THIS REPORT HAS BEEN FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION VIA EDGAR
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-7695
KUHLMAN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 58-2058047
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 Skidaway Village Square
Savannah, Georgia 31411
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code--(912) 598-7809
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
------------ ------------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at July 31, 1996
------ ----------------------------
Common Stock, $1.00 Par Value 13,386,021
- --------------------------------------------------------------------------------
<PAGE>
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
In thousands, except
per share data 1996 1995 1996 1995
-------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales. . . . . . . . . $112,200 $102,814 $215,657 $209,740
Cost of goods sold . . . . 88,476 83,423 170,469 169,636
-------- -------- -------- --------
Gross profit . . . . . . . 23,724 19,391 45,188 40,104
Selling, engineering,
general and
administrative expenses. 15,222 13,391 28,94 26,913
-------- -------- -------- --------
Operating profit . . . . . 8,502 6,000 16,244 13,191
-------- -------- -------- --------
Other income (expense):
Interest expense, net. (1,772) (1,827) (3,335) (3,683)
Merger expenses. . . --- (4,510) --- (4,510)
Other, net . . . . . . (356) 817 (793) 1,376
-------- -------- -------- --------
Total other income
(expense), net . (2,128) (5,520) (4,128) (6,817)
-------- -------- -------- --------
Income before taxes. . . . 6,374 480 12,116 6,374
Taxes on income. . . . . . 2,642 1,205 4,966 3,551
-------- -------- -------- --------
Income (loss) before
extraordinary item. . . 3,732 (725) 7,150 2,823
Extraordinary item (net of
tax effect of $1,175) . --- (1,861) --- (1,861)
-------- -------- -------- --------
Net income (loss). . . . . $ 3,732 $ (2,586) $ 7,150 $ 962
======== ======== ======== ========
Per share amounts
Primary:
Income (loss) before
extraordinary item $ 0.27 $ (0.06) $ 0.53 $ 0.21
Extraordinary item --- (0.14) --- (0.14)
-------- -------- -------- --------
Net income (loss). . . . . $ 0.27 $ (0.20) $ 0.53 $ 0.07
======== ======== ======== ========
Fully dilutive:
Income (loss) before
extraordinary item $ 0.27 $ (0.06) $ 0.52 $ 0.21
Extraordinary item --- (0.14) --- (0.14)
-------- -------- -------- --------
Net income (loss). . . . . $ 0.27 $ (0.20) $ 0.52 $ 0.07
-------- -------- -------- --------
Average shares outstanding
- - primary. . . . . . . . . 13,831 13,188 13,511 13,158
======== ======== ======== ========
Average shares outstanding
- - fully diluted . . . . . 13,904 13,188 13,873 13,158
======== ======== ======== ========
</TABLE>
The Notes To Consolidated Financial Statements
should be read in conjunction with these statements.
