THIS REPORT HAS BEEN FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION VIA EDGAR
---------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 21, 1995
KUHLMAN CORPORATION
(Exact name of registrant as Specified in Charter)
Delaware 1-7695 58-2058047
(State or other (Commision File No.) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
1 Skidaway Village Walk, Suite 201
Savannah, Georgia 31411
(Address of Principal executive office)(Zip Code)
Registrant's telephone number,
including area code -- (912)598-7809
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
---------------------------------------------------------
<PAGE>
Item 7.
(c) EXHIBITS
Exhibit 27. See Index to Exhibits on page 4.
Exhibit 99. See Index to Exhibits on page 4 which lists the
supplemental consolidated financial statements and
notes thereto filed herein.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
KUHLMAN CORPORATION
(Registrant)
By: /s/ Robert S. Jepson, Jr.
-----------------------------
Robert S. Jepson, Jr.
Chairman of the Board and
Chief Executive Officer
Dated: July 21, 1995
<PAGE>
KUHLMAN CORPORATION
INDEX TO EXHIBITS
EXHIBIT 27 FINANCIAL DATA SCHEDULES
Financial Data Schedule and the Twelve Months
Ended December 31, 1994. . . . . . . . . . . . . . . .5
Financial Data Schedule and the Three Months
Ended March 31, 1995 . . . . . . . . . . . . . . . . .6
EXHIBIT 99
(a) Supplemental Consolidated Financial Statements
Supplemental Consolidated Statements of
Income(loss)for the Three Years in the
Period Ended December 31, 1994 . . . . . . . . . . . .7
Supplemental Consolidated Balance Sheets as
of December 31, 1994 and 1993. . . . . . . . . . . .8-9
Supplemental Consolidated Statements of Cash
Flows for each of the Three Years in the
Period Ended December 31, 1994 . . . . . . . . . . . 10
Supplemental Consolidated Statement of
Shareholders' Equity as of December 31, 1994 . . . . 11
Notes to Supplemental Consolidated
Financial Statements . . . . . . . . . . . . . . .12-37
Report of Independent Public Accountants. . . . . . .38-39
Supplemental Consoildated Statements of
Income for the Three Months Ended
March 31, 1995 and 1994. . . . . . . . . . . . . . . 40
Supplemental Consolidated Balance Sheets
as of March 31, 1995 and 1994. . . . . . . . . . . . 41
Supplemental Consolidated Statements of
Cash Flows for the Three Months Ended
March 31, 1995 and 1994. . . . . . . . . . . . . . . 42
Supplemental Consolidated Statement of
Shareholders' Equity as of March 31, 1995. . . . . . 43
Notes to Supplemental Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . .44-45
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE KUHLMAN
1994 CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME (LOSS) AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 3,036
<SECURITIES> 0
<RECEIVABLES> 60,882
<ALLOWANCES> 990
<INVENTORY> 43,713
<CURRENT-ASSETS> 118,599
<PP&E> 146,337
<DEPRECIATION> 81,587
<TOTAL-ASSETS> 229,185
<CURRENT-LIABILITIES> 69,098
<BONDS> 76,895
<COMMON> 13,100
0
0
<OTHER-SE> 60,116
<TOTAL-LIABILITY-AND-EQUITY> 229,185
<SALES> 396,117
<TOTAL-REVENUES> 396,117
<CGS> 320,232
<TOTAL-COSTS> 320,232
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 314
<INTEREST-EXPENSE> 7,147
<INCOME-PRETAX> 15,603
<INCOME-TAX> 5,633
<INCOME-CONTINUING> 9,970
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,970
<EPS-PRIMARY> 0.73
<EPS-DILUTED> 0.73
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE KUHLMAN MARCH 1995 CONSOLIDATED BALANCE SHEET AND THE STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> MAR-31-1995
<CASH> 2,887
<SECURITIES> 0
<RECEIVABLES> 67,532
<ALLOWANCES> 1,078
<INVENTORY> 45,932
<CURRENT-ASSETS> 123,687
<PP&E> 149,270
<DEPRECIATION> 84,574
<TOTAL-ASSETS> 233,651
<CURRENT-LIABILITIES> 69,698
<BONDS> 76,966
<COMMON> 13,171
0
0
<OTHER-SE> 63,899
<TOTAL-LIABILITY-AND-EQUITY> 233,651
<SALES> 106,926
<TOTAL-REVENUES> 106,926
<CGS> 86,213
<TOTAL-COSTS> 86,213
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 83
<INTEREST-EXPENSE> 1,890
<INCOME-PRETAX> 5,894
<INCOME-TAX> 2,346
<INCOME-CONTINUING> 3,548
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,548
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
</TABLE>
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME(LOSS)
KUHLMAN CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
For the years ended December 31, 1994 1993 1992
- ----------------------------------------------------------------------------
In thousands, except per share amounts
<S> <C> <C> <C>
Net sales $ 396,117 $ 242,221 $ 231,426
Cost of goods sold 320,232 198,923 184,624
- ----------------------------------------------------------------------------
Gross profit 75,885 43,298 46,802
- ----------------------------------------------------------------------------
Operating expenses:
Selling, engineering, general and
administrative 52,601 31,869 32,801
Cost of restructuring --- 8,650 1,650
- ----------------------------------------------------------------------------
Total operating expenses 52,601 40,519 34,451
- ----------------------------------------------------------------------------
Operating profit 23,284 2,779 12,351
Other income(expense):
Interest expense, net (6,969) (4,523) (3,985)
Other, net (712) 178 1,470
- ----------------------------------------------------------------------------
Total other income(expense), net (7,681) (4,345) (2,515)
- ----------------------------------------------------------------------------
Income(loss) before taxes(benefit) 15,603 (1,566) 9,836
Taxes(benefit) on income(loss) 5,633 (1,876) 4,972
- ----------------------------------------------------------------------------
Income before cumulative effect
of accounting changes 9,970 310 4,864
Cumulative effect of accounting
changes related to post-retirement
benefits (net of tax effect of $3,623)
and income taxes --- --- (10,111)
- ----------------------------------------------------------------------------
Net income(loss) $ 9,970 $ 310 $ (5,247)
============================================================================
Per share amounts:
Income before effect of
accounting changes $ 0.73 $ 0.02 $ 0.38
Accounting changes --- --- (0.80)
- ----------------------------------------------------------------------------
Net income(loss) $ 0.73 $ 0.02 $ (0.42)
============================================================================
Average shares outstanding 13,647 13,484 12,618
============================================================================
</TABLE>
The NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
should be read in conjunction with these statements.
<PAGE>
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
KUHLMAN CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31, 1994 1993
- ----------------------------------------------------------------------
In thousands
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 3,036 $ 18,994
Restricted cash --- 1,800
Accounts receivable, less reserves of
$990 and $900 at December 31, 1994
and 1993, respectively 59,892 54,797
Inventories 43,713 47,254
Deferred income taxes 6,071 8,598
Prepaid expenses and other current assets 5,887 1,706
- ----------------------------------------------------------------------
Total current assets 118,599 133,149
- ----------------------------------------------------------------------
Plant and equipment
Land 2,413 1,955
Buildings and leasehold improvements 33,564 31,756
Machinery, fixtures and equipment 107,692 100,334
Construction in progress 2,668 1,834
- ----------------------------------------------------------------------
146,337 135,879
Less-accumulated depreciation and amortization (81,587) (74,718)
- ----------------------------------------------------------------------
Plant and equipment - net 64,750 61,161
- ----------------------------------------------------------------------
Intangible assets, net of amortization of
$1,668 and $237 at December 31, 1994 and
1993, respectively 39,452 40,883
Other assets 6,384 7,728
- ----------------------------------------------------------------------
$ 229,185 $ 242,921
======================================================================
LIABILITIES
Current liabilities
Notes payable $ 2,000 $ 3,247
Current portion of long-term debt 5,878 5,059
Accounts payable 30,624 25,779
Accrued liabilities 30,596 35,667
- ----------------------------------------------------------------------
Total current liabilities 69,098 69,752
- ----------------------------------------------------------------------
Long-term debt
Bank debt 59,253 77,140
Other long-term debt 17,642 20,684
- ----------------------------------------------------------------------
Total long-term debt 76,895 97,824
- ----------------------------------------------------------------------
Accrued postretirement benefits 8,943 9,769
- ----------------------------------------------------------------------
Deferred income taxes 1,033 1,389
- ----------------------------------------------------------------------
Total liabilities 155,969 178,734
- ----------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred stock, par value $1.00, authorized
2,000 shares, none issued; Junior participating
preferred stock, Series A, no par value
authorized 150 shares, none issued --- ---
Common stock, par value $1.00, authorized 20,000
shares, issued and outstanding 13,100 and
12,914 shares at December 31, 1994 and 1993,
respectively 13,100 12,914
Additional paid-in capital 25,300 23,513
Retained earnings 36,672 30,364
Foreign currency translation adjustments (1,813) (2,359)
Minimum pension liability (43) (245)
- ----------------------------------------------------------------------
Total shareholders' equity 73,216 64,187
- ----------------------------------------------------------------------
$ 229,185 $ 242,921
======================================================================
</TABLE>
The NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
should be read in conjunction with these balance sheets.
