THIS REPORT HAS BEEN FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION VIA EDGAR
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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, 1995
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.)
1 Skidaway Village Walk, Suite 201
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 31, 1995
----- ----------------------------
Common Stock, $1.00 Par Value 13,232,444
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PART 1.
ITEM 1. FINANCIAL STATEMENTS
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
(Unaudited)
(In thousands, except per share data)
Net sales . . . . . . . $ 102,814 $ 95,679 $ 209,740 $ 194,841
Cost of goods sold. . . 83,423 76,554 169,636 156,061
---------- ---------- ---------- ----------
Gross profit . . . . . 19,391 19,125 40,104 38,780
Selling, engineering,
general and
administrative
expenses . . . . . . 13,391 13,121 26,913 26,155
---------- ---------- ---------- ----------
Operating profit. . . . 6,000 6,004 13,191 12,625
---------- ---------- ---------- ----------
Other income(expense):
Interest expense, net (1,827) (1,598) (3,683) (3,506)
Merger expenses. . . (4,510) --- (4,510) ---
Other, net . . . . . 817 (239) 1,376 (130)
---------- ---------- ---------- ----------
Total other
income(expense), net (5,520) (1,837) (6,817) (3,636)
---------- ---------- ---------- ----------
Income before taxes and
extraordinary item 480 4,167 6,374 8,989
Taxes on income . . . . 1,205 1,580 3,551 3,542
---------- ---------- ---------- ----------
Income(loss) before
extraordinary item. . . (725) 2,587 2,823 5,447
Extraordinary item (net of
tax effect of $1,175) (1,861) --- (1,861) ---
---------- ---------- ---------- ----------
Net income(loss). . . . $ (2,586) $ 2,587 $ 962 $ 5,447
========== ========== ========== ==========
Per share amounts:
Income(loss) before
extraordinary item $ (0.06) $ 0.19 $ 0.21 $ 0.40
Extraordinary item . (0.14) --- (0.14) ---
---------- ---------- ---------- ----------
Net income(loss) . . $ (0.20) $ 0.19 $ 0.07 $ 0.40
========== ========== ========== ==========
Average shares
outstanding. . . . . 13,188 13,716 13,158 13,691
========== ========== ========== ==========
The Notes To Consolidated Financial Statements
should be read in conjunction with these statements.
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
1995 1994
-------- --------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . $ 3,797 $ 3,036
Accounts receivable, less reserves of $1,167
and $990 at June 30, 1995 and December 31, 1994,
respectively 61,118 59,892
Inventories . . . . . . . . . . . . . . . . . . 45,155 43,713
Deferred income taxes. . . . . . . . . . . . . . 4,194 6,071
Prepaid expenses and other current assets . . . 3,258 5,887
-------- --------
Total current assets . . . . . . . . . . . . 117,522 118,599
-------- --------
Plant and equipment, at cost:
Land, buildings and leasehold improvements . . . 36,415 35,977
Machinery and equipment . . . . . . . . . . . . 109,937 107,692
Construction in progress . . . . . . . . . . . . 3,256 2,668
-------- --------
. . . . . . . . . . . . . . . . . . . . . . . 149,608 146,337
Less - accumulated depreciation . . . . . . . . (84,283) (81,587)
-------- --------
. . . . . . . . . . . . . . . . . . . . . . . 65,325 64,750
-------- --------
Intangible assets, net of amortization of $2,045
and $1,496 at June 30, 1995 and December 31, 1994,
respectively 38,553 39,452
Other assets . . . . . . . . . . . . . . . . . . . 3,990 6,384
-------- --------
. . . . . . . . . . . . . . . . . . . . . . . $225,390 $229,185
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable. . . . . . . . . . . . . . . . . . $ --- $ 2,000
Current portion of long-term debt . . . . . . . 8,746 5,878
Accounts payable . . . . . . . . . . . . . . . . 31,543 30,624
Accrued liabilities . . . . . . . . . . . . . . 27,650 30,596
-------- --------