<PAGE>
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- -----------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . $ 2,950 $ 581
Accounts receivable, less reserves of $1,886
and $1,442 at June 30, 1996 and December
31, 1995, respectively . . . . . . . . . . . 61,839 55,753
Inventories . . . . . . . . . . . . . . . . . . 50,416 41,833
Deferred income taxes . . . . . . . . . . . . . 6,614 4,901
Prepaid expenses and other current assets . . . 3,766 3,535
-------- --------
Total current assets . . . . . . . . . . . . 125,585 106,603
-------- --------
Plant and equipment, at cost:
Land, buildings and leasehold improvements . . 41,949 37,077
Machinery and equipment . . . . . . . . . . . . 120,353 111,175
Construction in progress . . . . . . . . . . . 2,885 2,241
-------- --------
165,187 150,493
Less - accumulated depreciation . . . . . . . . (89,302) (84,244)
-------- --------
75,885 66,249
-------- --------
Intangible assets, net of amortization of $3,497
and $2,672 at June 30, 1996 and December 31,
1995, respectively. . . . . . . . . . . . . . . 56,816 37,201
-------- --------
Other assets . . . . . . . . . . . . . . . . . . . 4,664 4,849
-------- --------
$262,950 $214,902
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt . . . . . . . $ 3,094 $ 10,522
Accounts payable . . . . . . . . . . . . . . . 33,984 28,542
Accrued liabilities . . . . . . . . . . . . . . 36,466 28,357
-------- --------
Total current liabilities . . . . . . . . . . 73,544 67,421
-------- --------
Bank debt. . . . . . . . . . . . . . . . . . . . . 92,604 60,217
Other long-term debt . . . . . . . . . . . . . . . 5,438 3,436
-------- --------
Total long-term debt. . . . . . . . . . . . . . 98,042 63,653
-------- --------
Accrued postretirement benefits . . . . . . . . . 8,471 8,462
-------- --------
Other long-term liabilities. . . . . . . . . . . . 3,600 1,134
-------- --------
Total liabilities . . . . . . . . . . . . . . 183,657 140,670
-------- --------
Shareholders' equity:
Preferred stock, par value $1.00, authorized
2,000 shares, none issued; Junior
participating preferred stock, series A,
no par value, authorized 200 shares, none
issued. . . . . . . . . . . . . . . . . . . . --- ---
Common stock, par value $1.00, authorized
20,000 shares, issued 13,440 shares at
June 30, 1996 and 13,240 at December 31,
1995, respectively . . . . . . . . . . . . . 13,440 13,240
Additional paid-in capital . . . . . . . . . . 27,905 26,217
Retained earnings . . . . . . . . . . . . . . . 41,155 37,988
Foreign currency translation adjustments. . . . (1,905) (1,911)
Minimum pension liability . . . . . . . . . . . (382) (382)
-------- --------
80,213 75,152
Less - treasury shares at cost (72 shares at
June 30, 1996 and December 31, 1995). . . . . (920) (920)
-------- --------
Total shareholders' equity . . . . . . . . . 79,293 74,232
-------- --------
$262,950 $214,902
======== ========
</TABLE>
The Notes to Consolidated Financial Statements
should be read in conjunction with these statements.
<PAGE>
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------
1996 1995
------- --------
(Unaudited)
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . $ 7,150 $ 962
Adjustments to reconcile net income to net cash
provided by operating activities:
Extraordinary item, net . . . . . . . . . . . . . --- 1,861
Merger expenses . . . . . . . . . . . . . . . . . --- 4,510
Depreciation and amortization . . . . . . . . . . 6,320 6,060
Deferred income taxes, net. . . . . . . . . . . . 862 2,351
Provision for losses on accountsble . . . . . . . 293 839
Other, net. . . . . . . . . . . . . . . . . . . . (350) 519
Changes in operating assets and liabilities: (1)
Accounts receivable . . . . . . . . . . . . . . 1,375 (1,221)
Inventories . . . . . . . . . . . . . . . . . . . (2,381) (1,289)
Prepaid expenses and other current assets . . . (38) 2,444
Accounts payable. . . . . . . . . . . . . . . . 3,231 306
Accrued liabilities . . . . . . . . . . . . . . 3,037 (3,855)
-------- --------
Net cash provided by operating activities . 19,499 13,487
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . (4,579) (5,776)
Acquisitions, net of cash acquired. . . . . . . . (34,185) ---
Proceeds from the sale of assets. . . . . . . . . 80 89
-------- --------
Net cash used by investing activities . . . . . (38,684) (5,687)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in revolving loan facility . . . . . . (13,899) (927)
Proceeds from issuance of long-term debt. . . . . 38,379 24,814
Repayments of long-term debt . . . . . . . . . . (846) (25,385)
Dividends paid . . . . . . . . . . . . . . . . . (3,954) (1,848)
Payments for merger and related expenses. . . . . --- (4,601)
Stock options exercised and other . . . . . . . . 1,696 831
-------- --------
Net cash provided (used) by financing activities 21,376 (7,116)
-------- --------
Effect of exchange rate changes on cash. . . . . . . 178 77
-------- --------
Net increase in cash and cash equivalents . . . . . 2,369 761
Cash and cash equivalents at beginning of period . . 581 3,036
-------- --------
Cash and cash equivalents at end of period . . . $ 2,950 $ 3,797
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . $ 3,237 $ 3,815
Income taxes, net of refunds . . . . . . . . . . $ 2,004 $ 839
</TABLE>
(1) Net of the effects of acquisition, where applicable.
