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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1994
Commission File No. 1-5562
KOLLMORGEN CORPORATION
(Exact name of registrant as specified in its charter)
New York 04-2151861
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1601 Trapelo Road, Waltham, Massachusetts 02154
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 890-5655
NONE
(Former name, former address and former fiscal year, if changed since
last report.)
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 the latest practicable date.
Class Outstanding at August 10, 1994
Common Stock, $2.50 par value 9,641,538 shares
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KOLLMORGEN CORPORATION
INDEX
Page No.
PART I - Financial Information
Consolidated Statement of Operations for 3
the Three Months and Six Months Ended
June 30, 1994 and 1993 (unaudited)
Consolidated Balance Sheets as of 4
June 30, 1994 (unaudited) and
December 31, 1993
Consolidated Statements of Cash Flows for 5-6
the Six Months Ended June 30, 1994
and 1993 (unaudited)
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial 8-10
Condition and Results of Operations
PART II - Other Information 10
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<TABLE>
PART I - FINANCIAL INFORMATION
KOLLMORGEN CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -------------------
1994 1993 1994 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 49,778 $ 48,156 $ 93,937 $ 93,724
Cost of sales 32,483 31,575 61,235 62,603
--------- --------- --------- ---------
Gross profit 17,295 16,581 32,702 31,121
--------- --------- --------- ---------
Selling and marketing expense 6,834 6,267 12,954 12,283
General and administrative expense 5,473 5,587 10,550 11,090
Research and development expense 2,903 2,588 5,324 4,931
--------- --------- --------- ---------
Income before interest and taxes 2,085 2,139 3,874 2,817
--------- --------- --------- ---------
Other income (expense):
Interest expense, net (956) (1,076) (1,884) (2,233)
Other, net 27 (47) 16 (9)
--------- --------- --------- ---------
Income before income taxes 1,156 1,016 2,006 575
Provision for income taxes - - - -
--------- --------- --------- ---------
Net income $ 1,156 $ 1,016 $ 2,006 $ 575
========= ========= ========= =========
Earnings (loss) per common share $ 0.06 $ 0.04 $ 0.09 $ (0.06)
========= ========= ========= =========
Number of shares used in calculating
loss per common share 9,637 9,631 9,637 9,631
<FN>
See accompanying notes to consolidated financial statements
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<TABLE>
KOLLMORGEN CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
<CAPTION>
ASSETS
June 30,
1994 December 31,
(unaudited) 1993
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 11,125 $ 17,682
Restricted cash 8,854 6,720
Accounts receivable 34,241 33,744
Recoverable amounts on long-term contracts 7,787 5,834
Inventories 21,998 22,018
Prepaid expenses 3,584 3,564
--------- ---------
Total current assets 87,589 89,562
--------- ---------
Property, plant and equipment, net 30,851 30,461
Net assets held for sale 3,000 3,000
Other assets 11,605 10,985
--------- ---------
$ 133,045 $ 134,008
========= =========
LIABILITIES and SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 5,991 $ 5,532
Current portion of long-term debt 3,936 3,872
Accounts payable 15,407 16,341
Accrued liabilities 31,510 32,561
--------- ---------
Total current liabilities 56,844 58,306
--------- ---------
Long-term debt 42,494 44,120
Other liabilities 1,745 1,590
Redeemable preferred stock 22,469 22,407
Common shareholders' equity:
Common stock 26,878 26,875
Additional paid-in capital 21,895 23,447
Accumulated deficit (28,160) (30,166)
Cumulative translation adjustments (1,214) (2,624)
Less common stock in treasury, at cost (9,906) (9,947)
--------- ---------
Total common shareholders' equity 9,493 7,585
--------- ---------
$ 133,045 $ 134,008
========= =========
<FN>
See accompanying notes to consolidated financial statements.
