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 September 30, 1997
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 October 29, 1997
----- -------------------------------
Common Stock, $1.00 Par Value 16,484,704
<PAGE>
ITEM 1.
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(Unaudited)
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . $ 164,364 $ 119,198 $ 468,733 $ 334,855
Cost of goods sold . . . . . . . . 125,230 91,934 361,343 262,403
--------- --------- --------- ---------
Gross profit . . . . . . . . . . . 39,134 27,264 107,390 72,452
Selling, engineering, general
and administrative expenses. . . 23,893 16,023 66,670 44,967
--------- --------- --------- ---------
Operating profit . . . . . . . . . 15,241 11,241 40,720 27,485
--------- --------- --------- ---------
Other income(expense):
Interest expense, net . . . (1,882) (1,815) (6,848) (5,150)
Other, net. . . . . . . . . (637) (650) (1,340) (1,443)
--------- --------- --------- ---------
Total other
income(expense), net . (2,519) (2,465) (8,188) (6,593)
--------- --------- --------- ---------
Income before taxes. . . . . . . . 12,722 8,776 32,532 20,892
Taxes on income. . . . . . . . . . 5,049 3,647 13,168 8,613
--------- --------- --------- ---------
Net income . . . . . . . . . . . . $ 7,673 $ 5,129 $ 19,364 $ 12,279
========= ========= ========= =========
Per share amounts:
Net income - primary . . . . . $ 0.45 $ 0.37 $ 1.25 $ 0.90
========= ========= ========= =========
Net income - fully diluted . . $ 0.45 $ 0.37 $ 1.24 $ 0.89
========= ========= ========= =========
Average shares outstanding:
Primary . . . . . . . . . . . 17,133 13,829 15,464 13,614
========= ========= ========= =========
Fully diluted. . . . . . . . . 17,225 13,838 15,626 13,872
========= ========= ========= =========
</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>
September 30, December 31,
1997 1996
---------- ----------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . $ 7,396 $ 2,209
Accounts receivable, less reserves of $3,689
and $2,344 at September 30, 1997 and
December 31, 1996, respectively . . . . . . . 97,718 70,079
Inventories . . . . . . . . . . . . . . . . . . 63,514 52,530
Deferred income taxes. . . . . . . . . . . . . . 8,505 7,810
Prepaid expenses and other current assets. . . . 5,532 3,502
---------- ----------
Total current assets . . . . . . . . . . . 182,665 136,130
---------- ----------
Plant and equipment, at cost:
Land, buildings and leasehold improvements . . . 51,396 42,213
Machinery and equipment . . . . . . . . . . . . 159,939 122,655
Construction in progress . . . . . . . . . . . . 8,433 2,825
---------- ----------
219,768 167,693
Less - accumulated depreciation . . . . . . . . (100,914) (89,829)
---------- ----------
118,854 77,864
---------- ----------
Intangible assets, net of amortization
of $6,550 and $4,441 at September 30,
1997 and December 31, 1996, respectively . . . . 107,221 58,326
---------- ----------
Other assets . . . . . . . . . . . . . . . . . . . 11,477 5,096
---------- ----------
$ 420,217 $ 277,416
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt. . . . . . . . $ 956 $ 2,295
Accounts payable . . . . . . . . . . . . . . . . 48,445 35,410
Accrued liabilities. . . . . . . . . . . . . . . 72,613 43,833
---------- ----------
Total current liabilities . . . . . . . . . 122,014 81,538
---------- ----------
Bank debt . . . . . . . . . . . . . . . . . . . . . 97,757 87,764
Other long-term debt . . . . . . . . . . . . . . . 4,073 4,538
---------- ----------
Total long-term debt . . . . . . . . . . . . . . 101,830 92,302
---------- ----------
Accrued postretirement benefits . . . . . . . . . . 18,891 8,859
---------- ----------
Other long-term liabilities . . . . . . . . . . . . 10,344 3,143
---------- ----------
Total liabilities . . . . . . . . . . . . . 253,079 185,842
---------- ----------
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 16,553 shares at
September 30, 1997 and 13,803 at
December 31, 1996, respectively . . . . . . . 16,553 13,803
Additional paid-in capital . . . . . . . . . . . 102,169 32,749
Retained earnings . . . . . . . . . . . . . . . 51,691 47,272
Foreign currency translation adjustments . . . . (1,665) (640)
Minimum pension liability . . . . . . . . . . . (690) (690)
---------- ----------
168,058 92,494
Less - treasury shares at cost(72
shares at September 30, 1997