The Notes To Consolidated Financial Statements
should be read in conjunction with these statements.
<PAGE>
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For The Six Months Ended June 30, 1996
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Stock Capital Earnings Adjustment Liability Stock Total
------- ------- -------- ---------- --------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1995 $13,240 $26,217 $37,988 $ (1,911) $ (382) $(920) $74,232
------- ------- ------- --------- -------- ----- -------
Net income --- --- 7,150 --- --- --- 7,150
Cash dividends
declared
($0.30 per share) --- --- (3,983) --- --- --- (3,983)
Foreign currency
translation
adjustment --- --- --- 6 --- --- 6
Stock options
exercised and
other 200 1,688 --- --- --- --- 1,888
------- ------- ------- --------- -------- ----- -------
Balance at
June 30, 1996 $13,440 $27,905 $41,155 $ (1,905) $ (382) $(920) $79,293
======= ======= ======= ========= ======= ===== =======
</TABLE>
The Notes To Consolidated Financial Statements
should be read in conjunction with these statements.
<PAGE>
KUHLMAN CORPORATION AND SUBSIDIARIES
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Six Months Ended June 30, 1996
(Unaudited)
1. Consolidated Financial Statements
The consolidated balance sheet at June 30, 1996 and the
related consolidated statements of income, cash flows and
shareholders' equity for the three and six months ended June 30,
1996 and 1995, have been prepared by Kuhlman Corporation (the
"Company") without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position of the Company
at June 30, 1996 and the results of operations and cash flows for
the three and six months ended June 30, 1996 and 1995, have been
made. On May 31, 1995, a wholly-owned subsidiary of the Company
merged with Schwitzer, Inc. ("Schwitzer"). The merger was
accounted for as a pooling of interests. Therefore, the
financial statements for all periods shown have either been
restated to include, or include the combined balance sheet and
results of operations of both companies as if the merger had been
in effect for all periods presented. Certain amounts in the 1995
consolidated financial statements have been reclassified to
conform with the 1996 presentation.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been omitted from
the accompanying financial statements. These consolidated
financial statements, including the notes thereto, should be read
in conjunction with the Company's audited consolidated financial
statements as of and for the three years in the period ended
December 31, 1995 included on the Company's Annual Report on Form
10-K.
The results of operations for the three and six months ended
June 30, 1996 are not necessarily indicative of the results to be
expected for the full year 1996.
2. Acquisition of Communication Cable, Inc.
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, at $14.00 per share in cash. The purchase of the
tendered shares, which was consummated on February 21, 1996,
along with subsequent actions have resulted in CCI becoming a
wholly-owned subsidiary of the Company as of June 28, 1996. The
aggregate total cost of the acquisition of the outstanding shares
of CCI, which was primarily funded through bank debt, was
$43,775,000. CCI engineers, designs and manufactures a wide
variety of low voltage electronic wire and cable products.
The transaction is being accounted for as a purchase, and the
goodwill associated with the transaction will be amortized over
40 years. The purchase price allocations have been completed on
a preliminary basis, subject to adjustment should new or
additional facts about the business become known. The results of
operations of CCI are included in the consolidated financial
statements of the Company subsequent to February 21, 1996.
The following unaudited pro forma information for the periods
shown below gives effect to the acquisition of CCI as if it had
occurred at the beginning of each period. The pro forma
information combines the results of the Company with those for
CCI's quarter ended January 31, 1996 and six months ended April
30, 1995.