Total current liabilities . . . . . . . . . . 67,939 69,098
-------- --------
Bank debt. . . . . . . . . . . . . . . . . . . . . 71,839 59,253
Other long-term debt . . . . . . . . . . . . . . . 3,339 17,642
-------- --------
Total long-term debt. . . . . . . . . . . . . 75,178 76,895
-------- --------
Accrued postretirement benefits . . . . . . . . . 8,611 8,943
-------- --------
Deferred income taxes. . . . . . . . . . . . . . . 1,133 1,033
-------- --------
Total liabilities . . . . . . . . . . . . . . 152,861 155,969
-------- --------
Shareholders' equity:
Preferred stock, par value $1.00, authorized
2,000 shares, none issued; Junior participating
preferred stock, series A, no par value,
authorized 200 shares, none issued --- ---
Common stock, par value $1.00, authorized
20,000 shares, issued 13,205 shares at
June 30, 1995 and 13,100 at December 31, 1994,
respectively . . . . . . . . . . . . . . . . . 13,205 13,100
Additional paid-in capital . . . . . . . . . . . 26,066 25,300
Retained earnings . . . . . . . . . . . . . . . 34,727 36,672
Cumulative translation adjustment. . . . . . . . (1,426) (1,813)
Minimum pension liability. . . . . . . . . . . . (43) (43)
-------- --------
Total shareholders' equity . . . . . . . . . 72,529 73,216
-------- --------
$225,390 $229,185
======== ========
The Notes to Consolidated Financial Statements
should be read in conjunction with these statements.
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
--------------------
1995 1994
-------- --------
(Unaudited)
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . $ 962 $ 5,447
Adjustments to reconcile net income to net cash
provided by operating activities:
Extraordinary item, net. . . . . . . . . . . . . 1,861 ---
Merger expenses. . . . . . . . . . . . . . . . . 4,510 ---
Depreciation and amortization . . . . . . . . . 6,060 5,931
Deferred income taxes, net . . . . . . . . . . . 2,351 1,978
Provision for losses on accounts receivable . . 839 107
(Gain) loss on sale of assets. . . . . . . . . . (29) 20
Other, net . . . . . . . . . . . . . . . . . . . 548 (557)
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . (1,221) (588)
Inventories . . . . . . . . . . . . . . . . . (1,289) 2,956
Prepaid expenses and other current assets . . 2,444 (1,062)
Accounts payable. . . . . . . . . . . . . . . 306 4,269
Accrued expenses. . . . . . . . . . . . . . . (3,855) (3,095)
-------- --------
Net cash provided by operating activities . . . . 13,487 15,406
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . (5,776) (4,305)
Proceeds from the sale of equipment . . . . . . 89 100
-------- --------
Net cash used by investing activities . . . . . . (5,687) (4,205)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in revolver . . . . . . . . . . . . . . . (927) (22,955)
Proceeds from issuance of long-term debt . . . . 24,814 0
Repayments of long-term debt . . . . . . . . . . (25,385) (2,765)
Dividends . . . . . . . . . . . . . . . . . . . (1,848) (1,806)
Stock options exercised . . . . . . . . . . . . 722 541
Payments for merger and related expenses . . . . (4,601) ---
Restricted cash. . . . . . . . . . . . . . . . . --- 1,800
Other. . . . . . . . . . . . . . . . . . . . . . 109 ---
-------- --------
Net cash used by financing activities . . . . . . (7,116) (25,185)
-------- --------
Effect of exchange rate changes on cash and cash
equivalents. . . . . . . . . . . . . . . . . . . 77 38
-------- --------
Net increase(decrease) in cash and cash equivalents 761 (13,946)
Cash and cash equivalents at beginning of period . 3,036 18,994
-------- --------
Cash and cash equivalents at end of period . . . . $ 3,797 $ 5,048
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . $ 3,815 $ 4,272
======== ========
Income taxes, net of refunds . . . . . . . . . . $ 839 $ 1,008
======== ========
The Notes To Consolidated Financial Statements
should be read in conjunction with these statements.
