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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995, OR
/ / 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
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KUHLMAN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 58-2058047
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
3 SKIDAWAY VILLAGE SQUARE, SAVANNAH, GEORGIA 31411
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (912) 598-7809
Securities Registered Pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ----------------------------------- -----------------------------------
Common Stock, $1.00 Par Value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
None
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
As of March 1, 1996, 13,194,151 shares of Common Stock of the Registrant
were outstanding, and the aggregate market value of the shares of Common Stock
as of such date (based on the closing price on the New York Stock Exchange) of
the Registrant held by non-affiliates (including three executive officers) was
approximately $194,000,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference into this
Form 10-K:
Part II: Items 5-8 - Annual Report to Shareholders of the Registrant for the
year ended December 31, 1995.
Part III: Items 10-12 - Definitive Proxy Statement of the Registrant in
connection with the 1996 Annual Meeting of Stockholders.
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<PAGE>
PART 1.
ITEM 1. BUSINESS
GENERAL
Kuhlman Corporation (the "Registrant" or "Company"), a Delaware corporation
whose predecessor company was founded in 1894, is a holding company that owns
and manages a group of operating companies. These companies are Kuhlman Electric
Corporation ("Kuhlman Electric"), Coleman Cable Systems, Inc. ("Coleman"),
Schwitzer, Inc. ("Schwitzer"), and Emtec Products Corporation ("Emtec"), and
they are organized into two business segments, Electrical Products and
Industrial Products. In the Electrical Products Segment, the Company designs,
manufactures and markets electrical utility and industrial type transformers for
various markets and industries involved in electrical distribution systems; and
manufactures and markets electronic and electrical wire and cable products for
numerous commercial, industrial and consumer uses. In the Industrial Products
Segment, the Company designs, manufactures and markets turbochargers, engine
cooling fans, fan drives and crankshaft vibration dampers used in diesel and
gasoline engines for truck, agricultural, construction and other industrial
applications; and spring products and metal stampings used by other
manufacturers in their products or production process. The executive office of
the Company is located at 3 Skidaway Village Square, Savannah, Georgia 31411.
The telephone number is (912) 598-7809.
MERGER
On May 31, 1995, a wholly-owned subsidiary of the Company merged with and
into Schwitzer. In the transaction, shares of Schwitzer common stock were
converted into shares of the Company's common stock using an exchange ratio of
0.9615 share of the Company's common stock for each share of Schwitzer's common
stock. The merger was accounted for under the pooling of interests method of
accounting.
RECENT DEVELOPMENT
On February 16, 1996, the Company, through a wholly-owned subsidiary,
completed a tender offer for the outstanding shares of Communication Cable, Inc.
("CCI"), a North Carolina corporation traded on NASDAQ. Pursuant to the
Company's offer to purchase shares of CCI for $14.00 per share, shareholders of
CCI tendered 2,291,800 shares through that date. Kuhlman previously owned
315,703 shares of CCI. As of February 21, 1996, Kuhlman owned 2,607,503 shares
or 82.2% of all CCI shares outstanding for an aggregate total cost of
approximately $35,873,000. Kuhlman expects to purchase the remaining CCI shares
outstanding as soon as practicable. The acquisition of CCI shares was funded
primarily through an increase in the Company's bank credit facility.
CCI engineers, designs and manufactures a wide variety of low voltage
electronic wire and cable products which are marketed to original equipment
manufacturers ("OEMs") and, through distributors, to a variety of end users,
principally in the United States. CCI's products include coaxial, multi-
conductor and "category" cables which are used for data, voice and video
communications by the computer and data processing industries, medical and
industrial electronics users, the U.S. Government and associated agencies, and
for satellite and other telecommunication applications. Sales and net income for
its fiscal year ended October 31, 1995 were $56,256,000 and $2,118,000,
respectively.
BUSINESS SEGMENTS
The Company is organized into two business segments: Electrical Products and
Industrial Products. The following discussion addresses the products, markets
and organization of the Company's two business segments. For financial
information relating to the Company's business segments and domestic and
international operations, see Management's Discussion and Analysis of Financial
Condition and Results of Operations on pages 19 through 23 and Note 14 of Notes
to Consolidated Financial Statements on page 38 of the Registrant's Annual
Report to Shareholders for the year ended December 31, 1995 which is
incorporated herein by reference.
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ELECTRICAL PRODUCTS SEGMENT
The Electrical Products Segment is comprised of Kuhlman Electric and
Coleman. Demand and profitability for the segment are generally affected by the
level of domestic economic activity in the consumer, commercial and industrial
markets served. Housing starts, commercial and industrial construction,
maintenance and upgrading of established electrical systems, and electrical
usage are key indicators of demand for the segment's various electrical
products.
KUHLMAN ELECTRIC
Kuhlman Electric and its wholly-owned subsidiary, Associated Engineering
Company, manufacture and market electrical utility and industrial-type
transformers used in electrical distribution systems serving residences and
commercial and industrial buildings. These transformers range from small
instrument transformers used in the metering and switching of electricity and
pole-mounted, surface-mounted, or underground transformers serving from one to
eight residences, up to medium-size power transformers which are used in utility
substations or commercial-type electrical power centers serving shopping
centers, apartment complexes, factories and other users of electric power.
Generally, Kuhlman Electric's products are designed and built to the
requirements specified by the customer and agreed to at the time the order is
placed. Executive and administrative functions for Kuhlman Electric are
performed at its facility in Versailles, Kentucky.
The principal market for Kuhlman Electric's transformer products is electric
utility companies throughout the United States. A significant portion of the
distribution, power, and instrument transformers manufactured by Kuhlman
Electric in 1995 were marketed directly through thirteen sales professionals and
sales engineers. The balance was sold through nineteen independent commissioned
sales organizations, which employ approximately 60 salesmen and sales engineers.
COLEMAN
Coleman was acquired by the Company on December 15, 1993. Coleman
manufactures and distributes a wide range of products, including portable wiring
systems for the construction industry and OEM applications; wire for security,
heating, ventilating and air conditioning ("HVAC"), irrigation and sound
systems; and extension cords, trouble lights, booster cables and other products
for consumer, commercial and industrial markets. Coleman's products are sold
directly through twelve employee salespersons and a number of manufacturers'
representatives employing over 700 salespersons to electrical, commercial
contractor and security distributors, mass merchandisers and specialty
retailers, and various industrial and OEM users on a nationwide basis. Executive
and administrative functions for Coleman are conducted at its principal office
located in North Chicago, Illinois.
Coleman is organized into the following three business units which have been
set up primarily along basic product or distribution lines:
COLEMAN CABLE AND WIRE COMPANY. Coleman Cable and Wire Company provides a
line of flexible cords, power cables, control cables, robotics cables, diesel
locomotive cables and specialty cables used in the distribution of portable
power for construction, industrial and OEM applications. Coleman's cable and
wire products are sold to electrical distributors, wire and cable distributors,
OEMs and government agencies through its employee sales force and independent
representatives.
CORD PRODUCTS DIVISION. Coleman's Cord Products Division manufactures and
distributes a line of cord sets, trouble lights, cube taps, battery booster
cables, power supply cords, temporary outdoor lighting and ground fault
interrupters for consumer, contractor and OEM applications. Its products are
used for both home and commercial electrical needs and are sold through mass
merchandisers, hardware wholesalers, automotive retailers, warehouse clubs, home
centers, hardware chains, contractor/industrial supply houses and electrical
distributors. Also, Coleman believes that its Cord Products Division is one of
the leading providers of extension cords and battery booster cables to the
contractor supply market and nationally recognized retailers, respectively.
ELECTRONIC WIRE AND CABLE DIVISION. Coleman's Electronic Wire and Cable
Division manufactures electronic wire and cable, shielded and unshielded low
voltage control cables, fire alarm cables,
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plenum cables, closed circuit television wire and cables, and speaker cable for
a multitude of applications used by burglar alarm, fire alarm and sound system
installers, electrical contractors, energy management specialists and OEMs. The
primary market for "Signal" trade name products is the security industry where
the Company believes that it is one of the largest manufacturers and suppliers
of security cables in the United States. Signal products are sold to security
and equipment distributors, sound contractors, wire and cable distributors,
electronic parts distributors, electrical distributors and OEMs through its
employee sales force and to a lesser extent independent sales representatives.
In addition, the Electronic Wire and Cable Division manufactures cables for
energy management, irrigation and sprinkler systems which are marketed under its
"Baron" trade name. Baron products include thermostat cables, irrigation control
cables, underground feeder cables, submersible pump cables, instrumentation
cables and machine tool wire. These products are used in a variety of
applications by HVAC installers, energy management installers, golf course
sprinkler installers, irrigation system installers, OEMs, machine tool
manufacturers and electrical contractors.
INDUSTRIAL SEGMENT
The Industrial Products Segment is comprised of Schwitzer and Emtec. Demand
and profitability in this segment are affected by economic conditions in
industrialized and developing regions of the world. Capital expenditures for
medium- and heavy-duty trucks, construction and agricultural equipment and other
industrial transportation equipment are indirect indicators of demand for the
segment's products.
SCHWITZER
Schwitzer designs, manufactures and markets technically advanced engine
components, including turbochargers, fan drives, cooling fans and crankshaft
vibration dampers, for enhancing the efficiency of non-passenger car diesel and
gasoline engines. These components improve engine performance in terms of
horsepower output, fuel efficiency, emissions and durability and are custom
designed to meet the specific engine applications of each customer. Engines
incorporating the Company's products are used in light-, medium- and heavy-duty
trucks, and in agricultural and construction equipment and other industrial
applications. Sales of turbochargers accounted for 26 percent, 25 percent, and
34 percent of the consolidated net sales of Kuhlman during 1995, 1994 and 1993,
respectively. Schwitzer believes that it is one of the world's leading
independent suppliers of turbochargers to the non-passenger car market.
Schwitzer's primary customers are the world's leading engine builders,
located primarily in North America, Western Europe, South America and Japan.
Schwitzer sells its products to OEMs and aftermarket customers through its
internal sales force and through approximately 200 independent distributors to
customers in more than 60 countries throughout the world. Schwitzer's executive
office is located in Indianapolis, Indiana and its manufacturing locations
include operations in the United States, England and Brazil.
EMTEC
Emtec manufactures and markets a variety of coiled and flat springs, spring
assemblies and stampings used in automobiles, business machines and appliances,
spring sub-assemblies used in automobile transmissions and brake systems and a
spring sub-assembly used in cellular phones. Emtec also manufactures and
distributes marine hardware. Most of these products are custom-designed to
customer's requirements. The principal market for Emtec's springs, spring
assembly products and stampings is the automotive industry. These products are
sold through two employee salesmen and eleven independent commissioned sales
organizations. The market area is predominately the midwest United States,
although many of these products are utilized nationally and in Canada. Emtec's
principal office is located in Coldwater, Michigan.
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COMPETITION
The Company experiences substantial competition in each of its business
segments. The Company has numerous competitors, some of which have substantially
greater financial and technical resources than the Company and include some of
the world's largest business enterprises. The Company believes that it competes
primarily on the basis of product quality, product innovation, service and
price.
CUSTOMERS; SEASONALITY
During 1995, 1994 and 1993, various purchasing units of Caterpillar, Inc.
accounted for 10%, 11% and 15%, respectively, of the consolidated net sales of
Kuhlman. The Company's net sales are not seasonal to any significant extent;
however, net sales are generally related to economic activity.
RAW MATERIALS AND SUPPLIES
The principal raw materials required by the Electrical Products Segment are
steel, copper, aluminum, various insulating materials and polymers. Copper,
which is the Electrical Products Segment's single largest raw material, is
generally purchased in either extruded or rod form from a number of major
domestic producers. Pricing is typically based upon announced prices of the New
York Commodity Exchange, Inc. ("COMEX") for high grade copper, plus a negotiated
premium. The principal raw materials used in the Industrial Products Segment are
nickel, aluminum, cast iron and steel. Although castings used in the manufacture
of specialized turbines for turbochargers are available from only a few
suppliers worldwide, the Company has experienced no difficulties in obtaining
adequate supplies to meet its manufacturing needs.
Raw materials purchased by the Company are generally available from numerous
independent sources at competitive prices, and are obtained principally from
domestic suppliers. Management anticipates no significant difficulty in filling
its raw material requirements. However, it is possible that because of the
Company's increasing focus on "lean manufacturing", which incorporates "just-
in-time" supplier-customer delivery methods with fewer suppliers, the risk of
difficulties in obtaining raw materials may increase from time to time.
PATENTS, TRADEMARKS AND LICENSES
The Company owns and/or licenses a number of patents and patent
applications, and registered and unregistered trademarks which are valuable to
its business. Such patents, licenses and trademarks are not considered material
to the business of the Company as a whole.
BACKLOG
An order is included as part of the Company's backlog once a firm delivery
date has been received from the customer. The Company does not include in its
backlog orders which do not have a firm delivery date.
The following table sets forth backlog orders which the Company believes to
be firm as of the dates indicated although orders generally may be cancelled by
customers without penalty:
<TABLE>
<CAPTION>
AT DECEMBER 31
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1995 1994
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(IN THOUSANDS)
<S> <C> <C>
Electrical Products Segment.................................................... $ 40,891 $ 27,151
Industrial Products Segment.................................................... 60,409 60,300
----------- ---------
$ 101,300 $ 87,451
----------- ---------
----------- ---------
</TABLE>
At December 31, 1995, substantially all of the Company's backlog orders were
expected to be completed by December 31, 1996.
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ENGINEERING AND PRODUCT DEVELOPMENT
Kuhlman Corporation is continually seeking to improve existing products and
apply and enhance technologies for new products. 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
$6,745,000, $7,574,000 and $6,632,000 in 1995, 1994 and 1993, respectively.
ENVIRONMENTAL
In 1994, the Company recorded a charge of $1,400,000 for voluntary
environmental remediation activities at Schwitzer's Rolla, Missouri facility
which was closed in 1992. During 1995, the Company completed the environmental
remediation program and sold the Rolla, Missouri facility in the second quarter.
To the best of the Company's knowledge, it is in substantial compliance with
all federal, state and local environmental protection provisions, and believes
these provisions should not materially affect capital expenditures, earnings or
the Company's competitive position. However, legal and regulatory requirements
in those areas have been increasing, and there can be no assurance that
significant costs and liabilities will not be incurred for currently unknown or
future exposures or new regulatory developments.
EMPLOYEES
As of December 31, 1995 and 1994, the Company employed 2,284 and 2,375
persons, respectively, approximately 969 of whom are currently subject to
collective bargaining agreements. The Company considers relations with its
employees to be satisfactory.