In thousands, except per share data
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Net sales $ 224,892 $ 235,160
Net income before extraordinary item $ 7,172 $ 2,410
Net income $ 7,172 $ 549
Fully diluted per share amounts:
Net income before extraordinary item $ 0.52 $ 0.18
Net income $ 0.52 $ 0.04
</TABLE>
The unaudited pro forma information assumes that the Company
owned the outstanding shares of CCI at the beginning of the
periods presented, and accordingly, includes adjustments for
goodwill amortization, interest expense, certain administrative
costs and income taxes. The unaudited pro forma financial data
is presented for information purposes only and is not necessarily
indicative of the results of operations that actually would have
been achieved had the acquisition of CCI been consummated as of
that time.
3. Earnings and Dividends Per Share
Earnings per share in the accompanying consolidated
statements of income for the three and six months ended June 30,
1996 and 1995 have been computed based on the weighted average
number of shares of common stock and common stock equivalents, if
any, outstanding throughout the period. For the three months
ended June 30, 1996, primary and fully dilutive average shares
outstanding included approximately 537,000 and 610,000 shares,
respectively, resulting from the dilutive effects of common stock
equivalents. For the six months ended June 30, 1996, primary and
fully dilutive average shares outstanding included approximately
268,000 and 630,000 shares, respectively, resulting from the
dilutive effects of common stock equivalents. There was no
materially dilutive effect for the comparable year ago period.
A cash dividend of $0.15 per share was declared during each
of the first two quarters of 1996 and 1995, excluding the effect
prior to May 1995 of the shares issued in connection with the
merger with Schwitzer.
4. Inventories
Inventories consisted of the following, in thousands:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- ---------
(unaudited)
<S> <C> <C>
FIFO cost:
Raw materials $ 20,920 $ 20,630
Work-in-process 12,797 7,359
Finished goods 18,477 16,276
--------- ---------
Total 52,194 44,265
Excess of FIFO
over LIFO cost (1,778) (2,432)
--------- ---------
Net inventories $ 50,416 $ 41,833
========= =========
</TABLE>
5. Subsequent Event
On July 1, 1996, the Company amended its bank credit facility
in order to, among other things, enhance its flexibility, lower
its cost of borrowed funds and provide a facility to fund future
acquisitions. The credit facility in the amended agreement has
two components. The first component is a $125 million revolving
credit facility to be used for general corporate purposes and is
due on July 1, 2001. The second component is a 364-day, $125
million facility primarily to fund future acquisitions and
amounts drawn, if any, would convert to a 4-year term loan
commencing on July 1, 1997 with equal quarterly amortization.
Interest rates on amounts borrowed under the credit agreement are
based on certain financial ratios which have been amended to
reflect the Company's improved financial strength.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
On February 16, 1996, Kuhlman Corporation (the "Company"),
through a wholly-owned subsidiary, completed a tender offer for
the outstanding shares of Communication Cable, Inc. ("CCI"), a
North Carolina corporation at $14.00 per share.
The purchase price, for the shares of CCI was approximately
$43,775,000 and was primarily funded through an increase in the
Company's bank credit facility. The acquisition has been
accounted for by the purchase method of accounting and
accordingly, the net assets and results of operations for CCI are
included in the Company's consolidated financial statements as
part of the Electrical Products Segment from the date of
acquisition.
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 industries and for satellite
and other telecommunication applications.