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For The Six Months Ended June 30, 1995
(Unaudited)
(In thousands)
Additional Cumulative Minimum
Common Paid-in Retained Translation Pension
Stock Capital Earnings Adjustment Liability Total
-------- -------- -------- --------- -------- --------
Balances at
December 31, 1994 $ 13,100 $ 25,300 $ 36,672 $ (1,813) $ (43) $ 73,216
-------- -------- -------- -------- -------- --------
Net income --- --- 962 --- --- 962
Foreign currency
translation
adjustment --- --- --- 387 --- 387
Cash dividends declared
($0.30 per share) (1) --- --- (2,907) --- --- (2,907)
Issuance of stock 16 176 --- --- --- 192
Stock options exercised 89 633 --- --- --- 722
Other --- (43) --- --- --- (43)
-------- -------- -------- -------- -------- --------
Balances at
June 30, 1995 $ 13,205 $ 26,066 $ 34,727 $ (1,426) $ (43) $ 72,529
======== ======== ======== ======== ======== ========
(1) Dividends per share prior to May 31, 1995 have not been restated to
reflect the Schwitzer merger.
Notes To Consolidated Financial Statements
should be read in conjunction with these statements.
KUHLMAN CORPORATION AND SUBSIDIARIES
----------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Six Months Ended June 30, 1995
(Unaudited)
1. Consolidated Financial Statements
On May 31, 1995, Kuhlman Corporation (the "Company") merged
with Schwitzer, Inc. ("Schwitzer"). The merger was accounted for
as a pooling of interests. The financial information has been
restated to reflect the combined balance sheets and results of
operations of both companies as if the merger had been in effect
for all periods presented. Further information pertaining to the
merger is presented in Note 2 - Merger with Schwitzer, Inc.
The consolidated balance sheet at June 30, 1995 and the
related consolidated statements of income, cash flows and
shareholders' equity for the periods ended June 30, 1995 and
1994, have been prepared by the Company without audit. In the
opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the
financial position of the Company at June 30, 1995 and the
results of operations and cash flows for three and six months
ended June 30, 1995 and 1994, have been made.
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 should be read in conjunction with the
supplemental consolidated financial statements and notes thereto
contained in the Company's current report on Form 8-K dated July
21, 1995 and the consolidated financial statements and notes
thereto contained in the Company's and Schwitzer's Annual Reports
on Form 10-K for the year ended December 31, 1994 and January 1,
1995, respectively.
The results of operations for the six months ended June 30,
1995 are not necessarily indicative of the results to be expected
for the full year 1995.
Certain amounts in the 1994 consolidated financial statements
have been reclassified to conform with the 1995 presentation.
2. Merger with Schwitzer, Inc.
On May 31, 1995, a wholly-owned subsidiary of the Company
merged with and into Schwitzer, a New York Stock Exchange listed
company, whereby Schwitzer became a wholly-owned subsidiary of
the Company. The merger was accounted for under the pooling of
interests method of accounting. As provided for in the merger
agreement, each share of Schwitzer common stock was converted
into 0.9615 share of the Company's common stock, resulting in the
Company issuing approximately 6,980,000 shares of stock.
In accordance with the pooling of interests method of
accounting, the Company's financial statements have been restated
for all periods presented to include the results of Schwitzer.
Operating results for the Company and Schwitzer for three and six
months ended June 30, 1994, prior to the combination, are
presented in the table below, in thousands.
Three months ended Six months ended
June 30, June 30,
1994 1994
------------------ ----------------
The Company
Net sales $ 56,990 $119,406
Net income 296 1,432
- ----------------------------------------------------------
Schwitzer
Net sales $ 38,689 $ 75,435
Net income 2,291 4,015
- ----------------------------------------------------------
Combined
Net sales $ 95,679 $194,841
Net income 2,587 5,447
3. Earnings and Dividends Per Share
Earnings per share in the accompanying consolidated
statements of income for the three and six months ended June 30,
1995 and 1994 have been computed based on the average number
shares of common stock and common stock equivalents, if any,
outstanding throughout the period. The weighted shares
outstanding for the three months and six months ended June 30,
1994 included 716,000 and 725,000 shares, respectively, resulting
from the dilutive effects of common stock equivalents. There was
no dilutive effect of common stock equivalents in 1995.
