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 March 31, 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 April 30, 1996
----- -----------------------------
Common Stock, $1.00 Par Value 13,253,269
- -------------------------------------------------------------------------------
<PAGE>
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1996 1995
--------- ---------
(Unaudited)
(In thousands, except per share data)
<S> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . $ 103,457 $ 106,926
Cost of goods sold . . . . . . . . . . . . . 81,993 86,213
--------- ---------
Gross profit . . . . . . . . . . . . . . . . 21,464 20,713
Selling, engineering, general and
administrative expenses . . . . . . . . . 13,722 13,522
--------- ---------
Operating profit . . . . . . . . . . . . . . 7,742 7,191
--------- ---------
Other income(expense):
Interest expense, net . . . . . . . . . . (1,563) (1,856)
Other, net. . . . . . . . . . . . . . . . (437) 559
--------- ---------
Total other income(expense), net. . . . (2,000) (1,297)
--------- ---------
Income before taxes. . . . . . . . . . . . . 5,742 5,894
Taxes on income. . . . . . . . . . . . . . . 2,324 2,346
--------- ---------
Net income . . . . . . . . . . . . . . . . . $ 3,418 $ 3,548
========= =========
Per share amounts:
Net income - primary. . . . . . . . . . . $ 0.26 $ 0.27
========= =========
Net income - fully diluted. . . . . . . . $ 0.25 $ 0.27
========= =========
Average shares outstanding - primary . . . . 13,181 13,130
========= =========
Average shares outstanding - fully diluted . 13,656 13,130
========= =========
</TABLE>
The Notes To Consolidated Financial Statements
should be read in conjunction with these statements.
<PAGE>
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------- -----------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . $ 998 $ 581
Accounts receivable, less reserves of
$1,765 and $1,442 at March 31, 1996
and December 31, 1995, respectively . . . 64,693 55,753
Inventories . . . . . . . . . . . . . . . . 50,263 41,833
Deferred income taxes . . . . . . . . . . . 6,094 4,901
Prepaid expenses and other current assets . 2,700 3,535
--------- ---------
Total current assets . . . . . . . . . . 124,748 106,603
--------- ---------
Plant and equipment, at cost:
Land, buildings and leasehold improvements. 41,246 37,077
Machinery and equipment . . . . . . . . . . 118,381 111,175
Construction in progress . . . . . . . . . 2,879 2,241
--------- ---------
162,506 150,493
Less - accumulated depreciation . . . . . . (86,711) (84,244)
--------- ---------
75,795 66,249
--------- ---------
Intangible assets, net of amortization of
$3,006 and $2,672 at March 31, 1996 and
December 31, 1995, respectively . . . . . . 56,189 37,201
--------- ---------
Other assets . . . . . . . . . . . . . . . . . 4,670 4,849
--------- ---------
$ 261,402 $ 214,902
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt . . . . . $ 12,666 $ 10,522
Accounts payable . . . . . . . . . . . . . 36,211 28,542
Accrued liabilities . . . . . . . . . . . . 33,871 28,357
--------- ---------
Total current liabilities . . . . . . . . 82,748 67,421
--------- ---------
Bank debt. . . . . . . . . . . . . . . . . . . 84,085 60,217
Other long-term debt . . . . . . . . . . . . . 5,588 3,436
--------- ---------
Total long-term debt. . . . . . . . . . . . 89,673 63,653
--------- ---------
Accrued postretirement benefits . . . . . . . 8,403 8,462
--------- ---------
Other long-term liabilities. . . . . . . . . . 5,085 1,134
--------- ---------
Total liabilities . . . . . . . . . . . . 185,909 140,670
--------- ---------
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 13,273 shares at
March 31, 1996 and 13,240 at December
31, 1995, respectively. . . . . . . . . . 13,273 13,240
Additional paid-in capital . . . . . . . . 26,246 26,217
Retained earnings . . . . . . . . . . . . . 39,427 37,988
Foreign currency translation adjustments. . (2,151) (1,911)
Minimum pension liability . . . . . . . . . (382) (382)
--------- ---------
76,413 75,152
Less - treasury shares at cost (72 shares
at March 31, 1996 and December 31, 1995). (920) (920)
--------- ---------
Total shareholders' equity . . . . . . . 75,493 74,232
--------- ---------
