===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
AMENDMENT NO. 1
AMENDMENT TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 16, 1996
KUHLMAN CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 1-7695 58-2058047
(State or other (Commission File Number) (IRS Employer
Jurisdiciton of Identification No.)
Incorporation)
3 Skidaway Village Square, Savannah, Georgia 31411
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (912) 598-7809
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
===============================================================================
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Financial Statements of Business Acquired
See Index to Financial Statements and Pro
Forma Financial Information on page F-1
and pages referenced hereon.
(b) Pro Forma Financial Information
See Index to Financial Statements and Pro
Forma Financial Information on page F-1
and pages referenced hereon.
(c) Exhibits
(2)(a) Offer to Purchase dated November 29, 1995 by Kuhlman
Acquisition Corp. (incorporated by reference to Exhibit
(a)(1) to Schedule 14D-1 of Kuhlman Acquisition Corp.
and Kuhlman Corporation regarding Communication Cable,
Inc. dated November 29, 1995).
(2)(b) Supplement dated February 1, 1996 to Offer to Purchase
dated November 29, 1995 by Kuhlman Acquisition Corp.
(incorporated by reference to Exhibit (a)(15) to Amendment
No. 4 to Schedule 14D-1 of Kuhlman Acquisition Corp. and
Kuhlman Corporation regarding Communication Cable, Inc. dated
February 1, 1996).
(2)(c) Letter of Transmittal to Tender Shares of Common Stock of
Communication Cable, Inc. (incorporated by reference to
Exhibit (a)(2) to Schedule 14D-1 of Kuhlman Acquisition Corp.
and Kuhlman Corporation regarding Communication Cable, Inc.
dated November 29, 1995).
(23)(a) Consent of KPMG Peat Marwick LLP.
(99)(a) Fifth Amendment to Credit Agreement dated as of February 5,
1996 (incorporated by reference to Exhibit (b)(10) to
Amendment No. 5 to Schedule 14D-1 of Kuhlman Acquisition Corp.
and Kuhlman Corporation regarding Communication Cable, Inc.
dated February 12, 1996).
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)
By: /s/ Robert S. Jepson, Jr.
------------------------------
Robert S. Jepson, Jr.
Chairman and Chief
Executive Officer
Dated: April 26, 1996
KUHLMAN CORPORATION
INDEX TO FINANCIAL STATEMENTS
AND PRO FORMA FINANCIAL INFORMATION
COMMUNICATION CABLE, INC.
Independent Auditors' Report . . . . . . . . . . . . . F-2
Balance Sheets as of October 31, 1995 and 1994 . . . . F-3
Statements of Earnings for each of the three
years in the period ended October 31, 1995. . . . . F-4
Statements of Stockholders' Equity for each of
the three years in the period ended
October 31, 1995 . . . . . . . . . . . . . . . . . F-5
Statements of Cash Flows for each of the three
years in the period ended October 31, 1995. . . . . F-6
Notes to Financial Statements. . . . . . . . . . . . . F-7 through F-11
KUHLMAN CORPORATION AND SUBSIDIARIES AND COMMUNICATION CABLE, INC.
Unaudited Pro Forma Condensed Combined Balance Sheet
as of December 31, 1995 . . . . . . . . . . . . . . F-12
Unaudited Pro Forma Condensed Combined Statement of
Income for the year ended December 31, 1995 . . . . F-13
Notes to Unaudited Pro Forma Condensed Combined
Financial Statements . . . . . . . . . . . . . . . F-14 through F-15
F-1
Item 7(a) Financial Statements of Business Acquired
- -------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Communication Cable, Inc.:
We have audited the accompanying balance sheets of Communication Cable, Inc.
as of October 31, 1995 and 1994 and the related statements of earnings,
stockholders' equity, and cash flows for each of the years in the three-year
period ended October 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Communication Cable, Inc. as
of October 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the years in the three-year period ended October 31, 1995,
in conformity with generally accepted accounting principles.
As discussed in Note 1(f) to the financial statements, the Company adopted the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, as of November 1,
1993.
