<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 June 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 August 14, 1995
Common Stock, $2.50 par value 9,663,944 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, 1995 and 1994 (unaudited)
Consolidated Balance Sheet as of 4
June 30, 1995 (unaudited) and
December 31, 1994
Consolidated Statement of Cash Flows for 5-6
the Six Months Ended June 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 10
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<TABLE>
PART I - FINANCIAL INFORMATION
KOLLMORGEN CORPORATION AND SUBSIDIARIES
Consolidated Statement 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,
-------------------- -------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 58,887 $ 49,778 $112,303 $ 93,937
Cost of sales 39,036 32,483 74,729 61,235
--------- --------- --------- ---------
Gross profit 19,851 17,295 37,574 32,702
--------- --------- --------- ---------
Selling and marketing expense 7,717 6,834 14,862 12,954
General and administrative expense 5,588 5,473 10,756 10,550
Research and development expense 3,327 2,903 6,491 5,324
--------- --------- --------- ---------
Income before interest and taxes 3,219 2,085 5,465 3,874
--------- --------- --------- ---------
Other income (expense):
Interest expense, net (1,067) (956) (2,111) (1,884)
Other, net (314) 27 (344) 16
--------- --------- --------- ---------
Income before income taxes 1,838 1,156 3,010 2,006
Provision for income taxes - - - -
--------- --------- --------- ---------
Net income $ 1,838 $ 1,156 $ 3,010 $ 2,006
========= ========= ========= =========
Earnings per common share $ 0.13 $ 0.06 $ 0.19 $ 0.09
========= ========= ========= =========
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
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<TABLE>
KOLLMORGEN CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(Dollars in thousands)
<CAPTION>
ASSETS
June 30,
1995 December 31,
(unaudited) 1994
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,636 $ 7,165
Restricted cash 3,000 8,000
Accounts receivable 41,685 38,348
Recoverable amounts on long-term contracts 10,714 7,380
Inventories 27,112 23,231
Prepaid expenses 4,452 4,176
--------- ---------
Total current assets 94,599 88,300
--------- ---------
Property, plant and equipment, net 30,522 30,789
Net assets held for sale - 3,000
Goodwill 5,970 6,180
Other assets 9,732 9,932
--------- ---------
$ 140,823 $ 138,201
========= =========
LIABILITIES and SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 8,387 $ 10,104
Current portion of long-term debt 3,879 3,220
Accounts payable 25,661 18,722
Accrued liabilities 27,983 31,177
--------- ---------
Total current liabilities 65,910 63,223
--------- ---------
Long-term debt 38,883 40,667
Other liabilities 1,825 1,899
Redeemable preferred stock 22,594 22,532
Common shareholders' equity:
Common stock 26,895 26,891
Additional paid-in capital 18,792 20,353
Accumulated deficit (23,105) (26,115)
Cumulative translation adjustments (1,147) (1,371)
Less common stock in treasury, at cost (9,824) (9,878)
--------- ---------
Total common shareholders' equity 11,611 9,880
--------- ---------
$ 140,823 $ 138,201
========= =========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
KOLLMORGEN CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(Dollars in thousands)
(Unaudited)
<CAPTION>
For the
Six Months Ended
June 30,
------------------
1995 1994
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income from operations $ 3,010 $ 2,006
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 3,759 3,481
Changes in assets and liabilities:
Restricted cash 5,000 (2,134)
Accounts and notes receivable 2,356 1,135
Recoverable amounts on long-term contracts (3,334) (1,953)
Inventories (3,248) 728
Prepaid expenses (249) 74
Accounts payable and accrued liabilities (2,553) (3,964)
Deferred income taxes and other expenses (123) 107
Other 555 (180)
--------- ---------
Net cash provided by (used in) operations 5,173 (700)
--------- ---------
Cash flows from investing activities:
Capital expenditures (2,333) (2,043)
Proceeds from sale of building 2,605 -
Acquisition of Hightech Components - (749)
--------- ---------
Net cash provided by (used in) investing activities272 (2,792)
--------- ---------
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<PAGE>6
Cash flows from financing activities:
Net borrowings (repayments) under credit lines (1,909) 155
Principal repayment on other notes (477) -
Common stock issued from treasury 44 40
Principal payments on capital lease obligations (48) -
Retirement of long-term debt (1,098) (1,774)
Dividends (1,486) (1,486)
--------- ---------
Net cash provided by (used in) financing activities (4,974) (3,065)
--------- ---------
Net increase (decrease) in cash and equivalents 471 (6,557)
Cash and cash equivalents at beginning of period 7,165 17,682
--------- ---------
Cash and cash equivalents at end of period $ 7,636 $ 11,125
========= =========
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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<PAGE>7
KOLLMORGEN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 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
June 30, 1995, 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 June 30, 1995, and June 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 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. 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.
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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 by $471 thousand
during the first six months of 1995. Net income from operations and
depreciation and amortization provided $6.8 million in cash. Accounts
receivable provided $2.4 million in cash while other working capital
assets and liabilities used $9.0 million in cash. A reduction in the
amount of restricted cash provided $5.0 million in additional available
cash as a result of a renegotiation in a debt covenant with the Company's
lead bank.
Investing activities provided $272 thousand in cash. The sale of a
vacant facility during the first quarter of 1995 provided $2.6 million and
was offset by the purchase of capital equipment for $2.3 million.
Financing activities used $5.0 million in cash of which $1.9 million
was used for repayments under existing credit and $477 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 $1.5
million use of cash. 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.