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<TABLE>
KOLLMORGEN CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<CAPTION>
For the
Six Months Ended
June 30,
------------------
1994 1993
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income from operations $ 2,006 $ 575
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 3,481 3,566
Changes in assets and liabilities:
Restricted cash (2,134) (1,779)
Accounts and notes receivable 1,135 304
Recoverable amounts on long-term contracts (1,953) 4,635
Inventories 728 1,449
Prepaid expenses 74 279
Accounts payable and accrued liabilities (3,964) (4,915)
Deferred income taxes and other expenses 107 44
Other (180) (302)
--------- ---------
Net cash provided by (used in) operations (700) 3,856
--------- ---------
Cash flows from investing activities:
Capital expenditures (2,043) (2,770)
Acquisition of Hightech Components (749) -
--------- ---------
Net cash provided by (used in) investing activities (2,792) (2,770)
--------- ---------
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Cash flows from financing activities:
Net borrowings (repayments) under credit lines 155 (545)
Issuance of common stock - 17
Common stock issued from treasury 40 -
Retirement of long-term debt (1,774) (415)
Dividends (1,486) (1,487)
--------- ---------
Net cash provided by (used in) financing activities (3,065) (2,430)
--------- ---------
Net increase (decrease) in cash and equivalents (6,557) (1,344)
Cash and cash equivalents at beginning of period 17,682 23,463
--------- ---------
Cash and cash equivalents at end of period $ 11,125 $ 22,119
========= =========
Non-cash financing activities:
Acquisition of Hightech Components:
Fair value of assets acquired $ 1,539 $ -
Cash paid 749 -
--------- ---------
Note assumed $ 790 $ -
========= =========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
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KOLLMORGEN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1994
1. The accompanying unaudited consolidated financial statements include
the accounts of Kollmorgen Corporation and all of its majority owned
subsidiaries.
2. In the opinion of management, the unaudited consolidated financial
statements included herein contain all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly the
Company's and its consolidated subsidiaries' financial condition at
June 30, 1994, and the results of operations for the three-month and
six-month periods then ended and the cash flows for the six-month
period then ended. The results of operations for interim periods are
not necessarily indicative of the results to be expected for the full
year. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for additional information.
3. Earnings (loss) per common share is based on net income less the
dividends and interest accretion on redeemable preferred stock
divided by the average number of common shares outstanding. Fully
diluted net income assumes full conversion of all convertible
securities into common stock which include the convertible
subordinated debentures and redeemable preferred stock. The fully
diluted calculation does not result in dilution of net income per
common share and, accordingly, is not presented (see Exhibit 11).
4. On April 8, 1994, the net assets of Hightech Components, Ltd. were
purchased for $1.5 million of which $.7 million was paid in cash and
$.8 million was financed with a promissory note. Hightech is a
distributor of motion technology products and is located in
Hampshire, England.
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Management's Discussion and Analysis of Financial Condition
and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
Kollmorgen's cash and cash equivalents decreased by $6.6 million
during the first six months of 1994. Net income from operations and
depreciation and amortization provided $5.5 million in cash. The
Company's restricted cash balance increased by $2.1 million as its
outstanding standby letters of credit increased from year end 1993. In
addition, accounts receivable collections provided $1.1 million in cash
offset by decreases in payables and other liabilities of $4.0 million.
Recoverable amounts on long-term contracts increased by $2.0 million from
year-end 1993.
Investing activities used $2.8 million in cash of which $2.0 million
was used to purchase capital equipment. In addition, the assets of
Hightech Components, Ltd. were purchased for $1.5 million of which $.7
million was paid in cash and $.8 million was financed with an interest-
bearing promissory note. Hightech is a distributor of motion technology
products and is located in Hampshire, England.
Financing activities used $3.0 million in cash of which $1.5 million
was used for payment of dividends on both common and preferred stock. In
addition, the Company, in accordance with the terms of its 8-3/4%
convertible subordinated debentures, made a mandatory $1.8 million sinking
fund payment on May 1, 1994. The Company is also required to make a $2.0
million sinking fund payment, in accordance with the terms of its 10-1/2%
convertible subordinated debentures, on August 1, 1994.
The Company believes that, along with its existing cash and cash
equivalent balances, it can generate sufficient resources from operations
to fund its capital expenditures and the mandatory sinking fund payments.
There were no significant capital expenditure commitments at the end
of the quarter.
RESULTS OF OPERATIONS
Sales for the second quarter 1994 were $49.8 million resulting in net
income of $1.2 million or $.06 per common share. This compares with
second quarter sales for 1993 of $48.2 million and a net income of $1.0
million or $.04 per common share. For the 1994 six month period sales
were $93.9 million and a net income of $2.0 million or $.09 per common
share. This compares to 1993 results for the same period with sales of
$93.7 million and net income of $.6 million or a loss of $.06 per common
share. Earnings (loss) per common share are computed after payment of
preferred dividends.
Backlog at the end of the 1994 second quarter was $126 million, an
increase over year-end 1993 of $16 million.
