THIS REPORT HAS BEEN FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION VIA EDGAR
- -----------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-7695
KUHLMAN CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 58-2058047
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 Skidaway Village Square
Savannah, Georgia 31411
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code -- (912) 598-7809
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----------- -----------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 15, 1998
----- ----------------------------
Common Stock, $1.00 Par Value 16,813,801
- ---------------------------------------------------------------------------
<PAGE>
ITEM 1.
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1998 1997 1998 1997
--------- --------- --------- ---------
(Unaudited)
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales. . . . . . . . . . $ 194,142 $ 170,221 $ 378,244 $ 304,369
Cost of goods sold . . . . . 148,689 131,707 290,704 236,113
--------- --------- --------- ---------
Gross profit . . . . . . . . 45,453 38,514 87,540 68,256
--------- --------- --------- ---------
Operating expenses . . . . .
Selling, engineering,
general and administra-
tive expenses . . . . . 26,153 23,509 50,613 41,442
Intangible amortization . 910 777 1,815 1,335
--------- --------- --------- ---------
Total operating
expenses . . . . . . 27,063 24,286 52,428 42,777
--------- --------- --------- ---------
Operating profit . . . . . . 18,390 14,228 35,112 25,479
--------- --------- --------- ---------
Other income(expense):
Interest expense, net. . . (1,837) (3,028) (3,687) (4,966)
Other, net . . . . . . . . (308) (388) (689) (703)
--------- --------- --------- ---------
Total other
income(expense), net (2,145) (3,416) (4,376) (5,669)
--------- --------- --------- ---------
Income before taxes. . . . . 16,245 10,812 30,736 19,810
Taxes on income. . . . . . . 6,255 4,403 11,929 8,119
--------- --------- --------- ---------
Net income . . . . . . . . . $ 9,990 $ 6,409 $ 18,807 $ 11,691
========= ========= ========= =========
Per share amounts:
Net income - basic . . . . $ 0.60 $ 0.46 $ 1.13 $ 0.84
========= ========= ========= =========
Net income - diluted . . . $ 0.57 $ 0.43 $ 1.08 $ 0.80
========= ========= ========= =========
Average shares outstanding:
Basic. . . . . . . . . . . 16,736 13,928 16,656 13,840
========= ========= ========= =========
Diluted. . . . . . . . . . 17,476 14,785 17,452 14,635
========= ========= ========= =========
</TABLE>
The Notes To Consolidated Financial Statements
should be read in conjunction with these statements.
1
<PAGE>
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------- ---------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . $ 3,832 $ 6,529
Accounts receivable, less reserves of $3,406
and $3,726 at June 30, 1998 and December 31,
1997, respectively. . . . . . . . . . . . . . 115,375 104,190
Inventories . . . . . . . . . . . . . . . . . . 71,758 71,282
Deferred income taxes. . . . . . . . . . . . . . 13,741 13,540
Prepaid expenses and other current assets . . . 5,080 4,726
--------- ---------
Total current assets . . . . . . . . . . . . . 209,786 200,267
--------- ---------
Plant and equipment, at cost:
Land, buildings and leasehold improvements . . . 52,643 51,874
Machinery and equipment . . . . . . . . . . . . 170,993 173,300
Construction in progress . . . . . . . . . . . . 11,134 5,720
--------- ---------
234,770 230,894
Less - accumulated depreciation . . . . . . . . (112,904) (105,368)
--------- ---------
121,866 125,526
--------- ---------
Intangible assets, net of amortization of $9,260
and $7,445 at June 30, 1998 and December 31,
1997, respectively . . . . . . . . . . . . . . 121,803 123,616
--------- ---------
Other assets . . . . . . . . . . . . . . . . . . . 11,586 11,909
--------- ---------
$ 465,041 $ 461,318
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt . . . . . . . $ 1,417 $ 1,475
Accounts payable . . . . . . . . . . . . . . . . 54,218 50,913
Accrued liabilities . . . . . . . . . . . . . . 82,741 87,814
--------- ---------
Total current liabilities . . . . . . . . . . 138,376 140,202
--------- ---------
Long-term debt . . . . . . . . . . . . . . . . . . 102,821 116,257
--------- ---------
Accrued postretirement benefits . . . . . . . . . 19,857 19,573
--------- ---------
Other long-term liabilities. . . . . . . . . . . . 9,585 10,833
--------- ---------
Total liabilities . . . . . . . . . . . . . . 270,639 286,865
--------- ---------
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 16,850 shares at June 30, 1998
and 16,601 at December 31, 1997, respectively. 16,850 16,601
Additional paid-in capital . . . . . . . . . . . 109,359 103,543
Retained earnings . . . . . . . . . . . . . . . 71,576 57,777
Accumulated other comprehensive income . . . . . (2,463) (2,548)
--------- ---------
195,322 175,373
Less - treasury shares at cost (72 shares at
June 30, 1998 and December 31, 1997) . . . . . (920) (920)
--------- ---------
Total shareholders' equity . . . . . . . . . . 194,402 174,453
--------- ---------
$ 465,041 $ 461,318
========= =========
</TABLE>
The Notes to Consolidated Financial Statements
should be read in conjunction with these statements.
2
<PAGE>
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1998 1997
--------- ---------
(Unaudited)
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . $ 18,807 $ 11,691
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . 12,960 9,339
Deferred income taxes, net . . . . . . . . . (228) (269)
Provision for losses on accounts receivable. 130 181
Other, net . . . . . . . . . . . . . . . . . 1,775 1
Changes in operating assets and liabilities: (1)
Accounts receivable . . . . . . . . . . . (12,119) (8,372)
Inventories . . . . . . . . . . . . . . . (937) 1,621
Prepaid expenses and other current assets. (424) (1,083)
Accounts payable . . . . . . . . . . . . . 3,457 469
Accrued liabilities. . . . . . . . . . . . (5,343) 3,953
--------- ---------
Net cash provided by operating activities 18,078 17,531
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . (10,303) (6,874)
Acquisitions, net of cash acquired . . . . . --- (85,375)
Proceeds from the sale of assets . . . . . . 4,660 328
--------- ---------
Net cash used by investing activities . . (5,643) (91,921)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in revolving loan facility . . . (12,977) (61,319)
Proceeds from issuance of long-term debt . . 51 90,000
Repayments of long-term debt . . . . . . . . (550) (1,329)
Dividends paid . . . . . . . . . . . . . . . (4,970) (4,124)
Stock offering proceeds, net of expenses . . --- 64,072
Redemption of warrants . . . . . . . . . . . --- (9,139)
Stock options exercised and other . . . . . 3,458 1,820
--------- ---------
Net cash provided (used) by
financing activities . . . . . . . . . . (14,988) 79,981
--------- ---------
Effect of exchange rate changes on cash. . . . . (144) 140
--------- ---------
Net increase (decrease) in cash and cash
equivalents. . . . . . . . . . . . . . . . . . (2,697) 5,731
Cash and cash equivalents at beginning
of period . . . . . . . . . . . . . . . . . . 6,529 2,209
--------- ---------
Cash and cash equivalents at end of period . $ 3,832 $ 7,940
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . $ 4,921 $ 5,020
========= =========
Income taxes, net of refunds . . . . . . . . . $ 7,394 $ 7,132
========= =========
</TABLE>
(1)Net of the effects of acquisitions, where applicable.
The Notes To Consolidated Financial Statements
should be read in conjunction with these statements.
3
<PAGE>
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For The Six Months Ended June 30, 1998
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Accumulated Other
Comprehensive Income
--------------------
Foreign
Additional Currency Minimum Compre-
Common Paid-in Retained Translation Pension Treasury hensive
Stock Capital Earnings Adjustment Liability Stock Total Income
------ ------- -------- ---------- --------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance
at
December
31, 1997 $16,601 $103,543 $57,777 $(1,364) $(1,184) $(920) $174,453
Net
income --- --- 18,807 --- --- --- 18,807 $18,807
Cash
dividends
declared
($0.30 per
share) --- --- (5,008) --- --- --- (5,008)
Foreign
currency
translation
adjustment --- --- --- 85 --- --- 85 85
Issuance
of common
stock (1) 70 2,537 --- --- --- --- 2,607
Stock
options
exercised
and other 179 3,279 --- --- --- --- 3,458
------ -------- ------ -------- --------- ------ -------- ------
Balance at
June 30,
1998 $16,850 $109,359 $71,576 $(1,279) $(1,184) $(920) $194,402
======= ======== ======= ======= ======= ===== ========
Total comprehensive income for the six months ended June 30, 1998... $18,892
=======
</TABLE>
(1) Represents shares issued under the Company's Long-Term Incentive Plan.