and December 31, 1996) . . . . . . . . . . . (920) (920)
---------- ----------
Total shareholders' equity . . . . . . . . 167,138 91,574
---------- ----------
$ 420,217 $ 277,416
========== ==========
</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>
Nine Months Ended
September 30,
-------------------
1997 1996
--------- --------
(Unaudited)
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 19,364 $ 12,279
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . 14,759 9,578
Deferred income taxes, net . . . . . . . . . . . . 867 1,837
Provision for losses on accounts receivable . . . 322 445
Other, net . . . . . . . . . . . . . . . . . . . . 2,141 (487)
Changes in operating assets and liabilities: (1)
Accounts receivable . . . . . . . . . . . . . . (9,020) (5,398)
Inventories . . . . . . . . . . . . . . . . . . 1,667 (6,160)
Prepaid expenses and other current assets . . . (1,410) 1,358
Accounts payable. . . . . . . . . . . . . . . . 5,666 5,017
Accrued liabilities . . . . . . . . . . . . . . 6,939 5,820
--------- --------
Net cash provided by operating activities. . 41,295 24,289
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . . (13,317) (7,405)
Acquisitions, net of cash acquired . . . . . . . . (85,375) (35,097)
Proceeds from the sale of assets . . . . . . . . . 395 103
--------- --------
Net cash used by investing activities. . . . (98,297) (42,399)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in revolving loan facility . . . . . . (80,824) (14,736)
Proceeds from issuance of long-term debt . . . . . 90,000 39,435
Repayments of long-term debt . . . . . . . . . . . (1,668) (1,085)
Dividends paid . . . . . . . . . . . . . . . . . . (6,204) (5,958)
Stock offering proceeds, net of expenses . . . . . 68,187 ---
Redemption of warrants . . . . . . . . . . . . . . (9,139) ---
Stock options exercised . . . . . . . . . . . . . 2,309 1,911
Other. . . . . . . . . . . . . . . . . . . . . . . (12) (525)
--------- --------
Net cash provided by financing activities . . . 62,649 19,042
--------- --------
Effect of exchange rate changes on cash. . . . . . . . . (460) 183
--------- --------
Net increase in cash and cash equivalents . . . . . . . 5,187 1,115
Cash and cash equivalents at beginning of period . . . . 2,209 581
--------- --------
Cash and cash equivalents at end of period . . . . $ 7,396 $ 1,696
========= ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . $ 7,168 $ 4,505
========= ========
Income taxes, net of refunds . . . . . . . . . . . $ 8,574 $ 5,229
========= ========
</TABLE>
(1) Net of the effects of acquisitions, 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 Nine Months Ended September 30, 1997
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Foreign
Additional Currency Minimum
Common Paid-in Retained Translation Pension Treasury
Stock Capital Earnings Adjustment Liability Stock Total
-------- -------- -------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
December
31, 1996...$ 13,803 $ 32,749 $ 47,272 $ (640) $ (690) $ (920) $ 91,574
Net income.. --- --- 19,364 --- --- --- 19,364
Cash dividends
declared
($0.45 per
share)..... --- --- (6,616) --- --- --- (6,616)
Foreign currency
translation
adjustment. --- --- --- (1,025) --- --- (1,025)
Stock offering
proceeds,
net of
expenses... 2,500 65,687 --- --- --- --- 68,187
Redemption of
warrants... --- (810) (8,329) --- --- --- (9,139)
Issuance
of shares
under the
Long-Term
Incentive
Plan....... 89 2,251 --- --- --- --- 2,340
Stock options
exercised
and other.. 161 2,292 --- --- --- --- 2,453
-------- --------- -------- ------- ------- ------ -----
Balance at
September
30, 1997...$ 16,553 $ 102,169 $ 51,691 $(1,665) $ (690) $ (920) $167,138
======== ========= ======== ======= ======= ====== ========
</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 Nine Months Ended September 30, 1997
(Unaudited)
1. Consolidated Financial Statements
The consolidated balance sheet at September 30, 1997 and the
related consolidated statements of income, cash flows and
shareholders' equity for the three and nine months ended
September 30, 1997 and 1996, have been prepared by Kuhlman
Corporation (the "Company" or "Kuhlman") 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 September 30, 1997 and the results of
operations, cash flows and shareholders' equity for three and
nine months ended September 30, 1997 and 1996, have been made.