ITEM 2. PROPERTIES
As of December 31, 1995, the Company operated thirteen manufacturing plants,
including two foreign plants. The eleven domestic plants are located in the
states of California, Georgia, Illinois, Kentucky, Michigan, Mississippi, North
Carolina and Ohio. Of these manufacturing plants, five are owned and six are
leased. The Company's Industrial Products Segment operates two foreign
manufacturing plants, both of which are owned, located in England and Brazil. A
subsidiary in the Industrial Products Segment also operates a research and
development facility in Indianapolis, Indiana. The plant and equipment of
certain subsidiaries are encumbered by the security interest granted in
connection with the issuance of certain long-term debt obligations.
Substantially all of the remaining plant and equipment is encumbered by the
interest granted to participating commercial banks under the Company's Credit
Agreement, dated December 15, 1993, as subsequently amended. In the opinion of
the Company, its properties have been well maintained and are in proper
condition necessary to operate at present levels. A summary of floor space of
the principal facilities by business segment at December 31, 1995 is as follows:
<TABLE>
<CAPTION>
MANUFACTURING OFFICE
(1)(2) (1) WAREHOUSING
-------------------- -------------------- --------------------
OWNED LEASED OWNED LEASED OWNED LEASED TOTAL
-------- --------- -------- --------- -------- --------- --------
(IN THOUSANDS OF SQUARE FEET)
<S> <C> <C> <C> <C> <C> <C> <C>
Electrical.......... 399 423 -- 56 15 220 1,113
Industrial.......... 405 135 85 17 5 6 653
Corporate........... -- -- 16 -- -- -- 16
--
--- --- --- --- --- --------
804 558 101 73 20 226 1,782
--
--
--- --- --- --- --- --------
--- --- --- --- --- --------
</TABLE>
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(1) Includes 64,000 and 63,000 square foot plants in England and Brazil,
respectively.
(2) Excludes a 110,000 square foot plant in North Carolina and a 25,000 square
foot plant in Michigan which are not currently being utilized.
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ITEM 3. LEGAL PROCEEDINGS
The Company, from time to time, is subject to legal claims and other matters
relating to the conduct of its business. In the opinion of management, the
ultimate disposition of such matters presently outstanding will not have a
materially adverse effect upon the Company's consolidated financial position or
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information concerning the executive officers
of the Registrant:
<TABLE>
<CAPTION>
OFFICER OF
KUHLMAN
NAME AGE SINCE POSITION
- ----------------------------------- --- ---------- --------------------------------------------------
<S> <C> <C> <C>
Robert S. Jepson, Jr............... 53 1993 Chairman of the Board, Chief Executive Officer and
Director
Curtis G. Anderson................. 54 1994 President, Chief Operating Officer and Director
Gary G. Dillon..................... 61 1995 Chairman, President and Chief Executive Officer of
Schwitzer, Inc. and Director
Vernon J. Nagel.................... 38 1993 Executive Vice President of Finance, Chief
Financial Officer and Treasurer
Richard A. Walker.................. 44 1984 Executive Vice President, Chief Administrative
Officer, General Counsel and Secretary
John Zvolensky, Jr................. 54 1995 President and Chief Executive Officer of Kuhlman
Electric Corporation
</TABLE>
Officers of the Registrant are elected each year at the Annual Meeting of
the Board of Directors to serve for the ensuing year or until their successors
are elected and qualified.
Mr. Jepson, who was elected President and Chief Executive Officer of the
Registrant on February 10, 1993, and Chairman of the Board on June 9, 1993,
founded and was Chairman and Chief Executive Officer of The Jepson Corporation
from 1983 until its sale in 1989. The Jepson Corporation was a diversified
manufacturing company listed on the New York Stock Exchange. Immediately
preceding his election as President and Chief Executive Officer of the
Registrant, Mr. Jepson was, and is currently, Chairman and Chief Executive
Officer of Jepson Associates, Inc., a private investment company.
Mr. Anderson, who was elected President and Chief Operating Officer of the
Company on April 26, 1994, and a director on September 8, 1993, founded and has
been, since 1986, Chairman of Anderson Capital Corporation, a private investment
company. Prior thereto, he spent 19 years in corporate and investment banking,
including 14 years with Citibank and five years with The First National Bank of
Chicago where he served as Executive Vice President, Head of Financial Products
Department.
Mr. Dillon has served as Director since June 1, 1995. Mr. Dillon has served
as Chairman, President and Chief Executive Officer of Schwitzer, Inc. since
June, 1991, and served as President and Chief Executive Officer since April
1989. Prior thereto, he served as President and Chief Executive Officer of
Household Manufacturing, Inc.
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Mr. Nagel joined the Company on April 5, 1993 and was elected Vice President
of Finance, Chief Financial Officer and Treasurer of the Company on June 9, 1993
and Executive Vice President of Finance on February 22, 1994. He was the Vice
President of Finance, Chief Financial Officer and Secretary of Stericycle, Inc.
(medical waste management) from 1990 until 1993. Prior thereto, Mr. Nagel served
as a Vice President of The Jepson Corporation from 1985 until 1990, including
Chief Financial Officer from 1989 until 1990 and Controller from 1986 until
1989.
Mr. Walker has served as an Executive Vice President or similar position
with the Company since 1991. From 1984 until 1991, Mr. Walker served as Vice
President, General Counsel and Secretary of the Company. Prior thereto, Mr.
Walker was a partner in the law firm of Harness, Dickey & Pierce.
Mr. Zvolensky has served as President and Chief Executive Officer of Kuhlman
Electric since July 31, 1995. From July 1994 until joining Kuhlman Electric he
was General Manager and Chief Operating Officer of the Greater Cleveland Growth
Association. From January 1992 to September 1993 he served as President of WCI
Cabinet Group (a manufacturer of kitchen and bath cabinets), a division of White
Consolidated Industries. From 1987 to 1991, he was President and Chief Executive
Officer of Emerson Quiet Kool, a manufacturer of room air conditioners.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Information with respect to the principal market for the Registrant's common
stock, the high and low sales prices of such common stock and dividends paid
with respect thereto, and the approximate number of holders of record of such
common stock is incorporated herein by reference to the information contained
under the caption "Common Stock Price Ranges" on page 42 of the Registrant's
Annual Report to Shareholders for the year ended December 31, 1995.
ITEM 6. SELECTED FINANCIAL DATA
Information with respect to selected financial data for the Registrant is
incorporated herein by reference to information set forth under the caption
"Five-Year Selected Financial Data" on page 18 of the Registrant's Annual Report
to Shareholders for the year ended December 31, 1995.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information contained under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 19 through
23 of the Registrant's Annual Report to Shareholders for the year ended December
31, 1995 is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information contained under the captions "Consolidated Statements of
Income," "Consolidated Balance Sheets," "Consolidated Statements of Cash Flows,"
"Consolidated Statements of Shareholders' Equity," "Report of Independent Public
Accountants" and "Notes to Consolidated Financial Statements" on pages 24
through 40 of the Registrant's Annual Report to Shareholders for the year ended
December 31, 1995, is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the directors of the Registrant is incorporated
herein by reference to the information contained under the captions "Election of
Kuhlman Directors" and "Information Regarding Kuhlman Directors, Nominees for
Directors of Kuhlman and Executive Officers" of the Registrant's definitive
Proxy Statement for the 1996 Annual Meeting of Shareholders.
Information with respect to executive officers of the Registrant is included
in Item 1, Part I hereof under the caption "Executive Officers of the
Registrant."
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to Executive Compensation is incorporated herein by
reference to the information contained under the caption "Executive
Compensation" of the Registrant's definitive Proxy Statement for the 1996 Annual
Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to Security Ownership of Certain Beneficial Owners
and Management is incorporated herein by reference to the information contained
under the caption "Principal Stockholders and Beneficial Ownership of Management
of Kuhlman" of the Registrant's definitive Proxy Statement for the 1996 Annual
Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to Certain Relationships and Related Transactions
is incorporated herein by reference to the information contained under the
caption "Related Transactions" of the Registrant's definitive Proxy Statement
for the 1996 Annual Meeting of Shareholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements
The following consolidated financial statements of Kuhlman Corporation
and subsidiaries included in the Kuhlman Corporation 1995 Annual Report to
its shareholders for the year ended December 31, 1995, are incorporated
herein by reference:
Consolidated Statements of Income for each of the three years in
the period ended December 31, 1995.
Consolidated Balance Sheets -- December 31, 1995 and 1994.
Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 1995.
Consolidated Statements of Shareholders' Equity for each of the
three years in the period ended December 31, 1995.
Notes to Consolidated Financial Statements.
The financial statement schedule listed below for each of the three years in
the period ended December 31, 1995 is submitted herewith together with the
report and consent of independent public accountants.
2. Supplemental Schedule to Consolidated Financial Statements
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The information required to be submitted in Schedule II is included in the
consolidated financial statements and notes and supplemental schedules thereto.
Schedules other than that referred to above are omitted as not applicable or not
required, or the required information is shown in the financial statements or
notes thereto.
3. Exhibits
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger by and between Kuhlman
Corporation, Spinner Acquisition Corp. and Schwitzer, Inc.
(incorporated by reference to Exhibit 2.1 to Registration
Statement No. 33-58133).
2.2 Tender Offer Statement by the Registrant to Communication
Cable, Inc. (incorporated by reference to Schedule 14D-1
filed by the Registrant on November 29, 1995).
2.3 Stock Option Agreement by and between the Registrant,
Kuhlman Acquisition Corp. and James R. Fore (incorporated
by reference to Exhibit (c) (1) to Schedule 14D-1 filed by
the Registrant on November 29, 1995).
3.1 Certificate of Incorporation of the Registrant (incorporated
by reference to Exhibit 1 to the Registrant's Form 10-Q for
the quarter ended June 30, 1993).
3.2 Certificate of Amendment of Certificate of Incorporation of
the Registrant dated May 31, 1995 (incorporated by
reference to Exhibit 3.1 to Registration Statement No.
33-58133).
3.3 Certificate of the Voting Powers, Designations, Preferences,
and Relative, Participating, Optional, or Other Special
Rights, and the Qualifications, Limitations, or Other
Restrictions thereof of the Junior Participating Preferred
Stock, Series A of Kuhlman Corporation dated May 31, 1995.
3.4 By-laws of Registrant (incorporated by reference to Exhibit
3b to the Registrant's Form 10-K for the year ended
December 31, 1993).
10.1 1983 Incentive Stock Option Plan of the Registrant
(incorporated by reference to Exhibit 10b to the
Registrant's Form 10-K for the year ended December 31,
1983).
10.2 Amended 1986 Stock Option Plan of the Registrant
(incorporated by reference to Exhibit 10.3 to the
Registrant's Form 10-K for the year ended December 31,
1994).
10.3 Stock Option Plan for Non-Employee Directors (incorporated
by reference to Exhibit 10e to the Registrant's Form 10-K
for the year ended December 31, 1988).
10.4 Non-Employee Directors Stock Plan (incorporated by reference
to Exhibit 4 to the Registrant's Form 10-Q for the quarter
ended June 30, 1993).
10.5 Credit Agreement dated December 15, 1993 by and among the
Registrant, NationsBank of Georgia, N.A. and The Chase
Manhattan Bank, N.A. (incorporated by reference to Exhibit
10b to the Registrant's Form 8-K dated December 15, 1993).
10.6 First Amendment to Credit Agreement dated March 29, 1994
among the Registrant, NationsBank of Georgia, N.A. and The
Chase Manhattan Bank, N.A. (incorporated by reference to
Exhibit 10.2 to Registration Statement No. 33-58133).
10.7 Second Amendment to Credit Agreement dated March 30, 1994
among the Registrant, NationsBank of Georgia, N.A. and The
Chase Manhattan Bank, N.A. as Managing Agents (incorporated
by reference to Exhibit 10.3 to Registration Statement No.
33-58133).
10.8 Third Amendment to Credit Agreement dated December 31, 1994
among the Registrant, NationsBank of Georgia, N.A. and The
Chase Manhattan Bank, N.A. as Managing Agents (incorporated
by reference to Exhibit 10.4 to Registration Statement No.
33-58133).
</TABLE>
9
<PAGE>
<TABLE>
<C> <S>
10.9 1994 Stock Appreciation Rights Plan (incorporated by
reference to Exhibit 10.6 to the Registrant's Form 10-K for
the year ended December 31, 1994).
10.10 Fourth Amendment to Credit Agreement dated June 29, 1995
among the Registrant, NationsBank of Georgia, N.A. and the
Chase Manhattan Bank, N.A. as Managing Agents (incorporated
by reference to Exhibit 4.1 to the Registrant's Form 10-Q
for the quarter ended June 30, 1995).
10.11 1994 Stock Option Plan (Incorporated by reference to Exhibit
10.11 to Registration Statement No. 33-58133).
10.12 Schwitzer, Inc. Long-Term Executive Incentive Compensation
Plan, as amended (Incorporated by reference to Exhibit 4.3
to Registration Statement No. 33-61255).
13.0 Portions of Annual Report to Shareholders of the Registrant
for the year ended December 31, 1995 appearing under the
captions "Five-Year Selected Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results
of Operations," "Consolidated Statements of Income,"
"Consolidated Balance Sheets," "Consolidated Statements of
Cash Flows," "Consolidated Statements of Shareholders'
Equity," "Report of Independent Public Accountants," "Notes
to Consolidated Financial Statements" and "Common Stock
Price Ranges."
22.0 Subsidiaries of the Registrant.
23.0 Consent of Independent Public Accountants.
24.0 Power of Attorney.
27.0 Financial Data Schedule.
</TABLE>
- ------------------------
(b) No current reports on Form 8-K were filed during the quarter ended
December 31, 1995.
(c) See Item 14(a)(3) above.
(d) See Item 14(a)(2) above.
10
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements included in the Kuhlman Corporation 1995
Annual Report to Shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated February 6, 1996 (except with respect to
the matter discussed in Note 17 to the consolidated financial statements, as to
which the date is February 21, 1996). Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The supplemental
schedule to consolidated financial statements listed in the preceding index is
the responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Louisville, Kentucky
February 6, 1996 (Except with respect to the matter discussed in Note 17 to the
consolidated financial statements, as to which the date is February 21, 1996.)
11
<PAGE>
KUHLMAN CORPORATION AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------------------------ ----------- ----------- --------------- -----------
BALANCE AT BALANCE AT
BEGINNING END OF
DESCRIPTION OF PERIOD ADDITIONS WRITE-OFFS, NET PERIOD
- ------------------------------------------------------ ----------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
VALUATION AND QUALIFYING ACCOUNTS FROM
ASSETS IN CONSOLIDATED BALANCE SHEETS --
DOUBTFUL ACCOUNTS --
Year Ended December 31, 1995 $ 990 1,211 (759) $ 1,442
Year Ended December 31, 1994 $ 900 250 (160) $ 990
Year Ended December 31, 1993 $ 933 201 (234) $ 900
</TABLE>
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Date: March 27, 1996
By: /s/ ROBERT S. JEPSON, JR.
-----------------------------------
Robert S. Jepson, Jr.