On July 1, 1996, the Company amended its bank credit facility in
order to, among other things, enhance its flexibility, lower its
cost of borrowed funds and provide a facility to fund future
acquisitions. The credit facility in the amended agreement has
two components. The first component is a $125 million revolving
credit facility to be used for general corporate purposes and is
due on July 1, 2001. The second component is a 364-day, $125
million facility primarily to fund future acquisitions and amounts
drawn, if any, would convert to a 4-year term loan commencing on
July 1, 1997 with equal quarterly amortization. Interest rates on
amounts borrowed under the credit agreement are based on certain
financial ratios which have been amended to reflect the Company's
improved financial strength.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated a record $19,499,000 in cash flow from
operations in the first half of 1996 compared to $13,487,000 for
the same period in 1995, an increase of $6,012,000 (45%). The
increase was due to higher earnings in the first half of 1996 and
better utilization of working capital resources. Working capital
(net of cash) was $49,091,000 at June 30, 1996 compared to
$38,601,000 at December 31, 1995, an increase of $10,490,000
(27%). The increase was due primarily to greater cash balances
at June 30, 1996, the acquisition of CCI and the classification
of the Company's bank debt based on the amended credit agreement,
partially offset by higher accounts payable and accrued
liabilities at June 30, 1996. Cash and cash equivalents
increased to $2,950,000 at June 30, 1996 from $581,000 at
December 31, 1995 due to the timing of cash receipts at the end
of the second quarter of 1996. Accounts receivable, net was
$61,839,000 at June 30, 1996 compared to $55,753,000 at December
31, 1995, an increase of $6,086,000 (11%). The increase was due
primarily to the acquisition of CCI, partially offset by strong
cash collections in the Electrical Products Segment from winter
related booster cable sales. Similarly, inventories increased
$8,583,000 (21%) to $50,416,000 at June 30, 1996 from December
31, 1995 due to the inclusion of CCI and because of higher
expected sales activity in the Electrical Products Segment for
transformers and in the Industrial Products Segment for engine
products in North America. Prepaid expenses and other current
assets increased to $10,380,000 at June 30, 1996 from $8,436,000
at the end of 1995 due primarily to the addition of CCI.
Accounts payable and accrued liabilities increased $13,551,000
(24%) to $70,450,000 at June 30, 1996 from December 31, 1995 due
primarily to the addition of CCI, higher accounts payable to
vendors caused in part by the greater level of inventories noted
above and increased accrued liabilities due to the timing of
certain payments for expenses. Total debt outstanding was
$101,136,000 at June 30, 1996, up $26,961,000 from the end of
1995. The increase in total debt was due to the funding of the
acquisition of CCI, partially offset by the Company's record cash
flow in the first half of 1996. Shareholders' Equity increased
$5,061,000 (7%) in the first half of 1996 to $79,293,000 at June
30, 1996 from the end of 1995 due primarily to the Company's
record earnings, partially offset by dividends declared.
Capital expenditures in the first half of 1996 were $4,579,000
compared to $5,776,000 reported in the same period last year.
Expenditures in 1996 have been primarily for normal additions and
replacements to machinery and equipment, tooling for specific
customer applications and capacity enhancements.
Management believes that the Company's liquidity, forecasted cash
flows, available borrowing capacity and other financial resources
are adequate to support the anticipated operations, to finance
future capital expenditures as previously planned and to service
all existing debt requirements.
RESULTS OF OPERATIONS
The following table summarizes net sales and operating earnings
by segment, in thousands:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1996 1995 1996 1995
--------- --------- --------- ---------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales:
Electrical $ 66,381 $ 56,349 $ 123,830 $ 115,004
Industrial 45,819 46,465 91,827 94,736
--------- --------- --------- ---------
$ 112,200 $ 102,814 215,657 209,740
========= ========= ========= =========
Income before taxes:
Electrical $ 4,469 $ 2,831 $ 7,866 $ 5,274
Industrial 5,209 4,620 10,313 10,497
--------- --------- ---------- ---------
Operating earnings(1) 9,678 7,451 18,179 15,771
Corporate (1,532) (946) (2,728) (1,828)
Merger expenses --- (4,510) --- (4,510)
Interest expense, net (1,772) (1,827) (3,335) (3,683)
Unallocated --- 312 --- 624
--------- --------- ---------- ---------
$ 6,374 $ 480 $ 12,116 $ 6,374
========= ========= ========== =========
</TABLE>
(1) Operating earnings is defined as Operating Profit plus
Other, net directly attributable to each segment.
Three Months Ended June 30, 1996 and 1995
The Company posted record quarterly results in net sales,
operating profit and income before taxes in the second quarter of
1996. Net sales, operating profit and income before taxes
(excluding Merger Expenses in the 1995 period) increased
approximately 9%, 42% and 28%, respectively, in the second
quarter of 1996 when compared to the same period in 1995. The
increases were attributable to positive performance reported by
each of the Company's two product segments.
