SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 For the Quarter ended
March 31, 1995
-------------------------------------------------------
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 For the transition
period from to
------------------- --------------------
Commission file number 1-7695
--------------------------------
KUHLMAN CORPORATION
- -----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 58-2058047
- -----------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 Skidaway Village Walk, Suite 201, Savannah, Georgia 31411
- -----------------------------------------------------------------
(Address of Principal executive office) (Zip Code)
(912) 598-7809
- -----------------------------------------------------------------
(Registrant's telephone number, including area code)
- -----------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----------- ------------
Indicate the number of shares outstanding for each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at April 30, 1995
- ------------------------------ ------------------------------
Common Stock, $1.00 Par Value 6,210,798
<PAGE>
PART 1.
ITEM 1. FINANCIAL STATEMENTS
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
Three Months Ended
March 31,
-------------------
<CAPTION>
1995 1994
------ -------
(Unaudited)
(In thousands, except per share data)
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . $61,031 $62,416
Cost of goods sold. . . . . . . . . . . . . . . . . 50,853 51,406
------- -------
Gross profit. . . . . . . . . . . . . . . . . . . . 10,178 11,010
Selling, general and administrative expenses. . . . 8,419 8,704
------- -------
Operating profit. . . . . . . . . . . . . . . . . . 1,759 2,306
------- -------
Other income(expense):
Interest expense, net. . . . . . . . . . . . . . (1,343) (871)
Other, net . . . . . . . . . . . . . . . . . . . 780 614
------- -------
Total other income(expense), net . . . . . . . (563) (257)
------- -------
Income before taxes . . . . . . . . . . . . . . . . 1,196 2,049
Taxes on income . . . . . . . . . . . . . . . . . . 481 913
------- -------
Net income. . . . . . . . . . . . . . . . . . . . . $ 715 $ 1,136
======= =======
Per share amounts:
Net income . . . . . . . . . . . . . . . . . . . $ 0.12 $ 0.19
======= =======
Average shares outstanding. . . . . . . . . . . . . 6,175 6,039
======= =======
</TABLE>
The Notes To Consolidated Financial Statements
should be read in conjunction with these statements.
<PAGE>
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
-------- --------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . $ 228 $ 622
Accounts receivable, less reserves of $438 and
$363 at March 31, 1995 and December 31, 1994,
respectively. . . . . . . . . . . . . . . . . 35,290 36,004
Inventories . . . . . . . . . . . . . . . . . . 26,811 24,067
Future income tax benefit . . . . . . . . . . . 3,105 3,871
Prepaid expenses and other current assets . . . 1,929 4,125
-------- --------
Total current assets . . . . . . . . . . . . 67,363 68,689
-------- --------
Plant and equipment, at cost:
Land, buildings and leasehold improvements . . 20,958 20,797
Machinery and equipment . . . . . . . . . . . . 40,207 38,847
Construction in progress . . . . . . . . . . . 954 1,607
-------- --------
62,119 61,251
Less - accumulated depreciation . . . . . . . . (27,905) (26,802)
-------- --------
34,214 34,449
-------- --------
Intangible assets, net of amortization of $1,713
and $1,382 at March 31, 1995 and December 31,
1994, respectively. . . . . . . . . . . . . . . 38,885 39,216
Other assets . . . . . . . . . . . . . . . . . . . 3,984 4,209
-------- --------
$144,446 $146,563
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable . . . . . . . . . . . . . . . . . $ --- $ 2,000
Current portion of long-term debt . . . . . . . 5,238 5,243
Accounts payable . . . . . . . . . . . . . . . 20,842 19,331
Accrued liabilities . . . . . . . . . . . . . . 11,120 14,146
-------- --------
Total current liabilities . . . . . . . . . . 37,200 40,720
-------- --------
Bank debt. . . . . . . . . . . . . . . . . . . . . 52,800 51,750
Other long-term debt . . . . . . . . . . . . . . . 3,209 3,235
-------- --------
Total long-term debt. . . . . . . . . . . . . . 56,009 54,985
-------- --------
Accrued postretirement benefits . . . . . . . . . 2,186 2,186
-------- --------
Total liabilities . . . . . . . . . . . . . . . 95,395 97,891
-------- --------
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
10,000 shares, issued 6,211 shares at
March 31, 1995 and 6,146 at December 31,
1994, respectively . . . . . . . . . . . . . 6,211 6,146
Additional paid-in capital . . . . . . . . . . 13,031 12,506
Retained earnings . . . . . . . . . . . . . . . 29,852 30,063
Minimum pension liability . . . . . . . . . . . (43) (43)
-------- --------
Total shareholders' equity . . . . . . . . . 49,051 48,672
-------- --------
$144,446 $146,563
======== ========
</TABLE>
The Notes to Consolidated Financial Statements
should be read in conjunction with these statements.