Certain amounts in the 1996 consolidated financial statements
have been reclassified to conform with the 1997 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, 1996 included in the Company's annual report on Form
10-K.
The results of operations for the three and nine months ended
September 30, 1997 are not necessarily indicative of the results
to be expected for the full year 1997.
2. Acquisition of Kysor Transportation Products Group
On March 10, 1997, the Company purchased certain assets of
the Transportation Products Group ("Kysor") of Kysor Industrial
Corporation, a Michigan Corporation traded on the New York Stock
Exchange. The purchase price for Kysor was $86,000,000 in cash
plus the assumption of certain liabilities in the amount of
approximately $46,000,000 including debt of approximately
$722,000. The purchase of Kysor was financed from borrowings
under the Company's credit facility.
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 has been allocated to the assets
based on their estimated fair market value, subject to adjustment
should new or additional facts about the business become known.
The excess of the purchase price over the fair value of assets is
approximately $50,220,000, subject to future adjustments, if any.
The results of operations for Kysor are included in the
consolidated financial statements of the Company from the date of
acquisition.
The following unaudited pro forma information for the periods
shown below gives effect to the Kysor acquisition as if it had
occurred as of the beginning of each period.
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------
In thousands, except per share data 1997 1996
--------- ---------
<S> <C> <C>
Net sales $ 495,542 $ 440,701
Net income $ 20,182 $ 14,769
Fully diluted per share amounts:
Net income $ 1.29 $ 1.06
</TABLE>
The unaudited pro forma information assumes the acquisition
of the net assets 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 Kysor been consummated at the beginning of
the periods presented.
3. Earnings and Dividends Per Share
Earnings per share in the accompanying consolidated
statements of income for the three and nine months ended
September 30, 1997 and 1996 have been computed based on the
weighted average number of shares of common stock and common
stock equivalents outstanding throughout the period. Common
stock equivalents used in the primary and fully diluted per share
calculations for the three and nine months ended September 30,
1997 and 1996 are as follows:
<TABLE>
<CAPTION>
In thousands Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Primary 708 444 766 327
Fully diluted 800 453 928 585
</TABLE>
A cash dividend of $0.15 per share was declared during each
of the first three quarters of 1997 and 1996.
In March 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128"). This standard modifies
disclosure requirements for companies required to report earnings
per share ("EPS") to include presentations of Basic EPS (which
includes no dilution of common stock equivalents) and, if
applicable, Diluted EPS (which reflects the potential dilution of
common stock equivalents). The standard will not be effective
for the Company until the completion of its fourth quarter and
year end for 1997. The pro forma Basic and Diluted EPS for the
three and nine months ended September 30, 1997 and 1996,
respectively, assuming the application of SFAS No. 128 at the
beginning of those periods, is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
In thousands, except per share data 1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Earnings per share:
Basic $ 0.47 $ 0.38 $ 1.32 $ 0.92
Diluted $ 0.45 $ 0.37 $ 1.25 $ 0.89
Average shares outstanding:
Basic 16,425 13,385 14,698 13,287
Diluted 17,133 13,829 15,464 13,740
</TABLE>
4. Inventories
Inventories consisted of the following, in thousands:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
--------- ---------
(unaudited)
<S> <C> <C>
FIFO cost:
Raw materials $ 29,184 $ 24,648
Work-in-process 17,408 9,790
Finished goods 18,442 19,440
--------- ---------
Total 65,034 53,878
Excess of FIFO
over LIFO cost (1,520) (1,348)
--------- ---------
Net inventories $ 63,514 $ 52,530
========= =========
</TABLE>
5. Long-Term Incentive Plan
The Kuhlman Corporation Long-Term Incentive Plan (the "Long-
Term Incentive Plan") was adopted by the Board of Directors in
August 1996 and approved by the shareholders of the Company in
April 1997. Under the terms of the Long-Term Incentive Plan,
awards may be made to eligible participants for the achievement
of specific performance goals, including among others, the
attainment of certain price targets for Kuhlman common stock
within a specified period of time. The value of those awards may
be paid with Kuhlman common stock or cash, or a combination of
the two.