Net sales were $112,200,000 in the second quarter of 1996
compared to $102,814,000 in the same period in 1995, an increase
of $9,386,000 (9%). The increase in net sales occurred primarily
in the Electrical Products Segment, partially offset by a modest
decline in the Industrial Products Segment. Net sales reported
in the Electrical Products Segment increased by $10,032,000 (18%)
in the second quarter of 1996 compared to the same period in 1995
primarily because of the record sales of medium power
transformers and higher shipments of certain wire and cable
products to electrical distributors and original equipment
manufacturers. In the Industrial Products Segment, net sales in
the second quarter of 1996 declined by approximately one percent
compared to the same period in 1995 due primarily to lower sales
of spring products and lower shipments of turbochargers in
Brazil, substantially offset by the record sales of engine
products in North America where demand remained strong throughout
the period.
In addition to the sales gains noted above, the Company's
consolidated backlog increased $7,581,000 (7%) to $108,881,000 at
June 30, 1996 from the end of 1995. The increase was
attributable to the addition of CCI and higher demand in North
America for engine products, partially offset by increased
shipments of medium power transformer units in the Electrical
Products Segment.
Operating profit for the second quarter of 1996 was $8,502,000
compared to $6,000,000 reported for the same period in 1995, an
increase of $2,502,000 (42%). The increase was due to the record
sales volume in the Electrical Products Segment noted above and
improved operating efficiencies domestically along most key
domestic product lines. As a consequence, operating profit
margins advanced to a record high of 7.6% of net sales in the
second quarter of 1996 with each segment contributing to the
improvement. Operating earnings in the Electrical Products
Segment increased $1,638,000 (58%) to $4,469,000 in the second
quarter of 1996 compared to the same period in 1995. The
increase was due primarily to the higher sales noted above,
benefits from profit improvement efforts and the addition of CCI.
In the Industrial Products Segment, operating earnings improved
$589,000 (13%) to $5,209,000 in the second quarter of 1996
compared to the same period in 1995. The increase was due
primarily to the record shipments of engine products in North
America, partially offset by lower earnings internationally due
to changes in product mix and higher material costs in Europe and
soft demand in Brazil. Overall, operating expenses increased
$1,831,000 (14%) to $15,222,000 or 13.6% of net sales in the
second quarter for 1996 compared to $13,391,000 or 13.0% of net
sales reported in the second quarter of 1995. The increase in
operating expenses was due primarily to the higher sales noted
above and the addition of CCI. The increase in operating
expenses as a percentage of sales was due primarily to the sale
of Nehring in December 1995 which had substantially lower
operating expenses compared to the overall average.
Interest expense, net in the second quarter of 1996 was
$1,772,000 compared to $1,827,000 for the same period in 1995, a
decrease of $55,000 (3%). The decrease was due to the lower cost
of borrowed funds in the second quarter of 1996, partially offset
by higher debt levels as a result of the acquisition of CCI.
Other, net was an expense of $356,000 in the second quarter for
1996 compared to $3,693,000 in the same period last year. Other,
net in the second quarter of 1995 included a portion of the
transaction expenses associated with the merger of Schwitzer and
Kuhlman which totalled $5,600,000, net of tax ("Merger
Expenses"). Excluding the effect of Merger Expenses in Other,
net, the Company recorded income of $817,000 in the second
quarter of 1995 primarily because of a non-recurring gain on the
settlement of certain liabilities and income from a covenant not
to compete, which expired in the second quarter of 1995.
Net income for the second quarter of 1995 was $3,732,000, an
increase of $718,000 (24%) compared to $3,014,000 reported in the
same period in 1995, prior to deducting the Merger Expenses.