<PAGE>
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
Three Months Ended
March 31,
-------------------
<CAPTION>
1995 1994
------- --------
(Unaudited)
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . $ 715 $ 1,136
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . 1,548 1,425
Provision for losses on accounts receivable . . 83 31
(Gain) loss on sale of assets . . . . . . . . . (3) 92
Other, net. . . . . . . . . . . . . . . . . . . 341 (215)
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . 639 (268)
Inventories . . . . . . . . . . . . . . . . . . (2,744) 3,868
Future income tax benefit . . . . . . . . . . . 766 1,197
Prepaid expenses and other current assets . . . 2,072 (435)
Accounts payable and accrued expenses . . . . . (1,519) (1,731)
------- --------
Net cash provided by operating activities . . . . 1,898 5,100
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . (1,054) (681)
Proceeds from the sale of equipment . . . . . . 75 8
------- --------
Net cash used by investing activities . . . . . . (979) (673)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in revolver. . . . . . . . . . . . . . . (950) (13,700)
Repayments of term debt . . . . . . . . . . . . (31) (180)
Dividends . . . . . . . . . . . . . . . . . . . (922) (900)
Stock options exercised . . . . . . . . . . . . 590 516
Restricted cash . . . . . . . . . . . . . . . . --- 1,800
------- --------
Net cash used by financing activities . . . . . . (1,313) (12,464)
------- --------
Net decrease in cash and cash equivalents . . . . (394) (8,037)
Cash and cash equivalents at beginning of period . 622 16,555
------- --------
Cash and cash equivalents at end of period . . . . $ 228 $ 8,518
======= ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . $ 1,308 $ 1,160
======= ========
Income taxes, net of refunds . . . . . . . . . $(1,360) $ (177)
======= ========
</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>
Additional Minimum
Common Paid-in Retained Pension
Stock Capital Earnings Liability Total
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1994 . $ 6,146 $12,506 $30,063 $ (43) $48,672
------- ------- ------- ------- -------
Net income. . . . . . . . . . . --- --- 715 --- 715
Cash dividends declared
($0.15 per share) --- --- (926) --- (926)
Stock options exercised . . . . 65 525 --- --- 590
------- ------- ------- ------- -------
Balances at March 31, 1995. . . $ 6,211 $13,031 $29,852 $ (43) $49,051
======= ======= ======= ======= =======
</TABLE>
The Notes To Consolidated Financial Statements
should be read in conjunction with these statements.
<PAGE>
KUHLMAN CORPORATION AND SUBSIDIARIES
--------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 1995
(Unaudited)
A. 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.
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 consolidated
financial statements should be read in conjunction with the
consolidated financial statements and notes thereto contained in
the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
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.
Certain amounts in the 1994 consolidated financial statements
have been reclassified to conform with the 1995 presentation.
B. 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.
A cash dividend of $0.15 per share was declared during each
of the first quarters of 1995 and 1994.
C. Inventories
Inventories consisted of the following, in thousands:
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---------- -----------
(unaudited)
<S> <C> <C>
FIFO cost:
Raw materials $ 14,145 $ 11,006
Work-in-process 2,880 2,595
Finished goods 12,718 13,532
-------- --------
Total 29,743 27,133
Excess of FIFO
over LIFO cost (2,932) (3,066)
-------- --------
Net inventories $ 26,811 $ 24,067
======== ========
</TABLE>
D. Proposed Merger
On February 25, 1995, Kuhlman Corporation entered into an
agreement to merge Schwitzer, Inc. ("Schwitzer"), a New York
Stock Exchange listed company, with a wholly-owned subsidiary of
Kuhlman. In the transaction, shares of Schwitzer common stock
will be converted into shares of Kuhlman common stock using an
exchange ratio of 0.9615 share of Kuhlman common stock for each
outstanding share of Schwitzer common stock. The merger, to be
accounted for as a pooling, is subject to certain closing
conditions, including the approval of the shareholders of both
companies. It is anticipated that this transaction will be
consummated in the second quarter of 1995 following approval by
shareholders of both companies at their respective annual
meetings of shareholders to be held on May 31, 1995.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company generated approximately $1,898,000 in cash flow from
operations in the first quarter of 1995 compared to $5,100,000
for the similar period in 1994. Lower earnings, primarily at
Kuhlman Electric, and an increase in working capital resulted in
lower cash flow generated from operations in the first quarter of
1995 when compared to the similar period in 1994. Working
capital (net of cash) increased by $2,588,000 (10%) to
$29,935,000 at March 31, 1995 from December 31, 1994 primarily
due to higher levels of inventory companywide and the difference
in cash receipts and payments for certain assets and liabilities
more fully described below. Cash and cash equivalents were
$228,000 at March 31, 1995 compared to $622,000 at the end of
1994. The Company applies a majority of its excess cash against
its revolving credit facility to reduce borrowings in order to
lower its overall interest expense. Under the terms of the
Credit Agreement no payments are required to be made on the
revolving credit facility until December 31, 1999, and amounts
can be reborrowed at any time subject to certain limitations.