Pursuant to the Long-Term Incentive Plan, award levels were
achieved on April 10 and May 27, 1997 for the attainment of two
share price targets of $23 and $27, respectively, for Kuhlman
stock. The payout to the eligible participants, which consists
of two-thirds Kuhlman stock and one-third cash, is to be made in
four quarterly installments subject to certain vesting
requirements and other factors, commencing on May 1 and June 1,
1997 for the achievement of the $23 and $27 targets,
respectively. The estimated total pre-tax cost of such awards is
approximately $7,000,000, with approximately $3,600,000 and
$3,400,000 to be paid for the $23 and $27 targets, respectively.
The related compensation expense of such awards is recorded based
on the commencement date and the vesting requirements noted
above.
On July 31, 1997 additional award levels were approved
whereby certain key employees would receive a payout after the
attainment of each of two share price thresholds for Kuhlman
stock within two years from the award date, subject to certain
vesting requirements and other factors. The stock price
thresholds are $36 and $42 per share. Pursuant to such awards,
the total pre-tax cost of such awards would be approximately
$8,900,000, with approximately $4,450,000 to be paid after the
attainment of each of the above price thresholds. Each award is
to consist of two-thirds Kuhlman stock and one-third cash with
the value of award varying by participant. The payout to the
eligible participants pursuant to such awards will be made in
four quarterly installments subject to certain vesting
requirements and other factors. The related compensation expense
will be recorded as the awards vest. The Company achieved the
$36 threshold on October 21, 1997 with payouts and vesting to
commence on April 1, 1998 in accordance with the Long-Term
Incentive Plan.
6. Stock Offering
On June 27, 1997, the Company completed a public offering and
sale of 2,350,000 shares of its common stock at a per share price
to the public of $28.875. The total proceeds, net of expenses,
were approximately $64,072,000 of which approximately $54,933,000
was used to reduce amounts outstanding under the Company's credit
facilities, and approximately $9,139,000 was used to redeem
outstanding warrants. On July 8, 1997, an additional 150,000
shares were sold at a per share price to the public of $28.875
pursuant to the underwriters' over-allotment option. The
additional proceeds, net of expenses, of approximately $4,115,000
were used to reduce amounts outstanding under the Company's
credit facilities.
On a supplementary basis, assuming that the total offering
and sale of 2,500,000 shares as described above had been
completed as of January 1, 1996 and the estimated net proceeds
had been used to reduce the Company's indebtedness and redeem the
warrants, fully diluted earnings per share for the year ended
December 31, 1996 and the nine months ended September 30, 1997
would have been approximately $1.22 and $1.19, respectively.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
On March 10, 1997, Kuhlman Corporation ("Kuhlman" or the
"Company"), purchased certain assets of the Transportation
Products Group ("Kysor") of Kysor Industrial Corporation for
$86,000,000 in cash plus the assumption of certain liabilities
which totaled approximately $46,000,000. The purchase of Kysor
was financed from borrowings under the Company's credit facility.
The acquisition has been recorded following the purchase method
of accounting and accordingly, the net assets and results of
operations for Kysor are included in the Company's consolidated
financial statements as part of the Industrial Products Segment
from the date of acquisition.
Kysor designs and manufactures proprietary products including
polymer fans and fan clutches, various engine monitoring devices,
fuel tanks, instruments and heating, ventilating and air
conditioning systems for commercial and industrial vehicles and
other applications. The principal markets for its products are
original equipment manufacturers of light, medium and heavy-duty
trucks, buses, off-highway equipment and the marine industry.
On June 27 and July 8, 1997, the Company sold 2,350,000 and
150,000 shares, respectively, in a public offering at a per share
price to the public of $28.875. The total net proceeds, after
expenses, from the offering, were approximately $68,200,000. The
proceeds were used to redeem outstanding warrants to purchase
480,750 shares of the Company's common stock and to repay
outstanding debt.