<PAGE>
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
KUHLMAN CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
For the years ended December 31, 1994 1993 1992
- -----------------------------------------------------------------------------
In thousands
<S> <C> <C> <C>
Cash flows from operating activities:
Net income(loss) $ 9,970 $ 310 $ (5,247)
Adjustments to reconcile net income(loss)
to net cash provided by operating
activities:
Depreciation and amortization 11,207 8,602 8,978
Deferred income taxes 2,435 (1,275) (635)
Provision for losses on accounts
receivable 250 201 172
(Gain)loss on sale of plant and
equipment 207 588 (88)
Other, net 351 (241) (3,450)
Cost of restructuring --- 8,650 1,650
Cumulative effect of changes
in accounting principles --- --- 10,111
Changes in operating assets and
liabilities:(1)
Accounts receivables (4,885) (5,977) (685)
Inventories 3,719 5,202 3,797
Prepaid expenses and other
current assets (3,536) 1,766 206
Accounts payable 4,708 (1,377) 2,136
Accrued liabilities (5,545) (5,931) (4,851)
- ----------------------------------------------------------------------------
Net cash provided by operating activities 18,881 10,518 12,094
- ----------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (13,048) (6,091) (8,887)
Cash paid for acquired business --- (5,493) ---
Proceeds from sales of plant and equipment 346 2,460 478
- ----------------------------------------------------------------------------
Net cash used for investing activities (12,702) (9,124) (8,409)
- ----------------------------------------------------------------------------
Cash flows from financing activities:
Net change in revolving loan facility (13,941) (658) (788)
Proceeds from issuance of long-term debt 685 68,700 29,500
Repayment of long-term debt (8,259) (68,410) (34,648)
Dividends paid (3,640) (3,530) (3,452)
Stock options exercised 1,176 1,825 594
Proceeds from issuance of warrants --- --- 810
Repurchase of common stock --- --- (407)
Restricted cash 1,800 (1,800) ---
Payments related to the issuance of debt --- (2,882) ---
- ----------------------------------------------------------------------------
Net cash used for financing activities (22,179) (6,755) (8,391)
- ----------------------------------------------------------------------------
Effect of exchange rate changes on cash
and cash equivalents 42 4 (53)
- ----------------------------------------------------------------------------
Increase(decrease) in cash and cash
equivalents (15,958) (5,357) (4,759)
Cash and cash equivalents, beginning
of year 18,994 24,351 29,110
- ----------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 3,036 $ 18,994 $ 24,351
============================================================================
</TABLE>
(1) Net of the effects of acquisition and the cumulative effect
of changes in accounting principles, where applicable.
The NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
should be read in conjunction with these statements. See Note 11
for information on noncash investing and financing activities.
<PAGE>
SUPPLEMENTAL CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
KUHLMAN CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Common Shares
-------------
For the years Foreign
ended December Additional Currency Minimum
31, 1994, 1993 Pain-In Retained Translation Pension
and 1992 Shares Amount Capital Earnings Adjustment Liability Total
- -------------------------------------------------------------------------------
In thousands, except shares
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE-
DECEMBER 31, 1991,
as previously
reported 5,721,226 $ 5,721 $ 8,180 $35,903 $ --- $ --- $49,804
Adjustments in
connection with
pooling of
interests 6,852,394 6,853 11,390 6,419 459 --- 25,121
- -------------------------------------------------------------------------------
BALANCE-
DECEMBER 31,
1991 as restated 12,573,620 $12,574 $19,570 $42,322 $ 459 $ --- $74,925
- -------------------------------------------------------------------------------
Net loss --- --- --- (5,247) --- --- (5,247)
Cash dividends
declared ($.60
per share) (1) --- --- --- (3,456) --- --- (3,456)
Exercise of
stock options 80,323 80 514 --- --- --- 594
Repurchase of
common stock (31,500) (31) (376) --- --- --- (407)
Issuance of
common stock 11,212 11 140 --- --- --- 151
Issuance of
warrants --- --- 810 --- --- --- 810
Foreign currency
translation
adjustment --- --- --- --- (2,528) --- (2,528)
- -------------------------------------------------------------------------------
BALANCE-
DECEMBER 31,
1992 12,633,655 $12,634 $20,658 $33,619 ($2,069) --- $ 64,842
- -------------------------------------------------------------------------------
Net income --- --- --- 310 --- --- 310
Cash dividends
declared ($.60
per share) (1) --- --- --- (3,565) --- --- (3,565)
Exercise of
stock options 187,249 187 1,638 --- --- --- 1,825
Issuance of
common stock 93,113 93 1,217 --- --- --- 1,310
Minimum pension
liability --- --- --- --- --- (245) (245)
Foreign currency
translation
adjustment --- --- --- --- (290) --- (290)
- -------------------------------------------------------------------------------
BALANCE-
DECEMBER 31,
1993 12,914,017 $12,914 $23,513 $30,364 ($2,359)($245) $64,187
- -------------------------------------------------------------------------------
Net income --- --- --- 9,970 --- --- 9,970
Cash dividends
declared ($.60
per share) (1) --- --- --- (3,662) --- --- (3,662)
Exercise of
stock options 134,149 134 1,042 --- --- --- 1,176
Issuance of
common stock 51,435 52 745 --- --- --- 797
Minimum pension
liability --- --- --- --- --- 202 202
Foreign currency
translation
adjustment --- --- --- --- 546 --- 546
- -------------------------------------------------------------------------------
BALANCE-
DECEMBER 31,
1994 13,099,601 $13,100 $25,300 $36,672 ($1,813) ($43) $73,216
- -------------------------------------------------------------------------------
</TABLE>
(1) Dividends per share have not been restated to reflect the Schwitzer
merger.
The NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
should be read in conjunction with these statements.
<PAGE>
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- -----------------------------------------------------------------
Principles of Consolidation and Basis of Presentation
The supplemental consolidated financial statements include the
accounts of the Company and all majority owned subsidiaries.
Investments of 50% or less in affiliated companies are accounted
for on the equity method. All significant intercompany
transactions have been eliminated. The supplemental consolidated
statements of income(loss) include the results of an acquired
business accounted for under the purchase method of accounting
from the date of acquisition. Further information pertaining to
the acquisition is presented in Note 2, "Merger and Acquisition."
On May 31, 1995, the Company merged Schwitzer, Inc. ("Schwitzer")
with a wholly-owned subsidiary of the Company. The merger was
accounted for as a pooling of interests. The supplemental
consolidated financial statements for all periods have been
restated to present the combined balance sheets and results of
operations of both companies as if the merger had been in effect
for all periods presented. The supplemental consolidated
statements of shareholders' equity reflects the accounts of the
Company as if the additional common stock had been issued during
all periods presented. These supplemental consolidated financial
statements do not extend through the date of consummation,
however, they will become the historical consolidated financial
statements of the Company and subsidiaries after financial
statements covering the date of consummation are issued. Certain
amounts in the 1994, 1993 and 1992 Schwitzer financial statements
were reclassified to conform with the presentation used by the
Company. Further information pertaining to the merger is
presented in Note 2, "Merger and Acquisition." In addition,
certain amounts in the Company's 1993 and 1992 financial
statements have been reclassified to conform with the 1994
presentation. The supplemental consolidated financial
statements, including notes thereto, should be read in
conjunction with the historical financial statements of the
Company and Schwitzer included in their respective 1994 annual
reports on Form 10-K.
Restricted Cash
In 1993, the Company placed $1,800,000 in a restricted bank
account as partial collateral for a letter of credit issued by a
bank to guarantee the Company's performance required by an
industrial revenue bond indenture. In 1994 the Company replaced
the 1993 letter of credit with another letter of credit issued as
part of its credit agreement with a group of banks. At the time
of replacement, the restriction on the account was removed.
Inventories
Inventories are stated at the lower of cost or market and are
determined by either the last-in, first-out (LIFO) or first-in,
first-out (FIFO) method for domestic inventories. Inventories of
foreign operations are determined by the first-in, first-out
(FIFO) method. Approximately 53% and 62% of the inventories at
December 31, 1994 and 1993, respectively, were determined using
the LIFO method. Inventory costs include material, labor and
manufacturing overhead.
Plant and Equipment
Plant and equipment are carried at cost and are depreciated over
their estimated useful lives, ranging from 3 to 40 years, using
principally the straight-line method for financial reporting
purposes and accelerated methods for tax reporting purposes.
Plant and equipment obtained through the acquisition of a company
are recorded at estimated fair value as of the date of
acquisition. All additions subsequent to the acquisition date
are recorded at cost.
Intangible Assets
Intangible assets consist primarily of goodwill related to the
acquisition of a business. Goodwill is being amortized on a
straight-line basis over forty years. The Company continually
evaluates whether events and circumstances have occurred that
indicate the remaining estimated useful life of goodwill may
warrant revision or that the remaining balance of goodwill may
not be recoverable. When factors indicate that goodwill should
be evaluated for possible impairment, the Company uses an
estimate of the related business segment's undiscounted net
income over the remaining life of the goodwill in measuring
whether the goodwill is recoverable. Other intangible assets are
amortized to expense using the straight-line method over three to
ten years.
Income Taxes
In 1992, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes." Under
SFAS No. 109, deferred income taxes are recognized for the
estimated future tax effects of differences between the tax bases
of assets and liabilities and their financial reporting amounts
based on enacted tax laws. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount
expected to be realized. Federal and state income taxes are not
provided on undistributed earnings of foreign subsidiaries that
have been or are intended to be reinvested indefinitely. Based
upon current tax rates and the level of undistributed earnings of
the foreign subsidiaries, it is anticipated that no significant
net additional taxes would be incurred if the accumulated
earnings at December 31, 1994 were distributed.
Engineering
Engineering expenses include activities associated with product
development, the application of products to specific customer
needs, and ongoing efforts to refine and enhance existing
products. These costs are expensed as incurred and totaled
approximately $7,574,000, $6,632,000, and $8,134,000 in 1994,
1993 and 1992, respectively.
Postretirement Benefits
In 1992, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The new standard
requires that the expected cost of retiree health benefits be
charged to expense during the years that the employees render
service. Previously, the Company recognized these costs as
incurred.
Environmental Remediation and Compliance
Environmental remediation costs are accrued based on estimates of
known environmental remediation exposures. Liabilities are
recognized for remedial activities when the cleanup is probable
and the cost can be reasonably estimated. Environmental
compliance costs include maintenance and operating costs with
respect to pollution control equipment, cost of ongoing
monitoring programs and similar costs. Such costs are expensed
as incurred.
