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, 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 April 30, 1997
------ -----------------------------
Common Stock, $1.00 Par Value 13,797,429
- ---------------------------------------------------------------
<PAGE>
ITEM 1. KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1997 1996
---------- ----------
(Unaudited)
(In thousands, except per share data)
<S> <C> <C>
Net sales. . . . . . . . . . . . . . $ 134,148 $ 103,457
Cost of goods sold . . . . . . . . . 104,406 81,993
---------- ----------
Gross profit . . . . . . . . . . . . 29,742 21,464
Selling, engineering, general and
administrative expenses . . . . . 18,491 13,722
---------- ----------
Operating profit . . . . . . . . . . 11,251 7,742
---------- ----------
Other income(expense):
Interest expense, net . . . . . . (1,938) (1,563)
Other, net. . . . . . . . . . . . (315) (437)
---------- ----------
Total other income(expense), net (2,253) (2,000)
---------- ----------
Income before taxes. . . . . . . . . 8,998 5,742
Taxes on income. . . . . . . . . . . 3,716 2,324
---------- ----------
Net income . . . . . . . . . . . . . $ 5,282 $ 3,418
========== ==========
Per share amounts:
Net income - primary . . . . . . $ 0.36 $ 0.26
========== ==========
Net income - fully diluted . . . $ 0.36 $ 0.25
========== ==========
Average shares outstanding:
Primary . . . . . . . . . . . . . 14,479 13,181
========== ==========
Fully diluted . . . . . . . . . . 14,574 13,656
========== ==========
</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,
1997 1996
--------- -----------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . $ 6,781 $ 2,209
Accounts receivable, less reserves of $3,722 and
$2,344 at March 31, 1997 and December 31, 1996,
respectively 93,356 70,079
Inventories . . . . . . . . . . . . . . . . . . . 68,338 52,530
Deferred income taxes. . . . . . . . . . . . . . . 10,338 7,810
Prepaid expenses and other current assets 4,464 3,502
--------- ---------
Total current assets . . . . . . . . . . . . . 183,277 136,130
--------- ---------
Plant and equipment, at cost:
Land, buildings and leasehold improvements 51,981 42,213
Machinery and equipment . . . . . . . . . . . . . 155,982 122,655
Construction in progress . . . . . . . . . . . . . 3,352 2,825
--------- ---------
211,315 167,693
Less - accumulated depreciation . . . . . . . . . (92,943) (89,829)
--------- ---------
118,372 77,864
--------- ---------
Intangible assets, net of amortization of $4,998
and $4,441 at March 31, 1997 and December
31, 1996, respectively . . . . . . . . . . . . . 105,733 58,326
--------- ---------
Other assets . . . . . . . . . . . . . . . . . . . . 12,607 5,096
--------- ---------
$ 419,989 $ 277,416
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt . . . . . . . . $ 12,528 $ 2,295
Accounts payable . . . . . . . . . . . . . . . . . 47,296 35,410
Accrued liabilities . . . . . . . . . . . . . . . 69,312 43,833
--------- ---------
Total current liabilities . . . . . . . . . . 129,136 81,538
--------- ---------
Bank debt . . . . . . . . . . . . . . . . . . . . . . 163,184 87,764
Other long-term debt . . . . . . . . . . . . . . . . 4,499 4,538
--------- ---------
Total long-term debt . . . . . . . . . . . . . . 167,683 92,302
--------- ---------
Accrued postretirement benefits . . . . . . . . . . 19,403 8,859
--------- ---------
Other long-term liabilities . . . . . . . . . . . . 8,859 3,143
--------- ---------
Total liabilities . . . . . . . . . . . . . . 325,081 185,842
--------- ---------
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 13,835 shares at March 31, 1997
and 13,803 at December 31, 1996, respectively. . 13,835 13,803
Additional paid-in capital . . . . . . . . . . . . 33,174 32,749
Retained earnings . . . . . . . . . . . . . . . . . 50,490 47,272
Foreign currency translation adjustments. . . . . . (981) (640)
Minimum pension liability . . . . . . . . . . . . . (690) (690)
--------- ---------
95,828 92,494
Less - treasury shares at cost (72 shares at
March 31, 1997 and December 31, 1996) . . . . . (920) (920)
--------- ---------
Total shareholders' equity . . . . . . . . . . 94,908 91,574
--------- ---------
$ 419,989 $ 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>
Three Months Ended
March 31,
---------------------
1997 1996
--------- ---------
(Unaudited)
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . $ 5,282 $ 3,418