On June 30, 1997, the Company amended its primary credit
facilities in order to, among other things, enhance its financial
flexibility, lower its cost of borrowed funds and extend its
facility for funding future acquisitions. The Company's
revolving credit facility was increased to $165 million, up from
$125 million, to be used for general corporate purposes and is
due on June 30, 2002. In addition, the Company's 364-day, $125
million facility primarily for funding future acquisitions was
extended to June 29, 1998 and amounts drawn, if any, would
convert to a 4-year term loan commencing on October 1, 1998, with
equal quarterly amortization. Interest rates on amounts borrowed
under both facilities 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 $41,295,000 in cash flow from
operations in the first nine months of 1997 compared to
$24,289,000 for the same period in 1996, an increase of
$17,006,000 (70%). The increase was due primarily to the record
earnings of the Company in the first three quarters of 1997,
greater non-cash charges and better management of working capital
resources, particularly inventories. Working capital (net of
cash) was $53,255,000 at September 30, 1997 compared to
$52,383,000 at December 31, 1996, an increase of $872,000 (2%).
The increase was due primarily to greater working capital
associated with the acquisition of Kysor partially offset by
benefits from better management of working capital. Cash and
cash equivalents increased to $7,396,000 at September 30, 1997
from $2,209,000 at December 31, 1996 due to the timing of cash
receipts and payments as well as the addition of the cash
balances held by Kysor. Accounts receivable, net was $97,718,000
at September 30, 1997 compared to $70,079,000 at December 31,
1996, an increase of $27,639,000 (39%). The increase was due
primarily to the acquisition of Kysor and the Company's record
sales volume in the first three quarters of 1997. Similarly,
inventories increased $10,984,000 (21%) to $63,514,000 at
September 30, 1997 from December 31, 1996 due primarily to the
inclusion of Kysor, partially offset by declines in inventory at
certain locations due to improved manufacturing efficiencies.
Deferred taxes and prepaid expenses and other current assets
increased $2,725,000 (24%) to $14,037,000 at September 30, 1997
from the end of 1996 primarily because of tax attributes
associated with the acquisition of Kysor. Accounts payable and
accrued liabilities were $121,058,000 at September 30, 1997
compared to $79,243,000 at December 31, 1996, an increase of
$41,815,000 (53%). The increase was due primarily to the
addition of Kysor and the timing of certain payments.
Total debt outstanding at September 30, 1997 was
$102,786,000, up $8,189,000 (9%) from the end of 1996. The
increase in total debt was due to the acquisition of Kysor,
partially offset by the proceeds from the sale of 2,500,000
shares of common stock, a substantial portion of which were used
to pay down debt, and the positive cash flow from operations.
Shareholders' equity at September 30, 1997 was $167,138,000
compared to $91,574,000 at December 31, 1996, an increase of
$75,564,000 (83%). The increase was due to the sale of common
stock in the public stock offering, net of the redemption of
outstanding warrants, and record earnings in the first nine
months of 1997, partially offset by the payment of dividends.
The Company's total debt to capitalization ratio was 38% at
September 30, 1997, down from 51% at the end of 1996.
Capital expenditures for the first nine months of 1997 were
$13,317,000 compared to $7,405,000 reported in the same period
last year. The increase was due primarily to the acquisition of
Kysor. Expenditures in the first three quarters of 1997 were
primarily for normal replacements and additions 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:
<TABLE>
<CAPTION>
In thousands
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales:
Electrical Products $ 74,214 $ 71,560 $ 220,932 $ 195,390
Industrial Products 90,150 47,638 247,801 139,465
--------- --------- --------- ---------
$ 164,364 $ 119,198 $ 468,733 $ 334,855
========= ========= ========= =========
Income before taxes:
Electrical Products $ 5,391 $ 5,997 $ 14,375 $ 13,863
Industrial Products 12,760 6,149 33,662 16,462
--------- --------- --------- ---------
Operating earnings(1) 18,151 12,146 48,037 30,325
Corporate (3,547) (1,555) (8,657) (4,283)
Interest expense, net (1,882) (1,815) (6,848) (5,150)
--------- --------- --------- ---------
$ 12,722 $ 8,776 $ 32,532 $ 20,892
========= ========= ========= =========
</TABLE>
(1) Operating earnings is defined as operating profit plus
other, net directly attributable to each segment.