Foreign Currency Translation
A subsidiary of the Company has foreign subsidiaries located in
the United Kingdom (U.K.), Canada and Brazil. Financial data of
the U.K. and Canadian subsidiaries are translated into U.S.
dollars at current exchange rates and translation adjustments are
accumulated as a separate component of shareholders' equity.
Foreign currency transaction gains and losses of the U.K. and
Canadian subsidiaries are credited or charged to income as they
occur.
The Brazilian subsidiary operates in a hyperinflationary economy.
Accordingly, financial data stated in Brazilian currencies are
remeasured into U.S. dollars at both current (monetary items) and
approximate historical (non-monetary items) exchange rates and
the resulting adjustments are charged or credited to income.
Transaction adjustments included in other, net on the
consolidated statements of operations were $847,000 loss in 1994,
$1,040,000 loss in 1993 and $88,000 income in 1992. The
transaction adjustments for 1994, 1993 and 1992 are stated net of
imputed interest income (expense) of $(589,000), $749,000 and
$4,271,000 respectively, realized on net monetary assets and
liabilities.
Per Share Information
Earnings(loss) per share amounts are based on the weighted
average number of common shares outstanding during each year, as
adjusted for all materially dilutive common equivalent shares.
Common equivalent shares, which include stock options and
warrants, were determined under the treasury stock method.
Shares used in the per share calculation in 1994 and 1993 were
13,647,000 and 13,484,000, which included 638,000 and 672,000
shares, respectively, resulting from the dilutive effects of
common stock equivalents. As common stock equivalents are not
considered in loss periods, there was no associated dilution in
1992.
NOTE 2. MERGER AND ACQUISITION
- -----------------------------------------------------------------
On May 31, 1995, the Company merged Schwitzer, a New York Stock
Exchange listed company, with a wholly-owned subsidiary of the
Company. The merger was accounted for under the pooling of
interests method of accounting. Schwitzer designs, manufactures
and markets turbochargers, fan drives, cooling fans and
crankshaft vibration dampers for enhancing the efficiency of
diesel and gasoline engines. As provided for in the merger
agreement, each share of Schwitzer common stock was converted
into 0.9615 share of the Company's common stock, resulting in the
Company issuing approximately 6,980,000 shares of stock.
Transaction expenses and other charges related to the merger will
total approximately $5,600,000 net of tax, including $1,861,000
related to refinancing of Schwitzer's debt under terms more
favorable to the Company. These expenses will be charged to
expense in the quarter ended June 30, 1995.
In accordance with the pooling of interests method of accounting,
the Company's financial statements have been restated for all
periods presented to include the results of Schwitzer. Operating
results for the Company and Schwitzer for the years ended
December 31, 1994, 1993 and 1992, prior to restatement, are
presented below.
<TABLE>
<CAPTION>
Year ended December 31,
1994 1993 1992
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales:
Kuhlman $ 242,846 $ 118,097 $ 121,734
Schwitzer 153,271 124,124 109,692
- -------------------------------------------------------------------------
Combined $ 396,117 $ 242,221 $ 231,426
=========================================================================
Net income (loss):
Kuhlman $ 1,617 $ (2,998) $ 6,224
Schwitzer 8,930 2,530 (11,270)
Adjustment to valuation
allowance (1) (577) (511) 1,088
SFAS No. 106 adjustments (2) --- 1,289 (1,289)
- -------------------------------------------------------------------------
Combined $ 9,970 $ 310 $ (5,247)
=========================================================================
</TABLE>
(1) The tax provisions in 1994, 1993 and 1992 for the
combined company were adjusted to reflect changes in
the valuation allowance under SFAS No. 109 as if the
companies had been combined at January 1, 1992.
(2) The cumulative effect of accounting changes related to
postretirement benefits was adjusted to restate the
Company's transition period for adoption of SFAS No.
106 to January 1, 1992.
On December 15, 1993, the Company acquired all of the outstanding
stock of Coleman Holding Company ("Coleman") for $8,993,000. The
acquisition was funded by cash of the Company. Coleman is a
fully-integrated manufacturer and distributor of a broad range of
electrical and electronic wire and cable products to diverse
markets principally in the United States. Coleman's
manufacturing plants are located in Illinois.
The acquisition has been accounted for by the purchase method of
accounting and accordingly, the net assets and results of
operations for Coleman are included in the Company's Consolidated
Financial Statements from the date of acquisition. The fair
value of the assets acquired, including goodwill, was
$97,863,000, with liabilities assumed of $92,370,000. Cash paid
for the acquisition, net of cash acquired, was $5,493,000. The
purchase price has been allocated to the assets and liabilities
of Coleman based on estimated fair values. The purchase price
and expenses associated with the acquisition exceeded the fair
value of Coleman's net assets by approximately $38,398,000 which
has been assigned to goodwill. Amortization of the excess
purchase price is made over a period not to exceed forty years.
Subsequent to the acquisition, the Company refinanced
approximately $63,363,000 of Coleman's outstanding debt and
certain related fees through bank borrowings. See Note 3 of the
Notes To Consolidated Financial Statements.
The following unaudited pro forma information combines the
consolidated results of operations of the Company and Coleman as
if the acquisition had occurred on January 1, 1992:
<TABLE>
<CAPTION>
In thousands 1993 1992
- ----------------------------------------------------------------------
<S> <C> <C>
Net sales $ 354,243 $ 342,530
Net income (loss) $ 2,493 $ (7,027)
Net income (loss) per share $ 0.18 $ (0.53)
The pro forma operating results include each company's results of
operations for the indicated years with the adjusted depreciation
and amortization on plant and equipment, amortization of
goodwill, along with other relevant adjustments to reflect fair
market value required using the purchase method of accounting.
Interest expense on Coleman's outstanding indebtedness was
adjusted to reflect the improved creditworthiness of the Company.
The pro forma information given above does not purport to be
indicative of the results that actually would have been obtained
if the operations were combined during the periods presented and
is not intended to be a projection of future results or trends.
NOTE 3. SHORT-TERM AND LONG-TERM DEBT
- -----------------------------------------------------------------
On December 15, 1993, the Company entered into a credit agreement
with a group of banks which replaced certain of its existing bank
debt including approximately $61,260,000 outstanding at Coleman.
Pursuant to the credit agreement, the Company obtained a
$38,000,000 term loan and a revolving loan facility which mature
on December 31, 1999. The revolving loan facility allows the
Company to borrow up to $40,000,000 subject to certain
availability requirements. In addition, a subsidiary of the
Company had an unsecured revolving loan facility which allows it
to borrow up to $17,000,000 subject to certain availability
requirements. The Company and its subsidiary must pay a
commitment fee at an annual rate of 3/8 of 1% and 1/2 of 1%,
respectively, on the average daily unused portion of their
revolving loan facility. Interest rates on amounts borrowed vary
and are based on either a Eurodollar (LIBOR) rate plus 1.25-2.0%
subject to certain conditions or a Prime (base) rate plus up to
.75% option selected by the Company and its subsidiary at the
time of borrowing. At December 31, 1994, the Company and its
subsidiary borrowed approximately $30,750,000 under the revolving
loan facilities at an average interest rate of 8.0%. The Company
and its subsidiary are not required to repay any borrowings under
their revolving credit agreements before December 31, 1999 and
March 31, 1998, respectively. However, the Company has
classified $2,000,000 of debt outstanding under these agreements
which is expected to be repaid within one year as notes payable.
The notes payable balance could fluctuate according to the
working capital requirements of the Company. At December
31,1994, $34,000,000 of term debt was outstanding and carried an
average interest rate of 7.7%. At December 31, 1994, the Company
had unused availability under its credit agreements of
approximately $24,866,000. The subsidiary revolving loan
facility was refinanced under the Company's credit agreement
subsequent to the Merger with Schwitzer.
The fixed rate notes, obligations of a subsidiary of the Company,
are due in equal annual installments of $3,000,000 in 1998
through 2002 and bear interest at an annual rate of 10.21%
payable semi-annually on $15,000,000 of principal at par. These
notes are accompanied by detachable warrants that give the
holders the right to purchase with cash, or through surrender of
the notes at par, as adjusted by the conversion ratio in the
merger of the Company with Schwitzer, 480,750 shares, in the
aggregate, of the Company's common stock at an exercise price of
$8.32 per share, subject to certain conditions. The total
consideration of $15,000,000 received on the notes and warrants
was allocated $14,190,000 to the notes, recorded as long-term
debt, and $810,000 to the warrants, recorded as paid-in capital.
The Company has the right, under certain circumstances, to
repurchase the warrants, which expire on April 15, 2002. The
fixed rate notes were refinanced under the Company's credit
agreement subsequent to the Merger with Schwitzer.
The credit agreements of the Company and its subsidiary contain
various warranties and covenants pertaining to among others, the
maintenance of net worth, compliance with certain financial
ratios, and limitations on the payment of dividends, capital
expenditures, the incurrence of additional indebtedness by the
Company and its subsidiary and certain cross-default provisions.
In addition, the subsidiary note and bank credit agreements have
limitations on the payment of dividends to the Company. Under
the most restrictive of these provisions $6,057,000 of the
Company's consolidated retained earnings at December 31, 1994,
was free of any restriction as to the payment of dividends.
Under the most restrictive covenants in the subsidiary credit
agreement $4,300,000 of the subsidiaries retained earnings at
December 31, 1994 was free of any restriction as to the payment
of dividends to the Company. As of December 31, 1994, borrowings
under the Company's credit agreement are generally secured by
substantially all of the assets of the Company, except for those
of its Schwitzer subsidiary and specific assets related to
certain industrial revenue bonds and capital lease obligations.
Interest on the variable rate loan facility (denominated in
Sterling) is payable quarterly at variable rates (8.0% at
December 31, 1994). This variable rate facility also contains
certain financial covenants, including minimum tangible net worth
requirements of a certain foreign subsidiary of the Company.
A subsidiary of the Company was a party to an interest rate swap
agreement with a bank that expired in April 1994 pursuant to
which that subsidiary paid interest or received interest payments
for the difference between a fixed rate of 10.29% and LIBOR on
$22,000,000 of principal.