After giving effect to the Merger Expenses, the Company reported
a net loss of $2,586,000 in the second quarter of 1995. Earnings
per share on a fully diluted basis were $0.27 per share in the
second quarter of 1996 compared to $0.23 for the same period in
1995 prior to deducting the Merger Expenses, and a loss of $0.20
after taking such expenses into account. In addition, net income
in the second quarter of 1995 was benefitted by $551,000 (net of
tax) or $0.04 per share related to the non-recurring gain noted
above. The fully diluted average shares outstanding in the
second quarter of 1996 was 13,904,000, an increase of 716,000
shares (5%) over the same period in 1995. The Company's
effective tax rate for the second quarter of 1996 and 1995 was
41.5% and 39.6%, respectively, before giving effect to the merger
expenses in the 1995 period. The difference in rates was due
primarily to the change in the source of earnings between various
taxing countries.
Six Months Ended June 30, 1996 and 1995
Net sales, operating profit and net income (excluding the Merger
Expenses in the 1995 period) for the first six months of 1996
were record highs for the Company, up 3%, 23% and 9%,
respectively, over the results reported for the first half of
1995.
Net sales for the first half of 1996 were $215,657,000 compared
to $209,740,000 for the same period in 1995, an increase of 3%.
The increase was due primarily to the improved performance in the
Electrical Products Segment driven by the record sales volume for
medium power transformers, partially offset by lower sales in the
Industrial Products Segment. Net sales for the first half of
1996 in the Industrial Products Segment were positively impacted
by strong demand domestically for the Company's various engine
products, offset by weak orders for spring products and lower
shipments of turbochargers in Brazil primarily due to soft demand
caused by weak economic conditions in that country.
Operating profit for the first six months of 1996 was $16,244,000
compared to $13,191,000 reported for the same period in 1994, an
increase of $3,053,000 (23%). The increase in operating profit
was due to the positive financial performance in the Electrical
Products Segment along with the positive results posted by the
Industrial Products Segment in the first half in 1996. Operating
earnings in the Electrical Products Segment increased $2,592,000
(49%) to $7,866,000 in the first half of 1996 compared to the
same period in 1996 due to the higher sales volume noted above
and improved margins on key products. In the Industrial Product
Segment, operating earnings declined $184,000 (2%) to $10,313,000
in the first half of 1996 compared to the same period in 1995.
Operating earnings in this segment were benefitted by strong
demand in North America for various engine products and improved
operating efficiencies, which were more than offset by lower
earnings for spring products and international operations due to
changes in product mix, higher material costs and the impact of a
soft economic environment in Brazil. Overall, consolidated
operating profit margins for the first half of 1996 improved to
7.5% of net sales from 6.3% reported in the same period in 1995.
The improvement was due to higher gross profit margins which were
benefitted by the sales volumes noted above and improved
operating efficiencies at key manufacturing facilities, partially
offset by greater operating expenses as a percentage of sales.
Operating expenses for the first half of 1996 increased to
$28,944,000 or 13.4% of net sales from $26,913,000 or 12.8% of
net sales reported in the year-ago period due to the higher sales
volume noted above and the addition of CCI.
Interest expense, net for the first half of 1996 was $3,335,000
compared to $3,683,000 for the same period in 1995, a decrease of
$348,000 (9%). The decrease was due to the lower cost of
borrowed funds in 1996, partially offset by higher debt levels
throughout the 1996 period due to the acquisition of CCI. Other,
net in the first half of 1996 was an expense of $793,000 compared
to expense of $3,134,000 in the same period in 1995. Other, net
in the first half of 1995 included the Merger Expenses.
Excluding the effect of the Merger Expenses, the Company recorded
income of $1,376,000 in the first half of 1995 in Other, net,
primarily because of a non-recurring gain on the settlement of
certain liabilities and income from a covenant not to compete
which expired in the second quarter of 1995.
Net income for the first half of 1996 increased $588,000 (9%) to
$7,150,000 from $6,562,000 for the same period in 1995, prior to
deducting the Merger Expenses. After deducting the Merger
Expenses, the Company reported net income of $962,000 for the
first half of 1995. Earnings per share on a fully diluted basis
were $0.52 in the first half of 1996 compared to $0.50 for the
same period in 1995 prior to deducting the Merger Expenses, and
$0.07 after taking such expenses into account. In addition, net
income in the first half of 1995 was benefitted by $1,251,000
(net of tax) or $0.10 per share related to the non-recurring gain
noted above. The fully diluted average shares outstanding in the
first half for 1996 was 13,873,000 compared to 13,158,000 in the
year-ago period, an increase of 715,000 (5%).