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . 3,988 3,026
Deferred income taxes, net . . . . . . . . . . . (539) 708
Provision for losses on accounts receivable . . . 121 138
Other, net . . . . . . . . . . . . . . . . . . . 55 (200)
Changes in operating assets and liabilities: (1)
Accounts receivable . . . . . . . . . . . . . (4,216) (1,487)
Inventories . . . . . . . . . . . . . . . . . (3,077) (2,340)
Prepaid expenses and other current assets. . . 56 863
Accounts payable . . . . . . . . . . . . . . . 4,009 5,530
Accrued liabilities. . . . . . . . . . . . . . 3,449 1,254
--------- ---------
Net cash provided by operating activities. 9,128 10,910
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . (2,606) (1,753)
Acquisitions, net of cash acquired . . . . . . . (85,375) (31,826)
Proceeds from the sale of assets . . . . . . . . 52 ---
--------- ---------
Net cash used by investing activities (87,929) (33,579)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in revolving loan facility . . . . . . (4,319) (10,452)
Proceeds from issuance of long-term debt. . . . . 90,000 36,020
Repayments of long-term debt . . . . . . . . . . (754) (664)
Dividends paid . . . . . . . . . . . . . . . . . (2,060) (1,975)
Stock options exercised and other. . . . . . . . 443 62
--------- ---------
Net cash provided by financing activities . . 83,310 22,991
--------- ---------
Effect of exchange rate changes on cash. . . . . . . . 63 95
--------- ---------
Net increase in cash and cash equivalents . . . . . . 4,572 417
Cash and cash equivalents at beginning of period . . . 2,209 581
--------- ---------
Cash and cash equivalents at end of period. . . . $ 6,781 $ 998
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . $ 2,076 $ 1,483
========= =========
Income taxes, net of refunds . . . . . . . . . . $ 581 $ (580)
========= =========
</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>
<TABLE>
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For The Three Months Ended March 31, 1997
(Unaudited)
(In thousands)
<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. . --- --- 5,282 --- --- --- 5,282
Cash dividends
declared
($0.15 per
share). . . --- --- (2,064) --- --- --- (2,064)
Foreign currency
translation
adjustment. --- --- --- (341) --- --- (341)
Stock options
exercised and
other . . . 32 425 --- --- --- --- 457
-------- -------- -------- ------ ------ ------ -------
Balance at
March 31,
1997. . . . $ 13,835 $ 33,174 $ 50,490 $ (981) $ (690) $ (920) $94,908
======== ======== ======== ====== ====== ====== =======
</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, 1997
(Unaudited)
1. Consolidated Financial Statements
The consolidated balance sheet at March 31, 1997 and the
related consolidated statements of income, cash flows and
shareholders' equity for the three months ended March 31, 1997
and 1996, 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, 1997 and the results of operations, cash flows and
shareholders' equity for three months ended March 31, 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 months ended March
31, 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. The purchase of Kysor was financed
from borrowings under the Company's existing 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 $47,700,000, 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>
Year Ended Quarter Ended
December 31, March 31,
--------- -----------------------
In thousands, except per share data 1996 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Net sales . . . . . . . . . . . . $ 592,619 $ 160,957 $ 138,357
Net income . . . . . . . . . . . . $ 20,771 $ 6,107 $ 4,353
Fully diluted per share amounts:
Net income . . . . . . . . . . $ 1.44 $ 0.42 $ 0.32
</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 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 months ended March 31, 1997
and 1996 have been computed based on the weighted average number
of shares of common stock and common stock equivalents, if any,
outstanding throughout the period. Primary and fully diluted
shares used in the per share calculation in 1997 included
approximately 734,000 and 811,000 shares, respectively, resulting
from the dilutive effect of common stock equivalents. Fully
diluted shares used in the per share calculation in 1996 included
475,000 shares resulting from the dilutive effect of common stock
equivalents. There was no materially dilutive effect on primary
earnings per share during the first quarter of 1996.