The Notes To Consolidated Financial Statements
should be read in conjunction with these statements.
4
<PAGE>
KUHLMAN CORPORATION AND SUBSIDIARIES
__________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Six Months Ended June 30, 1998
(Unaudited)
1. Consolidated Financial Statements
The consolidated balance sheet at June 30, 1998 and the related
consolidated statements of income and cash flows for the three and six months
ended June 30, 1998 and 1997 and the statement of shareholders' equity for the
six months ended June 30, 1998, 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 June 30, 1998, the
results of operations and cash flows for three and six months ended June 30,
1998 and 1997 and the shareholders' equity for the six months ended June 30,
1998 have been made. Certain amounts in the 1997 consolidated financial
statements have been reclassified to conform with the 1998 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, 1997
included in the Company's annual report on Form 10-K.
The results of operations for the three and six months ended June 30,
1998 are not necessarily indicative of the results to be expected for the full
year 1998.
2. Acquisition of Snyder Tank Corporation
On November 14, 1997, a subsidiary of the Company acquired all of the
outstanding stock of Snyder Tank Corp. ("Snyder Tank") for approximately
$20,000,000 in cash plus the assumption of approximately $1,200,000 of debt.
Snyder Tank is a manufacturer of steel and aluminum fuel and air tanks for
medium and heavy-duty trucks, and metal tanks for liquified natural gas fuel
systems. Net sales of Snyder Tank for their fiscal year ended August 31, 1997
were approximately $45,700,000. The impact on operations of this acquisition
was not significant for any of the periods presented and, therefore, pro forma
amounts are not presented giving effect to the transaction.
5
<PAGE>
3. Earnings and Dividends Per Share
Basic earnings per share are computed by dividing net income by the
weighted average shares outstanding for the period. Diluted earnings per
share reflects the dilutive effects of common stock equivalents in the
weighted average shares outstanding. The following is a reconciliation of the
weighted average shares outstanding used in the computation of diluted
earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------- ---------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Weighted average shares outstanding 16,736 13,928 16,656 13,840
Dilutive impact of stock options outstanding 740 857 796 795
------ ------ ------ ------
Diluted average shares outstanding 17,476 14,785 17,452 14,635
====== ====== ====== ======
</TABLE>
A cash dividend of $0.15 per share was declared during each of the first
two quarters of 1998 and 1997.
4. Inventories
Inventories consisted of the following, in thousands:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------- ---------
(unaudited)
<S> <C> <C>
FIFO cost:
Raw materials $ 32,460 $ 32,904
Work-in-process 16,937 17,270
Finished goods 22,453 21,662
--------- ---------
Total 71,850 71,836
Excess of FIFO
over LIFO cost (92) (554)
--------- ---------
Net inventories $ 71,758 $ 71,282
========= =========
</TABLE>
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company generated $18,078,000 in cash flow from operations in the
first half of 1998 compared to $17,531,000 for the same period in 1997, an
increase of $547,000 (3%). The increase was due primarily to the record
earnings and depreciation and non-cash charges related to the Company's Long-
Term Incentive Program reported in the first half of 1998, partially offset by
higher working capital requirements. Working capital (net of cash) was
$67,578,000 at June 30, 1998 compared to $53,536,000 at December 31, 1997, an
increase of $14,042,000 (26%). The increase in working capital was due
primarily to greater accounts receivable as a result of the Company's record
sales volume and the payment of certain accrued liabilities. Cash and cash
equivalents decreased to $3,832,000 at June 30, 1998 from $6,529,000 at
December 31, 1997 due to the timing of certain payments, primarily at the
Company's international operations. Accounts receivable, net was $115,375,000
at June 30, 1998 compared to $104,190,000 at December 31, 1997, an increase of
$11,185,000 (11%). The increase was due primarily to the Company's record
sales volume in the first half of 1998, which was up 24% over the same period
in 1997. Inventories increased only $476,000 (1%) to $71,758,000 at June 30,
1998 from December 31, 1997 while supporting higher net sales because of
improved manufacturing efficiencies. Deferred taxes and prepaid expenses and
other current assets increased $555,000 (3%) to $18,821,000 at June 30, 1998
from the end of 1997 primarily because of adjustments for certain tax
attributes associated with the acquisition of Kysor. Accounts payable and
accrued liabilities were $136,959,000 at June 30, 1998 compared to
$138,727,000 at December 31, 1997, a decrease of $1,768,000 (1%). The
decrease was because of lower accrued expenses due to the payment of certain
items accrued throughout 1997 and paid in the first half of 1998, partially
offset by higher accounts payable to vendors.
Total debt outstanding at June 30, 1998 was $104,238,000, down
$13,494,000 (11%) from the end of 1997. The decrease was due to the repayment
of debt from the excess cash flow generated by the Company in the first half
of 1998. At June 30, 1998, shareholders' equity was $194,402,000, an increase
of $19,949,000 (11%) from the end of 1997. The increase was primarily due to
the record earnings in the first half of 1998, partially offset by the payment
of dividends. Total dividends paid in each of the first six months of 1998
and 1997 were $0.30 per share, or $4,970,000 and $4,124,000, respectively.
Total debt to capitalization fell to 34.9% at June 30, 1998 from 40.3% at the
end of 1997 due to the reduction in debt and the increase in equity.
Capital expenditures for the first six months of 1998 were $10,303,000
compared to $6,874,000 reported in the same period last year. Expenditures in
the first half of 1998 were primarily for normal replacements and additions to
machinery and equipment. In addition, the Company sold an excess facility and
certain other non-core assets generating approximately $4,660,000 in cash in
the first half of 1998 compared to $328,000 in the same period in 1997. The
gain on the sale of these assets was not significant.
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.
7
<PAGE>
RESULTS OF OPERATIONS
The following table summarizes net sales and operating earnings by
segment:
<TABLE>
<CAPTION>
In thousands
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1998 1997 1998 1997
--------- --------- --------- ---------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales:
Electrical $ 74,097 $ 74,235 $ 144,940 $ 146,718
Industrial 120,045 95,986 233,304 157,651
--------- --------- --------- ---------
$ 194,142 $ 170,221 $ 378,244 $ 304,369
========= ========= ========= =========
Income before taxes:
Electrical $ 7,303 $ 4,814 $ 13,019 $ 8,984
Industrial 15,538 12,059 30,249 20,902
--------- --------- --------- ---------
Operating
earnings(1) 22,841 16,873 43,268 29,886
Corporate (4,759) (3,033) (8,845) (5,110)
Interest expense, net (1,837) (3,028) (3,687) (4,966)
--------- --------- --------- ---------
$ 16,245 $ 10,812 $ 30,736 $ 19,810
========= ========= ========= =========
</TABLE>
(1) Operating earnings is defined as operating profit plus other, net
directly attributable to each segment.
Three Months Ended June 30, 1998 and 1997
Consolidated Results
The Company reported record quarterly results in the second quarter of
1998 in several key financial areas, including net sales, operating profit and
net income. Net income and earnings per share advanced 56% and 33%,
respectively, in the second quarter of 1998 when compared to the same period
in 1997. These increases were attributable to the positive operating
performance reported in each of the Company's two segments, Electrical and
Industrial Products, and the impact of the acquisition of Snyder Tank
Corporation ("Snyder Tank"), acquired in November 1997.
Net sales in the second quarter of 1998 were a record high of $194,142,000
compared to $170,221,000 reported in the same period in 1997, an increase of
$23,921,000 (14%). The increase in net sales was due primarily to robust
demand in the Industrial Products Segment and to the full period impact in
1998 of the Snyder Tank acquisition.