The Company is required, in accordance with the terms of its 10-1/2%
Convertible Subordinated Debentures, to make a mandatory $2.0 million
sinking fund payment on August 1, 1995. The Company believes that it can
generate sufficient resources through cash from operations and its current
borrowing capacity to finance its 1995 capital expenditures, sinking fund
payments, and working capital requirements.
There were no significant capital expenditure commitments at the end
of the quarter.
RESULTS OF OPERATIONS
Sales for the second quarter 1995 were $58.9 million resulting in net
income of $1.8 million or $.13 per common share. This compares with
second quarter 1994 sales of $49.8 million and net income of $1.2 million
or $.06 per common share. For the 1995 six month period sales were $112.3
million and net income of $3.0 million or $.19 per common share. This
compares to 1994 results for the same period with sales of $93.9 million
and net income of $2.0 million or $.09 per common share. Earnings per
common share are computed after payment of preferred dividends.
Backlog at the end of the 1995 second quarter was $137 million, an
increase over year-end 1994 of $18 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,
------------------ ---------------
1995 1994 1995 1994
------------------ ------------------
Motion Technologies Group:
Net sales $ 33,383 $ 25,593 $ 63,372 $ 48,832
Operating income $ 2,570 $ 2,519 $ 4,577 $ 4,353
Electro-Optical Instruments:
Net sales 25,504 24,185 48,931 45,105
Operating income 1,615 846 2,957 2,003
General Corporate:
Operating expenses (2,347) (2,209) (4,524) (4,350)
Consolidated:
Net sales $ 58,887 $ 49,778 $112,303 $ 93,937
Operating income $ 1,838 $ 1,156 $ 3,010 $ 2,006
In the Motion Technologies Group, second quarter 1995 sales were
$33.4 million, an increase of 30% from the corresponding quarter of 1994.
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 $4.6 million over the second quarter 1994 primarily
associated with increased OEM business. Sales in the ADP group increased
$3.2 as a result of increased bookings volume both domestically and in
Europe.
Operating income was $2.6 million for this segment, an increase of 2%
from the same period a year ago. The sales increase did not contribute
significantly to the operating income for this segment as a result of an
unfavorable product mix and higher sales of certain OEM contracts which
produced lower gross margins. Selling expenses increased due to higher
commission expenses on the increased sales volume. Additionally,
operating expenses increased as a result of costs associated with the
Company's efforts in defeating a petition from the International Union,
United Automobile, Aerospace & Agricultural Implement Workers of America
requesting the representation of a group of approximately 200 production
and maintenance employees at the Company's Inland Motor facility located
in Radford, Virginia.
Sales for the six month period of 1995 were $63.4 million with
operating income of $4.6 million compared to sales of $48.8 million and
operating income of $4.4 million for the same period in 1994. The
increase in sales occurred in both the ICP and ADP groups. Operating
income did not increase proportionately with the increased sales volume
due to unfavorable product mix and lower gross margins on OEM business.
Backlog for this segment at the end of the second quarter of 1995 was
$64 million, an increase of 10% over year-end 1994.
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In the Electro-Optical Instruments segment, sales were $25.5 million
for the second quarter of 1995, an increase of 5% 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.
Operating income was $1.6 million, an increase of 90% from the
corresponding quarter a year ago. The increase in sales volume and a
favorable product mix resulted in the increased operating income for the
quarter.
Sales for the six month period of 1995 were $48.9 million compared to
$45.1 million for the same period a year ago. Operating income for this
segment was $3.0 million compared to $2.0 million for the same period a
year ago. The increase in sales and in operating incomme 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 second quarter of 1995 was
$73 million, an increase of 22% over year-end 1994.
General corporate expenses includes interest expense, net of interest
income and general corporate administrative expenses.
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 10, 1995, the following four persons were elected as directors:
Jerald G. Fishman, James H. Kasschau, J. Douglas Maxwell, Jr. and
Robert N. Parker as Class I 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 9,367,512 55,490
James H. Kasschau 9,370,872 52,130
J. Douglas Maxwell, Jr. 9,371,236 51,766
Robert N. Parker 9,369,012 53,990
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Listed below are the exhibits filed with this report.
11 Statement re computation of per share earnings.
27 Financial Data Schedules
(b) Reports on Form 8-K -- None.
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<PAGE>11
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 14, 1995
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<TABLE>
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>
1995 1994 1995 1994
-------- -------- -------- --------
Net income $ 1,838 $ 1,156 $ 3,010 $ 2,006
Less preferred stock dividends
and accretion of discount (581) (581) (1,162) (1,162)
-------- -------- -------- --------
Earnings applicable to
primary common shares 1,257 575 1,848 844
Number of shares:
Weighted average number of
shares outstanding 9,651 9,637 9,651 9,637
-------- -------- -------- --------
Earnings per common share $ 0.13 $ 0.06 $ 0.19 $ 0.09
======== ======== ======== ========
<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 STATEMENTS OF OPERATIONS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 7,636
<SECURITIES> 0
<RECEIVABLES> 41,685
<ALLOWANCES> 1,000
<INVENTORY> 27,112
<CURRENT-ASSETS> 94,599
<PP&E> 115,225
<DEPRECIATION> 84,703
<TOTAL-ASSETS> 140,823
<CURRENT-LIABILITIES> 65,910
<BONDS> 38,390
<COMMON> 26,895
22,594
0
<OTHER-SE> (15,284)
<TOTAL-LIABILITY-AND-EQUITY> 140,823
<SALES> 108,590
<TOTAL-REVENUES> 112,303
<CGS> 72,307
<TOTAL-COSTS> 74,729
<OTHER-EXPENSES> 32,109
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,111
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,010
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,010
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
</TABLE>