Accounts receivable, net decreased $714,000 (2%) to $35,290,000
at March 31, 1995 from the end of 1994 primarily because of lower
sales activity for distribution transformers, partially
offset by record sales levels in the wire and cable segment.
Inventory levels increased in the quarter by $2,744,000 (11%) to
$26,811,000 at March 31, 1995 primarily because of higher
anticipated sales activity in the second quarter, particularly of
power transformers, and an increase in certain inventories of
wire and cable products in anticipation of vendor price
increases. Prepaid expenses and other current assets were
$1,929,000 at March 31, 1995 compared to $4,125,000 at December
31, 1994. The decline was primarily due to the receipt of cash
on a covenant not to compete and an income tax refund.
Accounts payable and accrued expenses declined $1,515,000 (5%) to
$31,962,000 at March 31, 1995 from December 31, 1994. The
decline was primarily due to a tightening of payment terms for
certain raw material components at Coleman Cable, cash payments
of certain charges related to actions taken in the fourth quarter
at Kuhlman Electric and a change in accruals for wages and
benefits, partially offset by increased accounts payable at
Kuhlman Electric. Total debt outstanding was $61,247,000 at
March 31, 1995, down $981,000 from December 31, 1994. As noted
above, the Company applies excess cash against outstanding
revolving debt.
Capital expenditures for the three months ended March 31, 1995
were $1,054,000, up $373,000 from the same period in the prior
year. Capital expenditures made in the quarter were for normal
additions, expenditures to improve operating efficiencies and to
expand the Company's manufacturing capacity, primarily at its
power transformer business.
Management believes that the Company's liquidity, forecasted cash
flows, available borrowing capacity and other financial resources
are adequate to support the anticipated operations, to finance
presently planned capital expenditures and to service all
existing debt requirements.
RESULTS OF OPERATIONS
The following table summarizes net sales and operating profit by
segment, in thousands:
<TABLE>
Three Months Ended March 31,
------------------------------
<CAPTION>
1995 1994
--------- ---------
(unaudited)
<S> <C> <C>
Net Sales:
Wire and Cable $ 38,923 $ 33,021
Electrical 19,732 27,465
Other 2,376 1,930
--------- ---------
$ 61,031 $ 62,416
========= =========
Operating Profit:
Wire and Cable $ 2,049 $ 2,240
Electrical 361 815
Other 231 186
Corporate (882) (935)
--------- ---------
$ 1,759 $ 2,306
========= =========
</TABLE>
Three Months Ended March 31, 1995 and 1994
Net sales, operating profit and net income declined in the first
quarter of 1995 compared to the same period in 1994 primarily
because of the downsizing of the distribution transformer
business and the impact of a moderate winter in certain key
markets on sales of battery booster cables.
Net sales were $61,031,000 for the first three months of 1995
compared to $62,416,000 in the same period in 1994. The decrease
in net sales was primarily due to lower sales in the electrical
segment, partially offset by record sales recorded in the wire
and cable segment and a positive increase for spring products.
Net sales for the wire and cable segment were benefited by
increased unit shipments, primarily to electrical distributors
and the high cost of copper throughout the first quarter of 1995.
Net sales in the electrical segment declined approximately
$7,733,000 in the first quarter of 1995 when compared to the same
period in 1994 due to lower shipments of distribution
transformers as a consequence of certain downsizing actions
initiated in the fourth quarter of 1994. These actions were
implemented to reduce operating costs and to improve the
Company's competitiveness in markets for those products.
However, sales of power transformers were up modestly in the
first quarter of 1995 compared to the same period in 1994
primarily due to a better sales mix of products. In addition,
bookings of power transformers were up significantly in the first
quarter from the prior year because of greater customer demand
due to shorter quoted lead times and enhanced product quality
which resulted from improvement programs initiated in 1993 and
1994. Shipments of instrument transformers declined in the first
quarter primarily because of the discontinuation of certain
products as part of the consolidation and downsizing at Kuhlman
Electric in 1994. Also, sales at the Company's Emtec Products
subsidiary in the first quarter of 1995 were higher when compared
to the similar period in 1994 primarily due to increased
shipments of certain non-automotive products.