Operating profit for the second quarter of 1998 reached a record high of
$18,390,000 compared to $14,228,000 reported for the same period in 1997, an
increase of $4,162,000 (29%). Consolidated operating profit margins in the
second quarter of 1998 advanced to 9.5% of net sales from 8.4% reported in the
year-ago period. The increases in consolidated operating profit and operating
profit margins were due to the record sales volume and improved gross profit
margins for certain products. Gross profit margins in the second quarter of
1998 advanced to 23.4% from 22.6% reported in the year-ago period due to the
impact of greater sales volume, improved product mix and better manufacturing
efficiencies, primarily in the Electrical Products Segment. Overall,
operating expenses increased $2,777,000 (11%) to $27,063,000, or 13.9% of net
sales, in the second quarter of 1998 compared to $24,286,000, or 14.3% of net
sales reported in the year-ago period. The increase in operating expenses was
due primarily to the higher net sales noted above, greater corporate expenses
due to the $3,103,000 pre-tax charge for the Company's Long-Term Incentive
Plan ("LTIP") and the acquisition
8
<PAGE>
noted above. Operating expenses, excluding the LTIP, in the second quarters of
1998 and 1997 were 12.3% and 13.2% of net sales, respectively. The decline in
operating expenses as a percentage of net sales, excluding the LTIP, was due to
the benefit of record sales volume and cost containment programs throughout
the Company.
Interest expense, net was $1,837,000 in the second quarter of 1998
compared to $3,028,000 for the same period in 1997, a decrease of $1,191,000
(39%). The decrease was due to lower levels of debt outstanding throughout
the 1998 period compared to the second quarter of 1997 because of the impact
of the sale of 2,350,000 shares of the Company's common stock in June 1997.
Other, net was an expense of $308,000 in the second quarter of 1998 compared
to a $388,000 expense reported in the same period in 1997, a decrease of
$80,000 (21%). The decrease was due to lower miscellaneous, non-operating
expenses, none of which were significant, in the second quarter of 1998
compared to the year-ago period.
Net income for the second quarter of 1998 was a record $9,990,000 compared
to $6,409,000 reported in the same period in 1997, an increase of $3,581,000
(56%). Earnings per share (diluted) in the second quarter of 1998 were $0.57
compared to $0.43 for the second quarter of 1997, an increase of 33%. 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 and the impact of additional common
stock issued primarily in June 1997. Net income was benefitted in the second
quarter of 1998 when compared to the year-ago period by a lower overall
effective tax rate. The Company's effective tax rate for the second quarter
of 1998 and 1997 was 38.5% and 40.7%, respectively. The difference in rates
was due primarily to the impact of higher pre-tax earnings which lessened the
impact of non-deductible goodwill and a change in the source of earnings
between various taxing authorities.
The Company's consolidated backlog was $168,895,000 at June 30, 1998
compared to $159,835,000 at March 31, 1998 and $170,970,000 at December 31,
1997, respectively. The increase in the backlog from the end of March 1998
was due primarily to increased orders for key products in each segment,
particularly the Electrical Products Segment, while the small decrease from
the prior year end was due to the beneficial impact of improved delivery
times.
Electrical Products Segment
In the Electrical Products Segment, net sales in the second quarter of
1998 of $74,097,000 were essentially the same when compared to the year-ago
period. Net sales remained constant because record shipments of medium power
transformers in the second quarter of 1998 were offset by the impact of lower
average copper prices on net sales of certain wire and cable products and
lower shipments of security wire and distribution transformers.
Operating earnings in the Electrical Products Segment increased $2,489,000
(52%) to $7,303,000 in the second quarter of 1998 over the same period in
1997. The increase was due to improved margins for both transformers and wire
and cable products. Kuhlman Electric reported the highest quarterly operating
earnings in its history and 29% above the year-ago period on higher net sales
and improved operating margins. Operating earnings at Coleman Cable advanced
79% in the second quarter of 1998 compared to that reported in the second
quarter of 1997. The increase was due primarily to improved gross profit
margins resulting from a better sales mix, the impact of lower copper costs
and greater manufacturing efficiencies due to programs implemented in 1997.
9
<PAGE>
Industrial Products Segment
Net sales for the Industrial Products Segment in the second quarter of
1998 were a record $120,045,000 compared to $95,986,000 reported in the same
period in 1997, an increase of $24,059,000 (25%). The increase was due
primarily to record sales of engine components and fuel tanks and the full
period impact of the acquisition of Snyder Tank. The record level of sales in
the quarter were due primarily to continued robust demand domestically and
internationally for turbochargers, fuel tanks and other engine components from
original equipment manufacturers of commercial and industrial transportation
products.
Operating earnings in the Industrial Products Segment improved $3,479,000
(29%) to a record $15,538,000 in the second quarter of 1998 when compared to
the same period in 1997. The increase was due primarily to the record
shipments of engine component products and fuel tanks, improved operating
efficiencies, and the acquisition of Snyder Tank noted above.
Six Months Ended June 30, 1998 and 1997
Consolidated Results
Net sales, operating profit and net income for the first six months of
1998 were again record highs for the Company, up 24%, 38% and 61%,
respectively, over the results reported for the first half of 1997.
Net sales for the first half of 1998 were $378,244,000 compared to
$304,369,000 for the same period in 1997, an increase of 24%. The increase
was due primarily to record shipments of medium power transformers and certain
components for commercial transportation applications and the addition of
Snyder Tank. Demand from customers in the first half of 1998 for certain
products remained vibrant in key markets served by the Company.
Operating profit for the first six months of 1998 was $35,112,000, or
9.3% of net sales, compared to $25,479,000, or 8.4% of net sales, in the year-
ago period, an increase of $9,633,000 (38%). The increase in operating profit
and margins was due to the positive results posted in each segment in the
first half of 1998 and the full period impact from the additions of Kysor,
acquired in March 1997, and Snyder Tank. Operating expenses for the first
half of 1998 were $52,428,000, or 13.9% of net sales, compared to $42,777,000,
or 14.1% of net sales, in the year-ago period. While spending for operating
expenses increased due to the higher sales volume noted above, the
acquisitions noted above and the impact of the Long-Term Incentive Plan,
operating expenses as a percentage of net sales declined because of higher
volume and cost containment programs. Excluding the impact of the Long-Term
Incentive Plan, operating expenses as a percentage of sales were approximately
12.6% and 13.6% in the first half of 1998 and 1997, respectively.
Interest expense, net for the first half of 1998 was $3,687,000 compared
to $4,966,000 for the same period in 1997, a decrease of $1,279,000 (26%).
The decrease was due primarily to the lower debt levels in the first half of
1998 compared to the year-ago period because of the proceeds from the sale of
common stock in June 1997 which were used to reduce debt incurred from the
acquisition of Kysor. Other, net in the first half of 1998 was an expense of
$689,000, virtually unchanged from the year-ago period.
Net income for the first half of 1998 increased $7,116,000 (61%) to a
record $18,807,000 from $11,691,000 reported in the same period in 1997.
Earnings per share in the first half of 1998 were $1.08 compared to $0.80 for
the year-ago period, an increase of 35%. The increase in earnings per share
was due to the higher net income noted above, partially offset by more shares
outstanding throughout the
10
<PAGE>
period. The fully diluted shares outstanding for the first half of 1998 and
1997 were 17,452,000 and 14,635,000, respectively. Net income in the first half
of 1998 was benefitted by a lower overall effective tax rate compared to
the year-ago period. The Company's effective tax rate for the first half of
1998 was 38.8% compared to 41.0% in the year-ago period. The difference
in rates was due primarily to the impact of higher pre-tax earnings which
lessened the impact of non-deductible goodwill and a change in this source of
earnings between various taxing authorities.
Electrical Products Segment
Net sales of the Electrical Products Segment in the first half of 1998
were $144,940,000 compared to $146,718,000 in the similar period in 1997, a
decrease of $1,778,000 (1%). The decrease was due primarily to the impact of
lower average copper prices on sales of certain wire and cable products and
reduced shipments of distribution transformers and security wire, partially
offset by record shipments of medium power transformers.