At December 31, 1994 and 1993, long-term debt consisted of the
following:
</TABLE>
<TABLE>
<CAPTION>
In thousands 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C>
Variable rate notes supported by revolving
and term loan agreement with banks,
Maturing through 1999 $ 64,750 $ 81,200
Fixed rate notes payable to an institutional
lender, maturing 1998 to 2002 14,407 14,326
Variable rate loan facility payable to bank,
denominated in sterling, maturing in
1995 to 1997 1,718 2,188
Obligations under capital leases, interest
rates ranging from 8% to 19%
(See Note 4) 2,231 2,339
Miscellaneous other long-term debt, rates
ranging from .85% to 15%, payable in
various amounts through 2011 1,667 6,077
- -----------------------------------------------------------------------------
84,773 106,130
Less - current portion (7,878) (8,306)
- -----------------------------------------------------------------------------
$ 76,895 $ 97,824
=============================================================================
</TABLE>
The minimum scheduled principal payments on long-term debt
outstanding at December 31, 1994 are as follows:
In thousands
-----------------------------------------------------------
1995 $ 7,878
1996 7,398
1997 7,831
1998 16,764
1999 33,911
Thereafter 10,991
-----------------------------------------------------------
Total minimum scheduled principal payments $ 84,773
===========================================================
NOTE 4. COMMITMENTS
- -----------------------------------------------------------------
Operating Leases
The Company leases certain of its buildings, machinery and
equipment under operating lease agreements which expire at
various dates over the next eight years.
The following is a summary of rent expense under all operating
leases:
In thousands 1994 1993 1992
- --------------------------------------------------------------------------
Minimum rentals $3,229 $1,621 $1,604
==========================================================================
Minimum future rental payments under noncancelable operating
leases for each of the next five years and in the aggregate are
as follows:
In thousands
- -----------------------------------------------------------------
1995 $ 2,809
1996 2,254
1997 1,890
1998 1,645
1999 1,521
Subsequent to 1999 1,908
- -----------------------------------------------------------------
Total minimum rental payments $ 12,027
=================================================================
Capital Leases
The Company leases various manufacturing, office and warehouse
properties and office equipment under capital leases which expire
at various dates through 2009. The assets and liabilities under
capital leases are recorded at the lower of the present value of
the minimum lease payments or the fair value of the assets. The
assets are depreciated over the shorter of their related lease
terms or their estimated productive lives. Depreciation of
assets under capital leases is included in depreciation expense.
At December 31, 1994 and 1993, property under capital leases
included with plant and equipment in the accompanying
consolidated balance sheet is as follows:
<TABLE>
<CAPTION>
In thousands 1994 1993
- --------------------------------------------------------------
<S> <C> <C>
Building and improvements $ 2,360 $ 2,360
Machinery and equipment 384 384
- --------------------------------------------------------------
2,744 2,744
Less-accumulated depreciation (879) (702)
- --------------------------------------------------------------
Plant and equipment, net $ 1,865 $ 2,042
==============================================================
</TABLE>
Minimum future lease payments under capital leases as of December
31, 1994 are as follows:
<TABLE>
<CAPTION>
In thousands
- -----------------------------------------------------------------
<S> <C>
1995 $ 464
1996 410
1997 424
1998 424
1999 414
Subsequent to 1999 3,604
- -----------------------------------------------------------------
Total minimum lease payments $ 5,740
Less-amounts representing interest (3,509)
- -----------------------------------------------------------------
Present value of net minimum lease payments 2,231
Less-current portion (118)
- -----------------------------------------------------------------
Long-term obligations under capital leases $ 2,113
=================================================================
</TABLE>
Certain capital leases provide for purchase options. Generally,
purchase options are at prices representing the expected fair
value of the property at the expiration of the lease term.
Severance Agreements
The Company instituted a severance policy in 1994 applicable to
certain of its executive officers. The severance policy provides
that if an executive officers' employment is terminated, the
executive's base pay, medical and dental coverage, health and
accident insurance, and disability and group life insurance will
be continued for a period of twenty-four months, subject to
certain conditions. The aggregate commitment under the executive
severance policy should all six covered employees be terminated
is approximately $3,300,000.
A subsidiary of the Company has an employment and compensation
agreement with an executive which provides for cash compensation
and the continuation of certain benefits under certain
circumstances, including a change in control of the subsidiary
(as defined). The commitment under this agreement at December
31, 1994 is approximately $1,350,000.
Legal Matters
The Company is involved in several legal matters. In the opinion
of management and outside legal counsel, the outcome of current
matters will not have a materially adverse effect on the
financial position or results of operations of the Company.
NOTE 5. INVENTORIES
- -----------------------------------------------------------------
Inventories at December 31, 1994 and 1993 consisted of the following:
<TABLE>
<CAPTION>
In thousands 1994 1993
- -----------------------------------------------------------------
<S> <C> <C>
FIFO cost:
Raw materials $ 17,333 $ 18,092
Work-in-progress 8,262 10,238
Finished products 21,677 19,282
- -----------------------------------------------------------------
47,272 47,612
Excess of FIFO over LIFO cost (3,559) (358)
- -----------------------------------------------------------------
$ 43,713 $ 47,254
=================================================================
</TABLE>
NOTE 6. ACCRUED LIABILITIES
- -----------------------------------------------------------------
Accrued liabilities at December 31, 1994 and 1993 consisted of
the following:
<TABLE>
<CAPTION>
In thousands 1994 1993
- -----------------------------------------------------------------
<S> <C> <C>
Salaries, wages and employee benefits $ 14,396 $ 14,015
Warranty related accruals 3,573 4,776
Dividends payable 922 900
Restructuring 178 4,203
Environmental reserve 1,229 ---
Other 10,298 11,773
- -----------------------------------------------------------------
$ 30,596 $ 35,667
=================================================================
</TABLE>
NOTE 7. INCOME TAXES
- -----------------------------------------------------------------
The Company adopted the provisions of SFAS No. 109, "Accounting
for Income Taxes," effective as of the beginning of 1992. A
charge of $1,179,000 ($0.09 per share) was recorded in the 1992
consolidated statement of income for the cumulative effect of
this change in accounting principle. Financial statements for
years prior to 1992 were not restated.
Income(loss) before taxes(benefits) and the cumulative effect of
accounting changes was as follows:
<TABLE>
<CAPTION>
In thousands 1994 1993 1992
- -----------------------------------------------------------------
<S> <C> <C> <C>
Domestic $ 11,270 $ (2,919) $ 8,694
Foreign 4,333 1,353 1,142
- -----------------------------------------------------------------
$ 15,603 $ (1,566) $ 9,836
=================================================================
</TABLE>
The provision(benefit) for income taxes consisted of the following:
<TABLE>
<CAPTION>
In thousands 1994 1993 1992
- -----------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 1,388 $ (441) $ 3,397
State 280 (306) 731
Foreign 1,750 566 983
- -----------------------------------------------------------------
$ 3,418 $ (181) $ 5,111
- -----------------------------------------------------------------
Deferred:
Federal $ 2,393 $ (1,373) $ 55
State 305 (281) (64)
Foreign (483) (41) (130)
- -----------------------------------------------------------------
2,215 (1,695) (139)
- -----------------------------------------------------------------
Total $ 5,633 $ (1,876) $ 4,972
=================================================================
</TABLE>
The significant components of the provision(benefit) for deferred
income taxes, resulting from differences in the timing of
recognition of income and expenses for income tax and financial
reporting purposes, consist of the following:
<TABLE>
<CAPTION>
In thousands 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Net operating loss carryforwards . . . . . $ 67 $ 1,119 $(1,327)
Restructuring costs. . . . . . . . . . . . 1,342 (1,560) 1,273
Depreciation . . . . . . . . . . . . . . . (540) (291) (365)
Compensation, benefits & pensions. . . . . (407) (267) (111)
Warranty & other sales accruals. . . . . . 443 (242) (101)
Additional taxes provided. . . . . . . . . 490 (1,486) 284
Inventory reserves & valuation . . . . . . 312 6 (447)
Postretirement benefits. . . . . . . . . . 309 323 238
Environmental reserve. . . . . . . . . . . (524) --- ---
Intangible asset write-off . . . . . . . . 753 --- ---
Reserves for interest. . . . . . . . . . . --- 423 14
Other, net (30) 280 403
- ---------------------------------------------------------------------------
Total $ 2,215 $(1,695) $ (139)
===========================================================================
</TABLE>
The effective income tax provision (benefit) differs from the
amount calculated using the statutory United States Federal
income tax rate, principally due to the following:
<TABLE>
<CAPTION>
In thousands 1994 1993 1992
- ----------------------------------------------------------------------------
Percentage Percentage Percentage
of income of income of income
before before before
Amount taxes Amount taxes Amount taxes
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Statutory United
States Federal
income tax... $5,305 34.0% $ (533) (34.0%) $ 3,344 34.0%
State income
taxes, net of
Federal income
tax effect... 359 2.3 (96) (6.1) 405 4.1
Additional taxes
provided..... 490 3.1 (1,486) (94.9) 284 2.9
Amortization of
goodwill..... 326 2.1 --- --- --- ---
Effect of stock
options...... (64) (.4) (248) (15.8) (170) (1.7)
Foreign tax
credit....... (200) (1.3) --- --- --- ---
Foreign tax
effects...... (203) (1.3) 64 4.0 203 2.0
Tax on foreign
dividends.... --- --- --- --- 926 9.4
Deduction for
pre-distri-
bution tax
adjustments... --- --- --- --- (49) (.5)
Other............ (380) (2.4) 423 27.0 29 .3
- -----------------------------------------------------------------------------
$5,633 36.1% $(1,876) (119.8%) $4,972 50.5%
=============================================================================
</TABLE>
In accordance with Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," the cumulative effect of the change in accounting
method to recognize the cost of post-retiree benefits has been
presented in the consolidated statements of income(loss), net of
income taxes of $3,623,000. Therefore, the income tax provision
(benefit) does not reflect a separate deferred tax benefit for
these expenses.