<PAGE>
A cash dividend of $0.15 per share was declared during each
of the first 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
first quarter of 1997 and 1996, respectively, assuming the
application of SFAS No. 128 at the beginning of those periods, is
as follows:
<TABLE>
<CAPTION>
In thousands, except per share data 1997 1996
-------- --------
<S> <C> <C>
Earnings per share:
Basic $ 0.38 $ 0.26
Diluted $ 0.36 $ 0.25
Average shares outstanding:
Basic 13,746 13,181
Diluted 14,479 13,559
Number of common stock
equivalents in diluted
shares outstanding 733 378
4. Inventories
Inventories consisted of the following, in thousands:
</TABLE>
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ---------
(unaudited)
<S> <C> <C>
FIFO cost:
Raw materials $ 29,312 $ 24,648
Work-in-process 16,744 9,790
Finished goods 24,199 19,440
--------- ---------
Total 70,255 53,878
Excess of FIFO
over LIFO cost (1,917) (1,348)
--------- ---------
Net inventories $ 68,338 $ 52,530
========= =========
</TABLE>
5. Long-Term Incentive Plan
On August 9, 1996, the Board of Directors adopted the Kuhlman
Corporation Long-Term Incentive Plan (the "Long-Term Incentive
Plan") for certain key employees of the Company. The Long-Term
Incentive Plan was approved by the shareholders of the
Company on April 24, 1997. Under the terms of the Long-Term
Incentive Plan, awards may be made of incentive and nonqualified
stock options, stock appreciation rights, and restricted stock to
eligible employees. In addition, awards may also be made to
eligible employees with a value tied to specific performance
goals and, after a specified period, the value of those awards
may be paid with Kuhlman Common Stock or cash, or a combination
of the two. Non-employee directors of Kuhlman are
eligible to participate in the Long-Term Incentive Plan, but only
for the award of nonqualified stock options.
Pursuant to the Long-Term Incentive Plan, on August 9, 1996
the Board of Directors approved, subject to shareholder approval,
awards whereby certain key employees would receive a payout after
the attainment of each of two share price thresholds for Kuhlman
stock within three years from the program commencement date,
subject to certain vesting requirements. The stock price
thresholds are $23 and $27 per share. In addition, subsequent to
the acquisition of Kysor, additional awards were granted to
certain executives of Kysor at the $27 threshold. If both
thresholds are attained, the total pre-tax cost of such awards
would be approximately $7,775,000, with approximately $3,600,000
and $4,175,000 to be paid after the attainment of the above price
thresholds, respectively. Each award consists of two-thirds
Kuhlman stock and one-third cash and the level of award varies by
participant. After achievement of each threshold, the payout to
the eligible participants will be made in four quarterly
installments subject to certain vesting requirements. The
related compensation expense will be recorded as the awards vest.
As of April 10, 1997, the Company had achieved the $23 threshold
with payouts to twenty eligible participants commencing on May 1,
1997. Based on the weighted average shares outstanding as of
March 31, 1997, the effect of the attainment of the first award
based on the above vesting schedule would be a charge of
approximately $0.04 per share per quarter.
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 existing 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, truck fuel tanks, marine instruments and
heating, ventilating and air conditioning systems for commercial
vehicles. 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. For the
year ended December 31, 1996, Kysor's net sales were
approximately $136,000,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated $9,128,000 in cash flow from
operations in the first quarter of 1997 compared to $10,910,000
for the same period in 1996, a decrease of $1,782,000 (16%). The
decline was due primarily to timing of the impact of changes in
working capital requirements, partially offset by the record earnings
reported in the first quarter of 1997. Working capital (net of cash) was
$47,360,000 at March 31, 1997 compared to $52,383,000 at December
31, 1996. The decline in working capital was due primarily to
the classification of the Company's debt associated with the
Kysor acquisition. Cash and cash equivalents increased to
$6,781,000 at March 31, 1997 from $2,209,000 at December 31, 1996
due to the timing of cash receipts and the addition of the cash
balances held by Kysor. Accounts receivable, net was $93,356,000
at March 31, 1997 compared to $70,079,000 at December 31, 1996,
an increase of $23,277,000 (33%). The increase was due primarily
to the acquisition of Kysor and the Company's record sales volume
in the first quarter of 1997. Similarly, inventories increased
$15,808,000 (30%) to $68,338,000 at March 31, 1997 from December
31, 1996 primarily due to the inclusion of Kysor and because of
higher expected sales activity in the Electrical Products
Segment. Deferred taxes and prepaid expenses and other current
assets increased $3,490,000 (31%) to $14,802,000 at March 31,
1997 from the end of 1996 primarily because of tax attributes
associated with the acquisition of Kysor. Accounts payable and
accrued liabilities were $116,608,000 at March 31, 1997 compared
to $79,243,000 at December 31, 1996, an increase of $37,365,000
(47%). The increase was due primarily to the addition of Kysor
and higher accounts payable to vendors caused by the greater
level of inventories.