(Signature of KPMG Peat Marwick LLP)
Raleigh, North Carolina
December 15, 1995
F-2
- -------------------------------------------------------------------------------
BALANCE SHEETS
October 31, 1995 and 1994
- -------------------------------------------------------------------------------
1995 1994
ASSETS
CURRENT ASSETS:
Cash and interest-bearing deposits.......... $ 5,339,837 1,797,290
Accounts and notes receivable:
Trade, less allowance for doubtful
accounts of $107,000 and $200,000 in
1995 and 1994, respectively............ 7,431,279 7,629,229
Other.................................... 639,492 95,123
----------- ----------
Total accounts and notes
receivable, net.................. 8,070,771 7,724,352
----------- ----------
Inventories................................. 7,259,373 9,148,240
Prepaid expenses............................ 109,419 94,801
Deferred income taxes....................... 32,952 196,495
----------- ----------
Total current assets................ 20,812,352 18,961,178
PROPERTY, PLANT AND EQUIPMENT, NET............ 6,781,453 8,450,256
INVESTMENT IN SUBLEASE........................ 330,311 350,933
OTHER......................................... 138,996 137,003
----------- ----------
$28,063,112 27,899,370
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current installments of long-term debt...... $ 409,234 417,072
Accounts payable, trade..................... 3,328,592 3,160,336
Accrued salaries, wages and bonuses......... 516,579 561,814
Accrued income taxes........................ 262,133 88,025
Other accrued expenses...................... 618,812 432,486
----------- ----------
Total current liabilities........ 5,135,350 4,659,733
LONG-TERM DEBT, EXCLUDING CURRENT INSTALLMENTS 2,211,430 4,591,904
DEFERRED INCOME TAXES......................... 523,118 630,969
Total liabilities................ 7,869,898 9,882,606
----------- ----------
STOCKHOLDERS' EQUITY:
Common stock................................ 2,577,425 2,494,839
Additional paid-in capital.................. 17,308,396 16,750,853
Shareholder loan............................ (16,695) (32,491)
Retained earnings (deficit)................. 324,088 (1,196,437)
----------- ----------
Total stockholders' equity....... 20,193,214 18,016,764
----------- ----------
$28,063,112 27,899,370
=========== ==========
See accompanying notes to financial statements.
F-3
- -------------------------------------------------------------------------------
STATEMENTS OF EARNINGS
Years ended October 31, 1995, 1994 and 1993
- -------------------------------------------------------------------------------
1995 1994 1993
NET SALES....................... $56,255,914 52,375,673 47,662,216
COST OF GOODS SOLD.............. 45,010,171 41,204,980 37,417,594
----------- ---------- ----------
Gross profit........... 11,245,743 11,170,693 10,244,622
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES...... 8,827,300 8,600,575 7,510,430
----------- ---------- ----------
Operating income....... 2,418,443 2,570,118 2,734,192
OTHER INCOME (EXPENSE):
Interest expense.............. (352,045) (349,567) (356,672)
Interest income............... 248,165 183,264 127,404
Engineering services.......... 136,500 152,011 214,360
Gain (loss) on sale of
equipment................... (14,307) 47,339 --
Gain on sale of Aerospace
Systems division............ 375,136 -- --
Expenses related to terminated
merger...................... (73,862) (279,085) --
Gain on sale of patent rights. 431,450 -- --
Other......................... 24,260 4,241 34,338
----------- ---------- ----------
Total other............ 775,297 (241,797) 19,430
----------- ---------- ----------
Earnings before income
taxes................ 3,193,740 2,328,321 2,753,622
INCOME TAX EXPENSE.............. 1,075,511 961,098 1,016,604
----------- ---------- ----------
Net earnings before
cumulative effect of
change in accounting
principle............ 2,118,229 1,367,223 1,737,018
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES... -- 154,157 --
----------- ---------- ----------
Net earnings........... $ 2,118,229 1,521,380 1,737,018
=========== ========== ==========
EARNINGS PER COMMON SHARE:
Before cumulative effect
of change in accounting
principle............ $ .80 .51 .66
Cumulative effect of
change in accounting
principle............ -- .06 --
----------- ---------- ----------
Net earnings........... $ .80 .57 .66
=========== ========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND COMMON SHARE
EQUIVALENTS OUTSTANDING....... 2,632,359 2,657,112 2,647,286
See accompanying notes to financial statements.
F-4
- -------------------------------------------------------------------------------
STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended October 31, 1995, 1994 and 1993
- -------------------------------------------------------------------------------
Common Stock Additional Retained Total
-------------------- paid-in Stockholder earnings stockholders'
Shares Amount capital loan (deficit) equity
--------- ---------- ---------- ------- ---------- ----------
Balance at
October 31,
1992....... 2,140,159 $2,140,159 12,846,898 (64,083) (310,755) 14,612,219
Stock dividend
(7%)....... 149,653 149,653 1,831,155 -- (1,982,903) (2,095)
Common stock
issued..... 5,554 5,554 15,346 -- -- 20,900
Stockholder
loan
repayment.. -- -- -- 15,796 -- 15,796
Net earnings. -- -- -- -- 1,737,018 1,737,018
--------- --------- ---------- ------- ---------- ----------
Balance at
October 31,
1993....... 2,295,366 2,295,366 14,693,399 (48,287) (556,640) 16,383,838
Stock dividend
(8%)....... 183,930 183,930 1,975,559 -- (2,161,177) (1,688)
Common stock
issued..... 15,543 15,543 81,895 -- -- 97,438
Stockholder
loan
repayment.. -- -- -- 15,796 -- 15,796
Net earnings. -- -- -- -- 1,521,380 1,521,380
--------- --------- ---------- ------- ---------- ----------
Balance at
October 31,
1994....... 2,494,839 2,494,839 16,750,853 (32,491) (1,196,437) 18,016,764
Stock dividend
(3%)....... 74,713 74,713 521,934 -- (597,704) (1,057)
Common stock
issued..... 7,873 7,873 35,609 -- -- 43,482
Stockholder
loan
repayment.. -- -- -- 15,796 -- 15,796
Net earnings. -- -- -- -- 2,118,229 2,118,229
--------- ---------- ---------- ------- ---------- ----------
Balance at
October 31,
1995....... 2,577,425 $2,577,425 17,308,396 (16,695) 324,088 20,193,214
========= ========== ========== ======= ========== ==========
See accompanying notes to financial statements.