The net deferred tax asset recognized in the consolidated
statements of financial position as of December 31, 1994 and
1993, consists of the following (in thousands):
<TABLE>
<CAPTION>
1994 1993
- ------------------------------------------------------------------
<S> <C> <C>
Total deferred tax assets $ 14,180 $ 17,726
Total deferred tax liabilities (7,142) (8,210)
- ------------------------------------------------------------------
Net deferred tax assets $ 7,038 $ 9,516
==================================================================
</TABLE>
The tax effect of each temporary difference and carryforward that
gives rise to significant deferred tax assets and deferred tax
liabilities as of December 31, 1994 and 1993, respectively, are
as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
- -----------------------------------------------------------------------
<S> <C> <C>
Accumulated tax depreciation of
property and equipment in excess of
accumulated book depreciation $ (4,502) $ (5,267)
Purchase price premium in inventory (1,752) (1,835)
Net operating loss carryforwards 2,202 2,208
Inventory reserves 638 700
Deferred warranty income 1,155 1,660
Accrued restructuring costs 532 2,982
Postretirement benefits 4,047 4,386
Environmental reserve 524 ---
Accrued employee benefits 2,771 2,482
Miscellaneous accruals 1,423 2,200
- -------------------------------------------------------------------------
$ 7,038 $ 9,516
=========================================================================
</TABLE>
One of the company's wholly-owned subsidiaries has available net
operating losses which expire as follows (in thousands):
2003 $ 1,600
2004 3,400
2005 425
--------
$ 5,425
========
Based upon anticipated reversals of timing differences and other
projected taxable income for future periods, management believes
that a valuation allowance for the net deferred tax asset
associated with timing differences and carryforwards is not
necessary.
Schwitzer was organized in 1989 in connection with the
distribution of its common stock (the "Distribution") by
Household International, Inc. ("Household"). Prior to the
Distribution, Schwitzer entered into a tax sharing agreement with
Household that provides, among other things, that, in general,
post-Distribution adjustments to pre-Distribution tax liabilities
of Household Manufacturing, Inc., Household Manufacturing Limited
and their subsidiaries, will be borne by Schwitzer or by
Household in proportions or by other formulas which are deemed by
Household to appropriately allocate these liabilities to
Schwitzer. The Distribution qualified as a tax-free spinoff
under Section 355 of the Internal Revenue Code of 1986, as
amended. However, if the Distribution were to be reclassified as
a taxable event, Household and Schwitzer would share the tax
costs in a no-fault situation and would indemnify each other for
any liabilities incurred arising from any act or omission by
either party that would cause the Distribution to be reclassified
as a taxable event.
NOTE 8. EMPLOYEE RETIREMENT PLANS
- -----------------------------------------------------------------
The Company has various employee retirement plans which provide
pension benefits to substantially all of its employees. Defined
benefit plans covering the hourly employees provide benefits of
stated amounts based on an employee's years of service and for
certain plans, compensation for a specified period of time before
retirement. Plans covering salaried employees provide benefits
that are based on an employee's years of service and compensation
for a specified period of time before retirement.
The total expense under these plans amounted to $1,686,000 in
1994, $2,239,000 in 1993, and $1,475,000 in 1992. Pension
expense for the defined benefit plans in 1994, 1993 and 1992 is
comprised of the following elements:
<TABLE>
<CAPTION>
In thousands 1994 1993 1992
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Current service cost $ 1,669 $1,662 $1,873
Interest on projected benefit obligations 1,878 1,957 1,869
Actual return on assets 933 (1,264) (1,589)
Gain due to curtailment (138) --- ---
Net amortization and deferral (2,656) (116) (678)
- --------------------------------------------------------------------------
$ 1,686 $ 2,239 $ 1,475
==========================================================================
</TABLE>
The Company's funding policy is to make annual contributions
required by applicable regulations, which may, from time to time,
exceed the Internal Revenue Service deductibility limits by
immaterial amounts. The Company annually contributes to the
defined benefit plans amounts which are actuarially determined to
provide the plans with sufficient assets to meet future benefit
payment requirements. Plan assets consist substantially of
investments in pooled funds which are comprised primarily of
equity securities, U.S. Government securities, corporate bonds
and investments in collective short-term investment funds.
The following table summarizes the funded status of the Company's
defined benefit pension plans and the related amounts recognized
in the Company's consolidated balance sheets as of December 31,
1994 and 1993:
<TABLE>
<CAPTION>
In thousands 1994 1993
- -------------------------------------------------------------------------------
Underfunded Overfunded Underfunded Overfunded
Plans Plans Plans Plans
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations-
Vested . . . . . . . . . . . $ 13,563 $ 4,503 $ 14,562 $ 4,219
Nonvested. . . . . . . . . . 1,476 347 1,482 469
- --------------------------------------------------------------------------------
Accumulated benefit obligations 15,039 4,850 16,044 4,688
Effects of salary progression 2,061 2,692 2,301 2,066
- --------------------------------------------------------------------------------
Projected benefit obligations 17,100 7,542 18,345 6,754
Plan assets at fair value 13,411 7,721 14,523 7,234
- --------------------------------------------------------------------------------
Plan assets over/(under)
projected benefit
obligations $ (3,689) $ 179 $ (3,822) $ 480
================================================================================
Pension benefit recognized in
the consolidated balance sheets $ (1,647) $ 1,484 $ (1,414) $ 1,213
Amounts not recognized:
Net asset upon transition to
new accounting standard 477 (132) 549 (119)
Net loss . . . . . . . . . . (1,734) (898) (2,521) (205)
Prior service cost . . . . . (785) (439) (436) (547)
Other --- 164 0 138
- --------------------------------------------------------------------------------
Total $ (3,689) $ 179 $ (3,822) $ 480
================================================================================
Additional liability . . . . $ 614 $ --- $ 749 $ ---
Intangible asset . . . . . . $ (543) $ --- $ (340) $ ---
Pre-tax reduction to
shareholders' equity . . . $ 71 $ --- $ 409 $ ---
</TABLE>
The assumptions used as of December 31, 1994 and 1993 in
determining pension expense and funded status information shown
above are as follows:
1994 1993
- -----------------------------------------------------------------
Discount rate. . . . . . . . . 7.5 - 8.7% 7.2 - 8.5%
Rate of salary progression . . 4.2 - 5.0% 4.2 - 6.0%
Long-term rate of return on assets 8.0 - 9.7% 9.0 - 9.7%
The Company eliminated its interest in the Quality Spring/Togo
joint venture in 1993. Prerequisite to this action was the
split-out of hourly employees under a joint plan. The Company
transferred $1,584,000 from its Master Trust Account to the new
entity's plan based on actuarial assumptions. Pursuant to the
Company's Plan, salaried personnel's pension benefits for Quality
Spring/Togo were frozen at September 30, 1993, and will remain
part of the Company's Plan.
In 1993, the Company amended certain of its plans to provide
improved benefits to retirees. The effect of the amendment was
an increase of approximately $690,000, in the projected benefit
obligation.
In addition to providing pension benefits, the Company and its
operating subsidiaries provide savings plans for management and
other employees. The plans provide for matching contributions
based on the terms of such plans to the accounts of plan
participants. The Company and its operating subsidiaries
expensed $377,000, $397,000, and $467,000 in the years ended
December 31, 1994, 1993 and 1992, respectively.
NOTE 9. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
- -----------------------------------------------------------------
Effective January 1, 1992, the Company adopted SFAS No. 106,
"Accounting for Postretirement Benefits Other Than Pensions."
This statement requires the Company to accrue the cost of
providing postretirement benefits during the active service
period of the employee. Certain domestic employees retiring from
the Company after reaching a designated retirement age, who have
rendered specific years of service, are entitled to
postretirement health care and medical coverage, subject to
deductibles, co-payments and other limitations. At the time of
election, the Company recognized an accumulated liability, which
resulted in an after-tax charge of $8,932,000 in 1992. Prior to
1992, the Company recognized these expenses as they were
incurred.
Net periodic postretirement benefit cost for 1994, 1993 and 1992
included the following components (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits attributed to
service during the period $ 94 $ 117 $ 135
Interest cost on accumulated
postretirement benefit obligation 894 971 1,099
Net deferral and amortization 28 --- ---
- -----------------------------------------------------------------------------
Net periodic postretirement benefit cost $ 1,016 $ 1,088 $ 1,234
=============================================================================
</TABLE>
The amounts recognized in the Company's consolidated balance
sheet at December 31, 1994 and 1993 were as follows (in
thousands):
<TABLE>
<CAPTION>
1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees. . . . . . . . . . . . . . . . . . . $ 11,422 $ 11,559
Fully eligible active plan participants 363 430
- -----------------------------------------------------------------------------
Fully eligible. . . . . . . . . . . . . . . . 11,785 11,989
Other active plan participants 946 1,021
- -----------------------------------------------------------------------------
Accumulated benefit obligation . . . . . . . . 12,731 13,010
Unrecognized net loss (1,855) (1,323)
- -----------------------------------------------------------------------------
Postretirement liability recognized in financial
statements $ 10,876 $ 11,687
=============================================================================
</TABLE>
The accumulated postretirement obligation was determined using a
discount rate of approximately 8%. An increase of approximately
11% in per capita claims cost was assumed for 1994. The
assumption provides for this rate to decline by 1% per year
through 1999 and then remain constant at 5.5% thereafter.
A 1% increase in the health care cost trend rate would increase
the estimated accumulated postretirement benefit obligation as of
December 31, 1994 by approximately $860,000. The impact on net
periodic cost is minimal. The Company's postretirement benefit
plans are unfunded.