A cash dividend of $0.15 per share was declared during each
of the first and second quarters of 1995 and 1994. Dividends per
share prior to May 31, 1995 have not been restated to reflect the
Schwitzer merger.
4. Inventories
Inventories consisted of the following, in thousands:
June 30, December 31,
1995 1994
-------- --------
(unaudited)
FIFO cost:
Raw materials $ 19,343 $ 17,333
Work-in-process 8,295 8,262
Finished goods 20,866 21,677
--------- ---------
Total 48,504 47,272
Excess of FIFO
over LIFO cost (3,349) (3,559)
--------- ---------
Net inventories $ 45,155 $ 43,713
========= =========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
On May 31, 1995, a wholly-owned subsidiary of Kuhlman Corporation
(the "Company") merged with and into Schwitzer, Inc.
("Schwitzer") whereby Schwitzer became a wholly-owned subsidiary
of the Company. In the transaction, each outstanding share of
common stock of Schwitzer was converted into 0.9615 share of the
Company's common stock, resulting in the Company issuing
approximately 6,980,000 shares of stock. The merger was
accounted for as a pooling of interests, with prior-period
financial results restated to reflect the merger. In connection
with the merger, Kuhlman and Schwitzer incurred one-time
transaction costs which totaled $5,600,000 (net of tax) and
included costs associated with the early extinguishment of debt
("Merger Expenses"). The Merger Expenses were recorded in the
Company's financial statements in the second quarter of 1995.
Upon completion of the merger with Schwitzer, the Company's
business units were realigned in recognition of the distinct
markets and customers it services into two product segments:
Electrical and Industrial. The Electrical Products segment
manufactures and sells primarily electrical equipment and wire
and cable products while the Industrial Products segment
manufactures and sells primarily engine components.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated approximately $13,487,000 in cash flow from
operations in the first half of 1995 compared to $15,406,000 for
the same period in 1994. Higher working capital needs, primarily
for accounts receivable required to support the Company's record
sales volume, resulted in lower cash flow generated from
operations in the first half of 1995 when compared to the same
period in 1994. Working capital (net of cash) decreased
nominally by $679,000 (2%) to $45,786,000 at June 30, 1995 from
December 31, 1994. When compared to June 30, 1994, working
capital (net of cash) increased by $4,533,000, primarily due to
an increased investment in accounts receivable. Cash and cash
equivalents were $3,797,000 at June 30, 1995 compared to
$3,036,000 at the end of 1994. Accounts receivable, net
increased $1,226,000 (2%) to $61,118,000 at June 30, 1995 from
the end of 1994 because of the record sales volume in the
Industrial Segment, partially offset by a decline in the
Electrical Segment due to lower shipments of distribution
transformers and the collection of booster cable sales made in
the fourth quarter of 1994 which carried extended payment terms.
Inventory levels increased $1,442,000 (3%) to $45,155,000 at June
30, 1995 primarily because of higher anticipated sales activity
in the Electrical Segment for power transformers. Prepaid
expenses and other current assets and deferred income taxes
declined $4,506,000 (38%) to $7,452,000 at June 30, 1995
primarily due to the receipt of cash on a covenant not to
compete, an income tax refund and changes in deferred income tax
assets.
Accounts payable and accrued expenses declined $2,027,000 (3%) to
$59,193,000 at June 30, 1995 from December 31, 1994. The decline
was primarily due to cash payments made in 1995 for certain 1994
charges related to the Company's Kuhlman Electric unit and the
positive settlement of certain liabilities, partially offset by
an increase in payables to vendors. Total debt outstanding was
$83,924,000 at June 30, 1995, down $849,000 from December 31,
1994. Subsequent to the merger, the Company repaid substantially
all of the domestic debt of Schwitzer with proceeds borrowed
under the Company's current bank loan facility which was
increased by $22,000,000 to accommodate the repayment and to pay
the associated Merger Expenses. The Company refinanced the
domestic debt of Schwitzer in order to lower its overall interest
rate on borrowed funds based on the enhanced financial strength
of the combined company. The cost associated with the early
retirement of Schwitzer's domestic debt was recognized as an
extraordinary item on the Company's Statement of Income.