F-5
- -------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
Years ended October 31, 1995, 1994 and 1993
- -------------------------------------------------------------------------------
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings........................... $ 2,118,229 1,521,380 1,737,018
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization....... 1,184,642 1,087,391 920,286
Loss (gain) on sale of equipment.... 14,307 (47,339) --
Gain on sale of Aerospace Systems
division.......................... (375,136) -- --
Gain on sale of patent rights....... (431,450) -- --
Decrease in value of equipment
held for resale................... -- 49,000 18,629
Amortization of notes payable
discounts......................... 20,426 21,982 23,478
Increase (decrease) in deferred
income taxes...................... 55,692 (145,679) 12,767
Decrease (increase) in accounts
and notes receivable.............. (112,765) (972,448) 509,141
Decrease (increase) in inventories.. 299,512 (1,939,691) (654,570)
Decrease (increase) in prepaid
expenses.......................... (14,618) 1,623 (66,188)
Increase (decrease) in accounts
payable, trade.................... 168,256 582,796 (314,775)
Increase (decrease) in accrued
expenses.......................... 359,800 (75,872) 6,306
Increase in other assets............ (1,993) (901) (9,134)
----------- --------- ---------
Total adjustments.............. 1,166,673 (1,439,138) 445,940
----------- --------- ---------
Net cash provided by operating
activities................... 3,284,902 82,242 2,182,958
----------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................... (473,094) (1,590,310) (1,365,748)
Collections on investment in sublease.. 18,418 28,457 --
Net proceeds from sale of equipment.... 17,332 202,000 --
Proceeds from sale of Aerospace
Systems division..................... 2,845,506 -- --
Proceeds from sale of patent rights.... 200,000 -- --
----------- --------- ---------
Net cash provided (used) by
investing activities......... 2,608,162 (1,359,853) (1,365,748)
----------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt...................... (2,408,738) (408,721) (387,890)
Proceeds from issuance of debt......... -- -- 34,436
Decrease in cash restricted for the
purchase of property, plant and
equipment............................ -- 42,152 130,306
Proceeds from issuance of common stock
and collections on stockholder loan.. 59,278 113,234 36,696
Cash portion of stock dividends for
fractional shares.................... (1,057) (1,688) (2,095)
---------- --------- ---------
Net cash used by financing
activities................... (2,350,517) (255,023) (188,547)
---------- --------- ---------
Net increase (decrease) in
cash......................... 3,542,547 (1,532,634) 628,663
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR................................ 1,797,290 3,329,924 2,701,261
---------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR. $5,339,837 1,797,290 3,329,924
========== ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for
interest............................ $ 385,769 340,994 352,052
========== ========= =========
Cash paid during the year for income
taxes............................... $ 865,585 1,045,144 1,188,088
========== ========= =========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During 1995, the Company sold patent rights and two machines with a net
book value of $67,150 for $200,000 in cash and a note receivable of $298,600.
During 1994, the Company subleased a building which was previously included in
property, plant and equipment under a capital lease. Gross payments receivable
at the inception of the sublease totaled $630,000.
During 1994 and 1993, the Company put into service in its production facilities
certain equipment which was being held for resale totaling $139,600, and
$226,000, respectively.
See accompanying notes to financial statements.
F-6
NOTES TO FINANCIAL STATEMENTS
October 31, 1995, 1994 and 1993
(1) NATURE OF BUSINESS
Communication Cable, Inc. (the "Company") engineers, designs and
manufactures specialty electronic cables to customer specifications
for use in computers, data processing, telecommunications, medical
electronic and the industrial electronic industries.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF FINANCIAL STATEMENT PRESENTATION
The financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the financial
statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the
date of the balance sheets and income and expenses for the periods
presented. Actual results could differ significantly from those estimates.