OUTLOOK FOR 1996
Management believes that the results of the first half support
its view that the Company is positioned to prosper in 1996.
However, management's optimism about the future continues to be
tempered somewhat by matters including the potential impact of
fluctuating raw material costs, an uncertain economic environment
in certain key markets and the potential for rising interest
rates. Management will continue to focus on these variables very
carefully.
SAFE HARBOR STATEMENT
Statements in this report that are not strictly historical are
"forward-looking" statements which should be considered as
subject to the many uncertainties that exist in the company's
operations and business environment. These uncertainties
include, but are not limited to, economic conditions, market
demand and pricing, competitive and cost factors and other risk
factors.
PART II. OTHER INFORMATION
ITEM 4 Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of security holders of the
Registrant was held on April 25, 1996.
(b) Not applicable.
(c) At such meeting all of the nominees for election as
directors were elected for the term of office set forth
below. The votes cast with respect to each nominee for
election as a director are as follows:
<TABLE>
<CAPTION>
Year When
Term of Office Votes For Votes
Nominee Expires Nominee Withheld
------- ------- ------- --------
<S> <C> <C> <C>
Steve Cenko 1999 11,706,035 85,983
Robert S. Jepson, Jr. 1999 11,719,002 73,015
John L. Marcellus, Jr. 1999 11,704,139 87,879
</TABLE>
At such meeting the security holders further voted upon and
approved the following:
(1) an amendment to the 1994 Stock Option Plan. 11,075,259
affirmative votes and 536,183 negative votes were cast,
and there were 180,576 abstentions with respect to such
matter.
(2) the ratification of the selection of Arthur Andersen
LLP as the independent auditors for the Registrant for
the year ending December 31, 1996. 11,720,559
affirmative votes and 36,563 negative votes were cast,
and there were 34,896 abstentions with respect to such
matter.
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits
27.0 Financial Data Schedule for the six month period ended
June 30, 1996.
(b) Reports on Form 8-K
During the period covered by this report, Registrant has
filed the following reports on Form 8-K.
Form 8-K/A dated April 26, 1996, amending Form 8-K dated
March 1, 1996, and reporting under Item 2 the acquisition of a
business and filing under Item 7 financial statements, pro forma
financial information and exhibits.
<PAGE>
SIGNATURES
-------------
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Kuhlman Corporation
---------------------------------------
(Registrant)
/s/ Robert S. Jepson, Jr.
---------------------------------------
Robert S. Jepson, Jr.
Chairman and Chief Executive Officer
/s/ Vernon J. Nagel
---------------------------------------
Vernon J. Nagel
Executive Vice President of Finance,
Chief Financial Officer and Treasurer
Date: August 12, 1996
-----------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE KUHLMAN JUNE 1996 CONSOLIDATED BALANCE SHEET AND THE STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 2,950
<SECURITIES> 0
<RECEIVABLES> 63,725
<ALLOWANCES> 1,886
<INVENTORY> 50,416
<CURRENT-ASSETS> 125,585
<PP&E> 165,187
<DEPRECIATION> 89,302
<TOTAL-ASSETS> 262,950
<CURRENT-LIABILITIES> 73,544
<BONDS> 98,042
0
0
<COMMON> 13,440
<OTHER-SE> 65,853
<TOTAL-LIABILITY-AND-EQUITY> 262,950
<SALES> 215,657
<TOTAL-REVENUES> 215,657
<CGS> 170,469
<TOTAL-COSTS> 170,469
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 293
<INTEREST-EXPENSE> 3,583
<INCOME-PRETAX> 12,116
<INCOME-TAX> 4,966
<INCOME-CONTINUING> 7,150
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,150
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.52
</TABLE>