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Segments of Business Information
(dollars in thousands)
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ---------------
1994 1993 1994 1993
------------------ ------------------
Motion Technologies Group:
Net sales $ 28,142 $ 28,912 $ 54,194 $ 56,534
Operating income $ 1,743 $ 2,424 $ 3,296 $ 3,657
Electro-Optical Instruments:
Net sales 21,636 19,244 39,743 37,190
Operating income 1,505 816 2,823 1,321
General Corporate:
Operating expenses (2,092) (2,224) (4,113) (4,403)
Consolidated:
Net sales $ 49,778 $ 48,156 $ 93,937 $ 93,724
Operating income $ 1,156 $ 1,016 $ 2,006 $ 575
In the Motion Technologies Group, second quarter 1994 sales were
$28.1 million, down 3% compared to $28.9 million for the corresponding
quarter of 1993. Operating income was $1.7 million compared to $2.4
million, down 28% from the same period a year ago. The decrease in sales
is primarily due to reduced revenues in the military/aerospace portion of
the business which decrease was slightly offset by increased sales in the
industrial business. The decrease in operating income is due to the
reduced sales and increased engineering expenses associated with new
products at the Company's subsidiary in France.
Sales for the six month period of 1994 were $54.2 million with
operating income of $3.3 million compared to sales of $56.5 million and
operating income of $3.7 million for the prior period. The reduction in
sales is due primarily to lower sales volume in the Company's
military/aerospace businesses both domestically and abroad. Certain cost
reductions implemented last year in the domestic motor businesses
partially offset the reduced profit generated on the lower sales volumes.
Backlog for this segment at the end of the second quarter 1994 was $59.2
million, an increase of 13% from year-end 1993.
In the Electro-Optical Instruments segment, sales were $21.6 million
for the second quarter of 1993, an increase of 12% compared to $19.2
million for the corresponding period a year ago. Operating income was
$1.5 million compared to $.8 million for the corresponding quarter a year
ago. The increase in sales is primarily a result of achieving certain
milestones on long-term military contracts at the Company's Electro-
Optical Division. (Major long-term programs at this Division are
accounted for using the percentage-of-completion method of revenue
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recognition.) In addition, there was a slight increase in revenues in the
commercial color and light measurement businesses. The increase in sales
volume contributed to the increased operating income for this segment.
For the six month period of 1994 sales were $39.7 million compared to
$37.2 million in 1993. Operating income was $2.8 million compared to $1.3
million for the corresponding period a year ago. The increase in sales is
a result of increased revenues on long-term military contracts. This
increase was partially offset by lower sales in the color and light
measurement products as a result of the California facility's temporary
shutdown due to the January earthquake and weak demand in the first
quarter for the color measurement products. Operating income for this
segment increased $1.5 million over the same six month period of 1993 as a
result of the increased revenues recognized on long-term military
contracts. Backlog for this segment at the end of the second quarter 1994
was $67 million, an increase of 15% over year-end 1993.
General corporate expense includes net interest income and expense
and general corporate administrative expenses. These expenses were down
$.3 million from the same six-month period of 1993 as a result of lower
interest expense due to the sinking fund payments on the Company's two
convertible subordinated debentures.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders of the Company held on
May 11, 1994, the following five persons were elected as directors:
Jerald G. Fishman as a Class I director for a term of one year and Gideon
Argov, Allan M. Doyle, Jr., Eric M. Ruttenberg and George P. Stephan as
Class II directors for a term of two years. The votes cast for or
against/withheld with respect to each nominee are set forth below:
Name For Against/Withheld
-------------------- --------- ----------------
Jerald G. Fishman 10,378,018 43,624
Gideon Argov 10,379,633 42,009
Allan M. Doyle, Jr. 10,381,786 39,856
Eric M. Ruttenberg 10,381,853 39,789
George P. Stephan 10,382,001 39,641
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -- Listed below are the exhibits filed with this
report.
Exhibit 11 Statement re computation of per share earnings.
(b) Reports on Form 8-K -- None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KOLLMORGEN CORPORATION
By: /s/ Robert J. Cobuzzi
Robert J. Cobuzzi, Senior Vice
President, Treasurer and
Chief Financial Officer
Date: August 12, 1994
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Exhibit 11
KOLLMORGEN CORPORATION
COMPUTATION OF PER SHARE EARNINGS
(Dollars in thousands, except per share amounts)
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1994 1993 1994 1993
-------- -------- -------- --------
Net income $ 1,156 $ 1,016 $ 2,006 $ 575
Less preferred stock dividends
and accretion of discount (581) (581) (1,162) (1,162)
-------- -------- -------- --------
Earnings (loss) applicable to
primary common shares 575 435 844 (587)
Number of shares:
Weighted average number of
shares outstanding 9,637 9,631 9,637 9,631
-------- -------- -------- --------
Earnings (loss) per common share $ 0.06 $ 0.04 $ 0.09 $(0.06)
======== ======== ======== ========
<FN>
See accompanying notes to consolidated financial statements.
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