(B) REVENUE RECOGNITION
The Company records sales revenue when goods are shipped to customers.
(C) ACCOUNTS RECEIVABLE
The Company establishes an allowance for doubtful receivables equal to
the estimated collection losses to be incurred. The estimated losses
are based on actual collection experience and management's opinion of the
current status of existing receivables. The Company's customers are widely
dispersed throughout the United States.
(D) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method.
(E) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is computed
by the straight-line method over the estimated useful lives of the assets.
(F) INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes.
Statement 109 requires a change from the deferred method of accounting for
income taxes of APB Opinion No. 11 to the asset and liability method of
accounting for income taxes. Under the asset and liability method of
Statement 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or
settled. Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
The Company adopted Statement 109 as of November 1, 1993. The cumulative
effect of this change in accounting for income taxes of $154,157 is
determined as of November 1, 1993, and is reported separately in the
statement of earnings for the year ended October 31, 1994. Prior years'
financial statements have not been restated.
(G) EARNINGS PER SHARE
Earnings per share are based on the weighted average number of common shares
and common equivalent shares outstanding during each period (2,632,359,
2,657,112 and 2,647,286 shares for the years ended October 31, 1995, 1994
and 1993, respectively). Common equivalent shares, which consist of stock
options, have been included in the weighted average number of shares
considered outstanding (when the effect of doing so is dilutive) based on
the treasury stock method. All share and per share data have been restated
to reflect a 3% stock dividend distributed April 30, 1995, a 8% stock dividend
distributed April 30, 1994, and a 7% stock dividend distributed April 30, 1993.
(H) STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, the Company considers all
short-term investments with a maturity, at date of purchase, of three months or
less to be cash equivalents.
(I) EMPLOYEE BENEFIT PLAN
The Company has a profit sharing and tax-qualified savings plan which was
established pursuant to Section 401(K) of the Internal Revenue Code. It is the
Company's policy to recognize plan costs as they accrue. Costs associated with
the plan were immaterial for the years ended October 31, 1995, 1994 and 1993.
F-7
(3) CASH AND CASH EQUIVALENTS
Cash and cash equivalents are stated at cost, which approximates market, and
consist of the following:
October 31, 1995
-----------------------------------
Interest Maturity
Rate Date Amount
---------- ---------- -----------
Money market accounts............. 2.5%-4% Daily $ 199,649
Eurobond fund..................... 5.35% Daily 4,140,188
Industrial Development Put Bond... Various Weekly 1,000,000
----------
$5,339,837
==========
October 31, 1994
----------------------------------
Interest Maturity
Rate Date Amount
---------- ----------- -----------
Money market accounts............. 2.5%-3% Daily $ 191,436
Eurobond fund..................... 4.75% Daily 579,103
Government securities bonds....... 4.10% Daily 26,751
Industrial Development Put Bond... Various Weekly 1,000,000
----------
$1,797,290
==========
(4) INVENTORIES
The components of inventories are as follows:
October 31,
----------------------
1995 1994
---------- ---------
Raw materials and supplies.............. $3,330,499 3,541,882
Work-in-process......................... 2,382,158 3,574,501
Finished goods.......................... 1,546,716 2,031,857
---------- ---------
$7,259,373 9,148,240
========== =========
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
October 31,
Estimated ------------------------
Useful Lives (Years) 1995 1994
-------------------- ---------- -----------
Land........................... -- $ 140,000 170,000
Buildings...................... 30-39 3,461,307 4,003,886
Machinery and equipment........ 3-12 8,113,199 8,274,753
Furniture and fixtures......... 3-7 229,389 205,101
Vehicles....................... 5-7 78,759 92,966
----------- ----------
12,022,654 12,746,706
Less accumulated depreciation.. 5,241,201 4,296,450
----------- ----------
$ 6,781,453 8,450,256
=========== ==========
During 1995, the Company sold the fixed assets and inventory of the Aerospace
Systems division for a cash price of $2,845,506, resulting in a gain before
income taxes of $375,136.
(6) INVESTMENT IN SUBLEASE
During 1994, the Company sublet a building and accounted for the transaction as
a direct financing sublease. The following is a summary of the investment in
sublease:
October 31,
--------------------
1995 1994
-------- --------
Total lease payments receivable................. $520,000 $580,000
Less unearned income............................ 169,067 210,649
-------- --------
Net investment in sublease...................... 350,933 369,351
Less amounts classified as current.............. 20,622 18,418
-------- --------
Non-current portion of investment in sublease... $330,311 $350,933
======== ========
Future minimum payments to be received under the direct financing
sublease for each of the five ensuing years ending October 31 are as follows:
1996................................................. $ 60,000
1997................................................. 60,000
1998................................................. 60,000
1999................................................. 60,000
2000................................................. 280,000
--------
$520,000
========
Interest income from investment in sublease was $41,231 in Fiscal 1995 and
$28,603 in Fiscal 1994.