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- -------------------------------------------------- ------------------------- ----------------
<C> <S> <C>
ROBERT S. JEPSON, JR.* Chairman of the Board and March 27, 1996
---------------------------------------- Chief Executive Officer
(Principal Executive
Officer)
and Director
VERNON J. NAGEL* Executive Vice President March 27, 1996
---------------------------------------- of Finance, Chief
Financial
Officer and Treasurer
(Principal Financial and
Accounting Officer)
CURTIS G. ANDERSON* President, Chief March 27, 1996
---------------------------------------- Operating
Officer and Director
WILLIAM E. BURCH* Director March 27, 1996
----------------------------------------
STEVE CENKO* Director March 27, 1996
----------------------------------------
GARY G. DILLON* Director March 27, 1996
----------------------------------------
ALEXANDER W. DREYFOOS, JR.* Director March 27, 1996
----------------------------------------
WILLIAM M. KEARNS, JR.* Director March 27, 1996
----------------------------------------
ROBERT D. KILPATRICK* Director March 27, 1996
----------------------------------------
JOHN L. MARCELLUS, JR.* Director March 27, 1996
----------------------------------------
GEORGE J. MICHEL, JR.* Director March 27, 1996
----------------------------------------
GENERAL H. NORMAN SCHWARZKOPF* Director March 27, 1996
----------------------------------------
*By /s/ ROBERT S. JEPSON, JR. Individually and as March 27, 1996
------------------------------------- Attorney-in-Fact
Robert S. Jepson, Jr.
</TABLE>
13
<PAGE>
CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES,
AND RELATIVE, PARTICIPATING, OPTIONAL, OR OTHER SPECIAL RIGHTS,
AND THE QUALIFICATIONS, LIMITATIONS, OR OTHER RESTRICTIONS
THEREOF OF THE
JUNIOR PARTICIPATING PREFERRED STOCK, SERIES A
(PAR VALUE $1.00 PER SHARE)
OF
KUHLMAN CORPORATION
___________________________________
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
___________________________________
The undersigned does hereby certify that the following resolutions were
duly adopted by the Board of Directors of Kuhlman Corporation, a Delaware
corporation ("Corporation"), the Certificate of Incorporation of which was filed
on March 4, 1993, at a meeting of said Board of Directors duly convened and held
on May 31, 1995, at which a quorum was present and acting throughout:
RESOLUTIONS OF THE BOARD OF DIRECTORS OF
KUHLMAN CORPORATION
WHEREAS, Article Fourth of the Certificate of Incorporation of the
Corporation expressly authorizes the Board of Directors of the Corporation to
provide for the issuance of shares of Preferred Stock of the Corporation, par
value $1.00 per share, in one or more series, and for such consideration or
considerations as the Board of Directors may determine, with such voting powers,
full or limited, or without voting powers, and with such designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof; and
WHEREAS, in the judgment of the Board of Directors, it is advisable and in
the best interests of this Corporation to establish a series of Preferred Stock
designated as "Junior Participating Preferred Stock, Series A", the number of
shares of which shall be 200,000.
NOW THEREFORE, BE IT RESOLVED, that pursuant to Article Fourth of the
Certificate of Incorporation of the Corporation, the Board of Directors of the
Corporation hereby establishes a series of Preferred Stock of the Corporation
designated as "Junior Participating Preferred Stock, Series A" (the "Series A
Preferred") and the number of shares constituting such series shall be 200,000,
with the following voting powers, designations, preferences, and
<PAGE>
relative, participating, optional, or other special rights, and qualifications,
limitations or restrictions:
1. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any
series of Preferred Stock ranking prior and superior to the shares of
Series A Preferred with respect to dividends, the holders of shares of
Series A Preferred, in preference to the holders of Common Stock of the
Corporation and of any other shares ranking junior as to dividends to the
Series A Preferred, shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the first day of March, June,
September and December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Preferred, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $10.00 or (b) subject to
the provision for adjustment hereinafter set forth, 100 times the aggregate
per share amount of all cash dividends and 100 times the aggregate per
share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of
a share of Series A Preferred. In the event the Corporation shall at any
time declare or pay any dividend on Common Stock payable in shares of
Common Stock, or effect a subdivision of combination or consolidation of
the outstanding Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the amount to
which holders of shares of Series A Preferred were entitled immediately
prior to such event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred as provided in Paragraph (A) of this Section immediately
after it declares a dividend or distribution on the Common Stock (other
than a dividend payable in shares of Common Stock); PROVIDED that, in the
event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date, and
the next subsequent Quarterly Dividend Payment Date, a dividend of $10.00
per share on the Series A Preferred shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
2
<PAGE>
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares
shall begin to accrue and be cumulative from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders of shares
of Series A Preferred entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly
Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Preferred in an amount
less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share
basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares
of Series A Preferred entitled to receive payment of a dividend or
distribution declared thereon, which record date shall not be more than 60
days prior to the date fixed for the payment thereof.
2. VOTING RIGHTS. The holders of shares of Series A Preferred shall have
the following voting rights:
(A) Each one-hundredth of a share of Series A Preferred shall entitle
the holder thereof to one vote on all matters submitted to a vote of the
stockholders of the Corporation.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Preferred and the holders of shares of Common Stock
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
3. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred as provided in Section 1 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Series A Preferred outstanding shall
have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, or make any other
distributions on, any shares ranking junior (either as to
dividends or upon liquidation, dissolution or winding up)
to the Series A Preferred;
(ii) declare or pay dividends on or make any other
distributions on any shares ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding
up) with the Series A Preferred, except dividends paid
ratably on the Series A Preferred and all
3
<PAGE>
such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares ranking junior (either as dividends or upon
liquidation, dissolution or winding up) to the Series A
Preferred, provided that the Corporation may at any time
redeem, purchase or otherwise acquire any such junior
shares in exchange for any shares of the Corporation
ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A
Preferred; or
(iv) purchase or otherwise acquire for consideration any shares
of Series A Preferred, or any shares ranking on a parity
with the Series A Preferred, except in accordance with a
purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend
rates and other relative rights and preferences of the
respective series and classes, shall determine in good
faith will result in fair and equitable treatment among
the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares
of the Corporation unless the Corporation could, under Paragraph (A) of
this Section 3, purchase or otherwise acquire such shares at such time and
in such manner.
4. REACQUIRED SHARES. Any shares of Series A Preferred purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and cancelled promptly after the acquisition thereof. All such shares shall
upon their cancellation become authorized but unissued shares of Preferred Stock
and may be reissued as part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein.
5. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made
(1) to the holders of shares ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred unless, prior
thereto, the holders of shares of Series A Preferred shall have received $100.00
per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment,
PROVIDED that the holders of shares of Series A Preferred shall be entitled to
receive an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount
4
<PAGE>
to be distributed per share to holders of Common Stock, or (2) to the holders of
shares ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred, except distributions
made ratably on the Series A Preferred and all other such parity stock in
proportion to the total amounts to which the holders of all such shares are
entitled upon such liquidation, dissolution or winding up. In the event the
Corporation shall at any time declare or pay any dividend on Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the aggregate
amount to which holders of shares of Series A Preferred were entitled
immediately prior to such event under the proviso in clause (1) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
6. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other shares or securities,
cash and/or any other property, then in any such case the shares of Series A
Preferred then outstanding shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of shares,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding Common Stock (by
reclassification or otherwise) into a greater or lesser number of shares of
Common Stock, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series A Preferred
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
7. NO REDEMPTION. The shares of Series A Preferred shall not be
redeemable. However, the Corporation may acquire shares of Series A Preferred
in any manner permitted by law, the provisions hereof and the Certificate of
Incorporation of the Corporation.
8. RANK. The Series A Preferred shall rank junior to all other series of
the Corporation's Preferred Stock as to the payment of dividends and the
distributions of assets, unless the terms of such other series specify to the
contrary.
9. AMENDMENT. The Certificate of Incorporation of the Corporation shall
not be amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series A Preferred so as to affect them
adversely without the affirmative vote of the holders of two-thirds of the
outstanding shares of Series A Preferred, voting together as a single class.
5
<PAGE>
IN WITNESS WHEREOF, Kuhlman Corporation has caused this Certificate to be
signed by its Chairman of the Board of Directors, Robert S. Jepson, Jr., and
attested by its Secretary, Richard A. Walker, this 31st day of May, 1995.
KUHLMAN CORPORATION
[Corporation Seal] /s/ Robert S. Jepson, Jr.
___________________________________
Robert S. Jepson, Jr.,
Chairman of the Board of Directors
Attest:
/s/ Richard A. Walker
___________________________________
Richard A. Walker, Secretary
6
<PAGE>
FIVE-YEAR SELECTED FINANCIAL DATA
KUHLMAN CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
For the years ended December 31, 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------
IN THOUSANDS, EXCEPT PER SHARE DATA
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales $425,384 $396,117 $242,221 $231,426 $237,216
Gross profit (%) 19.8% 19.2% 17.9% 20.2% 22.7%
Operating expenses (%) 12.9% 13.3% 13.2% 14.2% 14.4%
Operating profit before restructuring costs 29,161 23,284 11,429 14,001 19,661
Restructuring costs -- -- 8,650 1,650 --
Interest expense, net (7,066) (6,969) (4,523) (3,985) (4,154)
Merger expenses (4,510) -- -- -- --
Other income(expense) 493 (712) 178 1,470 52
Income(loss) before taxes, extraordinary item
and cumulative effect of change in accounting principles 18,078 15,603 (1,566) 9,836 15,559
Taxes(benefit) on income(loss) 8,034 5,633 (1,876) 4,972 6,680
Income before extraordinary item and cumulative
effect of change in accounting principles 10,044 9,970 310 4,864 8,879
Extraordinary item, net of tax (1,861) -- -- -- --
Cumulative effect of change in accounting
principles, net of tax -- -- -- (10,111) --
Net income(loss) 8,183 9,970 310 (5,247) 8,879
- ------------------------------------------------------------------------------------------------------------
Earnings per share
Income before extraordinary item and cumulative
effect of change in accounting principles $ 0.76 $ 0.73 $ 0.02 $ 0.38 $ 0.67
Extraordinary item, net of tax (0.14) -- -- -- --
Cumulative effect of change in accounting principles -- -- -- (0.80) --
Net income(loss) 0.62 0.73 0.02 (0.42) 0.67
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
As of December 31, 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------
IN THOUSANDS
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital $ 39,182 $ 49,501 $ 63,397 $ 54,845 $ 58,611
Net plant and equipment 66,249 64,750 61,161 53,187 56,006
Total assets 214,902 229,185 242,921 156,930 161,624
Total debt 74,175 84,773 106,130 41,814 48,406
Shareholders' equity 74,232 73,216 64,187 64,842 74,925
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
For the years ended December 31, 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------
IN THOUSANDS, WHERE APPLICABLE
<S> <C> <C> <C> <C> <C>
OTHER DATA
IBITDA(1) $ 40,974 $ 33,779 $ 20,209 $ 24,449 $ 29,473
Cash flow from operations 28,131 18,881 10,518 12,094 20,473
Capital expenditures 15,200 13,048 6,091 8,887 9,887
Depreciation and amortization 11,320 11,207 8,602 8,978 9,760
Dividends paid 5,814 3,640 3,530 3,452 3,438
Current ratio 1.6 1.7 1.9 2.3 2.3
Net book value per share 5.64 5.59 4.97 5.13 5.96
Return on average investment(2) 11.7% 9.2% 7.0% 8.8% 11.6%
Return on average equity(3) 18.0% 14.5% 8.4% 7.8% 12.3%
Total debt as a percentage of total capitalization 50.0% 53.7% 62.3% 39.2% 39.2%
Inventory turns 7.6 7.0 6.3 5.1 4.7
Days sales outstanding 52.3 53.7 52.4 50.4 51.6
Number of employees 2,284 2,375 2,364 1,883 1,865
Shares outstanding 13,167 13,100 12,914 12,634 12,574
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) INCOME BEFORE INTEREST AND TAXES PLUS DEPRECIATION AND AMORTIZATION,
EXCLUDING RESTRUCTURING COSTS AND MERGER EXPENSES.
(2) INCOME IS DEFINED AS NET INCOME PLUS NET OF TAX IMPACT OF INTEREST EXPENSE,
RESTRUCTURING COSTS, ACCOUNTING CHANGES AND MERGER EXPENSES. AVERAGE INVESTMENT
IS THE SUM OF TOTAL DEBT AND EQUITY PLUS THE EQUITY EFFECT OF RESTRUCTURING
COSTS, ACCOUNTING CHANGES AND MERGER EXPENSES, LESS CASH.
(3) INCOME IS DEFINED AS NET INCOME PLUS NET OF TAX IMPACT OF RESTRUCTURING
COSTS, ACCOUNTING CHANGES AND MERGER EXPENSES. AVERAGE EQUITY IS ADJUSTED FOR
THE EFFECT OF RESTRUCTURING COSTS, ACCOUNTING CHANGES AND MERGER EXPENSES.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
KUHLMAN CORPORATION AND SUBSIDIARIES
OVERVIEW
Over the last three years, Kuhlman Corporation ("Kuhlman" or the
"Company") has completed a major acquisition and a merger which along with
internal changes have resulted in significant growth in sales and net income.
In December 1993, Kuhlman purchased Coleman Cable Systems, Inc. ("Coleman
Cable"), a leading domestic manufacturer and distributor of electrical and
electronic wire and cable products, which more than doubled Kuhlman's size in
the electrical products industry. Then, on May 31, 1995, a wholly-owned
subsidiary of Kuhlman merged with and into Schwitzer, Inc. ("Schwitzer")
whereby Schwitzer became a wholly-owned subsidiary of the Company. In the
transaction, each outstanding share of common stock of Schwitzer was
converted into 0.9615 share of the Company's common stock, resulting in the
Company issuing an additional 6,980,000 shares of stock. The merger was
accounted for as a pooling of interests. As a result, consolidated net sales
exceeded $425 million in 1995, a substantial change from the $118 million
reported in 1993 by the original Kuhlman company before giving effect to the
merger. Similarly, net income (before merger expenses and the debt
extinguishment costs associated with the Schwitzer merger) was almost $14
million in 1995 compared to a net loss of $3 million reported in 1993 by the
original Kuhlman company.
The addition of Coleman Cable and Schwitzer, which is one of the world's
leading manufacturers of turbochargers and other components for medium- and
heavy-duty gasoline and diesel engines, significantly broadened and
diversified the Company and its markets. Therefore, upon completion of the
merger with Schwitzer, the Company's business units were realigned into two
product segments in recognition of those distinct markets and customers
served: Electrical and Industrial. The Electrical Products Segment
manufactures and sells primarily electrical equipment and wire and cable
products while the Industrial Products Segment manufactures and sells
primarily engine components and other metal products.
