<PAGE>
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 September 30, 1995
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 November 10, 1995
Common Stock, $2.50 par value 9,692,372 shares
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KOLLMORGEN CORPORATION
INDEX
Page No.
PART I - Financial Information
Consolidated Statements of Operations for 3
the Three Months and Nine Months Ended
September 30, 1995 and 1994 (unaudited)
Consolidated Balance Sheets as of 4
September 30, 1995 (unaudited) and
December 31, 1994
Consolidated Statements of Cash Flows 5-6
for the Nine Months Ended
September 30, 1995 and 1994 (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 11
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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 Nine Months Ended
September 30, September 30,
------------------- -----------------
1995 1994 1995 1994
--------- ------------------ ---------
<S> <C> <C> <C> <C>
Net sales $ 54,668 $ 46,396 $166,971 $140,333
Cost of sales 36,079 30,791 110,808 92,026
--------- ------------------ ---------
Gross profit 18,589 15,605 56,163 48,307
--------- ------------------ ---------
Selling and marketing expense 7,359 6,719 22,221 19,673
General and administrative expense 5,255 5,388 16,011 15,938
Research and development expense 3,162 2,451 9,653 7,775
--------- ------------------ ---------
Income before interest and taxes 2,813 1,047 8,278 4,921
--------- ------------------ ---------
Interest and other (income) expense:
Interest expense, net 1,132 915 3,243 2,799
Other 180 (43) 524 (59)
--------- ------------------ ---------
Income before income taxes 1,501 175 4,511 2,181
Provision for income taxes 0 0 0 0
--------- ------------------ ---------
Net income $ 1,501 $ 175 $ 4,511 $ 2,181
========= ================== =========
Earnings (loss) per common share $ 0.10 $ (0.04)$ 0.29 $ 0.05
========= ================== =========
Number of shares used in calculating
earnings (loss) per common share 9,670,000 9,643,0009,659,000 9,640,000
========= ================== =========
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
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<TABLE>
KOLLMORGEN CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
<CAPTION>
ASSETS
September 30,
1995 December 31,
(unaudited) 1994
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12,798 $ 7,165
Restricted cash 0 8,000
Accounts receivable (net of reserve of
$852 in 1995 and $1,064 in 1994) 43,098 38,348
Recoverable amounts on long-term contracts 9,034 7,380
Inventories 28,124 23,231
Prepaid expenses 4,283 4,176
--------- ---------
Total current assets 97,337 88,300
--------- ---------
Property, plant and equipment, net 29,380 30,789
Net assets held for sale 0 3,000
Goodwill 5,774 6,180
Other assets 9,788 9,932
--------- ---------
$ 142,279 $ 138,201
========= =========
LIABILITIES and SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 9,576 $ 10,104
Current portion of long-term debt 3,917 3,220
Accounts payable 23,938 18,722
Accrued liabilities 30,882 31,177
--------- ---------
Total current liabilities 68,313 63,223
--------- ---------
Long-term debt 36,900 40,667
Other liabilities 1,868 1,899
Redeemable preferred stock 22,625 22,532
Common shareholders' equity:
Common stock 26,902 26,891
Additional paid-in capital 17,971 20,353
Accumulated deficit (21,605) (26,115)
Cumulative translation adjustments (1,127) (1,371)
Less common stock in treasury, at cost (9,568) (9,878)
--------- ---------
Total common shareholders' equity 12,573 9,880
--------- ---------
$ 142,279 $ 138,201
========= =========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
KOLLMORGEN CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
(unaudited)
<CAPTION>
For the
Nine Months Ended
September 30,
------------------
1995 1994
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income from operations $ 4,511 $ 2,181
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 5,525 5,227
Other non-cash expenses 36 11
Changes in assets and liabilities:
Restricted cash 8,000 (1,280)
Accounts and notes receivable (2,991) 603
Recoverable amounts on long-term contracts (1,654) (2,822)
Inventories (4,252) 707
Prepaid expenses (94) (85)
Accounts payable and accrued liabilities 3,771 (1,288)
Deferred income taxes and other expenses (112) 407
Other 97 (455)
--------- ---------
Net cash provided by (used in) operations 12,838 3,206
--------- ---------
Cash flows from investing activities:
Capital expenditures (2,888) (3,397)
Proceeds from sale of building 2,605 0
Acquisition of assets of Hightech Components
and certain assets of Sperry Marine 0 (3,749)
--------- ---------
Net cash provided by (used in) investing activities (283) (7,146)
--------- ---------
Cash flows from financing activities:
Net borrowings (repayments) under credit lines (784) 331
Principal repayment on other notes (396) 0
Common stock issued from treasury 226 34
Net principal payments on capital lease obligations 2 (22)
Retirement of long-term debt (3,029) (3,765)
Dividends (2,233) (2,231)
--------- ---------
Net cash provided by (used in) financing activities (6,214) (5,653)
--------- ---------
Effect of exchange rate changes on cash (708) (348)
--------- ---------
Net increase (decrease) in cash and cash equivalents 5,634 (9,941)
Cash and cash equivalents at beginning of period 7,165 17,682
--------- ---------
Cash and cash equivalents at end of period $ 12,798 $ 7,741
========= =========
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Non-cash financing activities:
Acquisition of assets of Hightech Components and certain
assets of Sperry Marine:
Fair value of assets acquired $ 6,539
Cash paid 3,749
---------
Notes assumed $ 2,790
=========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>7
KOLLMORGEN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1995
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
September 30, 1995, and the results of operations for the three-month
and nine-month periods then ended and the cash flows for the nine-
month periods ended September 30, 1995, and September 30, 1994. 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. These interim
financial statements should be read in conjunction with the Company's
Annual Report on Form 10-K for the year ended December 31, 1994.