Capital Expenditures for the first half of 1995 were $5,776,000,
up $1,471,000 from the same period in the prior year. Total
expenditures were split evenly between the Company's two product
segments. Capital expenditures made in the Industrial Products
segment were for additions to machinery and equipment to upgrade
production quality, enhance output capacity and tooling for
application of certain products to specific customer orders,
particularly turbochargers. Expenditures in the Electrical
Products segment were primarily for normal additions and for
final installation of certain jacketing and extrusion lines to
enhance the Company's wire and cable manufacturing capabilities.
As noted above, the Company recorded the Merger Expenses, which
amounted to $5,600,000 (net of tax) and included the cost
associated with the early extinguishment of debt, in the second
quarter of 1995. In addition to the cost associated with the
early extinguishment of debt, the Merger Expenses were for
various legal, accounting and other professional services
utilized to complete the merger. Approximately, $4,601,000 of
the fees were paid in the second quarter of 1995. The balance of
the Merger Expenses is expected to be paid in the third quarter
of 1995.
Management believes that the Company's liquidity, forecasted cash
flows, available borrowing capacity and other financial resources
are adequate to support the anticipated operations, to finance
future capital expenditures as previously planned and to service
all existing debt requirements.
RESULTS OF OPERATIONS
The following table summarizes net sales and operating profit by
segment, in thousands:
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1995 1994 1995 1994
-------- -------- -------- --------
(unaudited) (unaudited)
Net sales:
Electrical $ 56,349 $ 54,956 $115,004 $115,442
Industrial 46,465 40,723 94,736 79,399
-------- -------- -------- --------
$102,814 $ 95,679 209,740 194,841
======== ======== ======== ========
Income before taxes and extraordinary item:
Electrical $ 2,831 $ 2,020 $ 5,274 $ 4,956
Industrial 4,620 4,391 10,497 8,807
Corporate (946) (958) (1,828) $ (1,893)
-------- -------- -------- --------
6,505 5,453 13,943 11,870
Interest
expense, net (1,827) (1,598) (3,683) (3,506)
Merger expenses (4,510) --- (4,510) ---
Unallocated 312 312 624 625
-------- -------- -------- --------
$ 480 $ 4,167 $ 6,374 $ 8,989
======== ======== ======== ========
Three Months Ended June 30, 1995 and 1994
Net sales and net income excluding the Merger Expenses
("Operating Net Income"), increased approximately 7% and 17%,
respectively, in the second quarter of 1995 when compared to the
same period in 1994. The increase in Operating Net Income was
attributable to positive gains reported in each of the Company's
two product segments.
Net sales were $102,814,000 in the second quarter of 1995
compared to $95,679,000 in the same period in 1994. The increase
in net sales occurred primarily in the Industrial Products
segment, as worldwide demand for turbochargers and certain other
products remained strong throughout the period. Net sales for
the Electrical Products segment increased modestly in the second
quarter of 1995 compared to the same period in 1994 primarily
because higher unit sales of wire and cable products and the
impact of higher copper prices were partially offset by lower
unit sales of distribution transformers. Unit sales of
distribution transformers were lower as a consequence of certain
downsizing actions initiated in the fourth quarter of 1994 to
reduce operating costs and to improve the Company's
competitiveness in markets for those products.
In addition to the sales gains noted above, bookings for new
orders in both the Electrical and Industrial Products segments
remained strong throughout the period. In the Electrical
Products segment, bookings for power transformer units in the
second quarter of 1995 were up approximately 70% over those
reported in the year ago period. Bookings for the Industrial
Products segment were approximately 6% higher in the second
quarter of 1995 when compared to the same period in 1994.
Overall, the Company's backlog was $100,825,000 at June 30, 1995.
The Company achieved operating profit of $6,000,000 for the
second quarter of 1995 which was essentially the same when
compared to the second quarter of 1994 on modestly higher
consolidated net sales. Operating profit margins, which were
5.8% and 6.3% of consolidated net sales in the second quarter of
1995 and 1994, respectively, declined in both segments. Margins
in the Industrial Products segment were suppressed somewhat by a
higher mix of OEM versus aftermarket shipments and higher raw
material and production costs. In the Electrical Products
segment margins for certain wire and cable products were impacted
by a softness in the U.S. economy, particularly for retail sales
and new construction, and the impact of higher copper costs.