The purpose of this discussion and analysis is to enhance the
understanding and evaluation of the Company's results of operations as well
as its financial position, cash flows, indebtedness and other key financial
information for the years ended December 31, 1995, 1994 and 1993. All
financial information contained in this report has been restated to include
the results of Schwitzer for all periods presented.
LIQUIDITY AND CAPITAL RESOURCES
Strong cash flow from operations and the merger with Schwitzer served to
further strengthen the Company's financial position in 1995. Management
believes that the Company's liquidity and financial flexibility are more than
adequate to support its continued growth through both internal expansion and
potential acquisitions.
Overall, the Company's cash flow from operations grew to $28,131,000 in
1995 from $18,881,000 and $10,518,000 in 1994 and 1993, respectively.
Improved operating earnings in each segment and strong working capital
management were the primary contributors to the Company's growth in cash flow
from operations. In addition, the Company generated $7,248,000 in cash in
1995 from the sale of the net assets of a non-core business unit and other
non-performing assets. Total cash flow generated from operations plus the
proceeds from the sale of assets totaled $35,379,000 in 1995. The Company
used its cash flow in 1995 primarily to fund capital expenditures, quarterly
dividend payments and to reduce debt.
A primary financial objective of the Company is to enhance long-term
shareholder value. The Company believes that achieving the proper returns on
its invested capital is a key factor in driving shareholder value. Toward
that objective, the Company continued to focus its efforts in 1995 on
improving the returns earned on its invested capital by redeploying
underperforming, non-core assets and making additional capital investments
into areas where the Company can maximize its earnings potential. As part of
this effort, the Company sold Nehring Electrical Works Company ("Nehring"),
a subsidiary of Coleman Cable, in the fourth quarter of 1995 for
approximately book value. Under the terms of the sales agreement, the
purchaser acquired substantially all of the assets and assumed certain
liabilities of Nehring for $6,509,000 in cash plus a note for $1,500,000. In
addition, the Company continued its capital reinvestment program in 1995 by
spending $15,200,000 primarily for new machinery and equipment. Over the last
three years, the Company has invested a total of $34,339,000 for new plant
and equipment primarily to improve product quality and durability, increase
manufacturing capacity and enhance its customer service capabilities in each
segment. The Company believes these investments, which have exceeded
depreciation expense by 20% over the three year period ended December 31,
1995, will enhance its operations and financial performance in 1996 and
beyond.
Working capital management was a key element in increasing the Company's
cash flow from operations in 1995. Consolidated working capital at December
31, 1995 was $39,182,000 compared to $49,501,000 at December 31, 1994, a
decline of $10,319,000. The decline in working capital was due primarily to
the sale of Nehring, the receipt of certain income tax refunds, and lower
excess cash balances at the end of 1995. The decline was partially offset by
the settlement of certain liabilities including completion of
19
ANNUAL REPORT
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
KUHLMAN CORPORATION AND SUBSIDIARIES
the environmental remediation program at Schwitzer's Rolla, Missouri
facility which was closed in 1992 and sold in 1995. The cash generated from
the decline in working capital was used to reduce the Company's outstanding
debt. Operating working capital (defined as accounts receivable and inventory
less accounts payable and accrued expenses) declined modestly to $40,687,000
at December 31, 1995 from $42,385,000 at December 31, 1994 primarily due to
the sale of Nehring, partially offset by higher levels of inventory required
to support future sales activity principally in the Electrical Products
Segment. In 1995, utilization measurements for working capital assets
improved over 1994 due to the success of inventory and accounts receivable
programs designed to enhance cash flow and minimize working capital
requirements. Excluding the 1995 net sales of Nehring, operating working
capital as a percentage of net sales at the end of 1995 was 10.6%. The
percentage was 10.7% at the end of 1994 and 11.5% at the end of 1993
(adjusted for sales of Coleman Cable for all of 1993). At December 31, 1995,
the current ratio was 1.6 compared to 1.7 at the end of 1994.
The Company's consolidated cash position was $581,000 at December 31,
1995 compared to $3,036,000 at December 31, 1994. The Company's excess cash
balances were used to reduce the outstanding debt under the long-term
revolving credit facility in order to lower its overall interest expense.
Under the terms of the revolving credit facility, no payments are required
until December 31, 1999 and amounts can be reborrowed at any time subject to
certain limitations. Also, in connection with the merger of Schwitzer, the
Company incurred one-time transaction costs in the second quarter of 1995
which totaled approximately $5,600,000 (net of tax) and included costs
associated with the early extinguishment of debt ("Merger Expenses").
Shortly after the completion of the merger, the Company repaid substantially
all of the domestic debt of Schwitzer with proceeds borrowed under the
Company's current bank credit facility which was increased by $22,000,000 to
accommodate the repayment and to pay the associated Merger Expenses. The
Company refinanced the domestic debt of Schwitzer in order to lower its
overall interest rate on borrowed funds based on the enhanced financial
strength of the combined company. The cost associated with the early
retirement of Schwitzer's domestic debt was recognized as an extraordinary
item on the Company's Consolidated Statement of Income.
Total debt outstanding at December 31, 1995 declined $10,598,000 (13%) to
$74,175,000 from $84,773,000 at December 31, 1994. The Company's debt to
total capital ratio was 50% at December 31, 1995 down from approximately 54%
at the end of 1994. Total availability under the Company's current credit
agreements was $18,495,000 at December 31, 1995. In addition, under the most
restrictive warranties and covenants contained in the credit agreements, the
Company had approximately $2,526,000 of consolidated retained earnings at
December 31, 1995 free of any restrictions as to the payment of dividends.
The Company paid quarterly common stock dividends of $0.15 per share in
1995. Total dividends paid in 1995 were $5,814,000, compared to $3,640,000 in
1994. The Company issued 6,980,000 new shares of common stock on May 31, 1995
in conjunction with the merger of Schwitzer. These newly issued shares were
eligible to receive only the last two quarterly dividends paid in 1995. Also
in 1995, the Company repurchased 72,388 shares of common stock for $920,000,
including expenses, as part of an "odd-lot" stock buy back program. The
purpose of this program was to reduce the service and administration cost
associated with shareholders who own less than 100 shares. The program, which
was terminated in November 1995, reduced the number of registered
shareholders by over 2,700 to approximately 7,900.
RESULTS OF OPERATIONS
CONSOLIDATED RESULTS
Consolidated net sales reached a record $425,384,000 in 1995 compared
with $396,117,000 and $242,221,000 reported in 1994 and 1993, respectively.
For the year ended December 31, 1995, the Company reported operating net
income (defined as net income before the net of tax effect of the
extraordinary item, Merger Expenses and restructuring costs) of $13,783,000
($1.05 per share) which compared to $9,970,000 ($0.73 per share) in 1994 and
$5,614,000 ($0.42 per share) in 1993. Net income in 1995 was $8,183,000
($0.62 per share) compared to $9,970,000 ($0.73 per share) and $310,000
($0.02 per share) in 1994 and 1993, respectively. Net income in 1995 included
the Merger Expenses of approximately $5,600,000 ($0.43 per share). Net income
in 1993 included approximately $5,304,000 ($0.39 per share) associated with a
one-time restructuring charge primarily for the cost associated with
repositioning the Company's transformer business.
Kuhlman's net sales in 1995 increased 7% over 1994. The growth in net
sales in 1995 over 1994 was primarily due to the Industrial Products Segment
which posted record sales as worldwide demand for the Company's engine
products remained vibrant throughout the period. Unit sales volume for many
products in the Electrical Products Segment increased in 1995, though total
net sales for the segment showed only a modest improvement because of lower
unit sales of distribution transformers due to the downsizing of this product
line which began in 1993. Kuhlman's consolidated net sales in 1994 were
substantially higher than those reported in 1993 due to the inclusion of the
full year results of Coleman Cable, acquired in December 1993, and the surge
in worldwide demand for turbochargers and other engine components.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
KUHLMAN CORPORATION AND SUBSIDIARIES
Kuhlman posted record operating profit in 1995 due to the strong earnings
performance reported in each business segment. Consolidated operating profit
increased 25% in 1995 to $29,161,000 (7% of sales) from $23,284,000 (6% of
sales) in 1994. Operating profit more than doubled in 1994 from $11,429,000
(5% of sales) reported in 1993 (prior to the restructuring charge of
$8,650,000) primarily due to the acquisition of Coleman Cable. The growth in
operating profit in 1995 was primarily due to the increased sales volumes
noted above, improved operating performance at Kuhlman Electric Corporation
("Kuhlman Electric"), higher gross profit margins and lower operating
expenses as a percentage of sales. Consolidated gross profit margins
increased to 19.8% of sales in 1995 from 19.2% and 17.9%, in 1994 and 1993,
respectively. The improvement in gross margins occurred primarily in the
Electrical Products Segment due to the streamlining of Kuhlman Electric and
better manufacturing efficiencies company-wide, partially offset by higher
raw material costs in certain products. The Company uses numerous raw
materials in its products, including copper, aluminum, steel and plastics.
Prices for many of these materials started to rise in 1994 as worldwide
economies began to strengthen and continued to rise throughout much of 1995.
Though the Company attempted to pass along these increases in the form of
higher prices to its customers, competition made this increasingly difficult
which resulted in pressure on operating margins for certain products. In 1995
and 1994, the Company was able to mitigate the impact of these higher costs
by exercising tight cost control measures and improving its operating
efficiencies. In 1993, increases in the cost of certain raw materials and
other manufacturing expenses due to inflation and normal business factors
were nominal. Operating expenses for Kuhlman in 1995 were $54,946,000 or
12.9% of sales compared to $52,601,000 or 13.3% of sales in 1994 and
$31,869,000 or 13.2% of sales in 1993 (excluding restructuring costs).
Operating expenses as a percentage of sales declined in 1995 compared to 1994
due to the higher sales volume noted above and cost containment programs
throughout the Company.
Other income (expense) for Kuhlman is made up of Interest expense, net,
Merger Expenses and Other, net. Interest expense, net for the Company was
$7,066,000, $6,969,000 and $4,523,000 in 1995, 1994 and 1993, respectively.
Interest expense was up nominally in 1995 compared to 1994 because much of
the debt reduction in 1995 did not occur until the fourth quarter. Interest
expense increased in 1994 compared to 1993 due to the additional debt assumed
in connection with the Coleman acquisition. In Other, net, the Company
generated other income of $493,000 in 1995, an expense of $712,000 in 1994
and income of $178,000 in 1993. Other, net contains miscellaneous income and
expense items associated with non-operating activities of the Company. These
items consisted primarily of income from a covenant not to compete, foreign
currency translation adjustments associated with the Company's manufacturing
operations in Brazil and other miscellaneous items. The covenant not to
compete, which was associated with a business sold in 1990, expired in June
1995. Foreign currency translation adjustments related to the Company's
Brazilian operations resulted in income of $75,000 in 1995 and expense of
$847,000 and $1,040,000 in 1994 and 1993, respectively. Fluctuations
associated with foreign currency translation adjustments due to the
hyperinflationary economy of Brazil may continue in the future.
The effective tax rate reported by the Company was 44.4%, 36.1% and a
benefit of 119.8% in 1995, 1994 and 1993, respectively. The reasons for the
difference between these rates and the statutory Federal income tax rate for
those three years is detailed in Note 6 of the Notes to Consolidated
Financial Statements.
ELECTRICAL PRODUCTS SEGMENT
The Electrical Products Segment is comprised of Kuhlman Electric and
Coleman Cable, which was acquired by the Company in December 1993. Sales and
operating earnings for the Electrical Products Segment are generally affected
by the level of domestic economic activity in the consumer, commercial and
industrial markets served. Housing starts, commercial and industrial
construction, and electrical usage are key indicators of demand for the
segment's various electrical products. Additionally, the maintenance and
upgrading of established electrical systems creates demand for the segment's
transformer products.
In 1995, the Electrical Products Segment reported record sales and
operating earnings. Net sales increased to $243,761,000 in 1995 from
$235,274,000 reported in 1994 and $109,458,000 in 1993. Operating earnings
for the Electrical Products Segment were $13,639,000 in 1995 compared to
$8,611,000 in 1994 and a loss of $6,325,000 in 1993. In 1995, sales and
operating earnings increased 4% and 58%, respectively, primarily due to the
consistent results reported for wire and cable products and a substantial
improvement in the operating performance of the transformer company. In 1994,
sales and operating earnings increased substantially over 1993 because of the
addition of Coleman Cable in December 1993 and the impact of restructuring
the transformer business which began in 1993.
The improvement in the financial results reported by the Electrical
Products Segment in 1995 was due principally to the turnaround in operating
performance of Kuhlman Electric. In the early 1990's, there was a significant
shift in the buying patterns and purchasing practices of electrical utilities
which resulted in lower orders throughout the industry, creating significant
price competition on the remaining orders for many transformer products. As a
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
KUHLMAN CORPORATION AND SUBSIDIARIES
consequence, the Company initiated a major restructuring program in 1993
which was designed to improve the competitiveness and profitability of
Kuhlman Electric. This program, which resulted in restructuring costs of
$8,650,000 ($7,705,000 of which related to the transformer company in 1993),
included reductions in workforce, redeployment of personnel, elimination of
certain unprofitable product lines and actions designed to streamline
operations. As a result of these and other actions, some of which carried
into the first quarter of 1995, Kuhlman Electric became a more flexible and
efficient organization, better able to provide its customers with higher
value-added products and services. In 1995, Kuhlman Electric reported steady
improvement in its quarterly operating earnings on lower unit sales volumes
compared to prior periods. Total sales of transformer products declined
approximately 14% in 1995 compared to 1994 and 20% compared to 1993, while
operating earnings have almost doubled in 1995 when compared to 1993 (before
restructuring costs). Kuhlman Electric had minimal operating earnings in
1994. The decline in sales occurred primarily because of lower shipments of
distribution transformers and the discontinuation of certain unprofitable
transformer product lines. Unit sales volume of the Company's other major
transformer product, power transformers, has increased almost 20% in each of
the last two years due to the Company's improved lead times and product
quality.
Net sales and operating earnings for wire and cable products reached
record highs in 1995 though margins as a percentage of sales trailed those
reported in 1994. Net sales increased 16% in 1995 compared to 1994 primarily
due to higher shipments of battery booster cables in late 1995, greater
penetration of the electrical distributor channel and to a lesser extent, the
impact of the high cost of copper throughout much of 1995. Operating earnings
grew nominally in 1995 compared to 1994 due to the higher volumes noted above
and better manufacturing efficiencies, partially offset by lower gross
margins earned on key products. Gross profit margins were impacted by the
softness in the domestic economy, particularly for retail sales and new
construction in the first half of 1995, resulting in significant price
competition in many of the Company's key wire and cable markets. Gross
profit margins improved in the second half of 1995 primarily due to greater
demand for certain products, particulary booster cables, and the impact of
lower material costs.