Operating earnings in the Electrical Products Segment increased
$4,035,000 (45%) to $13,019,000 in the first half of 1998 compared to the same
period in 1997. Operating margins advanced to 9.0% in the first half of 1998
from 6.1% in the first half of 1997. The increase in operating earnings
occurred at both Kuhlman Electric and Coleman Cable. At Kuhlman Electric,
operating earnings increased 31% primarily due to record shipments for medium
power transformers, partially offset by lower earnings for distribution
transformers because of reduced productivity. Operating earnings at Coleman
Cable increased 62% in the first half of 1998 compared to the year-ago period
primarily because of improved product mix, the impact of lower cost of copper,
and greater manufacturing efficiencies from programs implemented in 1997.
Industrial Products Segment
Net sales for the Industrial Products Segment in the first half of 1998
were $233,304,000 compared to $157,651,000 reported in the same period in
1997, an increase of $75,653,000 (48%). The increase was due primarily to
record shipments of industrial components for commercial and industrial
transportation applications and the additions of Kysor and Snyder Tank. The
record sales levels in the first six months of 1998 were due primarily to
continued robust demand for turbochargers, fuel tanks and other engine
components from original equipment manufacturers in North America and Europe.
Operating earnings in the Industrial Products Segment improved
$9,347,000 (45%) to $30,249,000 in the first half of 1998 when compared to the
same period in 1997. The increase was due to the record volumes noted above.
Operating margins were 13.0% in the first six months of 1998 compared to 13.3%
in the year-ago period. The decrease in operating margins was due primarily
to a change in product mix for fan and fan drives and the impact of Snyder
Tank, which generally has lower margins than the other key products of the
company.
OTHER MATTERS
Kuhlman is currently working to resolve the potential impact of the year
2000 on the processing of date-sensitive information by the Company's
computerized information systems and equipment. The year 2000 issue is the
result of computer programs being written using two digits, rather than four,
to define the applicable year. Any of the Company's programs or equipment
that have time-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000, which could result in miscalculations or
system failures. Based on present information, costs of addressing potential
problems are not currently expected to have a material adverse impact on the
Company's financial position, results of operations, cash flows, liquidity or
capital resources in future periods. However, if the Company, or its
customers or vendors are unable to resolve such processing issues in a timely
manner,
11
<PAGE>
it could have a material adverse financial impact. Accordingly, the
Company plans to devote the necessary resources to resolve all
significant year 2000 issues of which it is aware in a timely manner,
although it should be noted that the Company will not have full control or
knowledge of the actions or inactions of all of its customers or vendors.
While the Company does not expect expenditures associated with year 2000
compliance to be material, necessary cash outlays will be funded through the
Company's operating cash flow.
OUTLOOK FOR 1998
Management believes that the results in the second quarter support
its view that the Company is positioned to prosper in 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 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 captions "Other Matters" and "Outlook
For 1998" and certain other information contained in this report, which can be
identified by the use of forward-looking terminology such as "expected,"
"could," "will," "believes," or the negative thereof or other variations
thereon or 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 4 Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of security holders of the Registrant was held
on April 23, 1998.
(b) Curtis G. Anderson, William E. Burch, Alexander W. Dreyfoos, Jr.,
and General H. Norman Schwarzkopf were elected as directors at the
Annual Meeting. Steve Cenko, Gary G. Dillon, Robert S. Jepson,
Jr., William M. Kearns, Jr. and George J. Michel, Jr., continued
as directors after the Annual Meeting.
(c) At such meeting all of the nominees for election as directors were
elected for the term of office set forth below. The votes cast
with respect to each nominee for election as a director are as
follows:
<TABLE>
<CAPTION>
Year When
Term of Office Votes For Votes
Nominee Expires Nominee Withheld
----------- -------------- --------- --------
<S> <C> <C> <C>
Curtis G. Anderson 2001 13,455,807 158,559
William E. Burch 1999 13,448,641 165,725
Alexander W. Dreyfoos, Jr. 2001 13,453,267 161,099
General H. Norman Schwarzkopf 2001 13,449,020 165,346
</TABLE>
12
<PAGE>
At such meeting the security holders voted upon and approved the
following:
(1) the Kuhlman Corporation Employee Stock Purchase Plan. 13,344,005
affirmative votes and 199,269 negative votes were cast, and there
were 71,092 abstentions with respect to such matter.
(2) the Amendment to the Certificate of Incorporation of Kuhlman to
increase the number of authorized shares of common stock, par
value $1.00 per share, from 20,000,000 to 40,000,000. 13,204,261
affirmative votes and 365,862 negative votes were cast, and there
were 44,243 abstentions with respect to such matter.
(3) the ratification of the selection of Arthur Andersen LLP as the
independent auditors for the Registrant for the year ending
December 31, 1998. 13,591,187 affirmative votes and 12,009
negative votes were cast, and there were 11,170 abstentions with
respect to such matter.
ITEM 5 Other Information
Any proposal which a stockholder intends to present at the annual meeting of
stockholders in 1999 must be received by the Company by November 25, 1998 in
order to be eligible for inclusion in the proxy statement and proxy form
relating to such meeting. In addition, if any business should properly come
before such annual meeting other than that which is stated in such proxy
statement, then, if the Company does not receive timely notice of the matter,
the persons designated in such proxy form will vote or refrain from voting in
respect thereof in accordance with the judgment of the persons voting such
proxies. To be timely, a shareholder's notice shall be delivered to the
secretary of the Company at the Company's principal executive offices no later
than February 22, 1999 and no earlier than January 23, 1999. Such notice also
must otherwise comply with the provisions of the Company's bylaws.
ITEM 6 Exhibits
(a) Exhibits
3.1 Certificate of Incorporation of the Registrant as amended.
10.1 Kuhlman Corporation Employee Stock Purchase Plan.
27.0 Financial Data Schedule for the six month period ended June 30, 1998.
13
<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: , 1998
---------------
14
EXHIBIT 3.1
EXPLANATORY NOTE
Set forth below is the entire amended text of the Certificate of
Incorporation (the "Certificate") of the Registrant as currently in
effect. The following text reflects amendments to the Certificate
that were approved by the Registrant's stockholders on May 31, 1995
and April 23, 1998.
CERTIFICATE OF INCORPORATION
OF
KUHLMAN CORPORATION
FIRST: The name of the corporation is Kuhlman Corporation
(the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is Corporation Trust Center,
1209 Orange Street in the City of Wilmington, County of New Castle.
The name of the registered agent of the Corporation at that address
is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized
under the Delaware General Corporation Law.
FOURTH: The total number of shares of all classes of stock
which the Corporation shall have authority to issue is as follows:
(A)2,000,000 shares of Preferred Stock of the par value
of $1.00 per share (the "Preferred Stock"); and
(B)40,000,000 shares of Common Stock of the par value
of $1.00 per share (the "Common Stock").
The designations, voting powers, preferences and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions of the above classes of
stock and other general provisions relating thereto shall be as
follows:
PART I
PREFERRED STOCK
1. The Board of Directors is expressly authorized at
any time, and from time to time, to provide for the
issuance of shares of Preferred Stock in one or more
series, and for such consideration or considerations as
the Board of Directors may determine, with such voting
powers, full or limited, or without voting powers, and
with such designations, preferences and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as
shall be stated and expressed in the resolution or
resolutions providing for the issue thereof adopted by
the Board of Directors, all except as otherwise required
by law or this Certificate of Incorporation, and
including but without limiting the generality of the
foregoing, the following:
(a) The distinctive designation and number of
shares comprising such series, which number may
(except where otherwise provided by the Board of
Directors in creating such series) be increased or
decreased (but not below the number of shares then
outstanding) from time to time by action of the
Board of Directors.
(b) The dividend rate or rates on the shares of
such series and the relation which such dividends
shall bear to the dividends payable on any other
class of capital stock or on any other series of
Preferred Stock, the terms and conditions upon
which and the periods in respect of which dividends
shall be payable, whether and upon what conditions
such dividends shall be cumulative and, if
cumulative, the date or dates from which dividends
shall accumulate.