F-8
(7) LONG-TERM DEBT
Long-term debt consists of the following:
October 31, 1995 October 31, 1994
----------------------- -----------------------
Unamortized Unamortized
Principal Discount Net Principal Discount Net
--------- -------- --- --------- -------- ---
Industrial Revenue Bond
issued by the Chatham
County Industrial
Facilities and Pollu-
tion Control Financing
Authority payable in
monthly installments
of $9,321 through
2000. Interest is
payable monthly at a
rate of 80% of the
prime rate (Prime
rate at October 31,
1995 was 8.75%) (a)... $ 456,752 -- 456,752 568,609 -- 568,609
Industrial Revenue Bond
issued by the North
Carolina Industrial
Facilities and Pollu-
tion Control Financing
Authority payable in
$50,000 increments per
year through 2008.
Interest is payable
quarterly at a rate
of 4.7% (a)........... 650,000 -- 650,000 700,000 -- 700,000
Note issued in connection
with acquisition of
property and plant, due
in 1998 (discount is
based on imputed
interest rate of
10.375%).............. 188,750 45,563 143,187 203,750 65,989 137,761
Industrial Revenue Bond
issued by the City of
Texarkana, Arkansas
Industrial Development
Authority payable in
various annual maturities
ranging from $200,000
-$260,000 through 2000.
Interest is payable
monthly at rates of
6.6% to 7.0% (a)...... 1,116,667 -- 1,116,667 1,300,417 -- 1,300,417
Capital lease payable in
quarterly payments of
$12,500 with a balloon
payment $100,000 in 2000.
(imputed interest rate
of 12%)............... 234,416 -- 234,416 275,953 -- 275,953
Capital lease payable in
monthly payments of $662
through 1998. (imputed
interest rate of 6%) The
lease is secured by
equipment with a book
value of $23,367...... 19,642 -- 19,642 26,236 -- 26,236
Note issued in connection
with acquisition of
property and plant.
Paid in full upon sale
of Aerospace Systems
division.............. -- -- -- 2,000,000 -- 2,000,000
---------- ------ --------- --------- ------ ---------
2,666,227 45,563 2,620,664 5,074,965 65,989 5,008,976
Less current
installments.......... 409,234 -- 409,234 417,072 -- 417,072
---------- ------ --------- --------- ------ ---------
$2,256,993 45,563 2,211,430 4,657,893 65,989 4,591,904
========== ====== ========= ========= ====== =========
(a) The proceeds of the Industrial Revenue Bonds ("IRBs") were restricted for
the acquisition, construction and installation of the Company's manufacturing
plants. The debt is secured by land, buildings, improvements, machinery and
equipment. Provisions of the IRB agreements contain various loan covenants
including prohibition against paying cash dividends or redeeming shares of the
Company's stock. At October 31, 1995 the Company was either in compliance with
or had obtained waivers for all covenants.
(b) At October 31, 1995, the Company had a $2,500,000 unused line of credit
available at prime minus .25%.
(c) Maturities of long-term debt are as follows:
Note Capital
Year ending October 31, IRBs Payable Leases Total
- ------------------------ ---------- ------- ------- --------
1996.................... 364,357 15,000 29,877 409,234
1997.................... 379,357 15,000 33,177 427,534
1998.................... 394,357 158,750 34,184 587,291
1999.................... 409,357 -- 32,612 441,969
2000.................... 275,992 -- 124,207 400,199
Thereafter.............. 400,000 -- -- 400,000
---------- ------- ------- ---------
$2,223,420 188,750 254,057 2,666,227
========== ======= ======= =========
F-9
(8) FEDERAL AND STATE INCOME TAXES
The components of income tax expense for the years ended October 31, 1995, 1994
and 1993 consisted of the following:
1995 1994 1993
---------- ------- ---------
Current:
Federal..................... $ 907,722 854,151 901,073
State....................... 112,097 98,469 102,764
---------- ------- ---------
1,019,819 952,620 1,003,837
---------- ------- ---------
Deferred:
Federal..................... 50,296 7,144 11,410
State....................... 5,396 1,334 1,357
---------- ------- ---------
55,692 8,478 12,767
---------- ------- ---------
Income tax expense............ $1,075,511 961,098 1,016,604
========== ======= =========
The components of net deferred tax assets and net deferred tax
liabilities are as follows:
October 31,
-------------------
1995 1994
-------- -------
Deferred tax assets:
Inventories, principally due to
additional costs inventoried for tax
purposes............................... $ 75,539 86,917
Accounts receivable, principally due to
allowance for doubtful accounts........ 39,205 73,747
Tax income in excess of book income on
long-term contracts.................... -- 24,198
Accrued expenses......................... 19,238 31,743
-------- -------
Total gross deferred tax assets........ 133,982 216,605
-------- -------
Less valuation allowance................. -- --
-------- -------
Net deferred tax assets................ 133,982 216,605
-------- -------
Deferred tax liabilities:
Property, plant and equipment,
principally due to differences in
depreciation........................... 523,118 630,969
Installment sale......................... 85,005 --
Prepaid expenses......................... 16,025 20,110
-------- -------
Total gross deferred tax liabilities... 624,148 651,079
-------- -------
Net deferred tax liability............. $490,166 434,474
======== =======
There have been no valuation allowances recorded for the years ended October
31, 1995 and 1994, because the tax benefits of deductible temporary differences
can be realized by offsetting the tax effects of taxable temporary differences
for which a deferred tax liability has been recognized.