Three Months Ended September 30, 1997 and 1996
Consolidated Results
The Company reported record quarterly results in the third
quarter of 1997 in several key financial areas, including
operating profit, net income and cash flow from operations. Net
sales, operating profit and net income increased approximately
38%, 36% and 50%, respectively, in the third quarter of 1997 when
compared to the same period in 1996. The increases were
attributable primarily to the positive operating performance
reported in the Company's Industrial Products Segment and the
acquisition of Kysor.
Net sales were $164,364,000 in the third quarter of 1997
compared to $119,198,000 reported in the same period in 1996, an
increase of $45,166,000 (38%). Each of the Company's two
segments contributed to the increase in net sales as demand for
most of the Company's key products remained vibrant throughout
the period. Net sales were benefitted by approximately
$38,254,000 in the third quarter of 1997 due to the acquisition
of Kysor. Excluding the net sales contributed by Kysor, net
sales increased approximately 6% in the third quarter of 1997
when compared to the year ago period.
Operating profit for the third quarter of 1997 reached a
record high of $15,241,000 compared to $11,241,000 reported for
the same period in 1996, an increase of $4,000,000 (36%).
Consolidated operating profit margins in the third quarter of
1997 were 9.3% of net sales compared to 9.4% reported in the year
ago period. The increase in consolidated operating profit
occurred primarily due to the record sales volume and improved
gross profit margins for certain products, partially offset by
higher operating expenses. Overall, operating expenses increased
$7,870,000 (49%) to $23,893,000 or 14.5% of net sales in the
third quarter of 1997 compared to $16,023,000 or 13.4% of net
sales reported in the third quarter of 1996. The increase in
operating expenses was due primarily to the higher sales noted
above, greater corporate expenses associated with the Company's
Long-Term Incentive Plan which resulted in a pre-tax charge of
$1,750,000 and the addition of Kysor. Operating expenses,
excluding the impact of the Long-Term Incentive Plan, in the
third quarter of 1997 were 13.5% of net sales which is
essentially the same as reported in the year ago period.
Similarly, operating profit margins, excluding the impact of the
Long-Term Incentive Plan, in the third quarter of 1997, were
10.3%, up from 9.4% reported in the year ago period.
Interest expense, net was $1,882,000 in the third quarter for
1997 compared to $1,815,000 for the same period in 1996. The
increase was due to higher levels of debt outstanding throughout
the 1997 period compared to the third quarter of 1996, partially
offset by lower interest rates due to the Company's amendment to
its principal credit facilities on June 30, 1997. Other, net was
an expense of $637,000 in the third quarter of 1997 compared to a
$650,000 expense reported in the same period in 1996. The slight
decrease was due to lower miscellaneous, non-operating expenses,
none of which were significant, in the third quarter of 1997
compared to the year ago period.
Net income for the third quarter of 1997 was a record
$7,673,000 compared to $5,129,000 reported in the same period in
1996, an increase of $2,544,000 (50%). Earnings per share on a
fully diluted basis in the third quarter of 1997 were $0.45
compared to $0.37 for the third quarter of 1996, an increase of
22%. The increase in earnings per share was due to the higher
net income noted above, partially offset by more shares
outstanding throughout the period. The increase in the weighted
average number of shares outstanding for the earnings per share
calculation was due to higher common stock equivalents as a
result of an increase in the Company's stock price and the impact
of the common stock sold as part of a public stock offering. The
Company's effective tax rate for the third quarter of 1997 and
1996 was 39.7% and 41.6%, respectively. The difference in rates
was due primarily to the change in the source of earnings between
various taxing countries and the deductibility of goodwill
associated with the acquisition of Kysor.
In addition, bookings were strong throughout the third
quarter of 1997. The Company's consolidated backlog increased
$10,153,000 (6%) to a record $169,018,000 at September 30, 1997
from the backlog at June 30, 1997 and $50,037,000 (42%) from the
end of 1996. The increase in the backlog in the third quarter
occurred at each subsidiary as demand remained vibrant in most
key product lines. The increase in the first nine months of 1997
from the end of 1996 was attributable again to strong demand for
the Company's key products and the acquisition of Kysor.
Electrical Products Segment
In the Electrical Products Segment, net sales increased
$2,654,000 (4%) to $74,214,000 in the third quarter of 1997
compared to the same period in 1996. The increase was primarily
attributable to increased shipments of transformer products,
particularly medium power transformers, and certain wire and
cable products, partially offset by lower sales of security wire.