$ 261,402 $ 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>
Three Months Ended
March 31,
---------------------
1996 1995
--------- ---------
(Unaudited)
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . $ 3,418 $ 3,548
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization . . . . . . . . 3,026 3,071
Deferred income taxes, net. . . . . . . . . . 708 1,222
Provision for losses on accounts receivable . 138 97
Other, net. . . . . . . . . . . . . . . . . . (200) (541)
Changes in operating assets and liabilities: (1)
Accounts receivable . . . . . . . . . . . . (1,487) (6,285)
Inventories . . . . . . . . . . . . . . . . (2,340) (1,986)
Prepaid expenses and other current assets . 863 2,686
Accounts payable. . . . . . . . . . . . . . 5,530 2,776
Accrued liabilities . . . . . . . . . . . . 1,254 (265)
-------- --------
Net cash provided by operating
activities . . . . . . . . . . . . . . 10,910 4,323
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . (1,753) (2,384)
Acquisitions, net of cash acquired. . . . . . (31,826) ---
Proceeds from the sale of assets. . . . . . . --- 75
-------- --------
Net cash used by investing activities . . . (33,579) (2,309)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in revolving loan facility . . . . (10,452) (1,921)
Proceeds from issuance of long-term debt. . . 36,020 ---
Repayments of long-term debt . . . . . . . . (664) (31)
Dividends paid . . . . . . . . . . . . . . . (1,975) (922)
Stock options exercised and other . . . . . . 62 628
-------- --------
Net cash provided (used) by financing
activities. . . . . . . . . . . . . . . . 22,991 (2,246)
-------- --------
Effect of exchange rate changes on cash. . . . . 95 83
-------- --------
Net increase (decrease) in cash and cash
equivalents. . . . . . . . . . . . . . . . . . 417 (149)
Cash and cash equivalents at beginning
of period. . . . . . . . . . . . . . . . . . . 581 3,036
-------- --------
Cash and cash equivalents at end of period. . $ 998 $ 2,887
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . $ 1,483 $ 1,439
======== ========
Income taxes, net of refunds . . . . . . . . $ (580) $ (1,152)
======== ========
</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 Three Months Ended March 31, 1996
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Foreign
Additional Currency Minimum
Common Paid-in Retained Translation Pension Treasury
Stock Capital Earnings Adjustment Liability Stock Total
------ ------- -------- ---------- --------- -------- -------
<C> <S> <S> <S> <S> <S> <S> <S>
Balance at
December 31,
1995 . . . $13,240 $26,217 $ 37,988 $ (1,911) $ (382) $ (920) $ 74,232
------- ------- -------- -------- ------- ------ --------
Net income . . --- --- 3,418 --- --- --- 3,418
Cash dividends
declared ($0.15
per share) . --- --- (1,979) --- --- --- (1,979)
Foreign currency
translation
adjustment . --- --- --- (240) --- --- (240)
Stock options
exercised
and other. . 33 29 --- --- --- --- 62
------- ------- -------- -------- ------ ------ --------
Balance at
March 31,
1996 . . . . $13,273 $26,246 $ 39,427 $ (2,151) $ (382) $ (920) $ 75,493
======= ======= ======== ======== ====== ====== ========
</TABLE>
The Notes To Consolidated Financial Statements
should be read in conjunction with these statements.
<PAGE>
KUHLMAN CORPORATION AND SUBSIDIARIES
--------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 1996
(Unaudited)
1. Consolidated Financial Statements
The consolidated balance sheet at March 31, 1996 and the related
consolidated statements of income, cash flows and shareholders' equity for
the three months ended March 31, 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 March 31, 1996
and the results of operations and cash flows for three months ended March 31,
1996 and 1995, have been made. On May 31, 1995, the Company merged Schwitzer,
Inc. ("Schwitzer") with a wholly-owned subsidiary of the Company. The merger
was accounted for as a pooling of interests. The financial statements for all
periods have been restated to present the combined balance sheet and results of
operations of both companies as if the merger had been in effect for all
periods presented. Certain amounts in the 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 Form 10-K.