Total debt outstanding at March 31, 1997 was $180,211,000,
up $85,614,000 from the end of 1996. The increase in total debt
was due to the acquisition of Kysor. In order to fund the
acquisition and working capital needs, the Company borrowed
$90,000,000 under its $125,000,000, 364-day credit facility.
Under the terms of this facility, outstanding borrowings at July
1, 1997 are to be repaid in sixteen equal quarterly installments
beginning October 1, 1997. In addition, the Company assumed
approximately $721,000 of existing Kysor bank debt as part of the
acquisition. At March 31, 1997, shareholders' equity was
$94,908,00, an increase of $3,334,000 (4%) from the end of 1996.
Capital expenditures for the first three months of 1997 were
$2,606,000 compared to $1,753,000 reported in the same period
last year. Expenditures in the first quarter of 1997 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,
----------------------
1997 1996
---------- ---------
(unaudited)
<S> <C> <C>
Net sales:
Electrical $ 72,483 $ 57,449
Industrial 61,665 46,008
---------- ---------
$ 134,148 $ 103,457
========== =========
Income before taxes:
Electrical $ 4,170 $ 3,397
Industrial 8,843 5,104
---------- ---------
Operating earnings(1) 13,013 8,501
Corporate (2,077) (1,196)
Interest expense, net (1,938) (1,563)
---------- ---------
$ 8,998 $ 5,742
========== =========
</TABLE>
(1) Operating earnings is defined as operating profit plus
other, net directly attributable to each segment.
Three Months Ended March 31, 1997 and 1996
Consolidated Results
The Company reported record quarterly results in the first
quarter of 1997 in several key financial areas, including net
sales and net income. Net sales, operating profit and net income
increased approximately 30%, 45% and 55%, respectively, in the
first quarter of 1997 when compared to the same period in 1996.
The increases were attributable to the positive operating
performance reported in each of the Company's two segments,
Electrical and Industrial Products and the acquisition of Kysor.
Net sales were a record high of $134,148,000 in the first
quarter of 1997 compared to $103,457,000 reported in the same
period in 1996, an increase of $30,691,000 (30%). 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 $9,300,000 in the first quarter of 1997 due to the
acquisition of Kysor.
Operating profit for the first quarter of 1997 was a record
high of $11,251,000 compared to $7,742,000 reported for the same
period in 1996, an increase of $3,509,000 (45%). Consolidated
operating profit margins in the first quarter of 1997 improved to
8.4% of net sales compared to 7.5% reported in the year-ago
period. The increase in consolidated operating profit and
operating profit margins occurred primarily in the Industrial
Products Segment due to the record sales volume and improved
gross profit margins for certain products. Overall, operating
expenses increased $4,769,000 (35%) to $18,491,000 or 13.8% of
net sales in the first quarter of 1997 compared to $13,722,000 or
13.3% of net sales reported in the first quarter of 1996. The
increase in operating expenses was due primarily to the higher
sales noted above, greater corporate expenses associated with its
acquisition activities and the addition of Kysor. The increase
in operating expenses as a percentage of sales was due primarily
to the impact of higher corporate expenses.
Interest expense, net was $1,938,000 in the first quarter
for 1997 compared to $1,563,000 for the same period in 1996, an
increase of $375,000 (24%). The increase was due to the higher
levels of debt outstanding throughout the 1997 period compared to
the first quarter of 1996 due to the acquisitions of Communication
Cable, Inc. and Kysor. Other, net was an expense of $315,000 in the
first quarter of 1997 compared to a $437,000 expense reported in the
same period in 1996, a decrease of $122,000 (28%). The decrease
was due to lower miscellaneous, non-operating expenses, none of
which were significant, in the first quarter of 1997 compared to
the year-ago period.