NOTE 10. RESTRUCTURING CHARGES
- -----------------------------------------------------------------
In the first quarter of 1993, the Company recorded a
restructuring charge of $8,650,000 ($5,304,000 net of tax
benefits or $.39 per share). The restructuring charge was for
actions implemented by the Company to reduce its cost structure
and to improve its operating efficiencies, primarily at its
Kuhlman Electric subsidiary. The charge included $5,281,000 for
severance, pension and other personnel costs primarily related to
reductions in the salaried and hourly workforce, $1,468,000 for
the writedown and disposal of operating assets due to the
elimination of unprofitable product lines, $1,735,000 for the
implementation of programs to streamline operations and $166,000
for other writeoffs. In 1994, the Company made cash outlays of
$3,282,000 related to the restructuring program. In 1993, the
Company made cash outlays of $4,143,000 and recognized asset
writedowns of $1,225,000 related to the restructuring program.
In 1992, a subsidiary of the Company initiated a restructuring
program to reduce operating costs and improve manufacturing
efficiencies at its operating facilities. The restructuring
program primarily encompassed the adoption of new manufacturing
processes, methods and organizational systems. The Company
recorded a restructuring charge of $1,650,000 for the costs of
implementing the program, including equipment write-offs, plant
rearrangements and severance pay. The restructuring program was
substantially completed at December 31, 1994.
NOTE 11. SUPPLEMENTAL CASH FLOW INFORMATION
- -----------------------------------------------------------------
For purposes of the consolidated statements of cash flows, the
Company considers all investments with original maturities of
three months or less as cash equivalents.
Cash payments for interest and net cash payments for income taxes
are as follows:
<TABLE>
<CAPTION>
In thousands 1994 1993 1992
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Interest $ 7,642 $ 5,342 $ 4,972
Income taxes, net of refunds $ 3,600 $(1,316) $ 5,818
</TABLE>
Supplemental Non-Cash Investing and Financial Activities:
During 1994, the Company issued 28,169 shares of its common stock
to an executive in a non-cash transaction. The shares would have
to be returned to the Company in the event the executive left the
Company within one year. The fair market value of the stock at
the time of issuance was approximately $500,000 and approximately
$375,000 of this amount was charged to expense during 1994.
During 1994, the Company sold and disposed of certain non-
operating assets generating $100,000 in cash. The Company, which
recorded a loss of $92,000 on these transactions, reduced plant
and equipment and accumulated depreciation by $1,838,000 and
$1,646,000, respectively in 1994.
During 1993, the Company issued 50,000 shares of its common stock
to an executive in a non-cash transaction. The fair market value
of the stock at the time of issuance was $750,000, and this
amount was charged to expense during 1993.
During 1993, the Company issued 19,047 shares of its common stock
to an executive in lieu of a cash bonus. The fair market value
of the stock at the time of issuance was approximately $300,000,
and this amount was charged to expense during 1993.
During 1993, the Company sold an idle building and disposed of
certain non-operating assets generating $2,443,000 in cash. The
Company, which recorded a cumulative loss on these transactions
of $1,071,000, reduced plant and equipment, accumulated
depreciation and certain other assets by $4,498,000, $1,609,000
and $604,000, respectively in 1993.
See Note 2. Acquisition and Note 10. Restructuring Charge to the
Notes to Consolidated Financial Statements for additional
supplemental information on non-cash investing and financing
activities.
NOTE 12. STOCK PURCHASE RIGHTS AND OPTION PLANS
- -----------------------------------------------------------------
Preferred Stock Purchase Rights
The Company has distributed one preferred stock purchase right
for each outstanding share of common stock. Each right entitles
the holder to purchase one one-hundredth (1/100) of a share of
newly authorized Junior Participating Preferred Stock at a price
of $55 per right. The rights, which do not have voting rights,
will be exercisable only if a person or group acquires 20% or
more of the Company's common stock without the Company's prior
consent or announces a tender offer which would result in such
ownership of 30% or more of the common stock. In the event the
rights become exercisable and thereafter the Company is acquired
in a merger or other business combination, each right will
entitle its holder to purchase, at the right's then-current
exercise price, common stock of the acquiring Company having a
value of twice the exercise price of the right.
The rights expire on April 30, 1997, and may be redeemed by the
Company at a price of $.01 per right at any time prior to 10 days
after a 20% position has been acquired and under certain
circumstances thereafter.
Common Stock Options
The Company maintains two employee stock option plans, a 1983 and
a 1986 Stock Option Plans, for the granting of options to
officers and key employees of the Company. The 1983 Plan expired
in 1993, except to the extent that options were outstanding. All
options under the 1986 Plan were granted at prices equal to the
market value at the date of grant and may be exercised up to ten
years from that date. As of December 31, 1994, no shares were
available for grants under the 1986 Plan.
In conjunction with the merger with Schwitzer in May, 1995, the
Company assumed the outstanding stock options under the Long-Term
Executive Incentive Compensation Plan ("the 1989 Plan"), subject
to the conversion ratio specified in the merger agreement. The
1989 Plan provides for the granting of options to officers and
key employees of Schwitzer at the market value of shares at the
date of grant. Subsequent to the merger, no additional options
will be granted under the 1989 Plan.
In 1993, the Board of Directors adopted, and the shareholders
approved the 1993 Non-Employee Director's Stock Plan ("New
Director's Plan"). Pursuant to the New Director's Plan, each
non-employee director receives annually a number of shares equal
to an aggregate fair market value of $24,000 concurrent with the
meeting of the Board of Directors held each year following the
Annual Meeting of Stockholders. A total of 52,599 shares were
available for grants as of December 31, 1994. With the adoption
of the 1993 New Directors' Plan, the 1988 Stock Option Plan for
Non-Employee Directors was terminated, except to the extent that
options were outstanding.
A stock plan at Schwitzer prior to the May 1995 merger provided
for the issuance of shares of Schwitzer stock to non-employee
members of the Schwitzer Board of Directors for services to be
performed. These amounts were recorded as compensation expense
over the respective twelve-month service periods on a straight-
line basis. Schwitzer also granted restricted shares of its
stock to a key officer, which vested ratably over certain periods
through 1992. Compensation expense in connection with the shares
issued to non-employee members and the key officer was $105,000,
$92,000 and $151,000 in 1994, 1993 and 1992, respectively.
The following table summarizes the transactions pursuant to the
company's stock option plans for the three-year period ended
December 31, 1994:
<TABLE>
<CAPTION>
Number of Option
Shares Prices
In thousands, except option prices
- ----------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at
January 1, 1992, as previously reported 786 $5.44 to $16.90
Adjustments in connection with
pooling of interests 416 $4.81 to $15.73
- ----------------------------------------------------------------------------
Options outstanding at
January 1, 1992, as restated 1,202 $4.81 to $16.90
- ----------------------------------------------------------------------------
Granted 142 $8.06 to $15.63
Exercised (83) $4.81 to $12.58
Expired or terminated (29) $4.81 to $16.90
- ----------------------------------------------------------------------------
Options outstanding at
December 31, 1992 1,232 $4.81 to $16.90
- ----------------------------------------------------------------------------
Granted 364 $7.02 to $16.13
Exercised (203) $4.81 to $15.63
Expired or terminated (50) $4.81 to $16.90
- ----------------------------------------------------------------------------
Options outstanding at
December 31, 1993 1,343 $4.81 to $16.90
- ----------------------------------------------------------------------------
Granted 383 $9.75 to $17.75
Exercised (137) $4.81 to $15.63
Expired or Terminated (40) $4.81 to $16.90
- ----------------------------------------------------------------------------
Options outstanding at
December 31, 1994 1,549 $4.81 to $17.75
============================================================================
Exercisable at December 31, 1994 1,411
============================================================================
</TABLE>
In 1994, the Company adopted the Kuhlman Corporation 1994 Stock
Appreciation Rights Plan (the "SAR Plan"). The SAR Plan provides
for discretionary grants to key employees of cash-only stock
appreciation rights in shares of the Company's common stock.
Each Stock Appreciation Right ("SAR") measures the change in
value of a share of the Company's common stock from the date of
grant to the date of exercise. Unearned compensation,
representing changes in the market value of the SAR, will be
charged to income in the period incurred. A total of 1,500,000
SAR's are authorized to be granted under the Plan. As of
December 31, 1994, 151,000 SAR's with a basis of $13.88 had been
awarded and were outstanding under the SAR Plan.
NOTE 13. BUSINESS SEGMENT INFORMATION
- -----------------------------------------------------------------
The Company currently classifies its manufactured products into
two core business segments: (i) Electrical, such as
distribution, power and instrument transformers; and electrical
and electronic wire and cable products; (ii) Industrial, such as
turbochargers, engine cooling fans, fan drives and vibration
dampers used in medium and heavy duty diesel engines, light,
medium and heavy duty trucks, and agricultural and construction
equipment; and spring products and metal stampings for automotive
and non-automotive applications. Net sales represent shipments
to unaffiliated customers. Operating profit for each segment
includes all costs and expenses directly related to the segment
before financing charges or corporate allocations. Corporate
items principally represent general and administrative costs.
Identifiable assets are those used in the operations of each
business or geographic segment. Corporate assets consist
primarily of cash and cash equivalents.