The results of operations for the three months ended March 31, 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, 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. A total of 2,291,800 shares were tendered through
that date. The Company previously owned 315,703 shares of CCI. The shares
tendered were purchased on February 21, 1996 and resulted in the Company
owning approximately 82% of the total shares outstanding. Subsequent to
February 21, 1996, CCI redeemed a portion of the remaining outstanding
shares, pursuant to the North Carolina Control Share Acquisition Act, and the
Company's ownership in CCI increased to approximately 92% of the total shares
outstanding as of March 31, 1996 at an aggregate cost of approximately
$40,404,000. The Company plans to purchase the remaining CCI shares
outstanding as soon as practicable. 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 minority interest of approximately $1,862,000 is not
material to the financial position of the Company and is included in other
long-term liabilities as of March 31, 1996. 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 as if it had occurred at the
beginning of each period. The pro forma information combines the results of
the Company, reported on a calendar year basis, with those for CCI's fiscal
year ended October 31, 1995 and first quarters ended January 31, 1996 and 1995.
In thousands, except per share data
<TABLE>
<CAPTION>
Year Ended Quarter Ended March 31,
December 31, --------------------------
1995 1996 1995
--------- --------- ----------
<S> <C> <C> <C>
Net sales $ 479,610 $ 112,794 $ 118,997
Net income before extraordinary item $ 10,237 $ 3,440 $ 3,302
Net income $ 8,376 $ 3,440 $ 3,302
Fully diluted per share amounts:
Net income before extraordinary item $ 0.78 $ 0.25 $ 0.25
Net income $ 0.64 $ 0.25 $ 0.25
</TABLE>
The unaudited pro forma information assumes that the Company purchased
100% of 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 been consummated as
of that time.
3. Merger
On May 31, 1995, the Corporation merged Schwitzer, a New York Stock
Exchange listed company, with a wholly-owned subsidiary of the Company.
The merger was accounted for under the pooling of interests method of
accounting. As provided for in the merger agreement, each share of
Schwitzer common stock was converted into 0.9615 share of the Company's
common stock, resulting in the company issuing 6,980,000 shares of stock.
In accordance with the pooling of interests method of accounting, the
Company's financial statements have been restated for all periods
presented to include the results of Schwitzer. Net sales and net income
for the Company and Schwitzer for the quarter ended March 31, 1995, prior
to restatement, are presented below, in thousands:
<TABLE>
<S> <C>
- ----------------------------------------------------------------
The Company
Net sales $ 61,031
Net income 715
- ----------------------------------------------------------------
Schwitzer
Net sales $ 45,895
Net income 2,833
- ----------------------------------------------------------------
Combined
Net sales $ 106,926
Net income 3,548
</TABLE>
4. Earnings and Dividends Per Share
Earnings per share in the accompanying consolidated statements of
income for the three months ended March 31, 1996 and 1995 have been
computed based on the weighted average number of common stock and common
stock equivalents, if any, outstanding throughout the period. Under the
primary earnings per share calculation, there was no materially dilutive
effect of common stock equivalents for the respective periods. The 475,000
common stock equivalents used in the fully dilutive calculation for the
three months ended March 31, 1996 are based on the market price of the
Company's common stock on March 31, 1996. 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 quarters of 1996 and 1995, excluding the effect of the merger with
Schwitzer during 1995.
5. Inventories
Inventories consisted of the following, in thousands:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ---------
(unaudited)
<S> <C> <C>
FIFO cost:
Raw materials $ 22,013 $ 20,630
Work-in-process 11,921 7,359
Finished goods 18,343 16,276
--------- ---------
Total 52,277 44,265
Excess of FIFO
over LIFO cost (2,014) (2,432)
--------- ---------
Net inventories $ 50,263 $ 41,833
========= ==========
</TABLE>
6. Long-Lived Assets
On January 1, 1996, the Company adopted 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. Adoption of this provision did not materially affect the
financial position or results of operations of the Company.
7. Change of Control Agreements
The Company modified its existing severance policy for its officers to
include change of control agreements ("Control Agreements") as of February
20, 1996. Under the Control Agreements, upon a change of control, as
defined, each such officer would be entitled to receive, among other things,
three times his current annual pay, three times his highest cash bonus in
the past three years, and the payment of the value of any stock options and
stock appreciation rights. Each of the aforementioned would be adjusted
for any resulting income or excise tax liabilities to the officer. These
Control Agreements are subject to amendment or waiver by the Company's
Board of Directors prior to any change in control, as defined. Although
the aggregate commitment of the Company pursuant to the Control Agreements
cannot be specifically determined until the occurrence of such change of
control event, such payments could have a material effect on the
consolidated financial position and results of operations of the Company.