Operating earnings in the Electrical Products Segment were
$5,391,000 in the third quarter of 1997 compared to $5,997,000 in
the same period in 1996, a decrease of $606,000 (10%). The
decrease was due primarily to lower margins at Coleman Cable,
partially offset by improved operating margins at Kuhlman
Electric, which reported the highest operating earnings in its
history. Operating earnings at Coleman Cable in the third
quarter of 1997 were below that reported in the third quarter of
1996, due primarily to lower gross profit margins caused by
greater manufacturing variances and lower sales of security wire.
Industrial Products Segment
Net sales for the Industrial Products Segment in the third
quarter of 1997 were $90,150,000 compared to $47,638,000 reported
in the same period in 1996, an increase of $42,512,000 (89%).
The increase was due primarily to record sales of engine
components in North America and the addition of Kysor, which
added approximately $38,254,000 in net sales in the third quarter
of 1997. The record level of sales in the quarter were due
primarily to the robust demand for turbochargers, cooling system
products and other engine components from original equipment
manufacturers and fleet customers.
Operating earnings in the Industrial Products Segment
improved $6,611,000 (108%) to $12,760,000 in the third quarter of
1997 when compared to the same period in 1996. The increase was
due primarily to the record shipments of engine component
products, the positive impact of a change in sales mix, improved
operating efficiencies, and the addition of Kysor.
Nine Months Ended September 30, 1997 and 1996
Consolidated Results
Net sales, operating profit and net income for the first nine
months of 1997 were record highs for the Company, up 40%, 48% and
58%, respectively, over the results reported for the same period
in 1996.
Net sales for the first three quarters of 1997 were
$468,733,000 compared to $334,855,000 for the same period in
1996, an increase of 40%. The increase was due primarily to
record shipments of medium power transformers and certain
components for industrial and commercial engines and the addition
of Kysor, which contributed $90,002,000 in net sales. Excluding
the contribution of Kysor, net sales increased 13% in the first
three quarters of 1997 over the year ago period.
Operating profit for the first nine months of 1997 was a
record $40,720,000 or 8.7% of net sales compared to $27,485,000
or 8.2% of net sales in the year ago period, an increase of
$13,235,000 (48%). The increase in operating profit and margins
was due to the positive results posted in each segment in the
first three quarters of 1997 and the addition of Kysor, partially
offset by higher operating expenses. Operating expenses for the
first nine months of 1997 were $66,670,000 or 14.2% of net sales
compared to $44,967,000 or 13.4% of net sales in the year ago
period. Operating expenses increased due to the higher sales
volume noted above, the addition of Kysor and the impact of the
Long-Term Incentive Plan, which increased operating expenses by
$3,050,000. Excluding the impact of the Long-Term Incentive
Plan, operating expenses as a percentage of sales would have been
approximately 13.6%. Similarly, operating profit margins,
excluding the Long-Term Incentive Plan, for the first three
quarters of 1997 were 9.3% compared to 8.2% in the year ago
period.
Interest expense, net for the first nine months of 1997 was
$6,848,000 compared to $5,150,000 for the same period in 1996, an
increase of $1,698,000 (33%). The increase was due to the higher
debt levels, particularly in the first half of 1997, for the
acquisition of Kysor.
Net income for the first three quarters of 1997 increased
$7,085,000 (58%) to $19,364,000 from $12,279,000 reported in the
same period in 1996. Earnings per share on a fully diluted basis
in the first nine months of 1997 were $1.24 compared to $0.89 for
the year ago period, an increase of 39%. The increase in
earnings per share was due to the higher net income noted above,
partially offset by more shares outstanding throughout the
period. The fully diluted shares outstanding for the first nine
months of 1997 and 1996 were 15,626,000 and 13,872,000,
respectively. The increase in the weighted average number of
shares outstanding for the earnings per share calculation was due
to higher common stock equivalents as a result of an increase in
the Company's stock price and the impact of the common stock sold
as part of a public stock offering. The Company's effective tax
rate for the first three quarters of 1997 and 1996 was 40.5% and
41.2%, respectively. The difference in rates was due primarily
to the change in the source of earnings between various taxing
countries and the deductibility of goodwill associated with the
acquisition of Kysor.