INDUSTRIAL PRODUCTS SEGMENT
The Industrial Products Segment is comprised of Schwitzer, Inc. and Emtec
Products Corporation. Profitability in this segment is affected by economic
conditions in industrialized and developing regions of the world. Capital
expenditures for medium- and heavy-duty trucks, construction and agricultural
equipment and other industrial transportation equipment are indirect
indicators of demand for the segment's products.
Net sales and operating earnings in the Industrial Products Segment
reached record highs in 1995. Net sales were $181,623,000 in 1995 compared to
$160,843,000 and $132,763,000 in 1994 and 1993, respectively. Operating
earnings for the Industrial Products Segment increased to $19,541,000 in 1995
from $17,096,000 in 1994 and $9,163,000 in 1993. Operating earnings as a
percentage of sales were 10.8%, 10.6% and 6.9% in 1995, 1994, and 1993,
respectively. Sales to domestic customers as a percentage of total Industrial
Products Segment sales were 66%, 70% and 74% in 1995, 1994 and 1993,
respectively.
Sales and operating earnings increased 13% and 14%, respectively, in 1995
compared to 1994. The improvement was primarily the result of higher sales
volumes generated by the strong worldwide demand for turbochargers and other
engine and commercial components. The surge in demand came primarily from
original equipment manufacturers (OEMs) in the United States and Europe as
low interest rates continued to support growth in many economies around the
world. Sales to domestic based customers grew 7% in 1995 from 1994 while
international sales increased over 27% in the same period. The growth in
international sales came primarily in Europe due to greater market
penetration of the Company's products. Operating earnings grew $2,445,000 or
14% in 1995 over 1994 while profit margins in 1995 showed modest gains over
1994. The increase in operating margins was primarily due to improved
operating efficiencies, the impact of higher sales volume and lower operating
expenses as a percentage of sales. Operating margins in the Industrial
Products Segment in 1995 were suppressed somewhat by a higher mix of OEM
versus aftermarket shipments and higher raw material and production costs for
certain products. Operating earnings in 1994 were impacted by one-time
charges totaling $2,100,000 for environmental remediation costs and valuation
allowances associated with the Rolla, Missouri facility, sold in 1995.
In 1994, sales and operating earnings for the Industrial Products Segment
grew 21% and 87%, respectively, over the results reported in 1993. The growth
in sales volume was due primarily to greater demand from OEM and aftermarket
customers as market conditions in many parts of the world continued to
improve. Domestic sales increased approximately 14% in 1994 compared to 1993
primarily due to improved market conditions for medium- and heavy-duty trucks
and agriculture and construction equipment. International sales increased 43%
in 1994 compared to 1993 as demand for the Company's products increased
dramatically due to strengthening worldwide economies, primarily in Europe
and South America, and greater market penetration by the Company's industrial
products. The improvement in operating margins was driven by the higher sales
volume resulting in better utilization of production capacity, lower
manufacturing variances in 1994 due to higher expenses associated with a
plant start up in 1993 and lower operating expenses as a percentage of sales.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
KUHLMAN CORPORATION AND SUBSIDIARIES
SUBSEQUENT EVENT
On February 16, 1996, the Company, through a wholly-owned subsidiary,
completed a tender offer for the outstanding shares of Communication Cable, Inc.
("CCI"), a North Carolina corporation traded on NASDAQ . Pursuant to the
Company's offer to purchase shares of CCI for $14.00 per share, shareholders of
CCI tendered 2,291,800 shares through that date. Kuhlman previously owned
315,703 shares of CCI. As of February 21, 1996, Kuhlman owned 2,607,503 shares
or 82.2% of all CCI shares outstanding for an aggregate total cost of
approximately $35,873,000. Kuhlman plans to purchase the remaining CCI shares
outstanding as soon as practicable. The acquisition of CCI shares was funded
primarily through a $40,000,000 increase in the Company's bank credit facility.
CCI engineers, designs and manufactures a wide variety of low voltage
electronic wire and cable products which are marketed to original equipment
manufacturers and, through distributors, to a variety of end users,
principally in the United States. CCI's products include coaxial,
multi-conductor and "category" cables which are used for data, voice and
video communication applications by the computer and data processing
industries, medical and industrial electronics users, the U.S. Government and
associated agencies, and for satellite and other telecommunication
applications. Sales and net income for CCI's fiscal year ended October 31,
1995 were $56,256,000 and $2,118,000, respectively.
OUTLOOK FOR 1996
Over the past three years, Kuhlman Corporation has made significant
progress toward its objective of becoming a larger, more diversified
organization. Through diversification and size, management believes that
Kuhlman will be less dependent on the business cycles of a single economy,
industry or product and thus able to provide more consistent and sustainable
growth in earnings and cash flow on which to build the Company in the future.
Actions, such as the acquisition of Coleman, the merger with Schwitzer and
the streamlining of Kuhlman Electric, coupled with a significant capital
expenditure program, have made Kuhlman Corporation a larger and more
diversified company with greater financial resources. As Kuhlman enters
1996, management believes that the Company is positioned to grow and prosper
in its many markets.
A key objective in 1996 will continue to be to further enhance long-term
shareholder value by building a larger, more focused manufacturing
organization. Management believes that the addition of CCI will serve to
strengthen the Company by expanding its product offering in one of the
fastest growing areas of the wire and cable industry, data transmission and
telecommunications. Further, management remains optimistic that its
acquisition program will continue to provide future growth opportunities. As
a consequence of the above actions, management remains cautiously optimistic
about the Company's near-term prospects and confident about its long-term
future.
23
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
KUHLMAN CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1995 1994 1993
- ----------------------------------------------------------------------------------------------
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
<S> <C> <C> <C>
Net sales $425,384 $396,117 $242,221
Cost of goods sold 341,277 320,232 198,923
- ---------------------------------------------------------------------------------------------
Gross profit 84,107 75,885 43,298
- ---------------------------------------------------------------------------------------------
Operating expenses:
Selling, engineering, general and administrative 54,946 52,601 31,869
Cost of restructuring -- -- 8,650
- ---------------------------------------------------------------------------------------------
Total operating expenses 54,946 52,601 40,519
- ---------------------------------------------------------------------------------------------
OPERATING PROFIT 29,161 23,284 2,779
Other income (expense):
Interest expense, net (7,066) (6,969) (4,523)
Merger expenses (4,510) -- --
Other, net 493 (712) 178
- ----------------------------------------------------------------------------------------------
Total other income (expense), net (11,083) (7,681) (4,345)
- ----------------------------------------------------------------------------------------------
Income (loss) before taxes (benefit) and extraordinary item 18,078 15,603 (1,566)
Taxes (benefit) on income (loss) 8,034 5,633 (1,876)
- ----------------------------------------------------------------------------------------------
Income before extraordinary item 10,044 9,970 310
Extraordinary item (net of tax of $1,175) (1,861) -- --
- ----------------------------------------------------------------------------------------------
NET INCOME $ 8,183 $ 9,970 $ 310
- ----------------------------------------------------------------------------------------------
Per share amounts:
Income before extraordinary item $ 0.76 $ 0.73 $ 0.02
Extraordinary item, net of tax (0.14) -- --
- ----------------------------------------------------------------------------------------------
NET INCOME $ 0.62 $ 0.73 $0.02
- ----------------------------------------------------------------------------------------------
Average shares outstanding 13,178 13,647 13,484
- ----------------------------------------------------------------------------------------------
</TABLE>
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SHOULD BE READ IN CONJUNCTION
WITH THESE STATEMENTS.
24
<PAGE>
CONSOLIDATED BALANCE SHEETS
KUHLMAN CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
DECEMBER 31, 1995 1994
- ------------------------------------------------------------------------------------------
IN THOUSANDS
<S> <C> <C>
Assets
CURRENT ASSETS
Cash and cash equivalents $ 581 $ 3,036
Accounts receivable, less reserves of $1,442 and $990 at
December 31, 1995 and 1994, respectively 55,753 59,892
Inventories 41,833 43,713
Deferred income taxes 4,901 6,071
Prepaid expenses and other current assets 3,535 5,887
- ------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 106,603 118,599
- ------------------------------------------------------------------------------------------
PLANT AND EQUIPMENT
Land 2,275 2,413
Buildings and leasehold improvements 34,802 33,564
Machinery, fixtures and equipment 111,175 107,692
Construction in progress 2,241 2,668
- ------------------------------------------------------------------------------------------
150,493 146,337
Less-accumulated depreciation and amortization (84,244) (81,587)
- ------------------------------------------------------------------------------------------
PLANT AND EQUIPMENT - NET 66,249 64,750
- ------------------------------------------------------------------------------------------
Intangible assets, net of amortization of $2,672 and $1,668 at
December 31, 1995 and 1994, respectively 37,201 39,452
Other assets 4,849 6,384
- ------------------------------------------------------------------------------------------
$214,902 $229,185
- ------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Notes payable $ -- $ 2,000
Current portion of long-term debt 10,522 5,878
Accounts payable 28,542 30,624
Accrued liabilities 28,357 30,596
- ------------------------------------------------------------------------------------------
Total current liabilities 67,421 69,098
- ------------------------------------------------------------------------------------------
LONG-TERM DEBT
Bank debt 60,217 59,253
Other long-term debt 3,436 17,642
- ------------------------------------------------------------------------------------------
TOTAL LONG-TERM DEBT 63,653 76,895
- ------------------------------------------------------------------------------------------
Accrued postretirement benefits 8,462 8,943
- ------------------------------------------------------------------------------------------
Deferred income taxes 1,134 1,033
- ------------------------------------------------------------------------------------------
TOTAL LIABILITIES 140,670 155,969
- ------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred stock, par value $1.00, 2,000 shares authorized, none
issued; Junior participating preferred stock, Series A, no par
value, 200 shares authorized, none issued -- --
Common stock, par value $1.00, 20,000 shares authorized, 13,240
and 13,100 shares issued at December 31, 1995 and 1994, respectively 13,240 13,100
Additional paid-in capital 26,217 25,300
Retained earnings 37,988 36,672
Foreign currency translation adjustments (1,911) (1,813)
Minimum pension liability (382) (43)
- ------------------------------------------------------------------------------------------
75,157 3,216
Less--treasury stock at cost (72 shares at December 31, 1995) (920) --
- ------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 74,232 73,216
- ------------------------------------------------------------------------------------------
$214,902 $229,185
- ------------------------------------------------------------------------------------------
</TABLE>
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SHOULD BE READ IN CONJUNCTION
WITH THESE BALANCE SHEETS.
25
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
KUHLMAN CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
IN THOUSANDS
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,183 $ 9,970 $ 310
Adjustments to reconcile net income to net cash provided by operating activities:
Extraordinary item, net 1,861 -- --
Merger expenses 4,510 -- --
Depreciation and amortization 11,320 11,207 8,602
Deferred income taxes, net 3,501 2,435 (1,275)
Provision for losses on accounts receivable 1,211 250 201
(Gain)loss on sale of assets (301) 207 588
Other, net 368 351 (241)
Cost of restructuring -- -- 8,650
Changes in operating assets and liabilities:(1)
Accounts receivable (885) (4,885) (5,977)
Inventories (2,057) 3,719 5,202
Prepaid expenses and other current assets 2,240 (3,536) 1,766
Accounts payable 1,049 4,708 (1,377)
Accrued liabilities (2,869) (5,545) (5,931)
- --------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 28,131 18,881 10,518
- --------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (15,200) (13,048) (6,091)
Cash paid for acquired business -- -- (5,493)
Proceeds from sales of assets 7,248 346 2,460
- --------------------------------------------------------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (7,952) (12,702) (9,124)
- --------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in revolving loan facility (4,160) (13,941) (658)
Proceeds from issuance of long-term debt 25,016 685 68,700
Repayment of long-term debt (32,108) (8,259) (68,410)
Dividends paid (5,814) (3,640) (3,530)
Stock options exercised 933 1,176 1,825
Payments for merger and related expenses (5,612) -- --
Repurchase of common stock (920) -- --
Restricted cash -- 1,800 (1,800)
Payments related to the issuance of debt -- -- (2,882)
Other (23) -- --
- ---------------------------------------------------------------------------------------------------------------------
NET CASH USED FOR FINANCING ACTIVITIES (22,688) (22,179) (6,755)
- ---------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents 54 42 4
- ---------------------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents (2,455) (15,958) (5,357)
Cash and cash equivalents, beginning of year 3,036 18,994 24,351
- ---------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 581 $ 3,036 $18,994
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) NET OF THE EFFECTS OF ACQUISITION AND FOREIGN CURRENCY TRANSLATION, WHERE
APPLICABLE.
SEE NOTE 10 FOR INFORMATION ON NON-CASH INVESTING AND FINANCING ACTIVITIES.
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SHOULD BE READ IN CONJUNCTION
WITH THESE STATEMENTS.
26
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
KUHLMAN CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
FOREIGN
COMMON SHARES (1) ADDITIONAL CURRENCY MINIMUM
FOR THE YEARS ENDED ----------------- PAID-IN RETAINED TRANSLATION PENSION TREASURY
DECEMBER 31, 1995, 1994 AND 1993 SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT LIABILITY STOCK TOTAL
- ---------------------------------------------------------------------------------------------------------------------------------
IN THOUSANDS, EXCEPT SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE-DECEMBER 31, 1992 12,633,655 $12,634 $20,658 $33,619 $(2,069) $ -- $ -- $64,842
- ---------------------------------------------------------------------------------------------------------------------------------
Net income -- -- -- 310 -- -- -- 310
Cash dividends declared ($0.60 per share) (2) -- -- -- (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)
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 ($0.60 per share) (2) -- -- -- (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
Currency translation adjustment -- -- -- -- 546 -- -- 546
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE-DECEMBER 31, 1994 13,099,601 $13,100 $25,300 $36,672 $(1,813) $ (43) $ -- $73,216
- ---------------------------------------------------------------------------------------------------------------------------------
Net income -- -- -- 8,183 -- -- -- 8,183
Cash dividends declared ($0.60 per share) (2) -- -- -- (6,867) -- -- -- (6,867)
Exercise of stock options 127,130 127 806 -- -- -- -- 933
Issuance of common stock 16,000 16 176 -- -- -- -- 192
Repurchase of common stock -- -- -- -- -- -- (920) (920)
Minimum pension liability -- -- -- -- -- (339) -- (339)
Currency translation adjustment -- -- -- -- (98) -- -- (98)
Other (2,943) (3) (65) -- -- -- -- (68)
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE-DECEMBER 31, 1995 13,239,788 $13,240 $26,217 $37,988 $(1,911) $(382) $(920) $74,232
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) SHARES OUTSTANDING WERE 13,167,400, NET OF 72,388 TREASURY SHARES, AT
DECEMBER 31, 1995.