The Control Agreements are designed to encourage the continuity of
management in view of the possibility of a change of control. The Control
Agreements were not entered into in response to any specific action to
acquire control of the Company, and the Company is not aware of any such
action.
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. A total of 2,291,800 shares were tendered through
that date. The Company previously owned 315,703 shares of CCI. As of
March 31, 1996, the Company owned approximately 92% of all CCI shares
outstanding at an aggregate total cost of approximately $40,404,000. The
Company intends 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. 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.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated a record $10,910,000 in cash flow from operations in
the first quarter of 1996 compared to $4,323,000 for the same period in 1995,
an increase of $6,587,000 (152%). The improvement was due primarily to the
better utilization of working capital throughout the period. Working capital
(net of cash) was $41,002,000 at March 31, 1996 compared to $38,601,000
at December 31, 1995, an increase of $2,401,000 (6%). The increase was
due primarily to the addition of CCI, partially offset by higher accounts
payable at March 31, 1996. Cash and cash equivalents were $998,000 at
March 31, 1996 compared to $581,000 at December 31, 1995. Accounts
receivable, net increased $8,940,000 (16%) to $64,693,000 at March 31, 1996
from the end of 1995 primarily because of the acquisition of CCI.
Similarly, inventories increased $8,430,000 (20%) to $50,263,000 at
March 31, 1996 from December 31, 1995 due to the inclusion of CCI and
because of higher anticipated sales activity in the Electrical Products
Segment primarily for medium power transformers. Prepaid expenses and other
current assets increased nominally to $8,794,000 at March 31, 1996 from
$8,436,000 at the end of 1995. Accounts payable and accrued expenses
increased $13,183,000 (23%) to $70,082,000 at March 31, 1996 from
December 31, 1995 due primarily to the addition of CCI and higher accounts
payable to vendors caused in part by the greater level of inventories noted
above. Total debt outstanding was $102,339,000 at the end of the first
quarter, up $28,164,000 from December 31, 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 from operations in the first quarter of 1996.
The Company increased its current bank loan facility by $40,000,000
primarily to fund the acquisition of CCI. In addition, the Company assumed
approximately $2,493,000 of existing CCI debt as part of the acquisition.
Capital expenditures for the first three months of 1996 were $1,753,000
compared to $2,384,000 reported in the same period last year. Expenditures
in the first quarter of 1996 were primarily for normal replacements and
additions to machinery and equipment.
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
March 31,
-----------------------
1996 1995
--------- ---------
(unaudited)
<S> <C> <C>
Net sales:
Electrical $ 57,449 $ 58,655
Industrial 46,008 48,271
--------- ---------
$ 103,457 $ 106,926
========= =========
Income before taxes:
Electrical $ 3,397 $ 2,443
Industrial 5,104 5,877
--------- ---------
Operating earnings(1) 8,501 8,320
Corporate (1,196) (882)
Interest expense, net (1,563) (1,856)
Unallocated --- 312
--------- ---------
$ 5,742 $ 5,894
========= =========
</TABLE>
(1) Operating earnings is defined as Operating Profit plus
Other, net directly attributable to each segment.
Three Months Ended March 31, 1996 and 1995
The Company posted a record first quarter operating profit in 1996 on
lower net sales when compared to the same period in 1995. Operating profit
increased approximately 8% while net sales declined approximately 3%. The
increase in operating profit was primarily attributable to the positive
performance of the Company's Electrical Products Segment.
Net sales were $103,457,000 in the first quarter of 1996 compared to
$106,926,000 reported for the same period in 1995, a decline of $3,469,000
(3%). Net sales in the Electrical and Industrial Products Segments were
lower in the first quarter of 1996 when compared to the same period in 1995 by
2% and 5%, respectively. The decline in net sales in the Electrical Products
Segment was due primarily to the sale of Nehring Electrical Works Company,
("Nehring") a subsidiary of Coleman Cable, completed in the fourth quarter of
1995, partially offset by the inclusion of the results of CCI since the date
of acquisition by the Company. Excluding the impact of both Nehring and CCI,
net sales in the first quarter of 1996 for the Electrical Products Segment
increased by $5,489,000 (12%) when compared to the first quarter of 1995.