Deferred income tax expense in 1993 primarily related to tax depreciation in
excess of book depreciation.
The actual income tax expense for the years ended October 31, 1995, 1994 and
1993 differs from the "expected" amount (computed by applying the statutory
federal income tax rate of 34% to the earnings before income taxes and
cumulative effect of a change in accounting principle) as follows:
1995 1994 1993
------ ------ ------
Computed "expected" tax expense........ 34.0 % 34.0 % 34.0 %
Increase (decrease) in income taxes
resulting from:
State income taxes, net of federal
tax benefit........................ 2.4 2.8 2.5
Expenses related to terminated
merger............................. (3.0) 4.1 --
Other................................ .3 .4 .4
------ ------ ------
33.7 % 41.3 % 36.9 %
====== ====== ======
(9) COMMON STOCK AND STOCK OPTIONS
The Company has authorized 10,000,000 shares of $1 par value common stock.
Options for up to 1,336,678 shares of common stock have been made available
under the Company's stock option plans for directors and employees. The options
are exercisable for a maximum of ten years from the grant date at an exercise
price of not less than the fair market value of the common stock as of the date
of the grant of the option. The options that have been granted and are
exercisable at October 31, 1995 have a price range of $1.78 to $11.97 and if
exercised would generate proceeds of approximately $2,321,713.
The average price of options exercised in 1995 was $5.52.
A summary of stock options is as follows:
Exercisable at October 31, 1993....................... 225,869
Stock dividend adjustment............................. 18,805
Granted............................................... 15,000
Exercised............................................. (15,543)
Forfeited............................................. (3,564)
-------
Exercisable at October 31, 1994....................... 240,567
Stock dividend adjustment............................. 9,179
Granted............................................... 68,500
Exercised............................................. (7,873)
Forfeited............................................. (7,296)
-------
Exercisable at October 31, 1995....................... 303,077
=======
On February 25, 1991 the President of the Company borrowed $79,879 from the
Company to exercise stock options. The loan is evidenced by an unsecured
five-year promissory note of that date, payable in five equal annual
installments plus interest at the applicable federal rate as published by the
Internal Revenue Service beginning December 31, 1991.
F-10
(10) SALES TO MAJOR CUSTOMERS
During 1995, net sales to a single customer amounted to 11% of the Company's
net sales. In 1994, net sales to the same customer amounted to 10% of the
Company's net sales. In 1993, no single customer accounted for 10% or more of
the Company's net sales.
(11) QUARTERLY INFORMATION (UNAUDITED)
Fiscal 1995
-------------------------------------------------
Three months ended 1/31/95 4/30/95 7/31/95 10/31/95
- -------------------- ----------- ---------- ---------- ---------
Net sales........... $12,754,209 14,138,344 14,566,134 14,797,227
Gross profit........ 2,573,125 2,784,313 2,720,934 3,167,371
Net earnings........ 238,149 337,068 544,800 998,212
Earnings per share.. .09 .13 .21 .38
The quarter ended July 31, 1995 included the sale of certain patent rights
which increased net earnings by $217,719 and earnings per share by $.08.
The quarter ended October 31, 1995 included other income from engineering
services of $136,500 which increased after tax net earnings by $85,856 and
earnings per share by $.03. Also, the quarter ended October 31, 1995 included
the sale of the Aerospace Systems division which increased net earnings by
$235,953 and earnings per share by $.09.
Fiscal 1994
--------------------------------------------------
Three months ended 1/31/94 4/30/94 7/31/94 10/31/94
- ----------------------- ----------- ---------- ---------- ----------
Net sales.............. $12,105,626 12,267,232 13,445,883 14,556,932
Gross profit........... 2,761,365 2,639,963 2,829,746 2,939,619
Net earnings........... 581,954 430,277 399,066 110,083
Earnings per share..... .23 .16 .15 .04
The quarter ended April 30, 1994 included other income from engineering
services of $152,011 which increased after tax net earnings by $95,612 and
earnings per share by $.04.