(2) 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.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Kuhlman Corporation:
We have audited the accompanying consolidated balance sheets of Kuhlman
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years ended December 31, 1995.
these financial statements are the responsibility of the Company's
management. our responsibility is to express an opinion of these 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, the financial statements referred to above present
fairly, in all material respects, the financial position of Kuhlman
Corporation and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Louisville, Kentucky
February 6, 1996 (except with respect to the matter discussed in Note 17, as
to which the date is February 21, 1996)
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KUHLMAN CORPORATION AND SUBSIDIARIES
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Kuhlman
Corporation and all majority-owned subsidiaries (the "Company").
Investments of 50% or less in affiliated companies are accounted for under
the equity method. All significant intercompany transactions have been
eliminated. The consolidated statements of income 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 3. Acquisition and Divestiture.
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 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 consolidated statements of shareholders' equity
reflects the accounts of the Company as if the additional common stock had
been issued during all periods presented. Certain amounts in the 1994 and
1993 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. In addition, certain amounts in the
Company's 1994 and 1993 financial statements have been reclassified to
conform with the 1995 presentation.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.
REVENUE RECOGNITION
The Company recognizes sales of its products when the products are
shipped to customers.
CASH AND CASH EQUIVALENTS
The Company considers short-term investments with an original maturity of
three months or less to be cash equivalents which are reflected at their
approximate fair value.
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
principally by the first-in, first-out (FIFO) method. Approximately 50% and
53% of the inventories at December 31, 1995 and 1994, 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. In accordance with statement of Financial Accounting
Standards (SFAS) NO. 109, "Accounting for Income Taxes," adjustments
relating to preacquisition income tax contingencies will result in
corresponding adjustments to goodwill. During 1995, the Company reduced
goodwill by $725,000 as a result of changes in the status of certain tax
contingencies. 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 goodwill in
measuring whether the goodwill is recoverable. Other intangible assets are
amortized to expense using the straight-line method over three to six years.
LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (SFAS No.
121). This standard establishes accounting standards for evaluating the
potential impairment of long-lived assets, certain identifiable intangibles
and goodwill. The Company plans to adopt the provisions of SFAS No. 121 in
the first quarter of 1996 and does not expect that adoption will have a
material impact on its financial position or results of operations.
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 $6,745,000, $7,574,000 and
$6,632,000 in 1995, 1994 and 1993, respectively.
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KUHLMAN CORPORATION AND SUBSIDIARIES
ENVIRONMENTAL REMEDIATION AND COMPLIANCE
Environmental liabilities for remediation costs are accrued based on
estimates of known environmental remediation exposures. The measurement of
environmental liabilities is based on an evaluation of currently available
facts with respect to each individual site and considers factors such as
existing technology, presently enacted laws and regulations, and prior
experience in remediation of contaminated sites. Liabilities are recognized
for remedial activities when they can be reasonably estimated. Environmental
compliance costs, which include maintenance and operating costs with respect
to pollution control equipment, cost of ongoing monitoring programs and
similar costs, are expensed as incurred. Environmental costs are capitalized
if the costs increase the value of the property and/or mitigate or prevent
contamination from future operations.
FOREIGN CURRENCY TRANSLATION
A subsidiary of the Company has foreign subsidiaries located in the United
Kingdom (U.K.) and Brazil. Financial data of the U.K. subsidiary is
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. subsidiary 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 income were income of $75,000 in 1995, and
losses of $847,000 and $1,040,000 in 1994 and 1993, respectively. The
transaction adjustments for 1995, 1994 and 1993 are stated net of imputed
interest income (expense) of $390,000, $(589,000) and $749,000, respectively,
realized on net monetary assets and liabilities.
INCOME TAXES
The provision for income taxes includes Federal, state and foreign income
taxes currently payable and those deferred or prepaid because of temporary
differences between financial statement and tax bases of assets and
Liabilities. The Company records income taxes under the liability method.
Under this method, 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, 1995 were distributed.
FINANCIAL INSTRUMENTS AND HEDGING
Certain financial instruments are used to hedge risk caused by
fluctuating commodity prices and interest rates. The Company enters into
futures or option contracts to hedge price fluctuations for commodities used
in the manufacture of its products. The terms of the contracts are consistent
with the terms of the underlying transaction they are designed to hedge. As a
result, gains or losses on the transactions included in the Company's results
of operations offset losses and gains of the underlying transactions being
hedged.
In addition, the Company uses interest rate swap agreements to manage
interest costs and risks associated with changing interest rates. The
differential to be paid or received under these agreements is accrued as
interest rates change and is recognized in interest expense consistent with
the terms of the agreements. The counterparty to the interest rate swap
agreements is a major financial institution. The possibility of credit loss
from counterparty non-performance is remote and not anticipated.
PER SHARE INFORMATION
Earnings 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.
There was no materially dilutive effect of common stock equivalents in 1995.
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.
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KUHLMAN CORPORATION AND SUBSIDIARIES
NOTE 2. MERGER
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
totaled approximately $5,600,000 net of tax ($0.43 per share), including
$1,861,000 related to the refinancing of substantially all of Schwitzer's
domestic debt ("Merger Expenses"). These costs were 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 period ended March 31, 1995, and the years ended December
31, 1994 and 1993, prior to restatement, are presented as the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED DECEMBER 31,
MARCH 31, 1995 1994 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales:
Kuhlman $ 61,031 $242,846 $118,097
Schwitzer 45,895 153,271 124,124
- ---------------------------------------------------------------------------------------
Combined $106,926 $396,117 $242,221
- ---------------------------------------------------------------------------------------
Net income(loss):
Kuhlman $ 715 $ 1,617 $ (2,998)
Schwitzer 2,833 8,930 2,530
Adjustment to valuation allowance(1) -- (577) (511)
SFAS No. 106 adjustment(2) -- -- 1,289
- ---------------------------------------------------------------------------------------
Combined $ 3,548 $ 9,970 $ 310
- ---------------------------------------------------------------------------------------
</TABLE>
(1) THE TAX PROVISIONS IN 1994 AND 1993 FOR THE COMBINED COMPANY WERE
ADJUSTED TO REFLECT CHANGES IN THE VALUATION ALLOWANCE UNDER SFAS NO. 109 AS
IF THE COMPANIES HAD BEEN COMBINED DURING THOSE PERIODS.
(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 AS A RESULT OF THE MERGER.
NOTE 3. ACQUISITION AND DIVESTITURE
ACQUISITION
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. At the acquisition date, the purchase price and
expenses associated with the acquisition exceeded the fair value of Coleman's
net assets by approximately $38,398,000 which was 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 4 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, 1993:
<TABLE>
<CAPTION>
IN THOUSANDS 1993
- -----------------------------------------------------------------------
<S> <C>
Net sales $354,243
Net income $ 2,493
Net income per share $ 0.18
- -----------------------------------------------------------------------
</TABLE>
The pro forma operating results include each company's results of
operations for the indicated year 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 period presented and is not intended to be a projection
of future results or trends.
DIVESTITURE
In the fourth quarter of 1995, Coleman sold the net assets of its
subsidiary, Nehring Electrical Works Company ("Nehring"), for approximately
book value. Coleman received approximately $6,509,000 in cash plus a
$1,500,000 note for the net assets of Nehring. In 1995, Nehring had sales of
approximately $41,800,000, minimal operating earnings, and total assets of
$10,500,000.
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KUHLMAN CORPORATION AND SUBSIDIARIES
NOTE 4. SHORT-TERM AND LONG-TERM DEBT
On December 15, 1993, in conjunction with the Coleman acquisition, the
Company entered into a credit agreement with a group of banks that provided a
$38,000,000 term loan and a $40,000,000 revolving loan facility which mature
on December 31, 1999. Subsequent to the merger with Schwitzer on May 31,
1995, the Company increased its availability under the revolving loan
facility to $53,000,000 and increased the term loan facility to $47,000,000
in order to refinance substantially all of Schwitzer's domestic debt.
Under the terms of the credit agreement, the Company must pay a
commitment fee at an annual rate ranging from 3/20 of 1% to 3/8 of 1%,
depending on certain financial ratios, on the average daily unused portion of
the revolving loan facility. Interest rates on amounts borrowed vary and are
based on either the London Interbank Offered Rate ("LIBOR") plus .375-2.0%,
depending on certain financial ratios, or a Prime (base) rate plus up to .75%
option selected by the Company at the time of borrowing. At December 31,
1995, the Company had approximately $33,900,000 outstanding under the
revolving loan facility at an average interest rate of 7.0%. The Company is
not required to repay any borrowings under the revolving credit facility
before December 31, 1999. At December 31, 1995, $34,000,000 of term debt was
outstanding and carried an average interest rate of 7.1%.
The credit agreement of the Company contains various warranties and
covenants pertaining to among others, the maintenance of net worth,
compliance with certain financial ratios, restrictions on certain payments
including dividends and the incurrence of additional indebtedness. Under the
most restrictive of these provisions, $2,526,000 of the Company's
consolidated retained earnings at December 31, 1995, was free of any
restriction as to the payment of dividends. As of December 31, 1995,
borrowings under the Company's credit agreement were generally secured by
substantially all of the assets of the Company, except for those specific
assets related to certain industrial revenue bonds and capital lease
obligations.
A foreign subsidiary of Schwitzer is party to a variable rate loan
facility which is denominated in sterling. Interest on this facility is
payable quarterly at variable rates. The average interest rate on this
facility at December 31, 1995 was 8.1%. This variable rate facility also
contains certain financial covenants, including minimum tangible net worth
requirements of the foreign subsidiary of Schwitzer.
At December 31, 1995, the Company had unused availability under its
credit agreements of approximately $18,495,000.
At December 31, 1995 and 1994, long-term debt consisted of the following:
<TABLE>
<CAPTION>
IN THOUSANDS 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Variable rate notes supported by revolving and term
loan agreement with banks, maturing through 1999 $ 67,900 $64,750
Fixed rate notes payable to an institutional
lender, rate of 10.21% -- 14,407
Variable rate loan facility supported by revolving
and term loan agreements with a bank, denominated
in sterling, maturing in 1995 to 1997 1,965 1,718
Obligations under capital leases, interest rates
ranging from 8% to 19% (See Note 5) 2,132 2,231
Miscellaneous other long-term debt, rates up to 12%,
payable in various amounts through 2011 2,178 1,667
- ------------------------------------------------------------------------------
74,175 84,773
Less - current portion (10,522) (7,878)
- ------------------------------------------------------------------------------
$ 63,653 $76,895
- ------------------------------------------------------------------------------
</TABLE>
The minimum scheduled principal payments on long-term debt outstanding at
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
IN THOUSANDS
- ------------------------------------------------------------------------------
<S> <C>
1996 $10,522
1997 9,864
1998 9,809
1999 41,117
2000 177
Thereafter 2,686
- ------------------------------------------------------------------------------
Total minimum scheduled principal payments $74,175
- ------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KUHLMAN CORPORATION AND SUBSIDIARIES
NOTE 5. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases certain of its buildings, machinery and
equipment under operating lease agreements which expire at various dates
substantially over the next seven years.
The following is a summary of rent expense under all operating leases:
<TABLE>
<CAPTION>
IN THOUSANDS 1995 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum rentals $ 3,171 $ 3,229 $ 1,621
</TABLE>
Minimum future rental payments under noncancelable operating leases for each
of the next five years and in the aggregate are as follows:
<TABLE>
<CAPTION>
IN THOUSANDS
- ----------------------------------------------------------------------------
<S> <C>
1996 $ 2,591
1997 2,257
1998 1,879
1999 1,716
2000 1,406
Subsequent to 2000 1,434
- ----------------------------------------------------------------------------
Total minimum rental payments $ 11,283
- ----------------------------------------------------------------------------
</TABLE>
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, 1995 and 1994, property under capital leases included
with plant and equipment in the accompanying consolidated balance sheet is as
follows:
<TABLE>
<CAPTION>
IN THOUSANDS 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Building and improvements $ 2,360 $ 2,360
Machinery and equipment 247 384
- ----------------------------------------------------------------------------
2,607 2,744
Less-accumulated depreciation (964) (879)
- ----------------------------------------------------------------------------
Plant and equipment, net $ 1,643 $ 1,865
- ----------------------------------------------------------------------------
</TABLE>
Minimum future lease payments under capital leases as of December 31,
1995 are as follows:
<TABLE>
<CAPTION>
IN THOUSANDS
- ----------------------------------------------------------------------------
<S> <C>
1996 $ 356
1997 347
1998 347
1999 347
2000 347
Subsequent to 2000 2,981
- ----------------------------------------------------------------------------
Total minimum lease payments $ 4,725
Less-amounts representing interest (2,593)
- ----------------------------------------------------------------------------
Present value of net minimum lease payments 2,132
Less-current portion (66)
- ----------------------------------------------------------------------------
Long-term obligations under capital leases $ 2,066
- ----------------------------------------------------------------------------
</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.
ENVIRONMENTAL MATTERS
The Company has accrued for certain investigatory and noncapital
environmental remediation costs consistent with the policy set forth in Note 1.
These costs are accrued on the balance sheet and are not significant.
Based on the information currently available, management does not expect that
any sums that may have to be paid in connection with these environmental
matters would have a materially adverse effect on the consolidated financial
position or results of operations of the Company.
LEGAL MATTERS
The Company is involved in various legal matters. In the opinion of
management, the outcome of these current matters will not have a materially
adverse effect on the consolidated financial position or results of
operations of the Company.