(c) Whether the shares of such series shall be
redeemable, and, if redeemable, whether redeemable
for cash, property or rights, including securities
of any other corporation, at the option of either
the holder or the Corporation or upon the happening
of a specified event, the limitations and
restrictions with respect to such redemption, the
time or times when, the price or prices or rate or
rates at which, the adjustments with which and the
manner in which such shares shall be redeemable,
including the manner of selecting shares of such
series for redemption if less than all shares are
to be redeemed.
(d) The rights to which the holders of shares of
such series shall be entitled, and the preferences,
if any, over any other series (or of any other
series over such series), upon the voluntary or
involuntary liquidation, dissolution, distribution
or winding up of the Corporation, which rights may
vary depending on whether such liquidation,
dissolution, distribution or winding up is
voluntary or involuntary, and, if voluntary, may
vary at different dates.
(e) Whether the shares of such series shall be
subject to the operation of a purchase, retirement
or sinking fund, and, if so, whether and upon what
conditions such purchase, retirement or sinking
fund shall be cumulative or noncumulative, the
extent to which and the manner in which such fund
shall be applied to the purchase or redemption of
the shares of such series for retirement or to
other corporate purposes and the terms and
provisions relative to the operation thereof.
(f) Whether the shares of such series shall be
convertible into or exchangeable for shares of any
other class or of any other series of any class of
capital stock or other securities of the
Corporation, or the securities of any other
corporation or entity, and, if so convertible or
exchangeable, the price or prices or the rate or
rates of conversion or exchange and the method, if
any, of adjusting the same, and any other terms and
conditions of such conversion or exchange.
(g) The voting powers, full and/or limited, if
any, of the shares of such series, and whether and
under what conditions the shares of such series
(alone or together with the shares of one or more
other series) shall be entitled to vote separately
as a single class, upon any merger or consolidation
or other transaction of the Corporation, or upon
any other matter, including without limitation the
election of one or more additional directors of the
Corporation in case of dividend arrearages or other
specified events.
(h) Whether the issuance of any additional shares
of such series, or of any shares of any other
series, shall be subject to restrictions as to
issuance, or as to the powers, preferences or
rights of any other series.
(i) Any other preferences, privileges and powers
and relative, participating, optional or other
special rights, and qualifications, limitations or
restrictions of such series, as the Board of
Directors may deem advisable and as shall not be
inconsistent with the provisions of this
Certificate of Incorporation.
2. All shares of Preferred Stock of any one series
shall be of equal rank and identical in all respects,
except that shares of any one series issued at different
times may differ as to the dates from which dividends
thereon, if cumulative, shall be cumulative.
PART II
COMMON STOCK
1. Except as otherwise required by law or by this
Certificate of Incorporation, each holder of Common Stock
shall have one vote for each share of Common Stock held
by a holder on all matters voted upon by the holders of
Common Stock.
2. Subject to the preferential dividend rights, if any,
applicable to shares of Preferred Stock and subject to
applicable requirements, if any, with respect to the
setting aside of sums for purchase, retirement or sinking
funds for Preferred Stock, the holders of Common Stock
shall be entitled to receive, to the extent permitted by
law, such dividends as may be declared from time to time
by the Board of Directors.
3. In the event of any liquidation, dissolution or
winding up of the Corporation, the holders of Common
Stock shall be entitled, after payment or provision for
payment of the debts and other liabilities of the
Corporation and the amounts to which the holders of any
Preferred Stock shall be entitled, to share ratably in
the remaining net assets of the Corporation.
PART III
GENERAL PROVISIONS
1. Subject to the power of the Board of Directors to
provide to the contrary with respect to any one or more
series of Preferred Stock at any time authorized, no
holder of stock of any class of the Corporation shall be
entitled as a matter of right to purchase or subscribe
for any part of any unissued stock of any class, or of
any additional stock of any class of capital stock of the
Corporation, or of the bonds, certificates of
indebtedness, debentures, or other securities, whether or
not convertible into other securities, but any such stock
or other securities may be issued and disposed of
pursuant to resolution by the Board of Directors to such
persons, firms, corporations or associations and upon
such terms and for such consideration (not less than the
par value or stated value thereof) as the Board of
Directors in the exercise of its discretion may determine
and as may be permitted by law without action by the
stockholders. The Board of Directors may provide for
payment therefor to be received by the Corporation in
cash, personal property, real property (or leases
thereof) or services. Any and all shares of stock so
issued for which the consideration so fixed has been paid
or delivered, shall be deemed fully paid and not liable
to any further call or assessment.
2. Shares of any class or series of capital stock
redeemed, converted, exchanged, purchased, retired or
surrendered to the Corporation, or which have been issued
and reacquired in any manner may, upon compliance with
any applicable provisions of the Delaware General
Corporation Law, be given the status of authorized and
unissued shares of the same class.
FIFTH: The following provisions are inserted for the
management of the business and the conduct of the affairs of the
Corporation, and for further definition, limitation and regulation
of the powers of the Corporation and of its directors and
stockholders:
A. The business and affairs of the
Corporation shall be managed by or under the
direction of the Board of Directors. In
addition to the powers and authority expressly
conferred upon them by statute or by this
Certificate of Incorporation or the by-laws of
the Corporation, the directors are hereby
empowered to exercise all such powers and do
all such acts and things as may be exercised
or done by the Corporation.
B. The directors of the Corporation need not
be elected by written ballot unless the
by-laws so provide.
C. Any action required or permitted to be
taken by the stockholders of the Corporation
must be effected at a duly called annual or
special meeting of stockholders of the
Corporation and may not be effected by any
consent in writing by such stockholders.
D. Special meetings of stockholders of the
Corporation may be called only by the Chief
Executive Officer or by the Board of Directors
acting pursuant to a resolution adopted by a
majority of the Whole Board. For purposes of
this Certificate of Incorporation, the term
"Whole Board" shall mean the total number of
authorized directors whether or not there
exist any vacancies in previously authorized
directorships.
SIXTH: The Board of Directors is expressly empowered to
adopt, amend or repeal by-laws of the Corporation. Any adoption,
amendment or repeal of the by-laws of the Corporation by the Board
of Directors shall require the approval of a majority of the Whole
Board. The stockholders shall also have power to adopt, amend or
repeal the by-laws of the Corporation; provided, however, that, in
addition to any vote of the holders of any class or series of stock
of the Corporation required by law or by this Certificate of
Incorporation, the affirmative vote of the holders of at least
seventy percent (70%) of the voting power of all of the outstanding
shares of stock of the Corporation entitled to vote generally in
elections of directors, voting together as a single class, shall be
required to adopt, amend or repeal any provision of the by-laws of
the Corporation.
SEVENTH: A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except
for liability (i) for any breach of the director's duty of loyalty
to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware
General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit. If the Delaware
General Corporation Law is amended to authorize corporate action
further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at
the time of such repeal or modification.
EIGHTH: Whenever a compromise or arrangement is proposed
between this Corporation and its creditors, or any class of them
and/or between this Corporation and its stockholders, or any class
of them, any court of equitable jurisdiction within the State of
Delaware, may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this
Corporation under the provisions of Section 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or
of any receiver or receivers appointed for this Corporation under
the provisions of Section 279 of Title 8 of the Delaware Code order
a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the
case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in
value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the
case may be, agree to any compromise or arrangement and to any
reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and
the said reorganization shall, if sanctioned by the court to which
the said application has been made, be binding on all the creditors
or class of creditors, and/or on all the stockholders or class of
stockholders of this Corporation, as the case may be, and also on
this Corporation.
NINTH: Subject to the by-laws of the Corporation, the
Corporation shall, to the full extent permitted by Section 145 of
the Delaware General Corporation Law, as amended from time to time,
indemnify all persons whom it may indemnify pursuant thereto.
TENTH: The Corporation reserves the right to amend or repeal
any provision contained in this Certificate of Incorporation in the
manner prescribed by the laws of the State of Delaware and all
rights conferred upon stockholders are granted subject to this
reservation.
ELEVENTH: The incorporator is Kuhlman Corporation, a Michigan
corporation, whose mailing address is 2343 Alexandria Drive,
Suite 200, Lexington, Kentucky 40504.
