<PAGE> 1
Filed Pursuant to Rule 424(b)(3) of the
Rules and Regulations Under the
Securities Act of 1933
Registration Statement No. 33-47028
PROSPECTUS SUPPLEMENT
(To Prospectus dated July 13, 1995)
$100,000,000
K & F Industries, Inc.
11 7/8% Senior Secured Notes Due 2003
-------------------
This Prospectus Supplement, together with Prospectus, is to be used by
Lehman Brothers in connection with offers and sales of the above-referenced
securities in market-making transactions at negotiated prices related to
prevailing market prices at the time of sale. Lehman Brothers may act as
principal or agent in such transactions.
August 10, 1995
<PAGE> 2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1995
-------------
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 33-29035
--------
K & F Industries, Inc.
--------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 34-1614845
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
600 Third Avenue, New York, New York 10016
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (212) 297-0900
------------------------
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
----- -----
As of August 1, 1995, there were 553,344 shares of Class A common stock
outstanding and 458,994 shares of Class B common stock outstanding. All of the
Class A common stock of the Company except ten shares are owned by the Chairman
of the Company, all of the Class B common stock are owned by Loral Corporation
and all of the preferred stock except 44,999 shares are owned by four limited
partnerships of Lehman Brothers Holdings Inc.
<PAGE> 3
PART I. FINANCIAL INFORMATION
K & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1995 1995
------------- -------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 10,093,000 $ 8,493,000
Accounts receivable, net 33,427,000 33,548,000
Inventory 65,166,000 61,767,000
Other current assets 1,005,000 1,106,000
------------- -------------
Total current assets 109,691,000 104,914,000
------------- -------------
Property, plant and equipment 115,328,000 114,706,000
Less, accumulated depreciation and
amortization 53,764,000 51,574,000
------------- -------------
61,564,000 63,132,000
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Deferred charges, net of amortization 26,167,000 26,508,000
Cost in excess of net assets acquired,
net of amortization 206,701,000 208,228,000
Intangible assets, net of amortization 25,444,000 26,292,000
------------- -------------
$ 429,567,000 $ 429,074,000
============= =============
LIABILITIES and STOCKHOLDERS' DEFICIENCY:
Current Liabilities:
Accounts payable, trade $ 8,216,000 $ 10,345,000
Interest payable 13,021,000 8,771,000
Other current liabilities 37,244,000 37,773,000
------------- -------------
Total current liabilities 58,481,000 56,889,000
------------- -------------
Postretirement benefit obligation other
than pensions 77,109,000 77,717,000
Other long-term liabilities 20,038,000 19,216,000
11 7/8% senior secured notes due 2003 100,000,000 100,000,000
13 3/4% senior subordinated debentures
due 2001 210,000,000 210,000,000
Stockholders' Deficiency:
Preferred stock, $.01 par value --
authorized, 1,050,000 shares;
issued and outstanding, 1,027,635
shares (liquidation preference
of $60,110,000) 10,000 10,000
Common stock, Class B, $.01 par value --
authorized, 460,000 shares; issued
and outstanding, 458,994 shares
(liquidation preference of $26,848,000) 5,000 5,000
Common stock, Class A, $.01 par value --
authorized, 2,100,000 shares; issued
and outstanding, 553,334 shares 6,000 6,000
Additional paid-in capital 155,350,000 155,350,000
Deficit (183,942,000) (182,643,000)
Adjustment to equity for minimum pension
liability (7,192,000) (7,192,000)
Cumulative translation adjustment (298,000) (284,000)
------------- -------------
Total stockholders' deficiency (36,061,000) (34,748,000)
------------- -------------
$ 429,567,000 $ 429,074,000
============= =============
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 4
K & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------
JUNE 30, JUNE 30,
1995 1994
------------- -------------
<S> <C> <C>
Sales $ 62,293,000 $ 57,711,000
Costs and expenses 50,551,000 47,683,000
Amortization 2,615,000 2,650,000
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Operating income 9,127,000 7,378,000
Interest and investment income 219,000 33,000
Interest expense (10,645,000) (12,997,000)
------------- -------------
Net loss $ (1,299,000) $ (5,586,000)
============= =============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 5
K & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------
JUNE 30, JUNE 30,
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,299,000) $(5,586,000)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 4,805,000 4,969,000
Non-cash interest expense 375,000 2,670,000
Changes in assets and liabilities:
Accounts receivable, net 114,000 (2,553,000)
Inventory (3,406,000) 3,309,000
Other current assets 101,000 286,000
Accounts payable, interest payable,
and other current liabilities 1,592,000 4,840,000
Postretirement benefits other
than pensions (608,000) (406,000)
Other long-term liabilities 822,000 1,696,000
Deferred charges -- financing costs (300,000) --
----------- -----------
Net cash provided by operating
activities 2,196,000 9,225,000
----------- -----------
Cash flows from investing activities:
Capital expenditures (622,000) (319,000)
Deferred charges 26,000 27,000
----------- -----------
Net cash used in investing activities (596,000) (292,000)
----------- -----------
Cash flows from financing activities:
Payments of senior revolving loan -- (14,000,000)
Borrowings of senior revolving loan -- 4,000,000
----------- -----------
Net cash used by financing activities -- (10,000,000)
----------- -----------
Net increase (decrease) in cash and cash
equivalents 1,600,000 (1,067,000)
Cash and cash equivalents, beginning
of period 8,493,000 4,327,000
----------- -----------
Cash and cash equivalents, end of
period $10,093,000 $ 3,260,000
=========== ===========
Supplemental cash flow information:
Cash interest paid during the period $ 6,020,000 $ 6,124,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 6
K & F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying unaudited consolidated financial statements have
been prepared by K & F Industries, Inc. and Subsidiaries (the
"Company") pursuant to the rules of the Securities and Exchange
Commission ("SEC") and, in the opinion of the Company, include all
adjustments (consisting of normal recurring accruals) necessary for a
fair presentation of financial position, results of operations and
cash flows. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to such SEC rules. The Company believes that the
disclosures made are adequate to make the information presented not
misleading. The consolidated statement of operations for the three
months ended June 30, 1995 is not necessarily indicative of the
results to be expected for the full year. It is suggested that these
financial statements be read in conjunction with the audited
financial statements and notes thereto included in the Company's
March 31, 1995 Annual Report on Form 10-K.