However, margins for various transformer products improved in the
second quarter of 1995 as the Company realized benefits from
profit improvement programs implemented in 1994. Also, operating
profit margins were benefited in both segments by lower operating
expenses as a percentage of net sales. Operating expenses for
the second quarter were $13,391,000 or 13.0% of net sales
compared to $13,121,000 or 13.7% of net sales recorded in the
same period in 1994. The increased operating expenses of
$270,000 (2%) were due to the higher sales noted above, partially
offset by cost containment programs throughout the Company.
Interest expense, net in the second quarter was $1,827,000
compared to $1,598,000 for the same period in 1994. The increase
in interest expense, net was due primarily to higher interest
rates throughout the second quarter of 1995 and to a lesser
extent higher debt levels caused by greater working capital
needs. Other, net in the second quarter of 1995, excluding
Merger Expenses, was $817,000 compared to a net expense of
$239,000 for the same period in 1994. Other, net, which
consisted primarily of foreign currency adjustments, royalties,
income from a covenant not to compete and miscellaneous expenses
associated with non-operating activities was benefitted in the
second quarter of 1995 by approximately $850,000 for the
settlement of certain liabilities. The impact of foreign
currency fluctuations in the second quarter of 1995 was minimal.
In addition, the covenant not to compete, which paid the Company
approximately $1,250,000 per year, expired in the second quarter
of 1995.
Operating Net Income for the second quarter of 1995 was
$3,014,000 ($0.23 per share) compared to $2,587,000 ($0.19 per
share) for the same period in 1994. The increase in Operating
Net Income was due to the factors noted above. The Company
reported a net loss of $2,586,000 ($0.20 per share) in the second
quarter of 1995 due to the recognition of the Merger Expenses
which totalled $5,600,000, net of tax ($0.43 per share).
Six Months Ended June 30, 1995 and 1994
Net sales, operating profit and Operating Net Income were higher
for the first half of 1995 compared to the similar period in 1994
primarily because of the positive momentum in the Industrial
Products segment.
Net sales for the first half of 1995 were $209,740,000 compared
to $194,841,000 for the same period in 1994, an increase of 8%.
The increase was due primarily to the record sales volume
recorded in the Industrial Products segment, which continued to
experience strong worldwide demand across many of its primary
product lines. Net sales for the first half of 1995 for the
Electrical Products segment were essentially the same when
compared to the first half of 1994 because higher sales of
certain wire and cable products were offset by lower sales of
distribution transformers due to the impact of the downsizing
programs implemented in late 1994.
Operating profit for the first six months of 1995 was $13,191,000
compared to $12,625,000 reported for the same period in 1994, an
increase of $566,000 (4%). The increase in operating profit was
due substantially to the higher sales volume in the Industrial
Products segment, offset somewhat by lower operating profits
earned on sales of certain wire and cable products. Operating
profit for wire and cable products declined mainly because of
lower sales of booster cables in the first quarter of 1995 caused
by the mild winter and lower gross margins earned on various
product lines due to the softness in the U.S. economy in the
first half of 1995, particularly for retail sales and new
construction, and the impact of higher copper costs. As noted in
the second quarter, margins in the Industrial Products segment
were suppressed somewhat by a higher mix of OEM versus
aftermarket shipments and higher raw material costs.
Consolidated operating profit margin, as a percentage of sales,
for the first half of 1995 and 1994 were 6.3% and 6.5%,
respectively. Operating profit margin as a percentage of sales
declined somewhat in the first half of 1995 because of the lower
gross profit margins noted above, partially offset by a lower
percentage of operating expenses required to support the
Company's record sales volume. Operating expenses for the first
six months of 1995 were $26,913,000 or 12.8% of net sales
compared to $26,155,000 or 13.4% of net sales for the same period
in 1994. The increased operating expenses were due to the higher
sales noted above, partially offset by cost containment programs
throughout the Company.