The increase was due primarily to record sales of medium power transformers
and higher shipments of certain wire and cable products to electrical
distributors and original equipment customers. In the Industrial Products
Segment, the decline in net sales was due primarily to lower shipments of
turbochargers in Brazil reflecting the soft economic conditions in that
country. In addition, the Company's consolidated backlog increased
$1,707,000 (2%) to $103,007,000 at March 31, 1996 from the backlog at the
end of 1995. The increase was attributable to the acquisition of CCI during
the quarter, partially offset by strong shipments of medium power transformer
units in the Electrical Products Segment and slower incoming orders in certain
international operations of the Company's Industrial Products Segment.
Operating profit for the first quarter of 1996 was $7,742,000 compared to
$7,191,000 reported for the same period in 1995, an increase of $551,000
(8%). Consolidated operating profit margins in the first quarter of 1996
matched the Company's previous record high of 7.5% of net sales while
exceeding the 6.7% reported in the first quarter of 1995. The increase in
consolidated operating profit and operating profit margins occurred
primarily in the Electrical Products Segment due to the strong turnaround
in the operating performance at Kuhlman Electric, which reported its highest
quarterly profit since 1992. Operating earnings in the Electrical Products
Segment, increased $954,000 (39%) to $3,397,000 in the first quarter of 1996
compared to the same period in 1995. The increase was due primarily to the
improved level of operating performance at Kuhlman Electric, while Coleman
Cable maintained its operating earnings on lower sales because of improved
margins on certain wire and cable products. In the Industrial Products
Segment, operating earnings declined $773,000 (13%) to $5,104,000 for the
first three months of 1996 compared to $5,877,000 reported in the first
quarter of 1995. Operating earnings in the first quarter of 1995 for the
Industrial Products Segment included approximately $435,000 in non-recurring
income primarily related to royalties. Excluding the impact of the
non-recurring income, operating earnings in the Industrial Products Segment
declined nominally because of the lower sales noted above. Overall,
operating expenses increased minimally while net sales declined 3%.
Operating expenses as a percentage of net sales were 13.3% in the first
quarter of 1996 compared to 12.6% reported in the year ago period. The
increase in operating expenses as a percentage of sales was due to the sale of
Nehring which had substantially lower operating expenses than the overall
average.
Interest expense, net in the first quarter of 1996 was $1,563,000 compared
to $1,856,000 for the same period in 1995, a decrease of 293,000 (16%).
The decrease in interest expense was due to lower average debt outstanding
and lower interest rates throughout the period. Other, net in the first
quarter of 1996 was an expense of $437,000 compared to income of $559,000
reported in the same period in 1995. Other, net was benefited in the first
quarter of 1995 by certain miscellaneous income including the payment on a
covenant not to compete which was not present in the same quarter in 1996.
The covenant not to compete, which paid the Company approximately $1,250,000
per year, expired in the second quarter of 1995.
Kuhlman Corporation reported net income for the first quarter of 1995 of
$3,418,000 or primary earnings of $0.26 per share as compared to $3,548,000
or $0.27 per share in the first quarter of 1995. Net income for the first
quarter of 1995 was benefitted by approximately $700,000 or $0.05 per share
principally from the covenant not to compete and other miscellaneous income
noted above which was not present in the 1996 period. On a fully diluted
basis, the Company earned $0.25 per share in the first quarter of 1995.
The Company's effective tax rate for the first quarter of 1996 and 1995 was
40.5% and 39.8%, respectively. The difference in rates was due primarily
to the change in the source of earnings between the various taxing countries.
OUTLOOK FOR 1996
Management believes that the results of the first quarter 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.
PART II. OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Offer to Purchase dated November 29, 1995 by Kuhlman
Acquisition Corp. (incorporated by reference to Exhibit
(a)(1) to Schedule 14D-1 of Kuhlman Acquisition Corp.
and Kuhlman Corporation regarding Communication Cable,
Inc. dated November 29, 1995).
2.2 Supplement dated February 1, 1996 to Offer to Purchase
dated November 29, 1995 by Kuhlman Acquisition Corp.
(incorporated by reference to Exhibit (a)(15) to
Amendment No. 4 to Schedule 14D-1 of Kuhlman
Acquisition Corp. and Kuhlman Corporation regarding
Communication Cable, Inc. dated February 1, 1996).
2.3 Letter of Transmittal to Tender Shares of Common Stock
of Communication Cable, Inc. (incorporated by reference
to Exhibit (a)(2) to Schedule 14D-1 of Kuhlman
Acquisition Corp. and Kuhlman Corporation regarding
Communication Cable, Inc. dated November 29, 1995).