(12) SUBSEQUENT EVENTS (UNAUDITED)
On January 20, 1996, the Company signed an Agreement and Plan of Merger with
Pentair, Inc. providing for a merger of the Company at a cash price of $13.50
per share of outstanding common stock. Pursuant to the terms of the Merger
Agreement, the Company granted to Pentair an option to purchase up to 300,000
shares of the Company's common stock at $13.50 per share, exercisable until
February 22, 1996. The Company will be required to pay Pentair a $1,000,000
termination fee, plus expenses of up to $250,000, if the Company is acquired by
another party and under certain other circumstances. Consummation of the merger
is subject to shareholder approval and certain other conditions. On January
22, 1996, Kuhlman Corporation announced in a press release that it would
increase the purchase price in its previously announced tender offer from
$13.062 to $14.00 per share.
F-11
Item 7(b) Pro Forma Financial Information
KUHLMAN CORPORATION AND SUBSIDIARIES
AND COMMUNICATION CABLE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET
Communication Pro Forma Pro Forma
December 31, 1995 Kuhlman Cable Adjustments Combined
- -----------------------------------------------------------------------------
(Note 4)
In thousands
ASSETS
Current Assets
Cash and cash equivalents.. $ 581 $ 5,340 $ (5,300)(a) $ 621
Accounts receivable........ 55,753 7,431 --- 63,184
Inventories................ 41,833 7,259 (1,150)(b) 47,942
Other current assets....... 8,436 782 1,760 (c) 10,978
---------------------------------------------
Total current assets....... 106,603 20,812 (4,690) 122,725
---------------------------------------------
Plant and equipment - net.. 66,249 6,781 4,000(d) 77,030
---------------------------------------------
Intangible assets and other
long-term assets......... 42,050 470 20,548(e) 63,068
---------------------------------------------
................... $214,902 $ 28,063 $ 19,858 $262,823
=============================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of
long-term debt........... $ 10,522 $ 409 $ --- $ 10,931
Accounts payable........... 28,542 3,329 --- 31,871
Accrued liabilities........ 28,357 1,397 2,752(f) 32,506
---------------------------------------------
Total current liabilities.. 67,421 5,135 2,752 75,308
---------------------------------------------
Long-term debt............. 63,653 2,212 35,779(g) 101,644
---------------------------------------------
Other long-term
liabilities.............. 9,596 523 1,520(h) 11,639
---------------------------------------------
Total liabilities.......... 140,670 7,870 40,051 188,591
---------------------------------------------
Total shareholders' equity. 74,232 20,193 (20,193)(i) 74,232
---------------------------------------------
.................... $214,902 $ 28,063 $ 19,858 $262,823
=============================================
The Notes to Unaudited Pro Forma Condensed Combined
Financial Statements should be read in conjunction
with this balance sheet
F-12
KUHLMAN CORPORATION AND SUBSIDIARIES
AND COMMUNICATION CABLE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
Pro Forma Pro
Communication Adjustments Forma
Kuhlman Cable (Note 4) Combined
- ----------------------------------------------------------------------------
In thousands
Net sales................ $ 425,384 $ 56,256 $ (2,030)(j) $ 479,610
Cost of goods sold....... 341,277 45,010 (2,030)(j) 384,257
-------------------------------------------------
Gross Profit........... 84,107 11,246 --- 95,353
-------------------------------------------------
Operating expenses:
Selling, engineering,
general and
administrative......... 54,946 8,827 (140)(k) 63,633
-------------------------------------------------
Operating profit......... 29,161 2,419 140 31,720
-------------------------------------------------
Other income (expense):
Interest expense, net.... (7,066) (104) (2,712)(l) (9,882)
Merger expenses.......... (4,510) --- --- (4,510)
Other, net............... 493 879 --- 1,372
-------------------------------------------------
Total other income
(expense), net....... (11,083) 775 (2,712) (13,020)
-------------------------------------------------
Income before taxes...... 18,078 3,194 (2,572) 18,700
Taxes on income.......... 8,034 1,076 (647)(m) 8,463
-------------------------------------------------
Income before
extraordinary item.... $ 10,044 $ 2,118 $ (1,925) $ 10,237
=================================================
Income before
extraordinary item
per share.............. $ 0.76 $ 0.78
========= =========
Weighted average common
shares and common
stock equivalents...... 13,178 13,178
========= =========
The Notes to Unaudited Pro Forma Condensed Combined
Financial Statements should be read in conjunction
with this statement
F-13
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
1. On February 16, 1996, Kuhlman Corporation (the "Company"), through a
wholly-owned subsidiary, completed a tender offer for the outstanding
shares of Communication Cable, Inc. ("CCI"), a North Carolina
corporation traded on NASDAQ, for $14.00 per share in cash. CCI
engineers, designs and manufactures a wide variety of low voltage
electronic wire and cable products. Through the tender offer,
previously owned shares of CCI, and a redemption process conducted by
CCI pursuant to the North Carolina Control Share Acquisition Act, the
Company owned approximately 92% of all CCI shares outstanding as of
March 31, 1996, for an aggregate total cost of approximately $40,404,000.