Operating profit for the first three months of 1995 was
$1,759,000 compared to $2,306,000 for the same period in 1994.
The decline in operating profit occurred in the electrical and
wire and cable segments, partially offset by higher earnings at
Emtec and lower corporate expenses. The drop in operating profit
for the electrical segment was primarily due to certain residual
costs associated with the downsizing of the distribution
transformer business, implemented in the fourth quarter of 1994,
that carried into the first quarter of 1995. This was partially
offset by improved operating results reported for power
transformers due to the sales mix noted above and better
operating efficiencies. Operating profit at the wire and cable
segment was lower in the first quarter of 1995 primarily because
of the impact of the high cost of copper throughout the quarter
and the effect of the moderate winter on sales of booster cables.
The rising cost of copper, which the Company attempts to pass
along through increased selling prices, resulted in the higher
sales revenues noted above. However, the higher selling prices
precipitated softer demand which lead to increased pressure on
margins in the first quarter of 1995. Operating profit at Emtec
was higher in the first quarter of 1995 due to the increased
sales in certain non-automotive products noted above. Operating
expenses for the first quarter of 1995 were $8,419,000 or 13.8%
of net sales compared to $8,704,000 or 13.9% of net sales
recorded in the same period in 1994. Operating expenses declined
because of the lower sales noted above and cost containment
programs throughout the Company.
Interest expense, net of interest income in the first quarter of
1995 was $1,343,000 compared to $871,000 for the similar period
in 1994. The increase in interest expense, net was due primarily
to higher interest rates throughout the first quarter of 1995 and
to a lesser extent higher debt levels caused by greater working
capital needs. Other, net in the first quarter of 1995 and 1994
was $780,000 and $614,000, respectively. Other, net, which
consist primarily of royalties, income from a covenant not to
compete and miscellaneous expenses associated with non-operating
activities, was benefitted in the first quarter of 1995 by
approximately $140,000 for the settlement of a disputed claim.
Net income for the first three months of 1995 was $715,000 ($0.12
per share) compared to $1,136,000 ($0.19 per share) for the same
period in 1994. The above factors resulted in the decline in net
income in the first quarter of 1995 compared to the similar
period in 1994.
OUTLOOK FOR 1995
Management believes that the operating results of each business
unit in the first quarter of 1995 reflected challenges and
opportunities that management expects to face throughout the
balance of the year. Management believes that the actions taken
at Kuhlman Electric should continue to produce positive and
improving results. However, management's optimism about the
future continues to be tempered somewhat by the potential impact
of fluctuating raw material costs, an uncertain economic
environment in certain key markets and the potential for rising
interest rates. Management will continue to focus on these
variables very carefully.
On February 25, 1995, the Company entered into an agreement to
merge Schwitzer, Inc., a New York Stock Exchange listed company,
with a wholly-owned subsidiary of Kuhlman. The merger is subject
to certain closing conditions, including the approval of the
shareholders of both companies.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6(a)
Exhibit 27.
ITEM 6(b)
During the period covered by this report, Registrant has filed
the following reports on Form 8-K.
Form 8-K dated February 25, 1995 reporting under Item 5 an
agreement and plan of merger.
Form 8-K dated March 28, 1995 reporting under Item 7 various
financial statements of an acquired business.
<PAGE>
SIGNATURES
------------
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Kuhlman Corporation
---------------------------------------------
(Registrant)
/s/ Robert S. Jepson, Jr.
---------------------------------------------
Robert S. Jepson, Jr.
Chairman and Chief Executive Officer
/s/ Vernon J. Nagel
---------------------------------------------
Vernon J. Nagel
Executive Vice President of Finance and
Chief Financial Officer
Date: May 12, 1995
---------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS 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> 228
<SECURITIES> 0
<RECEIVABLES> 35,728
<ALLOWANCES> 438
<INVENTORY> 26,811
<CURRENT-ASSETS> 67,363
<PP&E> 62,119
<DEPRECIATION> 27,905
<TOTAL-ASSETS> 144,446
<CURRENT-LIABILITIES> 37,200
<BONDS> 56,009
<COMMON> 6,211
0
0
<OTHER-SE> 42,840
<TOTAL-LIABILITY-AND-EQUITY> 144,446
<SALES> 61,031
<TOTAL-REVENUES> 61,031
<CGS> 50,853
<TOTAL-COSTS> 50,853
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 83
<INTEREST-EXPENSE> 1,351
<INCOME-PRETAX> 1,196
<INCOME-TAX> 481
<INCOME-CONTINUING> 715
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 715
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