10.1 Fifth Amendment to Credit Agreement dated as of
February 5, 1996 among the Registrant, NationsBank,
N.A. (South) and The Chase Manhattan Bank, N.A. as
Managing Agents (incorporated by reference to Exhibit
(b)(10) to Amendment No. 5 to Schedule 14D-1 of Kuhlman
Acquisition Corp. and Kuhlman Corporation regarding
Communication Cable, Inc. dated February 12, 1996).
10.2 Form of Change in Control Agreement dated as of
February 20, 1996.
27.0 Financial Data Schedule for the three month period
ended March 31, 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 dated March 1, 1996 reporting an acquisition of a business
under Item 2.
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: May 14, 1996
-------------------
[FORM OF]
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT between Kuhlman Corporation, a Delaware corporation
(the "Company"), and (the "Employee") is dated as of February 20, 1996 (the
"Effective Date").
W I T N E S S E T H:
WHEREAS, the Company considers it to be in the best interests of its
stockholders to encourage the continued employment of key employees of the
Company in that the continuity of competent management is essential to
protecting and enhancing the best interests of the Company and its
stockholders; and
WHEREAS, the Employee is a key employee of the Company having served
in an executive capacity at the Company thereby acquiring an intimate
knowledge of the business and affairs of the Company and having clearly
demonstrated the ability to perform valuable services for the Company; and
WHEREAS, the Company believes that the possibility of the occurrence
of a Change in Control of the Company (as that phrase is defined in
Section 2) may result in the termination of the Employee's employment by
the Company or in the distraction of the Employee from the performance of
his duties to the Company, in either case to the detriment of the Company
and its stockholders; and
WHEREAS, the Company recognizes that the Employee could suffer
adverse financial and professional consequences if a Change in Control of
the Company were to occur; and
WHEREAS, the Company wishes to enter into this Agreement to protect
the Employee if a Change in Control of the Company occurs, thereby
encouraging the Employee to remain in the employ of the Company and not
be distracted from the performance of his duties to the Company;
NOW, THEREFORE, the parties agree as follows:
Section 1. Other Employment Arrangements. Except as provided in
Section 10, this Agreement does not affect the Employee's existing or
future employment arrangements with the Company. The Employee's employment
by the Company shall continue to be at the will of the Company. If a Change
in Control of the Company shall occur before the expiration of the term of
this Agreement, then, whether or not the Employee's employment by the
Company shall at any time be terminated, the Employee shall be entitled to
receive the benefits provided for in this Agreement. This Agreement
therefore modifies the current executive Severance Policy of the Company
in the context of a Change in Control of the Company.
Section 2. Change in Control of the Company. A "Change in Control
of the Company" shall have occurred if, after the Effective Date, (i) any
person (within the meaning of Section 13(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) other than the Company or an
Affiliate shall become the beneficial owner (as that term is defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of 20 percent
or more of the outstanding Voting Stock (such person's beneficial ownership
to be determined, in the case of rights to acquire Voting Stock, pursuant
to paragraph (d) of Rule 13d-3 under the Exchange Act) or (ii) the
stockholders of the Company shall approve (w) a merger or consolidation of
the Company with or into any person other than an Affiliate, (x) any sale,
lease, exchange or other transfer of all or substantially all the assets of
the Company to any person other than an Affiliate or (y) the dissolution of
the Company.
Section 3. Term of this Agreement. The term of this Agreement shall
begin on the Effective Date and, unless extended pursuant to the second
sentence of this Section or terminated pursuant to the third sentence of this
Section, shall expire at the end of the three-year period beginning on the
Effective Date (the "Expiration Date"). If the Company shall not have given
written notice to the Employee at least 45 days before the Expiration Date
that the term of this Agreement will expire on the Expiration Date, then the
term of this Agreement shall be extended automatically for successive
one-year periods (the first such period to begin on the day immediately
following the Expiration Date) unless and until the Company shall give
written notice to the Employee at least 45 days before the end of any
one-year period for which the term of this Agreement shall have been
extended that such term will expire at the end of such one-year period,
whereupon the term of this Agreement shall expire at the end of such
one-year period. This Agreement shall in any event expire upon the
termination by the Employee or the Company of the Employee's employment by
the Company, unless there has been a Change in Control of the Company.