The Company plans to purchase the remaining CCI shares outstanding as
soon as practicable. The acquisition of CCI will be accounted for as a
purchase. The acquisition of CCI shares was funded primarily through
a $40,000,000 increase in the Company's bank credit facility.
2. The Company operates and reports on a December 31 calendar year basis.
CCI operated and reported on an October 31 fiscal year basis. The
unaudited pro forma condensed combined balance sheet combines the
balance sheet of Kuhlman as of December 31, 1995 with the balance
sheet of CCI as of October 31, 1995. The unaudited pro forma condensed
combined statement of income combines the statement of income of Kuhlman
for the calendar year ended December 31, 1995 with the statement of
earnings of CCI for the fiscal year ended October 31, 1995.
3. The accompanying unaudited pro forma condensed combined balance sheet as of
December 31, 1995 has been prepared as if the acquisition of all of
the outstanding shares of CCI had been effective on December 31, 1995.
The unaudited pro forma combined statement of income for the year ended
December 31, 1995 has been prepared as if the acquisition of all of the
outstanding shares of CCI had been effective January 1, 1995. In the
opinion of management, all adjustments necessary to present fairly
such pro forma financial statements have been made. The pro forma
financial statements are for information purposes only and are not
necessarily indicative of the financial condition or results of
operations that would have occurred if the acquisition had been
consummated as of January 1, 1995.
4. Explanation of Pro Forma Adjustments
(a) A decrease in cash to reflect its use to reduce acquisition debt,
offset by cash proceeds of $6,075,000 received from the exercise
of CCI stock options prior to the acquisition.
(b) A decrease in inventory to reflect its fair market value to the
Company at the date of acquisition. The reduction in value is
attributable to the writedown of inventories associated with the
exit of certain product lines and the Company's strategy with
respect to the management of its working capital resources.
(c) An increase in the deferred income tax asset to reflect the tax
effect of purchase accounting adjustments.
(d) An increase in plant and equipment, net to reflect its fair
market value at the date of acquisition.
F-14
(e) An increase to record the excess of purchase price over the
fair market value of the net assets acquired at the date of
acquisition.
(f) An increase in accrued liabilities to record costs associated
with the exit of certain product lines, severance costs and
other transaction-related expenses associated with the acquired
business.
(g) An increase in debt to reflect the cost of the acquisition,
including all of the outstanding shares of CCI and estimated
transaction costs, totaling approximately $47,154,000, offset
by cash proceeds of approximately $6,075,000 from the exercise
of CCI stock options prior to the acquisition and the use of
excess cash of $5,300,000 to reduce the acquisition debt.
(h) An increase in the long-term deferred tax liability to reflect
the tax effect of the purchase accounting adjustments to plant
and equipment.
(i) To record Kuhlman's purchase of all of CCI's outstanding common
shares, offset by the increase in equity resulting from the
aforementioned exercise of CCI stock options.
(j) A decrease in sales and cost of sales to eliminate intercompany
sales between Kuhlman and CCI.
(k) A decrease in general and administrative expenses of $700,000 to
eliminate non-recurring and redundant costs, partially offset by
$560,000 of intangible amortization resulting from the acquisition.
(l) An increase in interest expense to reflect the carrying cost of
the acquisition debt at Kuhlman's average borrowing rate.
(m) A decrease in taxes on income to reflect the pro forma tax impact
of the CCI acquisition.
F-15
Exhibit (23)(a)
Independent Auditor's Consent
The Board of Directors
Communication Cable, Inc.:
We consent to the inclusion of our report dated December 15, 1995, with
respect to the balance sheets of Communication Cable, Inc. as of
October 31, 1995 and 1994 and the related statements of earnings,
stockholders' equity, and cash flows for each of the years in the three-year
period ended October 31, 1995, which report appears in Form 8-K/A of Kuhlman
Corporation dated April 26, 1996. Our report refers to the fact that on
November 1, 1993, Communication Cable, Inc. adopted the provisions of the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes."
(Signature of KPMG Peat Marwick LLP)
Raleigh, North Carolina
April 23, 1996