Interest expense, net for the first half of 1995 was $3,683,000
compared to $3,506,000 for the same period in 1994. The increase
in interest expense, net was due primarily to higher interest
rates throughout the period and to a lesser extent higher debt
levels caused by greater working capital needs. Other, net in
the first half of 1995 was $1,376,000 compared to an expense of
$130,000 for the same period in 1994. As noted above, other, net
was benefitted primarily by the positive settlement of certain
liabilities.
Operating Net Income for the first half of 1995 was $6,562,000
($0.50 per share) compared to $5,447,000 ($0.40 per share) for
the same period in 1994. The increase in operating net income
was due to the factors noted above. Net income for the first
half of 1995 was $962,000 ($0.07 per share), which was impacted
by the recognition of the Merger Expenses of $5,600,000, net of
tax ($0.43 per share).
OUTLOOK FOR 1995
With the merger of Schwitzer completed, Management believes the
Company is well positioned both strategically and financially to
grow and prosper in the future. Management intends to build on
the Company's existing base by expanding its presence in those
market segments which it currently serves, both through internal
growth and acquisitions. Management continues to remain
cautiously optimistic about the Company's prospects for both the
balance of the year and over the long term as well.
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 May 31, 1995.
(b) Not applicable
(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:
Year When
Term of Office Votes for Votes
Nominee Expires Nominee Withheld
------- -------------- ------- --------
Curtis G. Anderson 1998 5,484,623 53,046
William E. Burch 1998 5,480,925 56,744
Alexander W. Dreyfoos 1998 5,483,778 54,167
General H. Norman
Schwarzkopf 1998 5,474,778 62,890
At such meeting the security holders further voted upon and
approved the following:
(1) a proposal for the issuance of shares of common stock
of the Registrant in the merger of Spinner Acquisition
Corp., a wholly owned subsidiary of the Registrant,
with and into Schwitzer, Inc. 4,546,190 affirmative
votes and 73,267 negative votes were cast, and there
were 102,104 abstentions and 816,107 broker non-votes
with respect to such matter.
(2) a proposal to amend the Certificate of Incorporation
(the "Registrant's" Certificate) of the Registrant to
increase the number of shares that the Registrant has
the authority to issue to 20,000,000 and to amend the
Registrant's Certificate to delete the designation, in
the Registrant's Certificate, of certain shares of
Kuhlman Preferred Stock as Junior Participating
Preferred Stock, Series A. 4,423,631 affirmative votes
and 200,233 negative votes were cast, and there were
97,697 abstentions and 816,107 broker non-votes with
respect to such matter.
(3) the 1994 Stock Option Plan. 3,572,159 affirmative
votes and 955,959 negative votes were cast, and there
were 193,442 abstentions and 816,108 broker non-votes
with respect to such matter.
(4) the ratification of the selection of Arthur Andersen
LLP as the independent auditors for the Registrant.
5,481,952 affirmative votes and 20,627 negative votes
were cast, and there were 35,089 abstentions with
respect to such matter.
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Agreement and Plan of Merger by and between Kuhlman
Corporation, Spinner Acquisition Corp. and Schwitzer,
Inc. (incorporated by reference to Exhibit 2.1 to
Registration Statement No. 33-58133).
3.1 Certificate of Incorporation of the Registrant.
3.2 Amendment to Certificate of Incorporation of the
Registrant.
3.3 Certificate of Designation of the Registrant dated
May 31, 1995.
4.1 Fourth Amendment to Credit Agreement dated June 29,
1995 among the Registrant, NationsBank of Georgia, N.A.
and The Chase Manhattan Bank, N.A.
27.0 Financial Data Schedule for the six month period ended
June 30, 1995.
(b) Reports on Form 8-K
During the period covered by this report, Registrant has filed
the following reports on Form 8-K.
Form 8-K dated May 31, 1995 reporting a merger under Item 2.
SIGNATURES
------------
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Kuhlman Corporation
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(Registrant)
/s/ Robert S. Jepson, Jr.
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Robert S. Jepson, Jr.
Chairman and Chief Executive Officer
/s/ Vernon J. Nagel
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Vernon J. Nagel
Executive Vice President of Finance and
Chief Financial Officer
Date: August 11, 1995
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