Section 4. Benefits Payable on Change in Control. If a Change in
Control of the Company shall occur before the expiration of the term of this
Agreement, then the Employee shall be entitled to the following benefits:
(i) the Company shall pay to the Employee, as a lump sum, an
amount equal to the sum of:
(A) three times the amount of the Employee's annual base
salary as in effect on the date of occurrence of the Change in
Control of the Company (the "Change in Control Date"), plus
(B) three times the amount of the largest annual cash
bonus paid or payable by the Company to the Employee for services
rendered during any one of the three most recent fiscal years of
the Company, regardless of when such bonus may have been paid or
payable, plus
(C) the amount, if positive, equal to the aggregate spread
between the exercise prices of all outstanding unexercised options
to purchase shares of the Company's capital stock ("Shares") and
other rights whose value derives from the value of Shares
(including, without limitation, "cash-only" stock appreciation
rights), which options or rights had been issued by the Company
and are held by the Employee on the Change in Control Date, whether
or not enough time had elapsed from the date of grant of such
options or rights so as to make them fully exercisable or vested
on the Change in Control Date, and the higher of
(1) the closing price of the Shares as reported on the
New York Stock Exchange or in the over-the-counter market,
as the case may be, on the Change in Control Date, or
(2) the highest price per Share actually paid in
connection with the Change in Control of the Company, plus
(D) an additional amount equal to the aggregate of any and
all federal, state and local income tax and excise tax liabilities
of the Employee resulting from the payments due pursuant to clauses
(A), (B), (C) and (D) hereof; and
(ii) the Company (at its sole expense) shall take the following
actions:
(A) throughout the three-year period immediately following
the Change in Control Date (the "Relevant Period"), the Company
shall maintain in effect, and not materially reduce the benefits
provided by, each of the Benefit Plans; and
(B) the Company shall arrange for the Employee's
uninterrupted participation throughout the Relevant Period in
each of the Benefit Plans, provided that, if the Employee's
participation in any Benefit Plan is not permitted by its terms,
then, throughout the Relevant Period, the Company (at its sole
expense) shall provide the Employee with substantially the same
benefits as were provided to the Employee pursuant to such Benefit
Plan on the Change in Control Date.
Each payment required to be made to the Employee pursuant to the foregoing
provisions of this Section shall be made by check drawn on an account of
the Company at a bank located in the United States of America and shall be
paid not more than 10 days after the Change in Control Date. Upon payment in
full to the Employee of all amounts due under subsection (i) of this Section,
all of the options and other rights referred to in clause (C) of such
subsection as to which payment has been made shall be automatically cancelled.
Section 5. Notices. Notices required or permitted to be given by
either party pursuant to this Agreement shall be in writing and shall be
deemed to have been given when delivered personally to the other party or
when deposited with the United States Postal Service as registered mail with
postage prepaid and addressed:
(i) if to the Employee, at the Employee's address last shown
on the Company's records, and
(ii) if to the Company, at 3 Skidaway Village Square, Savannah,
Georgia 31411, directed to the attention of the Chief Executive Officer;
or, in either case, to such other address as the party to whom or to which
such notice is to be given shall have specified by notice given to the other
party.
Section 6. Withholding Taxes. The Company may withhold from all
payments to be paid to the Employee pursuant to this Agreement all taxes
that, by applicable federal, state or local law, the Company is required
to so withhold.
Section 7. Expenses of Enforcement. Upon demand by the Employee
made to the Company, the Company shall reimburse the Employee for all
reasonable expenses (including legal fees and expenses) incurred by the
Employee in enforcing or seeking to enforce the payment of any amount or
other benefit to which the Employee shall become entitled pursuant to this
Agreement.
Section 8. Employment by Subsidiaries. If, at the Effective Date,
the Employee is an employee of a subsidiary of the Company, then references
in this Agreement to the Employee's employment by the Company shall be
understood as references to the Employee's employment by the subsidiary.
Section 9. No Obligation to Mitigate. The Employee shall not be
required to mitigate the amount of any payment or other benefit required
to be paid to the Employee pursuant to this Agreement, whether by seeking
other employment or otherwise, nor shall the amount of any such payment or
other benefit be reduced on account of any compensation earned by the
Employee as a result of employment by another person.