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KUHLMAN CORPORATION AND SUBSIDIARIES
NOTE 6. INCOME TAXES
Income (loss) before taxes (benefits) and extraordinary item was as follows:
<TABLE>
<CAPTION>
IN THOUSANDS 1995 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $ 13,270 $ 11,270 $ (2,919)
Foreign 4,808 4,333 1,353
- ----------------------------------------------------------------------------
$ 18,078 $ 15,603 $ (1,566)
- ----------------------------------------------------------------------------
</TABLE>
The provision (benefit) for income taxes consisted of the following:
<TABLE>
<CAPTION>
IN THOUSANDS 1995 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 3,784 $ 1,388 $ (441)
State 630 280 (306)
Foreign 1,680 1,750 566
- ----------------------------------------------------------------------------
$ 6,094 $ 3,418 $ (181)
- ----------------------------------------------------------------------------
Deferred:
Federal $ 1,738 $ 2,393 $(1,373)
State 204 305 (281)
Foreign (2) (483) (41)
- ----------------------------------------------------------------------------
1,940 2,215 (1,695)
- ----------------------------------------------------------------------------
Total $ 8,034 $ 5,633 $(1,876)
- ----------------------------------------------------------------------------
</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 1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PERCENTAGE PERCENTAGE PERCENTAGE
OF INCOME OF INCOME OF INCOME
BEFORE BEFORE BEFORE
AMOUNT TAXES AMOUNT TAXES AMOUNT TAXES
- ------------------------------------------------------------------------------------------------
Statutory United States
Federal income tax $ 6,147 34.0% $ 5,305 34.0% $ (533) (34.0%)
State income taxes, net of
Federal income tax effect 550 3.0 359 2.3 (96) (6.1)
Additional taxes provided -- -- 490 3.1 (1,486) (94.9)
Amortization of goodwill 332 1.8 326 2.1 -- --
Effect of foreign subsidiaries 75 0.4 (403) (2.6) 64 4.0
Merger costs 949 5.3 -- -- -- --
Other (19) (0.1) (444) (2.8) 175 11.2
- ------------------------------------------------------------------------------------------------
$ 8,034 44.4% $ 5,633 36.1% $ (1,876) (119.8%)
- ------------------------------------------------------------------------------------------------
</TABLE>
The net deferred tax asset recognized in the consolidated statements of
financial position as of December 31, 1995 and 1994, consists of the following
(in thousands):
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Total deferred tax assets $ 11,053 $ 14,180
Total deferred tax liabilities (5,972) (7,142)
- ----------------------------------------------------------------------------
Net deferred tax assets $ 5,081 $ 7,038
- ----------------------------------------------------------------------------
</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 1995 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Net operating loss carryforwards $ 425 $ 67 $ 1,119
Restructuring costs (326) 1,342 (1,560)
Depreciation 47 (540) (291)
Compensation, benefits & pensions 566 (407) (267)
Warranty & other sales accruals 129 443 (242)
Additional taxes provided -- 490 (1,486)
Inventory reserves & valuation 40 312 6
Postretirement benefits 217 309 323
Environmental reserve 490 (524) --
Bad debt reserves (184) 261 102
Purchase price premium (209) (76) --
Other, net 745 538 601
- ----------------------------------------------------------------------------
Total $1,940 $2,215 $(1,695)
- ----------------------------------------------------------------------------
</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, 1995 and 1994, respectively, are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Accumulated tax depreciation of
property and equipment in excess
of accumulated book depreciation $ (4,445) $ (4,502)
Purchase price premium in inventory (1,543) (1,752)
Net operating loss carryforwards 1,729 2,202
Inventory reserves 775 638
Warranty and other sales accruals 1,026 1,155
Restructuring costs 38 532
Postretirement benefits 3,830 4,047
Environmental reserve 34 524
Accrued employee benefits 2,053 2,771
Bad debt reserves 643 459
Miscellaneous accruals 941 964
- ----------------------------------------------------------------------------
$ 5,081 $ 7,038
- ----------------------------------------------------------------------------
</TABLE>
One of the company's wholly-owned subsidiaries has available net operating
losses which expire as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
2004 $ 4,095
2005 455
- ----------------------------------------------------------------------------
$ 4,550
- ----------------------------------------------------------------------------
</TABLE>
The application of these net operating loss carryforwards against future
taxable income is limited under the provisions of Internal Revenue Code
Section 482 to $455,000 per taxable period. Management expects that the full
amount of these carryforwards will be utilized over the next ten years.
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KUHLMAN CORPORATION AND SUBSIDIARIES
NOTE 7. EMPLOYEE BENEFIT PLANS
EMPLOYEE RETIREMENT PLANS
The Company has various employee retirement plans which provide pension
benefits to substantially all of its employees. Defined benefit plans 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.
The total expense under these plans amounted to $1,556,000 in 1995,
$1,686,000 in 1994 and $2,239,000 in 1993. Pension expense for the defined
benefit plans in 1995, 1994 and 1993 is comprised of the following elements:
<TABLE>
<CAPTION>
IN THOUSANDS 1995 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Current service cost $ 1,576 $ 1,669 $ 1,662
Interest on projected
benefit obligations 2,008 1,878 1,957
(Return) loss on assets (3,151) 933 (1,264)
Gain due to curtailment -- (138) --
Net amortization and deferral 1,123 (2,656) (116)
- ----------------------------------------------------------------------------
$ 1,556 $ 1,686 $ 2,239
- ----------------------------------------------------------------------------
</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 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, 1995 and 1994:
<TABLE>
<CAPTION>
IN THOUSANDS 1995 1994
- -------------------------------------------------------------------------------------------
ACCUMULATED ASSETS ACCUMULATED ASSETS
BENEFITS EXCEED BENEFITS EXCEED
EXCEED ACCUMULATED EXCEED ACCUMULATED
ASSETS BENEFITS ASSETS BENEFITS
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested $3,216 $17,578 $ 13,563 $4,503
Nonvested 707 1,138 1,476 347
- -------------------------------------------------------------------------------------------
Accumulated benefit
obligations 3,923 18,716 15,039 4,850
Effects of salary progression -- 5,879 2,061 2,692
- -------------------------------------------------------------------------------------------
Projected benefit obligations 3,923 24,595 17,100 7,542
Plan assets at fair value 2,889 22,649 13,411 7,721
- -------------------------------------------------------------------------------------------
Plan assets over/(under)
projected benefit
obligations $(1,034) $(1,946) $ (3,689) $ 179
Unrecognized transition
(asset) liability (76) 319 (477) 132
Unrecognized net loss 551 1,852 1,734 898
Unrecognized prior service
cost 580 669 785 439
Other -- -- -- (164)
Adjustment to recognize
minimum liability (1,130) -- (614) --
- -------------------------------------------------------------------------------------------
(Accrued) prepaid
pension expense $(1,109) $ 894 $ (2,261) $1,484
- -------------------------------------------------------------------------------------------
Intangible asset $ 498 $ -- $ 543 $ --
Pre-tax reduction to
shareholders' equity $ 632 $ -- $ 71 $ --
</TABLE>
The assumptions used as of December 31, 1995, 1994 and 1993 in
determining pension expense and funded status information shown above are as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.5% 7.5-8.7% 7.2-8.5%
Rate of salary
progression 4.2% 4.2-5.0% 4.2-6.0%
Long-term rate
of return on assets 9.7% 8.0-9.7% 9.0-9.7%
</TABLE>
In addition to providing pension benefits, the Company and certain 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 $664,000, $377,000 and $397,000 in the years ended December 31, 1995,
1994 and 1993, respectively, related to these savings plans.
34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KUHLMAN CORPORATION AND SUBSIDIARIES
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company charges the cost of postretirement benefits other than
pensions to earnings during the active service period of its employees.
Net periodic postretirement benefit cost for 1995, 1994 and 1993 included
the following components (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits
attributed to service
during the period $ 80 $ 94 $ 117
Interest cost on accumulated
postretirement benefit
obligation 968 894 971
Net deferral and amortization 26 28 --
- ----------------------------------------------------------------------------
Net periodic postretirement
benefit cost $1,074 $1,016 $1,088
- ----------------------------------------------------------------------------
</TABLE>
The amounts recognized in the Company's consolidated balance sheet at
December 31, 1995 and 1994 were as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $11,326 $11,422
Fully eligible active plan
participants 442 363
- ----------------------------------------------------------------------------
Fully eligible 11,768 11,785
Other active plan participants 1,481 946
- ----------------------------------------------------------------------------
Accumulated benefit obligation 13,249 12,731
Unrecognized net loss (3,019) (1,855)
- ----------------------------------------------------------------------------
Postretirement liability recognized
in financial statements $10,230 $10,876
- ----------------------------------------------------------------------------
</TABLE>
The accumulated postretirement obligation was determined using a discount
rate of approximately 7.5%. An increase of approximately 10% in per capita
claims cost was assumed for 1996. The assumption provides for this rate to
decline by 1% per year through 2000 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,
1995 by approximately $938,000. The impact on net periodic cost is minimal.
The Company's postretirement benefit plans are unfunded.
SEVERANCE AGREEMENTS
The Company maintains a severance policy 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 up to twenty-four months, subject to certain
conditions. The aggregate maximum commitment under the executive severance
policy should all four covered employees be terminated is up to approximately
$2,800,000.
NOTE 8. COST OF RESTRUCTURING
In 1993, the Company recorded a restructuring charge of $8,650,000
($5,304,000 net of tax benefits or $0.39 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 1993,
the Company made cash outlays of $4,143,000 and recognized asset writedowns of
$1,225,000 related to the restructuring program. In 1994, the Company made cash
outlays of $3,282,000 related to the restructuring program.
NOTE 9. OTHER, NET
Other, net for the years ended December 31, 1995, 1994 and 1993 consisted of
the following:
<TABLE>
<CAPTION>
IN THOUSANDS 1995 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Covenant not to compete $ 624 $ 1,250 $ 1,250
Foreign currency
translation adjustments 75 (847) (1,040)
Expenses of a
terminated merger -- (530) --
Miscellaneous (206) (585) (32)
- ----------------------------------------------------------------------------
$ 493 $ (712) $ 178
- ----------------------------------------------------------------------------
</TABLE>
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KUHLMAN CORPORATION AND SUBSIDIARIES
NOTE 10. SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest and net cash payments for income taxes are as
follows:
<TABLE>
<CAPTION>
IN THOUSANDS 1995 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Interest $ 6,743 $ 7,642 $ 5,342
Income taxes, net of refunds $ 1,726 $ 3,600 $ (1,316)
</TABLE>
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES
In 1994, the Company issued 28,169 shares of its common stock to an
executive in a non-cash transaction. The shares vested after a one-year
period. 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 and the balance in 1995.
In 1995, 1994, and 1993, the Company issued 16,000, 10,816 and 11,585
shares of its common stock, respectively, under the 1993 Non-Employee
Directors Stock Plan in non-cash transactions. The fair market value of the
stock at the time of issuance was $192,000, $192,000 and $168,000,
respectively, and these amounts were amortized to expense over the one-year
term of the grants.
In 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.
In 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.
See Note 3. Acquisition and Divestiture and Note 8. Cost of Restructuring
to the Notes to Consolidated Financial Statements for additional supplemental
information on non-cash investing and financing activities.
NOTE 11. SHAREHOLDERS' EQUITY AND OTHER STOCK INFORMATION
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 $0.01 per right at any time prior to 10 days after a 20% position has
been acquired and under certain circumstances thereafter.
STOCK REPURCHASE
In August 1995, the Board of Directors authorized the repurchase of up to
$1,000,000 of the Company's "odd-lot" common shares on the open market; odd-lots
are defined as blocks of less than 100 shares of the Company's stock held by a
single individual, trust or institution. The program was instituted to reduce
the Company's administrative costs related to the odd-lot shares. The repurchase
of shares was accounted for under the cost method. In the fourth quarter of
1995, the Company repurchased 72,388 of its common shares at an aggregate cost
of $920,000, including expenses of the program.
COMMON STOCK OPTIONS, STOCK GRANTS AND STOCK APPRECIATION RIGHTS
The 1994 Stock Option Plan was approved by shareholders of the Company on
May 31, 1995. The plan provides for the granting of up to 500,000 options to
purchase common shares to officers and key employees of the Company. All
options under the 1994 Plan are 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, 1995, there were 213,663 options available for grant under
the 1994 Plan.
The Company maintains three other employee stock option plans, a 1983, a
1986 and a 1989 Stock Option Plan, for the granting of options to officers
and key employees of the Company. All options under the 1983 Plan and 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. The 1983 Plan and
the 1986 Plan expired in 1992 and 1995, respectively, except to the extent
that options were outstanding. In conjunction with the merger with Schwitzer
in May, 1995, the Company assumed the outstanding stock options under 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.
36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KUHLMAN CORPORATION AND SUBSIDIARIES
In 1993, the Board of Directors adopted, and the shareholders approved the
1993 Non-Employee Directors Stock Plan ("New Directors Plan"). Pursuant to the
New Directors 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 36,599 shares were available for grants as of December
31, 1995. 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.
The following table summarizes the transactions pursuant to the company's
stock option plans for the three-year period ended December 31, 1995:
<TABLE>
<CAPTION>
NUMBER OF OPTION
SHARES PRICES
- ----------------------------------------------------------------------------
<S> <C> <C>
IN THOUSANDS, EXCEPT OPTION PRICES
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
- ----------------------------------------------------------------------------
Granted 382 $ 8.45 to $12.88
Exercised (134) $ 4.81 to $12.32
Expired or terminated (225) $12.25 to $17.00
- ----------------------------------------------------------------------------
OPTIONS OUTSTANDING AT
DECEMBER 31, 1995 1,572 $ 4.81 TO $17.75
- ----------------------------------------------------------------------------
EXERCISABLE AT
DECEMBER 31, 1995 1,420
- ----------------------------------------------------------------------------
</TABLE>
In 1994, the Company adopted the 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 SARs are authorized to be granted under the SAR Plan. As of
December 31, 1995, 151,000 SARs with a basis of $13.88 had been awarded and
were outstanding under the SAR Plan.
WARRANTS
The Company issued detachable warrants to a former lender of Schwitzer.
The warrants give the holder the right to purchase 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 Company has the right, subject to certain conditions, to repurchase the
warrants, which expire on April 15, 2002.
NOTE 12. INVENTORIES
Inventories at December 31, 1995 and 1994 consisted of the following:
<TABLE>
<CAPTION>
IN THOUSANDS 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
FIFO cost:
Raw materials $ 20,630 $ 17,333
Work-in-progress 7,359 8,262
Finished products 16,276 21,677
- ----------------------------------------------------------------------------
44,265 47,272
Excess of FIFO over LIFO cost (2,432) (3,559)
- ----------------------------------------------------------------------------
$ 41,833 $ 43,713
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
</TABLE>
NOTE 13. ACCRUED LIABILITIES
Accrued liabilities at December 31, 1995 and 1994 consisted of
the following:
<TABLE>
<CAPTION>
IN THOUSANDS 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Salaries, wages and employee benefits $ 13,891 $ 14,396
Warranty related accruals 2,554 3,573
Dividends payable 1,975 922
Other 9,937 11,705
- ----------------------------------------------------------------------------
$ 28,357 $ 30,596
- ----------------------------------------------------------------------------
</TABLE>
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KUHLMAN CORPORATION AND SUBSIDIARIES
NOTE 14. BUSINESS AND GEOGRAPHICAL SEGMENT INFORMATION
The Company's operations are organized into two business segments which
are defined as Electrical Products and Industrial Products. The Electrical
Products Segment manufactures and markets distribution, power and instrument
transformers for domestic electrical utilities and certain industrial users;
and electrical and electronic wire and cable products to consumer, commercial
and industrial users in North America. The Industrial Products Segment
designs, produces and markets various industrial products, including
turbochargers, fan drives, cooling fans and crankshaft vibration dampers for
enhancing the efficiency of diesel and gasoline engines used in medium- and
heavy-duty trucks, agricultural, construction and other industrial
applications. In addition, operations in this segment manufacture and
distribute a variety of springs and metal parts used by other manufacturers
in their products or production processes. Approximately two-thirds of the
Industrial Products Segment's sales are made to domestic customers with the
balance sold throughout the world.
Net sales represent shipments to unaffiliated customers. Operating
earnings 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 property and equipment.