The Company's operations by business segment and geographic area
for the years ended December 31, 1994, 1993 and 1992, are as
follows:
FINANCIAL DATA BY BUSINESS SEGMENT
<TABLE>
<CAPTION>
In thousands 1994 1993 1992
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales (1)
Electrical $ 235,274 $ 109,458 $ 110,658
Industrial 160,843 132,763 120,768
- --------------------------------------------------------------------------
$ 396,117 $ 242,221 $ 231,426
==========================================================================
Income(Loss) Before
Taxes(Benefit) and
Accounting Changes
Electrical (2) $ 8,611 $ (6,325) $ 6,550
Industrial 17,096 9,163 6,021
Corporate (2) (3,855) (1,931) ---
- --------------------------------------------------------------------------
21,852 907 12,571
Interest Expense, Net (6,969) (4,523) (3,985)
Unallocated 720 2,050 1,250
- --------------------------------------------------------------------------
$ 15,603 $ (1,566) $ 9,836
==========================================================================
Identifiable Assets
Electrical $ 142,190 $ 148,806 $ 75,658
Industrial 85,447 81,195 79,373
Corporate/Unallocated 1,548 12,920 ---
- --------------------------------------------------------------------------
$ 229,185 $ 242,921 $ 155,031
==========================================================================
Capital Expenditures
Electrical $ 6,283 $ 2,429 $ 5,017
Industrial 6,211 3,521 3,870
Corporate/Unallocated 554 141 ---
- --------------------------------------------------------------------------
$ 13,048 $ 6,091 $ 8,887
==========================================================================
Depreciation and Amortization
Electrical $ 5,406 $ 2,635 $ 2,631
Industrial 5,771 5,957 6,347
Corporate/Unallocated 30 10 ---
- --------------------------------------------------------------------------
$ 11,207 $ 8,602 $ 8,978
==========================================================================
</TABLE>
(1) In 1994, 1993 and 1992, sales to Caterpillar, Inc., a
customer of the Company's Industrial Segment, represented
10%, 15% and 13%, respectively, of the Company's net sales.
(2) 1993 Operating Profit reflects a restructuring charge of
$8,650, of which $7,705 relates to the Electrical Segment
and $945 to Corporate/Unallocated.
FINANCIAL DATA BY GEOGRAPHIC SEGMENT
<TABLE>
<CAPTION>
1994 1993 1992
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales
United States $ 347,173 $ 207,945 $ 195,783
Europe 38,630 27,294 30,401
Brazil 10,314 6,982 5,242
- -----------------------------------------------------------------------
$ 396,117 $ 242,221 $ 231,426
=======================================================================
Income(loss) Before Tax
and Accounting Change
United States $ 16,999 $ (705) $ 11,013
Europe 3,304 1,763 2,320
Brazil 1,549 (151) (762)
- -----------------------------------------------------------------------
21,852 907 12,571
Interest Expense, Net (6,969) (4,523) (3,985)
Unallocated 720 2,050 1,250
- -----------------------------------------------------------------------
$ 15,603 $ (1,566) $ 9,836
=======================================================================
Identifiable Assets
United States $ 196,481 $ 216,933 $ 128,760
Europe 23,925 18,385 18,981
Brazil 8,151 6,754 6,406
Canada 628 849 884
- -----------------------------------------------------------------------
$ 229,185 $ 242,921 $ 155,031
=======================================================================
</TABLE>
NOTE 14. FINANCIAL INSTRUMENTS
- -----------------------------------------------------------------
Off-Balance Sheet Risk
The Company enters into contracts and options hedging future
commodity purchases, principally copper, for periods consistent
with the terms of the underlying transactions. The Company does
not engage in speculation. While the commodity hedging contracts
and options affect the Company's results of operations, they do
so only in connection with the underlying transactions. As a
result, they do not subject the Company to risk from commodity
price movements, because gains and losses on these contracts
offset losses and gains on the transactions being hedged. At
December 31, 1994 and 1993, the Company had $5,990,000 and
$753,000 of commodity hedging contracts and options outstanding,
substantially all of which were for copper. The hedging
contracts generally have maturities that do not exceed 12 months.
At December 31, 1994, the Company had immaterial unrealized gains
on hedging contracts and options.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade
accounts receivable. The risk is limited due to the large number
of entities comprising the Company's customer base and their
dispersion across many different industries and geographies. At
December 31, 1994, the Company had no significant concentrations
of credit risk.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and
cash equivalents, trade receivables, trade payables, and debt
instruments. The book values of cash and cash equivalents, trade
receivables and trade payables are considered to be
representative of their respective fair values because of the
immediate or short-term maturity of these financial instruments.
The Company had approximately $84,773,000 of debt instruments at
December 31, 1994, for which the fair value approximated the book
value because a substantial portion of the underlying instruments
are variable rate notes which reprice frequently.
Guarantees
The Company has guaranteed the payment obligations for certain
leases of its subsidiaries. These guarantees amounted to
$1,483,000 at December 31, 1994. As of December 31, 1994, a
subsidiary has guaranteed up to $2,000,000 of bank debt financing
of an unconsolidated affiliate under a joint venture agreement.
The Company is of the opinion that its subsidiaries and the
unconsolidated affiliate will be able to perform under their
respective obligations and that no payments will be required and
no losses will be incurred under such guarantees.
Letters of Credit and Surety Bonds
At December 31, 1994, the Company had letters of credit and
surety bonds outstanding totaling $2,446,000 which guarantee
various activities, including performance of the Company's
obligations under certain self-insured workers' compensation
insurance programs. The Company is of the opinion that no losses
will be incurred due to non-performance of these obligations.
NOTE 15. OTHER INCOME (EXPENSE)
- -----------------------------------------------------------------
Other income (expense) for the years ended December 31, 1994,
1993 and 1992 consisted of the following:
<TABLE>
<CAPTION>
In thousands 1994 1993 1992
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Covenant not to compete $ 1,250 $ 1,250 $ 1,250
Royalty income 846 874 868
Foreign currency translation adjustments (847) (1,040) 88
Loss on disposal of equipment (92) (1,037) ---
Expenses of terminated merger (530) --- ---
Other, net (1,339) 131 (736)
- ----------------------------------------------------------------------------
$ (712) $ 178 $ 1,470
============================================================================
</TABLE>
NOTE 16. QUARTERLY FINANCIAL DATA (UNAUDITED)
- -----------------------------------------------------------------
The Company's quarterly results are summarized below for the
years ended December 31, 1994 and 1993.
In thousands, except per share data
<TABLE>
<CAPTION>
Quarter
-----------------------------------------
1994 First Second Third Fourth Total
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 99,162 $ 95,679 $102,192 $ 99,084 $396,117
Gross profit $ 19,655 $ 19,125 $ 20,006 $ 17,099 $ 75,885
Operating profit $ 6,621 $ 6,004 $ 6,870 $ 3,789 $ 23,284
Net income $ 2,860 $ 2,587 $ 3,519 $ 1,004 $ 9,970
Net income per share $ 0.21 $ 0.19 $ 0.26 $ 0.07 $ 0.73
</TABLE>
In thousands, except per share data
<TABLE>
<CAPTION>
Quarter
-----------------------------------------
1993 First Second Third Fourth Total
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 57,166 $ 60,749 $ 59,348 $ 64,958 $242,221
Gross profit $ 10,100 $ 11,034 $ 10,523 $ 11,641 $ 43,298
Operating profit
(loss)(1) $ (6,610) $ 3,254 $ 2,732 $ 3,403 $ 2,779
Net income(loss)(1) $ (4,553) $ 1,418 $ 1,622 $ 1,823 $ 310
Net income(loss) per
share(1) $ (0.36) $ 0.11 $ 0.12 $ 0.13 $ 0.02
</TABLE>
(1) First quarter 1993 results reflect a restructuring charge of
$8,650 ($5,304 net of tax or $0.42 per share).
<PAGE>
Report of Independent Public Accountants
We have audited, in accordance with generally accepted auditing
standards, the consolidated balance sheets of Kuhlman Corporation
(a Delaware Corporation) and subsidiaries as of December 31, 1994
and 1993, and the related consolidated statements of income
(loss), shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1994 (not presented
herein) and, in our report dated February 6, 1995, we expressed
an unqualified opinion on those statements. We have also
audited, in accordance with generally accepted auditing
standards, the consolidated balance sheets of Schwitzer, Inc. (a
Delaware corporation) and subsidiaries as of January 1, 1995 and
January 2, 1994 and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the
three years in the period ended January 1, 1995 (not presented
herein) and, in our report dated February 9, 1995, we expressed
an unqualified opinion on those statements. As discussed in the
notes to the consolidated financial statements noted above both
Kuhlman Corporation and Schwitzer, Inc. changed their methods of
accounting for income taxes and postretirement benefits other
than pensions.
We have also made a similar audit of the accompanying
supplemental consolidated balance sheets of Kuhlman Corporation
and subsidiaries as of December 31, 1994 and 1993, and the
related supplemental consolidated statements of income,
shareholders' equity and cash flows for each of the three years
in the period ended December 31, 1994. The supplemental
consolidated statements give retroactive effect to the merger
with Schwitzer, Inc. on May 31, 1995, which has been accounted
for as a pooling of interests as described in Note 1. These
supplemental financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these supplemental financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, based upon our audit, the supplemental
consolidated financial statements referred to above present
fairly, in all material respects, the financial position of
Kuhlman Corporation and its subsidiaries as of December 31, 1994
and 1993, and the results to their operations and their cash
flows for each of the three years in the period ended December
31, 1994, after giving retroactive effect to the merger with
Schwitzer, Inc. as described in Note 1, all in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements,
effective January 1, 1992, the Company changed its methods of
accounting for income taxes and postretirement benefits other
than pensions.
Arthur Andersen LLP
Louisville, Kentucky
May 31, 1995
<PAGE>
KUHLMAN CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1995 1994
--------- ---------
(Unaudited)
(In thousands, except per share data)
<C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . $ 106,926 $ 99,162
Cost of goods sold . . . . . . . . . . . . . 86,213 79,507
--------- ----------
Gross profit . . . . . . . . . . . . . . . . 20,713 19,655
Selling, engineering and development,
general and administrative expense. . . . . . 13,522 13,034
. --------- ----------
Operating profit . . . . . . . . . . . . . . 7,191 6,621
--------- ----------
Other income(expense):
Interest expense, net . . . . . . . . . . (1,856) (1,908)
Other, net. . . . . . . . . . . . . . . . 559 109
--------- ----------
Total other income(expense), net. . . . (1,297) (1,799)
--------- ----------
Income before taxes. . . . . . . . . . . . . 5,894 4,822
Taxes on income. . . . . . . . . . . . . . . 2,346 1,962
--------- ----------
Net income . . . . . . . . . . . . . . . . . $ 3,548 $ 2,860
========= ==========
Per share amounts:
Net income. . . . . . . . . . . . . . . . $ 0.27 $ 0.21
========= ==========
Average shares outstanding . . . . . . . . . 13,130 13,665
========= ==========
</TABLE>
The Notes To Supplemental Consolidated Financial Statements
should be read in conjunction with these statements.