Section 10. Confidential Information. From the Effective Date until
the expiration of the term of this Agreement, the Employee shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses, that shall have been
obtained by the Employee during the Employee's employment by the Company or
any of its affiliated companies and that shall not have become public
knowledge (other than as a result of acts by the Employee in violation of
this Section). The Company shall not withhold or reduce any amount or
other benefit payable to the Employee pursuant to the terms of this
Agreement, or otherwise, on the ground that the Employee has breached or
threatened to breach the foregoing provisions of this Section; the sole
remedy of the Company for a breach or anticipated breach of such provisions
shall be injunctive relief.
Section 11. Amendment and Waiver. The Company, acting through the
Board of Directors, may amend or waive any or all of the Company's
obligations set forth in Section 4 at any time prior to the occurrence of
a Change in Control of the Company. Otherwise, no provision of this Agreement
may be amended or waived other than by written instrument signed by both
parties. No waiver by either party of any breach of this Agreement shall
be considered a waiver of any other or subsequent breach.
Section 12. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Georgia.
Section 13. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force
and effect.
Section 14. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which
together will constitute the same instrument.
Section 15. Assignment. This Agreement shall inure to the benefit
of and be enforceable by the Employee's legal representative. The
Company may not assign any of its obligations under this Agreement unless
such assignment is to a person with or into which the Company shall have
been merged or consolidated or to which the Company shall have transferred
its assets as an entirety or substantially as an entirety.
Section 16. Interpretation.
(a) In the event of the enactment of any successor
provision to any statute or rule cited in this Agreement,
references in this Agreement to such statute or rule shall be to
such successor provision. The headings of Sections of this
Agreement shall not control the meaning or interpretation of this
Agreement. References in this Agreement to any Section are to
the corresponding Section of this Agreement unless the context
otherwise indicates.
(b) As used in this Agreement, the following terms have the
meanings indicated:
(i) "Affiliate" means any person who is, at the date hereof,
controlling or controlled by, or under common control with, the Company.
(ii) "Benefit Plans" means all of the Company's employee benefit
plans, including life insurance and medical, dental, health, accident
and disability plans, in which the Employee was a participant on the
Change in Control Date.
(iii) "Board of Directors" means the Board of Directors of the
Company or any duly authorized committee thereof.
(iv) "Company" has the meaning assigned to such term in the
recitals to this Agreement and shall include any person with or into
which such person shall have been merged or consolidated or to which
such person shall have transferred its assets as an entirety or
substantially as an entirety.
(v) The term "person" means any individual, corporation,
partnership, joint venture, association, joint-stock company, limited
partnership, limited liability company, trust, unincorporated
organization, government or agency or political subdivision of any
government. When the context of this Agreement so indicates, such term
also has the meaning assigned to it in Section 13(d) of the Exchange
Act.
(vi) The term "this Agreement" means this Change of Control
Agreement as it may be amended from time to time in accordance with
Section 11.
(vii) "Voting Stock" means shares of capital stock of the Company
the holders of which are entitled to vote for the election of
directors of the Company, but excluding shares entitled to vote only
upon the occurrence of a contingency unless that contingency shall
have occurred.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the Effective Date.
KUHLMAN CORPORATION Approved:
By: By:
---------------------------- ---------------------------
Robert D. Kilpatrick
Chairman, Compensation Committee of
the Board of Directors
THE EMPLOYEE:
(L.S.)
- -------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE KUHLMAN MARCH 1996 CONSOLIDATED BALANCE SHEET AND THE STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 998
<SECURITIES> 0
<RECEIVABLES> 66,458
<ALLOWANCES> 1,765
<INVENTORY> 50,263
<CURRENT-ASSETS> 124,748
<PP&E> 162,506
<DEPRECIATION> 86,711
<TOTAL-ASSETS> 261,402
<CURRENT-LIABILITIES> 82,748
<BONDS> 89,673
<COMMON> 13,273
0
0
<OTHER-SE> 62,220
<TOTAL-LIABILITY-AND-EQUITY> 261,402
<SALES> 103,457
<TOTAL-REVENUES> 103,457
<CGS> 81,993
<TOTAL-COSTS> 81,993
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 138
<INTEREST-EXPENSE> 1,563
<INCOME-PRETAX> 5,742
<INCOME-TAX> 2,324
<INCOME-CONTINUING> 3,418
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,418
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.25
</TABLE>