2. Receivables are summarized as follows:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1995 1995
----------- ------------
<S> <C> <C>
Accounts receivable, principally from
commercial customers $30,880,000 $30,036,000
Accounts receivable, on U.S. Government
and other long-term contracts 3,006,000 3,871,000
Allowances (459,000) (359,000)
----------- -----------
$33,427,000 $33,548,000
=========== ===========
</TABLE>
3. Inventory consists of the following:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1995 1995
----------- ------------
<S> <C> <C>
Raw materials and work-in-process $36,873,000 $35,819,000
Finished goods 15,958,000 15,500,000
Inventoried costs related to U.S.
Government and other long-term
contracts 12,779,000 11,072,000
----------- -----------
65,610,000 62,391,000
Less, unliquidated progress payments
received, principally related
to long-term government contracts 444,000 624,000
----------- -----------
$65,166,000 $61,767,000
=========== ===========
</TABLE>
5
<PAGE> 7
K & F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The Company customarily sells original wheel and brake equipment below
cost as an investment in a new airframe which is expected to be
recovered through the subsequent sale of replacement parts. These
commercial investments (losses) are recognized when original equipment
is shipped. Losses on U.S. Government contracts are immediately
recognized in full when determinable.
Inventory is stated at average cost, not in excess of net realizable
value. In accordance with industry practice, inventoried costs may
contain amounts relating to contracts with long production cycles, a
portion of which will not be realized within one year.
4. Other current liabilities consist of the following:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1995 1995
------------ ------------
<S> <C> <C>
Accrued payroll costs $13,128,000 $13,149,000
Accrued taxes 6,151,000 6,978,000
Accrued costs on long-term contracts 5,802,000 6,477,000
Accrued warranty costs 6,458,000 5,248,000
Postretirement benefit obligation other
than pensions 2,000,000 2,000,000
Other 3,705,000 3,921,000
----------- -----------
$37,244,000 $37,773,000
=========== ===========
</TABLE>
5. Contingencies
There are various lawsuits and claims pending against the Company
incidental to its business. Although the final results in such suits
and proceedings cannot be predicted with certainty, in the opinion of
management, the ultimate liability, if any, will not have a material
adverse effect on the Company.
6
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Comparison of Results of Operations for the Three Months Ended June 30, 1995 and
June 30, 1994
Sales for the first three months of fiscal year 1996 totaled $62,293,000
reflecting an increase of $4,582,000 or 7.9% compared with $57,711,000 for the
same period in the prior year. This increase was primarily due to higher
military sales on various programs.
Operating income increased 23.7% to $9,127,000 or 14.7% of sales for the first
three months of fiscal year 1996 compared with $7,378,000 or 12.8% of sales for
the same period in the prior year. Operating margins increased primarily due to
operating efficiencies, the overhead absorption effect relating to the higher
sales volume and lower independent research and development costs on the A-321
and MD-90 programs. Partially offsetting this increase were higher shipments of
original equipment to airframe manufacturers at or below the cost of production.
Interest expense decreased $2,352,000 for the first three months of fiscal year
1996 compared with the same period in the prior year. This decrease was
primarily due to the retirement of the 14 3/4% Subordinated Convertible
Debentures in the second quarter of fiscal year 1995.
Approximately 370 hourly employees of the Company's Aircraft Braking Systems
subsidiary are represented by the United Auto Workers' Union. Aircraft Braking
Systems' three-year contract with the United Auto Workers' Union expired on
August 10, 1991. Aircraft Braking Systems has not had a ratified collective
bargaining agreement since August 10, 1991, but has operated under Company
implemented terms and conditions of employment.
Financial Condition
The Company expects that its principal use of funds for the next several years
will be to pay interest and principal on indebtedness, fund capital expenditures
and make investments in equipment for new airframes. Debt amortization commences
August 1, 1999. The Company's management believes that it will have adequate
resources to meet its cash requirements through funds generated from operations
and borrowings under its $70 million revolving credit facility (maturing April
27, 1997, which is subject to a borrowing base of a portion of eligible accounts
receivable and inventory). At June 30, 1995, the Company had $54.3 million
available to borrow under its revolving credit facility.
Bookings
Bookings for the first three months of fiscal year 1996 totaled $56,971,000
reflecting an increase of $6,011,000 or 11.8% compared with $50,960,000 for the
same period in the prior year. This increase reflects a generally stronger
demand on the Company's commercial wheel and brake programs.
7
<PAGE> 9
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
None
(b) Reports on Form 8-K.
There were no reports on Form 8-K for the three months ended June
30, 1995.
8
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
K & F INDUSTRIES, INC.
-----------------------
Registrant
/s/ KENNETH M. SCHWARTZ
-----------------------
Kenneth M. Schwartz
Chief Financial Officer
and
Registrant's Authorized
Officer
Dated: August 10, 1995
9