THE UNDERSIGNED incorporator hereby acknowledges that this
Certificate of Incorporation is its act and deed and that the facts
herein stated are true.
KUHLMAN CORPORATION,
a Michigan corporation
Dated: March 1, 1993 By: /s/ Robert S. Jepson, Jr.
---------------------------
Robert S. Jepson, Jr.
President and Chief
Executive Officer
KUHLMAN CORPORATION EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
KUHLMAN CORPORATION EMPLOYEE STOCK PURCHASE PLAN
Table of Contents
Section Page
1. Purpose............................................................. 1
2. Definitions......................................................... 1
3. Plan Administration................................................. 3
(a) Committee Members.......................................... 3
(b) Powers and Duties of the Committee......................... 3
(c) Committee Action........................................... 4
(d) Exoneration of Committee Members........................... 4
4. Eligibility to Participate in Offerings............................. 4
5. Offerings........................................................... 5
6. Participation in Offerings.......................................... 5
7. Payroll Deductions.................................................. 5
8. Grant of Purchase Rights............................................ 6
9. Exercise of Purchase Rights......................................... 6
10. Delivery............................................................ 7
11. Withdrawal; Termination of Employment............................... 7
12. Interest............................................................ 8
13. Stock Subject to the Plan........................................... 8
14. Disposition Upon Death.............................................. 9
15. Transferability..................................................... 9
16. Share Transfer Restrictions......................................... 9
17. Amendment or Termination............................................ 10
i
<PAGE>
18. Notices............................................................. 10
19. Effective Date of Plan.............................................. 10
20. Miscellaneous....................................................... 10
(a) Headings and Gender........................................ 10
(b) Governing Law.............................................. 10
(c) Plan Not A Contract of Employment.......................... 11
ii
<PAGE>
KUHLMAN CORPORATION EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of this Kuhlman Corporation Employee Stock Purchase Plan
(the "Plan") is to advance the interests of Kuhlman Corporation, a Delaware
corporation (the "Company"), and its shareholders by providing Eligible
Employees (as defined in section 2(g) below) of the Company and its Designated
Subsidiaries (as defined in section 2(f) below) with an opportunity to acquire
an ownership interest in the Company by purchasing Common Stock of the Company
on favorable terms through payroll deductions. It is the intention of the
Company that the Plan, as applied to Employees resident in the United States of
America, qualify as an "employee stock purchase plan" under section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, provisions
of the Plan shall be construed so as to extend and limit participation in a
manner consistent with the requirements of section 423 of the Code. If the Plan
is extended to an Employee resident in a country other than the United States
of America, the Plan shall not be subject to section 423 of the Code and the
terms of the Plan may be subject to an appendix to the Plan corresponding to
the Employee's resident country.
2. Definitions.
(a) "Board" means the Board of Directors of the Company.
(b) "Business Day" means a day when the New York Stock Exchange
is open for trading.
(c) "Common Stock" means the common stock, par value $1.00 per
share, of the Company, or the number and kind of shares of
stock or other securities into which such common stock may be
changed in accordance with section 13 of the Plan.
(d) "Committee" means the entity administering the Plan, as
provided in section 3 below.
(e) "Compensation" means the total cash compensation, including
salary, wages, overtime pay, and bonuses, paid to an Eligible
Employee by reason of his employment with the Employer
(determined prior to any reduction thereof by operation of a
salary reduction election under a plan described in section
401(k) of the Code or section 125 of the Code), as reported
on IRS Form W-2, but excluding any amounts not paid in cash
which are required to be accounted for as imputed income on
IRS Form W-2, any reimbursements of expenses and amounts
under stock incentives or stock options.
(f) "Designated Subsidiary" means a Subsidiary that has been
designated by the Committee from time to time, in its sole
discretion, as eligible to participate in the Plan.
<PAGE>
(g) "Eligible Employee" means, with respect to any Offering, an
individual who is an Employee at all times during the period
beginning three (3) months before the Offering Date and
ending on the Offering Date.
(h) "Employee" means any person, including an Insider, who has
attained age 18 and is employed by the Company or one of its
Designated Subsidiaries.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means, with respect to any share of
Common Stock, as of any date under the Plan, the closing
price of the Common Stock on the New York Stock Exchange
composite transactions on a particular date.
(k) "Insider" means any Participant who is subject to section 16
of the Exchange Act.
(l) "Offering" means any of the offerings to Participants of
Purchase Rights (as defined in Section 8) to purchase Common
Stock under the Plan, each beginning on the first Business
Day of a calendar year quarter and continuing until the
last Business Day of such quarter, as described in section
5 below.
(m) "Offering Date" means the first day of the period of an
Offering under the Plan, as described in section 5 below.
(n) "Participant" means an Eligible Employee who elects to
participate in Offerings under the Plan pursuant to section 6
below.
(o) "Purchase Right Price" means the lesser of: (i) 85% of the
Fair Market Value of one share of Common Stock on the
Offering Date, or (ii) 85% of the Fair Market Value of one
share of Common Stock on the Termination Date the definition
of which, for purposes of this subsection 2(o) only, shall be
subject to Treas. Reg. ss.1.421-7(f).
(p) "Securities Act" means the Securities Act of 1933, as amended.
(q) "Subsidiary" means any corporation, other than the Company,
in an unbroken chain of corporations, beginning with the
Company, if, at the time a Purchase Right is granted under
the Plan, each of the corporations, other than the last
2
<PAGE>
corporation in the unbroken chain, owns stock possessing 50
percent or more of the total combined voting power of all
classes of stock in one of the other corporations in such
chain.
(r) "Termination Date" means the last day of the period of an
Offering under the Plan, as described in section 5 below.
3. Plan Administration.
(a) Committee Members. The administration of the Plan shall be
under the supervision of the committee for the Plan (the
"Committee") appointed by the Board from time to time.
Members of the Committee shall serve at the pleasure of the
Board and may be removed by the Board at any time without
prior written notice. A Committee member may resign by giving
written notice to the Board.
(b) Powers and Duties of the Committee. The Committee will have
full power to administer the Plan in all of its details,
subject to the requirements of applicable law. For this
purpose, the Committee's powers will include, but will not be
limited to, the following authority, in addition to all other
powers provided by this Plan:
(i) To adopt and apply, in a uniform and
nondiscriminatory manner to all persons similarly
situated, such rules and regulations as it deems
necessary or proper for the efficient and proper
administration of the Plan, including the
establishment of any claims procedures that may
include a requirement that all disputes that cannot
be resolved between a Participant and the Committee
will be subject to binding arbitration;
(ii) To interpret the Plan and decide all questions
concerning the Plan, such as the eligibility of any
person to participate in the Plan, and the
respective benefits and rights of Participants and
others entitled thereto and the exclusive power to
remedy ambiguities, inconsistencies or omissions in
the terms of the Plan;
(iii) To appoint such agents, counsel, accountants,
consultants and other persons as may be required to
assist in administering the Plan;
(iv) To allocate and delegate its responsibilities under
the Plan and to designate other persons to carry out
any of its responsibilities under the Plan;
(v) To prescribe such forms as may be necessary or
appropriate for Employees to make elections under
the Plan or to otherwise administer
3
<PAGE>
the Plan; and
(vi) To do such other acts as it deems necessary or
appropriate to administer the Plan in accordance
with its terms, or as may be provided for or
required by law.
(c) Committee Action. The certificate of a Committee member
designated by the Committee that the Committee has taken or
authorized any action shall be conclusive in favor of any
person relying on, or subject to, the certificate. Any
interpretation of the Plan, and any decision on any matter
within the discretion of the Committee, made by the Committee
in good faith shall be final and binding on all persons. A
majority of the members of the Committee shall constitute a
quorum. The Committee shall act by majority approval of the
members and shall keep minutes of its meetings. Action of the
Committee may be taken without a meeting if unanimous written
consent is given. Copies of minutes of the Committee's
meetings and of its actions by written consent shall be kept
with the corporate records of the Company.