The Company's operations by business segment and geographic area for the
years ended December 31, 1995, 1994 and 1993, are as follows:
FINANCIAL DATA BY BUSINESS SEGMENT
<TABLE>
<CAPTION>
IN THOUSANDS 1995 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES (1)
Electrical $243,761 $ 235,274 $ 109,458
Industrial 181,623 160,843 132,763
- ----------------------------------------------------------------------------
$425,384 $ 396,117 $ 242,221
- ----------------------------------------------------------------------------
INCOME (LOSS) BEFORE TAXES (BENEFIT) AND
EXTRAORDINARY ITEM
Electrical(2) $ 13,639 $ 8,611 $ (6,325)
Industrial 19,541 17,096 9,163
- ----------------------------------------------------------------------------
Operating earnings(3) 33,180 25,707 2,838
Corporate(2) (4,156) (3,855) (1,931)
Interest expense, net (7,066) (6,969) (4,523)
Merger expenses (4,510) -- --
Unallocated 630 720 2,050
- ----------------------------------------------------------------------------
$ 18,078 $ 15,603 $ (1,566)
- ----------------------------------------------------------------------------
IDENTIFIABLE ASSETS
Electrical $127,760 $ 142,190 $ 148,806
Industrial 84,145 85,447 81,195
Corporate/unallocated 2,997 1,548 12,920
- ----------------------------------------------------------------------------
$214,902 $ 229,185 $ 242,921
- ----------------------------------------------------------------------------
CAPITAL EXPENDITURES
Electrical $ 4,287 $ 6,283 $ 2,429
Industrial 9,183 6,211 3,521
Corporate/unallocated 1,730 554 141
- ----------------------------------------------------------------------------
$15,200 $ 13,048 $ 6,091
- ----------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION
Electrical $ 5,667 $ 5,406 $ 2,635
Industrial 5,606 5,771 5,957
Corporate/unallocated 47 30 10
- ----------------------------------------------------------------------------
$11,320 $ 11,207 $ 8,602
- ----------------------------------------------------------------------------
</TABLE>
(1) IN 1995, 1994 AND 1993, SALES TO A LONG-TIME CUSTOMER OF THE COMPANY'S
INDUSTRIAL PRODUCTS SEGMENT REPRESENTED 10%, 11% AND 15%, RESPECTIVELY, OF THE
COMPANY'S NET SALES. NO OTHER CUSTOMER REPRESENTS MORE THAN 4% OF THE COMPANY'S
NET SALES.
(2) 1993 OPERATING EARNINGS REFLECT A RESTRUCTURING CHARGE OF $8,650, OF WHICH
$7,705 RELATES TO THE ELECTRICAL PRODUCTS SEGMENT AND $945 TO CORPORATE/
UNALLOCATED.
(3) OPERATING EARNINGS IS DEFINED AS OPERATING PROFIT PLUS OTHER, NET DIRECTLY
ATTRIBUTABLE TO EACH SEGMENT.
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KUHLMAN CORPORATION AND SUBSIDIARIES
FINANCIAL DATA BY GEOGRAPHIC SEGMENT
<TABLE>
<CAPTION>
IN THOUSANDS 1995 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES
United States $ 363,050 $ 347,173 $ 207,945
Europe 50,632 38,630 27,294
Brazil, other 11,702 10,314 6,982
- ----------------------------------------------------------------------------
$ 425,384 $ 396,117 $ 242,221
- ----------------------------------------------------------------------------
INCOME(LOSS) BEFORE TAXES(BENEFIT)
AND EXTRAORDINARY ITEM
United States $ 24,100 $ 16,999 $ (705)
Europe 4,601 3,304 1,763
Brazil, other 323 1,549 (151)
Interest expense, net (7,066) (6,969) (4,523)
Merger expenses (4,510) -- --
Unallocated 630 720 2,050
- ----------------------------------------------------------------------------
$ 18,078 $ 15,603 $ (1,566)
- ----------------------------------------------------------------------------
IDENTIFIABLE ASSETS
United States $ 181,699 $ 196,481 $ 216,933
Europe 26,308 23,925 18,385
Brazil, other 6,895 8,779 7,603
- ----------------------------------------------------------------------------
$ 214,902 $ 229,185 $ 242,921
- ----------------------------------------------------------------------------
</TABLE>
NOTE 15. FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company has only limited involvement with derivative financial
instruments and does not use them for speculation or
trading purposes. The Company hedges the effects of fluctuations in
commodity prices, principally copper, through commodity futures and option
contracts, and interest rates through interest rate swap agreements.
At December 31, 1995 and 1994, the Company had $1,328,000 and $5,225,000,
respectively, of commodity hedging futures contracts outstanding, substantially
all of which were for copper. In addition, the company had $765,000 of commodity
hedging option contracts for copper outstanding at December 31, 1994. The
hedging contracts generally have maturities that do not exceed 12 months.
In 1995, the Company entered into three interest rate swap agreements to
reduce the risk of movements in interest rates on a portion of its variable rate
debt. The terms of the agreements, which have a combined notional principal
amount of $35,000,000, allow the Company to receive or make payments on the
difference between the stated LIBOR rate and current market rates. The stated
LIBOR rates are fixed and range from 5.40% to 6.35%. The agreements commence
on various dates starting on June 30, 1995 and mature on various dates, the
latest of which is September 30, 1998.
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.
FAIR VALUE OF FINANCIAL 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 fair value of the Company's debt instruments approximated
the book value because a substantial portion of the underlying instruments
are variable rate notes which reprice frequently.
The fair value of the Company's futures contracts are estimated based on
current settlement values. The fair value of the interest rate swaps are
based on valuations from a financial institution. The fair value of the
futures and option contracts and swap agreements approximate the unrealized
gains or losses on these instruments. Realized gains or losses during 1995
and unrealized gains or losses at December 31, 1995 on the commodity futures
contracts and interest rate swaps were minimal.
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, 1995, the Company had no significant
concentrations of credit risk.
GUARANTEES
The Company has guaranteed the payment obligations for certain leases and
certain payment commitments of its subsidiaries. These guarantees amounted to
$1,872,000 at December 31, 1995. The Company is of the opinion that its
subsidiaries 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, 1995, the Company had letters of credit and surety bonds
outstanding totaling $3,850,000 which guarantee certain activities, primarily
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.
39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KUHLMAN CORPORATION AND SUBSIDIARIES
NOTE 16. QUARTERLY FINANCIAL DATA (UNAUDITED)
The Company's quarterly results are summarized below for the years ended
December 31, 1995 and 1994.
<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT PER SHARE DATA QUARTER
----------------------------------------------
1995 FIRST SECOND(1) THIRD FOURTH TOTAL
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $106,926 $102,814 $108,561 $107,083 $425,384
Gross profit 20,713 19,391 22,061 21,942 84,107
Operating profit 7,191 6,000 7,911 8,059 29,161
Income before
extraordinary
item 3,548 (725) 3,393 3,828 10,044
Extraordinary
item, net -- (1,861) -- -- (1,861)
Net income 3,548 (2,586) 3,393 3,828 8,183
- -------------------------------------------------------------------------------------------
Earnings per share:
Income before
extraordinary
item 0.27 (0.06) 0.26 0.29 0.76
Extraordinary
item, net -- (0.14) -- -- (0.14)
Net income per
share 0.27 (0.20) 0.26 0.29 0.62
- -------------------------------------------------------------------------------------------
QUARTER
----------------------------------------------
1994 FIRST SECOND THIRD FOURTH TOTAL
- -------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------
Earnings per share:
Net income
per share 0.21 0.19 0.26 0.07 0.73
- -------------------------------------------------------------------------------------------
</TABLE>
(1) Net income for the second quarter and full year of 1995 includes
approximately $5,600 or $0.43 per share for Merger Expenses.
NOTE 17. SUBSEQUENT EVENT
On February 16, 1996, the Company, through a wholly-owned subsidiary,
completed a tender offer for the outstanding shares of Communication Cable, Inc.
("CCI"), a North Carolina corporation traded on NASDAQ . Pursuant to the
Company's offer to purchase shares of CCI for $14.00 per share, shareholders of
CCI tendered 2,291,800 shares through that date. Kuhlman previously owned
315,703 shares of CCI. As of February 21, 1996, Kuhlman owned 2,607,503 shares
or 82.2% of all CCI shares outstanding for an aggregate total cost of
approximately $35,873,000. Kuhlman plans to purchase the remaining CCI shares
outstanding as soon as practicable. The acquisition of CCI shares was funded
primarily through a $40,000,000 increase in the Company's bank credit facility.
CCI sales and net income for its fiscal year ended October 31, 1995 were
$56,256,000 and $2,118,000 respectively.
40
<PAGE>
COMMON STOCK PRICE RANGES
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------------------------------------
Quarters High Low Close Dividend(a) High Low Close Dividend(a)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1st 13 1/2 10 3/4 11 5/8 $0.15 19 3/8 15 16 3/4 $0.15
2nd 12 3/8 10 3/8 11 1/4 0.15 18 3/8 14 3/4 14 3/4 0.15
3rd 13 10 3/4 12 1/8 0.15 15 3/8 14 1/8 14 3/4 0.15
4th 13 3/8 10 7/8 12 1/2 0.15 16 11 12 1/8 0.15
</TABLE>
(a) DIVIDENDS PER SHARE NOT RESTATED TO REFLECT THE MERGER WITH SCHWITZER.
The Common Stock of Kuhlman (KUH) is listed on the New York Stock Exchange
and is quoted daily by the Exchange in most major newspapers. The table above
shows the price range per share and the dividends declared per share for the
last two years. At December 31, 1995, there were 13,167,400 shares of Common
Stock outstanding and 7,895 shareholders of record. It is estimated there are
approximately 17,500 shareholders in total, including those holding stock in
"nominee" or "street" name.
A dividend investment program is maintained for Kuhlman shareholders of
record. Additional shares of stock may be purchased with dividends paid on
Kuhlman stock and/or with cash payments of $10 to $3,000 per calendar quarter.
The Company pays all brokerage fees and administrative costs on these stock
purchases. The plan is administered for the Company by its Transfer Agent,
Harris Trust and Savings Bank. Inquiries concerning the plan should be
directed to the bank.
- -C-1996 Kuhlman Corporation
42
<PAGE>
EXHIBIT 22.0
SUBSIDIARIES OF KUHLMAN CORPORATION
Jurisdiction
of
Name Incorporation
---- -------------
Kuhlman Electric Corporation Delaware
Coleman Cable Systems, Inc. Delaware
Schwitzer, Inc. Delaware
Emtec Products Corporation Ohio
<PAGE>
EXHIBIT 23.0
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation of our
report dated February 6, 1996 (except with respect to the matter discussed in
Note 17 to the consolidated financial statements as to which the date is
February 21, 1996) on the consolidated financial statements of Kuhlman
Corporation as of December 31, 1995, included in the Company's 1995 Annual
Report to Shareholders incorporated by reference in this Form 10-K and of our
report dated February 6, 1996 (except with respect to the matter discussed in
Note 17 to the consolidated financial statements as to which the date is
February 21, 1996) on the schedule included in this Form 10-K, into the
Company's previously filed Registration Statement File Nos. 2-77396, 33-20184,
33-64544, 33-82718, 33-58133 and 33-61255.
ARTHUR ANDERSEN LLP
March 27, 1996
<PAGE>
EXHIBIT 24.0
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being a
director or officer, or both, of KUHLMAN CORPORATION, a Delaware corporation
(the "Company"), does hereby constitute and appoint ROBERT S. JEPSON, JR.,
CURTIS G. ANDERSON, VERNON J. NAGEL, and RICHARD A. WALKER, with full power
to each of them to act alone, as the true and lawful attorneys and agents of
the undersigned, with full power of substitution and resubstitution to each
of said attorneys, to execute, file or deliver any and all instruments and to
do any and all acts and things which said attorneys and agents, or any of them,
deem advisable to enable the Company to comply with the Securities Exchange
Act of 1934, as amended and any requirements of the Securities and Exchange
Commission in respect thereto, relating to annual reports on Form 10-K,
including specifically, but without limitation of the general authority
hereby granted, the power and authority to sign his name as director or
officer, or both, of the Corporation, as indicated below opposite his
signature, to annual reports on Form 10-K or any amendments or papers
supplemental thereto; and each of the undersigned does hereby fully ratify
and confirm all that said attorneys and agents, or any of them, or the
substitute of any of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has subscribed these presents,
this 20th day of February 1996.
/s/ Robert S. Jepson, Jr. /s/ Alexander W. Dreyfoos, Jr.
- ------------------------------------ -------------------------------------
Robert S. Jepson, Jr., Chairman of Alexander W. Dreyfoos, Jr., Director
the Board and Chief Executive Officer
(Principal Executive Officer) and
Director /s/ William M. Kearns, Jr.
-------------------------------------
William M. Kearns, Jr., Director
/s/ Vernon J. Nagel
- ------------------------------------
Vernon J. Nagel, Executive Vice /s/ Robert D. Kilpatrick
President of Finance, Chief Financial -------------------------------------
Officer and Treasurer (Principal Robert D. Kilpatrick, Director
Financial and Accounting Officer)
/s/ Curtis G. Anderson /s/ John L. Marcellus, Jr.
- ------------------------------------ -------------------------------------
Curtis G. Anderson, President, Chief John L. Marcellus, Jr., Director
Operating Officer and Director
/s/ George J. Michel, Jr.
/s/ William E. Burch -------------------------------------
- ------------------------------------ George J. Michel, Jr., Director
William E. Burch, Director
/s/ General H. Norman Schwarzkopf
/s/ Steve Cenko -------------------------------------
- ------------------------------------ General H. Norman Schwarzkopf,
Steve Cenko, Director Director
/s/ Gary G. Dillon
- ------------------------------------
Gary G. Dillon, Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE KUHLMAN
1995 CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME (LOSS) AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 581
<SECURITIES> 0
<RECEIVABLES> 57,195
<ALLOWANCES> 1,442
<INVENTORY> 41,833
<CURRENT-ASSETS> 106,603
<PP&E> 150,493
<DEPRECIATION> 84,244
<TOTAL-ASSETS> 214,902
<CURRENT-LIABILITIES> 67,421
<BONDS> 63,653
0
0
<COMMON> 13,240
<OTHER-SE> 60,992
<TOTAL-LIABILITY-AND-EQUITY> 214,902
<SALES> 425,384
<TOTAL-REVENUES> 425,384
<CGS> 341,277
<TOTAL-COSTS> 341,277
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,211
<INTEREST-EXPENSE> 7,321
<INCOME-PRETAX> 18,078
<INCOME-TAX> 8,034
<INCOME-CONTINUING> 10,044
<DISCONTINUED> 0
<EXTRAORDINARY> 1,861
<CHANGES> 0
<NET-INCOME> 8,183
<EPS-PRIMARY> 0.62
<EPS-DILUTED> 0.62
</TABLE>