Electrical Products Segment
Net sales of the Electrical Products Segment for the first
three quarters of 1997 were $220,932,000 compared to $195,390,000
in the similar period in 1996, an increase of $25,542,000 (13%).
The increase was due primarily to greater shipments of
transformer products, particularly medium power transformers, and
certain wire and cable products, and the inclusion of the results
of Communication Cable, Inc., which was acquired by the Company
on February 21, 1996, for the full period. The increase was
partially offset by lower net sales of security wire due to
increased competition in that market segment.
Operating earnings in the Electrical Products Segment
increased $512,000 (4%) to $14,375,000 in the first three
quarters of 1997 compared to the same period in 1996. Operating
margins were 6.5% and 7.1% in the first three quarters of 1997
and 1996, respectively. The increase in operating earnings was
due primarily to the higher sales volume noted above and improved
margins at Kuhlman Electric, partially offset by lower operating
earnings at Coleman Cable. Operating earnings at Coleman Cable
declined in the first three quarters of 1997 compared to the year
ago period primarily because of the impact of changes in the cost
of copper, greater manufacturing variances and lower sales of
security wire.
Industrial Products Segment
Net sales for the Industrial Products Segment in the first
nine months of 1997 were $247,801,000 compared to $139,465,000
reported in the same period in 1996, an increase of $108,336,000
(78%). The increase was due primarily to record sales of engine
components in North America and Europe and the addition of Kysor,
which added approximately $90,002,000 in net sales from the date
of its acquisition by the Company. The record sales levels in
the first nine months of 1997 were due primarily to greater
penetration in key markets and continued robust demand for
turbochargers and other engine components from original equipment
manufacturers and fleet customers.
Operating earnings in the Industrial Products Segment
improved $17,200,000 (104%) to $33,662,000 in the first nine
months of 1997 when compared to the same period in 1996.
Operating margins advanced to 13.6% in the first three quarters
of 1997 from 11.8% reported in the year ago period. The increase
in operating earnings was due primarily to the record shipments
of engine component products, the positive impact of a change in
sales mix, improved operating efficiencies, and the addition of
Kysor.
OUTLOOK FOR 1997
Management believes that the results in the third quarter
support its view that the Company is positioned to prosper for
the balance of 1997 and into 1998. However, management's
optimism about the future continues to be tempered somewhat by
matters including, but not limited to, the potential impact of
fluctuating currencies and 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
The statements contained under the caption "Outlook For 1997"
and certain other information contained in this report contain
forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), which can be identified by the use of
forward-looking terminology such as "anticipate," "may," "will,"
"expect," "continue," "remains," "intend," "aim," "trend,"
"seek," "should," and "prospects," or the negative thereof or
other variations thereon or comparable terminology. Forward-
looking statements are inherently subject to risks and
uncertainties, many of which cannot be predicted with accuracy
and some of which might not even be anticipated. Future events
and actual results, financial and otherwise, may differ
materially from the results discussed in the forward-looking
statements. Factors that might cause such differences include,
but are not limited to, the potential impact of fluctuating raw
material costs, an uncertain economic environment in certain key
markets and the potential for rising interest rates.
PART II. OTHER INFORMATION
ITEM 6 Exhibits
(a) Exhibits
27.0 Financial Data Schedule for the nine month period
ended September 30, 1997.
<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 hereunto 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: November 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE KUHLMAN SEPTEMBER 1997 CONSOLIDATED BALANCE SHEET AND THE STATEMENT OF
INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<CASH> 7,396
<SECURITIES> 0
<RECEIVABLES> 101,407
<ALLOWANCES> 3,689
<INVENTORY> 63,514
<CURRENT-ASSETS> 182,665
<PP&E> 219,768
<DEPRECIATION> 100,914
<TOTAL-ASSETS> 420,217
<CURRENT-LIABILITIES> 122,014
<BONDS> 101,830
<COMMON> 16,553
0
0
<OTHER-SE> 150,585
<TOTAL-LIABILITY-AND-EQUITY> 420,217
<SALES> 468,733
<TOTAL-REVENUES> 468,733
<CGS> 361,343
<TOTAL-COSTS> 361,343
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 322
<INTEREST-EXPENSE> 7,278
<INCOME-PRETAX> 32,532
<INCOME-TAX> 13,168
<INCOME-CONTINUING> 19,364
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,364
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 1.24
</TABLE>