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, redeemable preferred stock, and stock
options. The fully diluted calculation does not result in dilution
of net income per common share and, accordingly, is not presented
(see Exhibit 11).
4. Effective January 1, 1995, the Company began reporting the operating
results of its French instruments business in the Electro-Optical
Instruments segment. Previously, the business had been part of the
Motion Technologies Group. Accordingly, 1994 segment information has
been restated to reflect this change.
5. On October 1, 1995, the Company sold its Photo Research Division to a
subsidiary of Excel Technology, Inc. for $3.5 million. The results
of Photo Research for the nine months ended September 30, 1995, and
1994, are included in the accompanying financial statements. The
sale of this Division will have no material impact on the Company's
financial position.
6. Inventories consist of the following:
September 30, December 31,
1995 1994
------------- ------------
Raw materials $ 15,198 $ 12,323
Work in process 8,827 6,888
Finished goods 4,099 4,020
----------- -----------
Total $ 28,124 $ 23,231
=========== ===========
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<PAGE>8
Management's Discussion and Analysis of Financial Condition
and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
Kollmorgen's cash and cash equivalents increased $5.6 million during
the first nine months of 1995. Net income from operations after adding
back non-cash charges generated $10 million in cash. Increases in
accounts receivable and recoverable amounts on long-term contracts used
$4.6 million in cash, and inventory increases used $4.3 million in cash.
Other working items, principally accounts payable and accrued liabilities,
generated $3.7 million in cash. The elimination of the requirement of the
Company to maintain restricted cash balances by the Company's lead bank
made available $8 million in cash. Total cash generated from operations
was $12.8 million for the nine months ended September 30, 1995.
Investing activities used $283 thousand in cash. The sale of a
vacant facility during the first quarter of 1995 provided $2.6 million and
was offset by equipment purchases of $2.9 million.
Financing activities used $6.2 million in cash during the first nine
months of 1995. Repayments under existing credit lines was $784 thousand,
and $396 thousand was paid on a note assumed from the purchase of Hightech
Components in 1994. Dividend payments on both common and preferred stock
accounted for a $2.2 million use of cash. In accordance with the terms of
its 10-1/2% Convertible Subordinated Debentures, the Company made a
mandatory sinking fund payment of $2 million. The Company also purchased,
on the open market, approximately $1.1 million aggregate principal amount
of the Company's 8-3/4% Convertible Subordinated Debentures at market
prices approximating par value to fulfill the mandatory sinking fund
obligations.
There were no significant capital expenditure commitments at the end
of the quarter.
The Company believes that it can generate sufficient cash from
operations and its current borrowing capacity to finance its cash
requirements for capital expenditures, sinking fund payments, and working
capital requirements for the next twelve months. The Company has no
material unhedged assets and liabilities, and does not utilize derivative
financial instruments to hedge against foreign currency exposure or for
other purposes.
RESULTS OF OPERATIONS
Sales for the third quarter 1995 were $54.7 million, and net income
was $1.5 million or $.10 per common share. This compares with third
quarter 1994 sales of $46.4 million and net income of $175 thousand or a
loss of $.04 per common share. For the nine months ended September 30,
1995, sales were $167 million and net income was $4.5 million or $.29 per
common share. Results for the same period of 1994 were sales of $140
million and net income of $2.2 million or $.05 per common share. Earnings
per common share are computed after payment of preferred dividends.
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<PAGE>9
Backlog at September 30, 1995, was $119 million, remaining relatively
unchanged from the backlog at December 31, 1994.