<PAGE>
KUHLMAN CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
--------- -----------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . $ 2,887 $ 3,036
Accounts receivable, less reserves of $1,078
and $990 at March 31, 1995 and December 31,
1994, respectively 66,454 59,892
Inventories . . . . . . . . . . . . . . . . . . 45,932 43,713
Deferred income taxes . . . . . . . . . . . . . 5,305 6,071
Prepaid expenses and other current assets . . . 3,109 5,887
--------- ----------
Total current assets . . . . . . . . . . . . 123,687 118,599
--------- ----------
Plant and equipment, at cost:
Land, buildings and leasehold improvements . . 36,254 35,977
Machinery and equipment . . . . . . . . . . . . 110,400 107,692
Construction in progress . . . . . . . . . . . 2,616 2,668
--------- ----------
. . . . . . . . . . . . . . . . . . . . . . . 149,270 146,337
Less - accumulated depreciation . . . . . . . . (84,574) (81,587)
--------- ----------
. . . . . . . . . . . . . . . . . . . . . . . 64,696 64,750
--------- ----------
Intangible assets, net of amortization of
$2,026 and $1,668 at March 31, 1995 and
December 31, 1994, respectively . . . . . . . . 39,094 39,452
Other assets . . . . . . . . . . . . . . . . . . . 6,174 6,384
--------- ----------
. . . . . . . . . . . . . . . . . . . . . . . $233,651 $229,185
========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable . . . . . . . . . . . . . . . . . $ --- $ 2,000
Current portion of long-term debt . . . . . . . 5,944 5,878
Accounts payable . . . . . . . . . . . . . . . 33,617 30,624
Accrued liabilities . . . . . . . . . . . . . . 30,137 30,596
--------- ----------
Total current liabilities . . . . . . . . . . 69,698 69,098
--------- ----------
Bank debt. . . . . . . . . . . . . . . . . . . . . 59,331 59,253
Other long-term debt . . . . . . . . . . . . . . . 17,635 17,642
--------- ----------
Total long-term debt. . . . . . . . . . . . . . 76,966 76,895
--------- ----------
Accrued postretirement benefits . . . . . . . . . 8,790 8,943
--------- ----------
Deferred income taxes . . . . . . . . . . . . . 1,127 1,033
--------- ----------
Total liabilities . . . . . . . . . . . . . . . 156,581 155,969
--------- ----------
Shareholders' equity:
Preferred stock, par value $1.00, authorized 2,000
shares, none issued; Junior participating
preferred stock, series A, no par value,
authorized 200 shares, none issued. . . . . . --- ---
Common stock, par value $1.00, authorized 20,000
shares, issued 13,172 shares at March 31, 1995
and 13,100 at December 31, 1994, respectively . 13,172 13,100
Additional paid-in capital . . . . . . . . . . 25,880 25,300
Retained earnings . . . . . . . . . . . . . . . 39,294 36,672
Foreign currency translation adjustments. . . . (1,233) (1,813)
Minimum pension liability . . . . . . . . . . . (43) (43)
--------- ----------
Total shareholders' equity . . . . . . . . . 77,070 73,216
--------- ----------
. . . . . . . . . . . . . . . . . . . . . . . $233,651 $229,185
========= ==========
</TABLE>
The Notes to Supplemental Consolidated Financial Statements
should be read in conjunction with these statements.
<PAGE>
KUHLMAN CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1995 1994
---------- ----------
(Unaudited)
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . $ 3,548 $ 2,860
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . 3,071 2,978
Deferred income taxes, net. . . . . . . . . . . 1,222 1,377
Provision for losses on accounts receivable . . 97 52
(Gain) loss on sale of assets . . . . . . . . . (3) 92
Other, net. . . . . . . . . . . . . . . . . . . (503) (457)
Effect of exchange rates on assets and liabilities (35) 259
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . (6,285) (1,275)
Inventories . . . . . . . . . . . . . . . . . (1,986) 2,914
Prepaid expenses and other current assets . . 2,686 (360)
Accounts payable. . . . . . . . . . . . . . . 2,776 743
Accrued expenses. . . . . . . . . . . . . . . (265) (1,626)
---------- ----------
Net cash provided by operating activities . . . . 4,323 7,557
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . (2,384) (1,943)
Proceeds from the sale of equipment . . . . . . 75 8
---------- ----------
Net cash used by investing activities . . . . . . (2,309) (1,935)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in revolver . . . . . . . . . . . . . . (1,921) (16,175)
Repayments of term debt . . . . . . . . . . . . (31) (728)
Dividends . . . . . . . . . . . . . . . . . . . (922) (900)
Stock options exercised . . . . . . . . . . . . 628 526
Restricted cash . . . . . . . . . . . . . . . . --- 1,800
---------- ----------
Net cash used by financing activities . . . . . . (2,246) (15,477)
---------- ----------
Effect of exchange rate changes on cash. . . . . . 83 (256)
---------- ----------
Net decrease in cash and cash equivalents . . . . (149) (10,111)
Cash and cash equivalents at beginning of period . 3,036 18,994
---------- ----------
Cash and cash equivalents at end of period . . . . $ 2,887 $ 8,883
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . $ 1,439 $ 1,504
========== ==========
Income taxes, net of refunds . . . . . . . . . $(1,152) $ (165)
========== ==========
</TABLE>
The Notes To Consolidated Financial Statements
should be read in conjunction with these statements.
<PAGE>
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For The Three Months Ended March 31, 1995
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Foreign
Additional Currency Minimum
Common Paid-in Retained Translation Pension
Stock Capital Earnings Adjustment Liability Total
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1994 $13,100 $25,300 $36,672 $(1,813) $ (43) $73,216
------- ------- ------- ------- ------- -------
Net income --- --- 3,548 --- --- 3,548
Cash dividends
declared ($0.15
per share)(1) --- --- (926) --- --- (926)
Stock options
exercised 72 556 --- --- --- 628
Foreign currency
translation
adjustment --- --- --- 580 --- 580
Other --- 24 --- --- --- 24
------- ------- ------- ------- ------- -------
Balances at
March 31, 1995 $13,172 $25,880 $39,294 $(1,233) $ (43) $ 7,070
======= ======= ======= ======= ======= =======
</TABLE>
(1) Dividends per share have not been restated to reflect the Schwitzer
merger.
The Notes To Consolidated Financial Statements
should be read in conjunction with these statements.
<PAGE>
KUHLMAN CORPORATION AND SUBSIDIARIES
---------------------------------
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 1995
(Unaudited)
1. Supplemental Consolidated Financial Statements
The consolidated balance sheet at March 31, 1995 and the
related consolidated statements of income, cash flows and
shareholders' equity for the three months ended March 31, 1995
and 1994, have been prepared by Kuhlman Corporation (the
"Company") without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position of the Company
at March 31, 1995 and the results of operations and cash flows
for three months ended March 31, 1995 and 1994, have been made.
On May 31, 1995, the Company merged Schwitzer, Inc. ("Schwitzer")
with a wholly-owned subsidiary of the Company. The merger was
accounted for as a pooling of interests. The financial
statements for all periods have been restated to present the
combined balance sheet and results of operations of both
companies as if the merger had been in effect for all periods
presented. Certain amounts in the 1994 consolidated financial
statements have been reclassified to conform with the 1995
presentation.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been omitted from
the accompanying financial statements. These supplemental
consolidated financial statements, including the notes thereto,
should be read in conjunction with the Company's audited
supplemental consolidated financial statements as of and for the
three years ended December 31, 1994 included in this Form 8-K.
The results of operations for the three months ended March
31, 1995 are not necessarily indicative of the results to be
expected for the full year 1995.
2. Merger
On May 31, 1995, the Corporation merged Schwitzer, a New York
Stock Exchange listed company, with a wholly-owned subsidiary of
the Company. The merger was accounted for under the pooling of
interests method of accounting. As
provided for in the merger agreement, each share of Schwitzer
common stock was converted into 0.9615 share of the Company's
common stock, resulting in the company issuing 6.98 million
shares of stock. In accordance with the pooling of interests
method of accounting, the Company's financial statements have
been restated for all periods presented to include the results of
Schwitzer. Operating results for the Company and Schwitzer for
the quarters ended March 31, 1995 and 1994, prior to restatement,
are presented below.
<TABLE>
<CAPTION>
Quarter Ended March 31,
-----------------------
1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
The Company
Net sales $ 61,031 $ 62,416
Net income 715 1,136
- ----------------------------------------------------------------------------
Schwitzer
Net sales $ 45,895 $ 36,746
Net income 2,833 1,724
- ----------------------------------------------------------------------------
Combined
Net sales $106,926 $ 99,162
Net income 3,548 2,860
- ----------------------------------------------------------------------------
</TABLE>
3. Earnings and Dividends Per Share
Earnings per share in the accompanying consolidated statements
of income for the three months ended March 31, 1995 and 1994 have
been computed based on the average number of common stock and
common stock equivalents, if any, outstanding throughout the
period. Shares used in the per share calculation for the three
months ended December 31, 1994 included 734,000 shares resulting
from the dilutive effect of common stock equivalents. There was
no dilution for the three months ended March 31, 1995.
A cash dividend of $0.15 per share was declared during each of
the first quarters of 1995 and 1994, excluding the effect of the
merger with Schwitzer.
4. Inventories
Inventories consisted of the following, in thousands:
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
--------- ------------
(unaudited)
<S> <C> <C>
FIFO cost:
Raw materials $ 21,986 $ 17,333
Work-in-process 8,129 8,262
Finished goods 19,242 21,677
--------- -----------
Total 49,357 47,272
Excess of FIFO
over LIFO cost (3,425) (3,559)
--------- -----------
Net inventories $ 45,932 $ 43,713
========= ===========
</TABLE>