(d) Exoneration of Committee Members. No member of the Committee
shall be liable for any action or determination made in good
faith with respect to the Plan or any Purchase Right granted
under it. The Company hereby agrees to indemnify, defend and
hold harmless, to the fullest extent permitted by law, any
Committee member against any and all liabilities, damages,
costs and expenses (including attorneys' fees and amounts
paid in settlement of any claims approved by the Company)
occasioned by any act or omission to act in connection with
the Plan, if such act or omission was not due to the gross
negligence or willful misconduct of the Committee member.
4. Eligibility to Participate in Offerings.
(a) An Eligible Employee is entitled to participate in Offerings
in accordance with sections 5 and 6, beginning with the
Offering Date after an Employee first becomes an Eligible
Employee, subject to the limitations imposed by section 423
of the Code.
(b) Notwithstanding any provisions of the Plan to the contrary:
(i) no Employee shall be granted a Purchase Right under the
Plan if immediately after the grant, such Employee (or any
other person whose stock ownership would be attributed to
such Employee pursuant to section 424(d) of the Code) would
own shares of Common Stock and/or hold outstanding options to
purchase shares of Common Stock possessing 5% or more of the
total combined voting power or value of all classes of shares
of the Company or of any Subsidiary; and (ii) the ability of
an Eligible Employee who is an Insider to participate in
Offerings under the Plan may be limited by the Committee to
the extent necessary to comply with Rule
4
<PAGE>
16b-3 of the Exchange Act (17 CFR ss.240.16b-3).
5. Offerings. Purchase Rights to purchase shares of Common Stock shall be
offered to Participants under the Plan through a continuous series of
Offerings, each beginning on the first Business Day of a calendar year quarter
(the "Offering Date"), and each Offering shall terminate on the last Business
Day of a calendar year quarter corresponding to the Offering Date (the
"Termination Date"). The Committee may designate that the first Offering under
the Plan, however, have an Offering Date after the beginning of a calendar year
quarter. Offerings under the Plan shall continue until either (a) the
Committee decides, in its sole discretion, that no further Offerings shall be
made because the Common Stock remaining available under the Plan is
insufficient to make an Offering to all Eligible Employees, or (b) the Plan is
terminated in accordance with section 17 below. Notwithstanding the foregoing,
Offerings will be limited under the Plan so that no Eligible Employee will be
permitted to purchase shares of Common Stock under all "employee stock purchase
plans" (within the meaning of section 423 of the Code) of the Company and its
Subsidiaries in excess of $25,000 of the Fair Market Value of such shares of
Common Stock (determined at the time of an Offering Date) for each calendar
year in which an Offering is outstanding at any time.
6. Participation in Offerings.
(a) An Eligible Employee may participate in Offerings under the
Plan by completing a subscription agreement authorizing
payroll deductions on the form provided by the Company (the
"Participation Form") and filing the Participation Form with
the Company (pursuant to such standards or procedures as are
established by the Committee) at least 15 days before the
Offering Date of the first Offering in which such Employee
wishes to participate.
(b) Except as provided in section 7(a) below, payroll deductions
for a Participant shall begin with the first payroll
following the applicable Offering Date, and shall continue
until the Plan is terminated, subject to earlier termination
by the Participant as provided in section 11 below or
increases or decreases by the Participant in the amount of
payroll deductions as provided in section 7(c) below.
7. Payroll Deductions.
(a) By completing and filing a Participation Form, an Eligible
Employee shall elect to have payroll deductions withheld from
his total Compensation on each paydate (including paydates
covering regular payroll, commissions and bonuses) during the
time he is a Participant in the Plan in such amount as he
shall designate on the Participation Form; provided, however,
that: (i) payroll deductions must be in such percentages or
whole dollar amounts, as determined by rules established by
the Committee which may change from time to time to provide
for the efficient administration of the Plan; (ii) the
Committee may
5
<PAGE>
establish rules limiting the amount of an Eligible Employee's
Payroll Deductions, except that any percentage or dollar
limitation must apply uniformly to all Eligible Employees;
(iii) and each Participant's payroll deductions must be equal
to at least the minimum percentage or dollar amount
established by the Committee from time to time, but no more
than $21,250 (U.S.) per calendar year.
(b) All payroll deductions authorized by a Participant shall be
credited to an account established under the Plan for the
Participant. The funds represented by such account shall be
held as part of the Company's general assets, usable for any
corporate purpose, and the Company shall not be obligated to
segregate such funds. A Participant may not make any separate
cash payment or contribution to such account.
(c) No increases or decreases of the amount of payroll deductions
for a Participant may be made during an Offering. A
Participant may increase or decrease the amount of his payroll
deductions under the Plan for subsequent Offerings by
completing an amended Participation Form and filing it with
the Company (pursuant to such standards and procedures
established by the Committee) not less than 15 days prior to
the Offering Date as of which such increase or decrease is to
be effective.
(d) A Participant may discontinue his participation in the Plan
at any time as provided in section 11 below, and subject to
Rule 16b-3 of the Exchange Act.
8. Grant of Purchase Rights. On each Offering Date, each Participant
shall be granted (by operation of the Plan) a right to purchase
(a "Purchase Right"), at the Purchase Right Price, as many shares of
Common Stock as he will be able to purchase with the payroll
deductions credited to his account during his participation in the
Offering beginning on such Offering Date. The maximum number of shares
of Common Stock that an Employee may purchase under an Offering may
not exceed 500 (as may be adjusted from time to time under section
13(b)), but subject to the other terms and conditions of the Plan.
9. Exercise of Purchase Rights.
(a) Unless a Participant gives written notice to the Company as
provided in subsection 9(c) below or withdraws from the Plan
pursuant to section 11 below, his Purchase Rights for shares
of Common Stock granted under an Offering will be exercised
automatically at the Termination Date of such Offering for
the purchase of the number of shares of Common Stock that the
accumulated payroll deductions in his account on such
Termination Date will purchase at the applicable Purchase
Right Price.
(b) No Participant (or any person claiming through such
Participant) shall have any
6
<PAGE>
interest in any Common Stock subject to a Purchase Right
under the Plan until such Purchase Right has been exercised,
at which point such interest shall be limited to the interest
of a purchaser of the Common Stock purchased upon such
exercise pending the delivery of such Common Stock in
accordance with section 10 below. During his lifetime, a
Participant's Purchase Rights for shares of Common Stock
under the Plan is exercisable only by him.
(c) By written notice to the Company prior to the end of the
Business Day on a Termination Date corresponding to an
Offering, a Participant may elect, effective on such
Termination Date, to withdraw all of the accumulated payroll
deductions in his account as of the Termination Date (which
will also constitute a notice of termination and withdrawal
pursuant to section 11(a)). However, the preceding sentence
shall not apply to an Insider if the withdrawal would
constitute a "Discretionary Transaction" (within the meaning
of Rule 16b-3(b)(1)) that is not an exempt transaction under
Rule 16b-3(f).
10. Delivery. As promptly as practicable after the Termination Date of
each Offering, the Company will issue or cause to be issued the shares
of Common Stock purchased upon exercise of a Participant's Purchase
Rights granted for such offering, to a brokerage firm (designated by
the Company) that has rights to execute trades on the New York Stock
Exchange.
11. Withdrawal; Termination of Employment.
(a) Except as provided in Section 9, a Participant may terminate
his participation in the Plan and withdraw all, but not less
than all, the payroll deductions credited to his account
under the Plan at any time prior to the end of the Business
Day on a Termination Date corresponding to an Offering, by
giving written notice to the Company. Such notice shall state
that the Participant wishes to terminate his involvement in
the Plan, specify a Termination Date and request the
withdrawal of all of the Participant's payroll deductions
held under the Plan. All of the Participant's payroll
deductions credited to his account will be paid to him as
soon as practicable after the Termination Date specified in
the notice of termination and withdrawal (or, if no such date
is specified, as soon as practical after receipt of his
notice of termination and withdrawal), and his Purchase
Rights for such Offering will be automatically canceled,
and no further payroll deductions for the purchase of
shares of Common Stock will be made for such Offering or
for any subsequent offering, except in accordance with a
new Participation Form filed pursuant to section 6 above.