Segments of Business Information
(dollars in thousands)
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1995 1994 1995 1994
------------------ ------------------
Motion Technologies Group:
Net sales $ 32,079 $ 25,814 $ 95,451 $ 74,646
Operating profit 2,425 1,708 7,002 6,061
Electro-Optical Instruments:
Net sales $ 22,589 $ 20,582 $ 71,520 $ 65.687
Operating profit 1,431 612 4,388 2,615
General Corporate:
Operating expenses $ (2,355)$ (2,145) $ (6,879)$ (6,495)
Consolidated:
Net sales $ 54,668 $ 46,396 $166,971 $140,333
Operating profit 1,501 175 4,511 2,181
In the Motion Technologies Group, third quarter 1995 sales were $32
million, an increase of 24% over the same period a year ago. The increase
in sales occurred in both the industrial and commercial (ICP) and the
aerospace and defense (ADP) products groups. Sales in the ICP group
increased $5 million over the third quarter 1994 primarily due to
increased OEM business. Sales in the ADP group increased $1.2 million
over the same quarter last year as a result of increased sales in both the
domestic and European markets.
Operating income was $2.4 million for this segment, an increase of
42% over the same period of 1994. The increase in operating income was
due to increased volume in industrial and commercial business which was
partially offset by lower gross margins on sales of certain OEM contracts.
Sales for the nine months period of 1995 were $95.5 million with
operating income of $7 million as compared to sales of $74.6 million and
operating income of $6.1 million for the same period of 1994. The
increase in sales of 28% occurred in both the ICP and ADP groups. The
increase in operating income of 15% was not proportional to the increase
in sales volume due to unfavorable product mix and lower gross margins on
OEM business.
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Backlog for this segment at the end of the third quarter of 1995 was
$57.0 million, a decrease of $1 million or 1.7% over year-end 1994.
In the Electro-Optical Instruments segment, sales were $22.6 million
for the third quarter of 1995, an increase of 9.8% from the same period a
year ago. The increase was primarily attributed to increased sales of new
products in the Company's color instrumentation business, sales of
calibration equipment by the Company's French instrument business, and
increased revenues from the Company's consulting engineering business.
Operating income for the third quarter of 1995 was $1.4 million
versus $612 thousand for the same period a year ago. The increase in
sales and a favorable product mix resulted in the increased operating
income for the quarter.
Sales for the nine month period of 1995 were $71.5 million compared
to $65.7 million for the same period a year ago. Operating income was
$4.4 million compared to $2.6 million for the same period a year ago. The
increase in sales and in operating income was primarily a result of the
new products introduced during 1994 at the Company's color instrumentation
business.
Backlog for this segment at the end of the third quarter of 1995 was
$61 million, an increase of 2% over year-end 1994.
General corporate expenses includes interest expense, net of interest
income, and general corporate administrative expenses. Interest expense,
net of income, increased for the nine months ended September 30, 1995, due
to higher borrowing by the Company's European subsidiary and lower
interest income on invested cash balances.
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<PAGE>11
PART II - OTHER INFORMATION
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.
Exhibit 27 Financial Data Schedules
(b) Reports on Form 8-K -- None.
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<PAGE>12
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: November 13, 1995
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<TABLE>
Exhibit 11
KOLLMORGEN CORPORATION
COMPUTATION OF PER SHARE EARNINGS
(Amounts in thousands, except per share amounts)
<CAPTION>
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
<S> <C> <C> <C> <C>
1995 1994 1995 1994
-------- -------- -------- --------
Net income $ 1,501 $ 175 $ 4,511 $ 2,181
Less preferred stock dividends
and accretion of discount (582) (581) (1,746) (1,743)
-------- -------- -------- --------
Earnings (loss) applicable to
primary common shares 919 (406) 2,765 438
Number of shares:
Weighted average number of
shares outstanding 9,670 9,643 9,659 9,640
-------- -------- -------- --------
Earnings (loss) per common share $ 0.10 $ (0.04) $ 0.29 $ 0.05
======== ======== ======== ========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
KOLLMORGEN CORPORATION AND SUBSIDIARIES EXHIBIT 27
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 12,798
<SECURITIES> 0
<RECEIVABLES> 43,098
<ALLOWANCES> 852
<INVENTORY> 28,124
<CURRENT-ASSETS> 97,337
<PP&E> 115,173
<DEPRECIATION> 85,793
<TOTAL-ASSETS> 142,279
<CURRENT-LIABILITIES> 68,313
<BONDS> 38,340
<COMMON> 26,902
22,625
0
<OTHER-SE> (14,329)
<TOTAL-LIABILITY-AND-EQUITY> 142,279
<SALES> 161,071
<TOTAL-REVENUES> 166,971
<CGS> 106,982
<TOTAL-COSTS> 110,808
<OTHER-EXPENSES> 47,885
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,243
<INCOME-PRETAX> 4,511
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,511
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,511
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0.29
</TABLE>