Net income for the first quarter of 1997 was a record
$5,282,000 compared to $3,418,000 reported in the same period in
1996, an increase of $1,864,000 (55%). Earnings per share on a
fully diluted basis in the first quarter of 1997 were $0.36
compared to $0.25 for the first quarter of 1996, an increase of
44%. 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 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. The Company's effective tax rate for
the first quarter of 1997 and 1996 was 41.3% and 40.5%,
respectively. The difference in rates was due primarily to the
change in the source of earnings between various taxing
countries.
In addition, bookings were strong throughout the first
quarter of 1997. The Company's consolidated backlog increased
$34,801,000 (29%) to $153,782,000 at March 31, 1997 from the
backlog at the end of 1996. The increase was attributable
primarily to the acquisition of Kysor and strong demand for
certain Industrial components.
Electrical Products Segment
In the Electrical Products Segment, net sales increased
$15,034,000 (26%) to $72,483,000 in the first quarter of 1997
compared to the same period in 1996 primarily because of greater
shipments of transformer products, particularly medium power
transformers, and the inclusion of CCI's results for the full
quarter. CCI was acquired by the Company on February 21, 1996.
Operating earnings in the Electrical Products Segment
increased $773,000 (23%) to $4,170,000 in the first quarter of
1997 compared to the same period in 1996. The increase was due
primarily to greater net sales and improved operating margin at
Kuhlman Electric which reported its highest operating profit in
the last sixteen quarters. Operating profit at Coleman Cable was
essentially the same in the first quarter of 1997 and 1996,
respectively, as the impact of CCI's full quarter results in 1997
were offset by lower sales and operating profit for certain
electronic wire and cable due to weak demand industry wide. The
drop in demand was caused primarily by the impact of end users of
certain electronic wire reducing excess inventory levels.
Industrial Products Segment
Net sales for the Industrial Products Segment in the first
quarter of 1997 were $61,665,000 compared to $46,008,000 reported
in the same period in 1996, an increase of $15,657,000 (34%).
The increase was primarily due to record sales of engine
components in North America and Europe and the addition of Kysor,
which added approximately $9,300,000 in net sales from the date
of its acquisition by the Company. The record sales levels in
the quarter were primarily due to continued robust demand for
turbochargers and other engine components from original equipment
manufacturers.
Operating earnings in the Industrial Products Segment
improved $3,739,000 (73%) to $8,843,000 in the first 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. Operating
earnings in the first quarter of 1997 were benefitted by
approximately $812,000 from the addition of Kysor since its
acquisition by Kuhlman.
OUTLOOK FOR 1997
Management believes that the results in the first quarter
support its view that the Company is positioned to prosper in
1997. 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
The statements contained under the caption "Outlook For 1997" and
certain other information contained in this report, which can be
identified by the use of forward-looking terminology such as "believes,"
or the negative thereof or other variations thereon on comparable
terminology, constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
and are subject to the safe harbors created thereby. These statements
should be considered as subject to the many risks and uncertainties that
exist in the Company's operations and business environment. Such risks
and uncertainties could cause actual results to differ materially from
those projected. These uncertainties include, but are not limited to,
economic conditions, market demand and pricing, competitive and cost
factors, raw material prices, global interest rates, foreign exchange
rates, and other risk factors.
PART II. OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Asset Purchase Agreement among Kuhlman Corporation,
Transpro Group, Inc., Kysor Industrial Corporation,
and certain subsidiaries of Kysor Industrial
Corporation dated as of February 2, 1997 [Incorporated
by reference to Exhibit 2 to Schedule 14D-9 of Kysor
Industrial Corporation dated February 7, 1997 (SEC
File No. 1-8973].
10.2 Kuhlman Corporation Long-Term Incentive Plan
[Incorporated by reference to Exhibit 4.2 to
Registration Statement on Form S-8 (No. 333-26371)]
27.0 Financial Data Schedule for the three month period
ended March 31, 1997.
(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 10, 1997 reporting an acquisition of a
business under Item 2.
<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: May 15, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE KUHLMAN MARCH 1997 CONSOLIDATED BALANCE SHEET AND THE STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH STATEMENTS.
</LEGEND>
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