(b) Upon termination, or notice of termination, of a
Participant's employment for any reason, including retirement
or death, any payroll deductions authorized under section 7
shall be cancelled immediately. Thereafter, any payroll
7
<PAGE>
deductions that were previously accumulated in the
Participant's account prior to his termination or notice of
termination will be applied in accordance with the provisions
of Section 9. However, if a termination of employment
precludes an Employee from being classified as an Eligible
Employee with respect to an Offering, then the payroll
deductions accumulated in his account will be returned to him
as soon as practicable after such termination or, in the case
of his death, to the person or persons entitled thereto under
section 14 below, and his Purchase Rights will be
automatically canceled. For purposes of the Plan, the
termination date of employment shall be the Participant's
last date of actual employment and shall not include any
period during which such Participant receives any severance
payments. A transfer of employment between the Company and a
Designated Subsidiary or between one Designated Subsidiary
and another Designated Subsidiary, or absence or leave
approved by the Company, shall not be deemed a termination of
employment under this subsection 11(b).
(c) A Participant's termination and withdrawal pursuant to
subsection 11(a) above will not have any effect upon his
eligibility to participate in a subsequent Offering by
completing and filing a new Participation Form pursuant to
section 6 above or in any similar plan that may hereafter be
adopted by the Company; provided, however, that, unless
otherwise permitted by the Committee in its sole discretion,
an Insider may be precluded from reparticipating in the Plan
to the extent necessary to comply with Rule 16b-3.
12. Interest. No interest shall accrue on a Participant' s payroll
deductions under the Plan.
13. Stock Subject to the Plan.
(a) The maximum number of shares of Common Stock that shall be
reserved for sale under the Plan shall be 500,000 shares,
subject to adjustment upon changes in capitalization of the
Company as provided in subsection (b) below. The shares to be
sold to Participants under the Plan may be, at the election
of the Company, either treasury shares or shares authorized
but unissued and may be derived from shares of Common Stock
purchased by the Company. If the total number of shares of
Common Stock that would otherwise be subject to Purchase
Rights granted pursuant to section 8 above on any Termination
Date exceeds the number of shares then available under the
Plan (after deduction of all shares for which Purchase Rights
have been exercised or are then outstanding), the Company
shall make a pro rata allocation of the shares of Common
Stock remaining available for issuance in as uniform and
equitable a manner as is practicable. In such event, the
Company shall give written notice of such reduction of the
number of shares subject to Purchase Rights to each
Participant affected thereby and shall return any excess
funds accumulated in each
8
<PAGE>
Participant's account as soon as practicable after the
Termination Date of such Offering.
(b) If any Purchase Right under the Plan is exercised after any
Common Stock dividend, split-up, recapitalization, merger,
consolidation, combination or exchange of Common Stock or the
like, occurring after the shareholders of the Company approve
the Plan, the number of shares of Common Stock to which such
Purchase Right shall be applicable and the Purchase Right
Price for such Common Stock shall be appropriately adjusted
by the Company.
14. Disposition Upon Death.
(a) If a Participant dies, shares of Common Stock and/or cash, if
any, attributable to the Participant's account under the Plan
(when cash or shares of Common Stock are held for his
account) shall be delivered to the executor or administrator
of the estate of the Participant; or, if no such executor or
administrator has been appointed (to the knowledge of the
Company), the Company, in its discretion, may deliver such
shares of Common Stock and/or cash to the spouse or to any
one or more dependents or relatives of the Participant; or,
if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a
Participant's account nor any rights relating to the exercise of a Purchase
Right or to receive shares of Common Stock under the Plan may be assigned,
transferred, pledged or otherwise disposed of in any way (other than by will,
the laws of descent and distribution, or as provided in section 14 above) by
the Participant. Any such attempt at assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may treat such act
as an election to withdraw funds in accordance with section 11(a) above.
16. Share Transfer Restrictions.
(a) Shares of Common Stock shall not be issued under the Plan
unless such issuance is either registered under the
Securities Act and applicable state securities laws or is
exempt from such registrations.
(b) Shares of Common Stock issued under the Plan may not be sold,
assigned, transferred, pledged encumbered, or otherwise
disposed of (whether voluntarily or involuntarily) except
pursuant to registration under the Securities Act and
applicable state securities laws, or pursuant to exemptions
from such registrations.
(c) Notwithstanding any other provision of the Plan or any
documents entered into pursuant to the Plan and except as
permitted by the Committee in its sole
9
<PAGE>
discretion, any shares of Common Stock issued to a
Participant who is an Insider may not be sold, assigned,
transferred, pledged, encumbered or otherwise disposed of for
a six-month period until after the Purchase Right Price is
determined on or after the Termination Date corresponding to
the Offering with respect to which they were issued.
17. Amendment or Termination. The Plan may be amended by the Committee
from time to time to the extent that the Committee deems necessary or
appropriate in light of, and consistent with, section 423 of the Code;
provided, however, that any amendment that either changes the composition,
function or duties of the Committee or modifies the terms and conditions
pursuant to which Purchase Rights are granted hereunder must be approved by the
Board. The Board also may terminate the Plan or the granting of Purchase Rights
pursuant to the Plan at any time; provided, however, that the Board shall not
have the right to modify, cancel, or amend any outstanding Purchase Right
granted pursuant to the Plan before such termination unless each Participant
consents in writing to such modification, amendment or cancellation. The Plan
shall terminate automatically if it is not approved by the shareholders of the
Company, in accordance with Treas. Reg. ss.1.423-2(c), within 12 months of its
adoption by the Company. Notwithstanding the foregoing, no amendment adopted
by either the Committee or the Board shall be effective, without approval of
the shareholders of the Company, if shareholder approval of the amendment is
then required pursuant to Rule 16b-3 under the Exchange Act or any successor
rule or section 423 of the Code.
18. Notices. All notices or other communications by a Participant to the
Company in connection with the Plan shall be deemed to have been duly given
when received by the Secretary of the Company or by any other person designated
by the Company for the receipt of such notices or other communications, in the
form and at the location specified by the Company.
19. Effective Date of Plan. The Plan shall be effective as of a date determined
by the Committee, but subject to the shareholder approval requirement, no later
than October 1, 1998. The Plan has been adopted by the Board subject to
shareholder approval, and prior to shareholder approval shares of Common Stock
issued under the Plan are subject to such approval.
20. Miscellaneous.
(a) Headings and Gender. The headings to sections in the Plan
have been included for convenience of reference only. The
masculine pronoun shall include the feminine and the singular
the plural, whenever appropriate. Except as otherwise
expressly indicated, all references to sections in the Plan
shall be to sections of the Plan.
(b) Governing Law. The Plan shall be interpreted and construed in
accordance with the internal laws of the State of Delaware to
the extent that such laws are not
10
<PAGE>
superseded by the laws of the United States of America.
(c) Plan Not A Contract of Employment. The Plan does not
constitute a contract of employment and participation in the
Plan does not give any Employee or Participant the right to
be retained in the employ of the Company or a Designated
Subsidiary, nor give any person a right or claim to any
benefit under the Plan, unless such right or claim has
specifically accrued under the terms of the Plan.
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE KUHLMAN JUNE 1998 CONSOLIDATED BALANCE SHEET AND THE STATEMENT OF
INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 3,832
<SECURITIES> 0
<RECEIVABLES> 118,781
<ALLOWANCES> 3,406
<INVENTORY> 71,758
<CURRENT-ASSETS> 209,786
<PP&E> 234,770
<DEPRECIATION> 112,904
<TOTAL-ASSETS> 465,041
<CURRENT-LIABILITIES> 138,376
<BONDS> 102,821
<COMMON> 16,850
0
0
<OTHER-SE> 177,552
<TOTAL-LIABILITY-AND-EQUITY> 465,041
<SALES> 378,244
<TOTAL-REVENUES> 378,244
<CGS> 290,704
<TOTAL-COSTS> 290,704
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 130
<INTEREST-EXPENSE> 4,032
<INCOME-PRETAX> 30,736
<INCOME-TAX> 11,929
<INCOME-CONTINUING> 18,807
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,807
<EPS-PRIMARY> 1.13
<EPS-DILUTED> 1.08
</TABLE>
