effective December 31, 2000 and in February, 2001, AirKaman of Jacksonville, Inc. paid the corporation a termination fee of $100,000 as consideration for such termination. Also in 2000 the corporation utilized the services of Mr. Ivan Humberto Iraola Pellane as a sales representative in connection with the sale of the corporation's K-MAX and SH-2 helicopters for use in Peru. Mr. Iraola Pellane is the son-in-law of Mr. Walter Kozlow, an Executive Officer of the corporation. The corporation's agreement with Mr. Iraola Pellane with respect to the SH-2 helicopter provides for a fee of $3,000 per month for certain in-country support and marketing services and also provides for a commission of 2 1/2% on any sale of the SH-2 helicopter which may ensue. To date no such sales have occurred. The corporation's agreement with Mr. Iraola Pellane with respect to the K-MAX helicopter provides for a commission arrangement of 5% on such sales with an additional 1% as compensation for after market support services. In December, 2000, the corporation was awarded a contract valued at $21 million with the U.S. State Department for the sale of five K-MAX helicopters for use in Peru. Payments to Mr. Iraola Pellane for his services under his commission arrangement are subject to the corporation's receipt of payment from the customer.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS. See Item 8 concerning financial statements appearing as Exhibit 13 to this Report.
(a)(2) FINANCIAL STATEMENT SCHEDULES. An index to the financial statement schedules immediately precedes such schedules.
(a)(3) EXHIBITS. An index to the exhibits filed or incorporated by reference immediately precedes such exhibits.
(b) REPORTS ON FORM 8-K: None
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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, in the Town of Bloomfield, State of Connecticut, on this 15th day of March, 2001.
KAMAN CORPORATION (Registrant)
By Paul R. Kuhn, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature: Title: Date: - ---------------------------------------------------------------
Paul R. Kuhn President, Chief Executive March 15, 2001 Officer and Director
Robert M. Garneau Executive Vice President March 15, 2001 and Chief Financial Officer (Principal Financial and Accounting Officer)
Paul R. Kuhn March 15, 2001 Attorney-in-Fact for:
Brian E. Barents Director E. Reeves Callaway, III Director Frank C. Carlucci Director Laney J. Chouest Director John A. DiBiaggio Director Huntington Hardisty Director C. William Kaman, II Director Eileen S. Kraus Director Hartzel Z. Lebed Director Walter H. Monteith, Jr. Director Wanda L. Rogers Director
KAMAN CORPORATION AND SUBSIDIARIES
Index to Financial Statement Schedules
Report of Independent Auditors
Financial Statement Schedules:
Schedule V - Valuation and Qualifying Accounts
REPORT OF INDEPENDENT AUDITORS
KPMG LLP Certified Public Accountants One Financial Plaza Hartford, Connecticut 06103
The Board of Directors and Shareholders Kaman Corporation:
Under date of February 5, 2001, we reported on the consolidated balance sheets of Kaman Corporation and subsidiaries as of December 31, 2000 and 1999 and the related consolidated statements of operations, changes in shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 2000, as contained in the 2000 annual report to shareholders. These consolidated financial statements and our report thereon are included in the annual report on Form 10-K for 2000. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule as listed in the accompanying index. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits.
In our opinion, such schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
Hartford, Connecticut February 5, 2001
KAMAN CORPORATION AND SUBSIDIARIES SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS (Dollars in Thousands)
KAMAN CORPORATION
INDEX TO EXHIBITS
Exhibit 3a The Amended and Restated by reference Certificate of Incorporation of the corporation, as amended, has been filed with the Securities and Exchange Commission on form S-8POS on May 11, 1994, as Document No. 94-20.
Exhibit 3b The By-Laws of the corporation by reference as amended on February 9, 1999 has been filed with the Securities and Exchange Commission on Form 10-K on March 16, 1999, as Document No. 99-03.
Exhibit 4a Indenture between the corporation by reference and Manufacturers Hanover Trust Company, as Indenture Trustee, with respect to the Corporation's 6% Convertible Subordinated Debentures, has been filed as Exhibit 4.1 to Registration Statement No. 33 - 11599 on Form S-2 of the corporation filed with the Securities and Exchange Commission on January 29, 1987 and is incorporated in this report by reference.
Exhibit 4b Revolving Credit Agreement by reference between the corporation and The Bank of Nova Scotia and Fleet National Bank as Co-Administrative Agents and Bank One, N.A. as the Documentation Agent and The Bank of Nova Scotia and Fleet Securities, Inc. as the Co-Lead Arrangers and Various Financial Institutions dated as of November 13, 2000 filed as Exhibit 4 to form 10-Q filed with the Securities and Exchange Commission on November 14, 2000, Document No. 54381-00-500006.
Exhibit 4c The corporation is party to certain by reference long-term debt obligations, such as real estate mortgages, copies of which it agrees to furnish to the Commission upon request.
Exhibit 10a The Kaman Corporation 1993 Stock attached Incentive Plan as amended effective November 18, 1997 has been filed as an exhibit to the Corporation's Form 10-K Document No. 54381-98-09 filed with the Securities and Exchange Commission on March 16, 1998 as amended by Document No. 54381-98-13 on March 27, 1998 and by Document No. 54381-00-500006 on November, 14, 2000) and as amended effective February 13, 2001, which amendment is attached hereto.
Exhibit 10b The Kaman Corporation Employees by reference Stock Purchase Plan as amended effective November 19, 1997 has been filed as an exhibit to the Corporation's Form 10-K Document No. 54381-98-09 filed with the Securities and Exchange Commission on March 16, 1998 (as amended by Document No. 54381-98-13 on March 27, 1998) and is incorporated in this report by reference.
Exhibit 10c Kaman Corporation Supplemental attached Employees' Retirement Plan, as amended
Exhibit 10d Kaman Corporation Deferred attached Compensation Plan, as amended
Exhibit 10e Kaman Corporation Cash Bonus Plan, attached as amended
Exhibit 10f Employment Agreements and Change in by reference Control Agreements with certain executive officers have been filed as exhibits to the following filings by the corporation with the Securities and Exchange Commission: Form 10-Q (Document No. 54381-99-14) filed November 12, 1999; Form 10-K (Document No. 54381-00-03) filed March 21, 2000; and Form 10-Q (Document No. 54381-00-500006) Filed November 14, 2000.
Exhibit 10f(IV) Agreement between Kaman by reference Corporation and Huntington Hardisty dated February 24, 2000 has been filed as Exhibit 10d to the corporation's Form 10-K Document No. 54381-00-03.
Exhibit 10g Notice of change of control by reference filed as Exhibit 99 to the corporation's Form 8-K dated August 16, 2000 as Document No. 54381-00-000010.
Exhibit 11 Statement regarding computation attached of per share earnings.
Exhibit 13 Portions of the Corporation's attached 2000 Annual Report to Shareholders as required by Item 8.
Exhibit 21 Subsidiaries. attached
Exhibit 23 Consent of Independent Auditors. attached
Exhibit 24 Power of attorney under which attached this report has been signed on behalf of certain directors.