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 March 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 1-7695
KUHLMAN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 58-2058047
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 Skidaway Village Square
Savannah, Georgia 31411
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code -- (912) 598-7809
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----------- ------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 27, 1998
----- -----------------------------
Common Stock, $1.00 Par Value 16,752,817
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ITEM 1.
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31,
--------------------
1998 1997
--------- ---------
(Unaudited)
(In thousands, except per share data)
Net sales . . . . . . . . . . . . . . . . . . . . . $ 184,102 $ 134,148
Cost of goods sold . . . . . . . . . . . . . . . . 142,015 104,406
--------- ---------
Gross profit . . . . . . . . . . . . . . . . . . . 42,087 29,742
--------- ---------
Operating expenses:
Selling, engineering, general and
administrative expenses . . . . . . . . . . . 24,460 17,933
Intangible amortization . . . . . . . . . . . . . 905 558
--------- ---------
Total operating expenses . . . . . . . . . . 25,365 18,491
--------- ---------
Operating profit . . . . . . . . . . . . . . . . . 16,722 11,251
--------- ---------
Other income(expense):
Interest expense, net. . . . . . . . . . . . . . (1,850) (1,938)
Other, net . . . . . . . . . . . . . . . . . . . (381) (315)
--------- ---------
Total other income(expense), net . . . . . . . . (2,231) (2,253)
--------- ---------
Income before taxes . . . . . . . . . . . . . . . . 14,491 8,998
Taxes on income . . . . . . . . . . . . . . . . . . 5,674 3,716
--------- ---------
Net income . . . . . . . . . . . . . . . . . . . . $ 8,817 $ 5,282
========= =========
Per share amounts:
Net income - basic . . . . . . . . . . . . . . . $ 0.53 $ 0.38
========= =========
Net income - diluted . . . . . . . . . . . . . . $ 0.51 $ 0.36
========= =========
Average shares outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . . 16,567 13,746
========= =========
Diluted . . . . . . . . . . . . . . . . . . . . . 17,419 14,479
========= =========
The Notes To Consolidated Financial Statements
should be read in conjunction with these statements.
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
1998 1997
--------- ---------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . $ 8,210 $ 6,529
Accounts receivable, less reserves of $3,637
and $3,726 at March 31, 1998 and December
31, 1997, respectively 108,369 104,190
Inventories . . . . . . . . . . . . . . . . . 74,155 71,282
Deferred income taxes. . . . . . . . . . . . . 14,363 13,540
Prepaid expenses and other current assets. . . 4,560 4,726
--------- ---------
Total current assets . . . . . . . . . . . . . 209,657 200,267
--------- ---------
Plant and equipment, at cost:
Land, buildings and leasehold improvements . . 53,530 51,874
Machinery and equipment . . . . . . . . . . . 172,372 173,300
Construction in progress . . . . . . . . . . . 7,686 5,720
--------- ---------
233,588 230,894
Less - accumulated depreciation . . . . . . . (108,800) (105,368)
--------- ---------
124,788 125,526
--------- ---------
Intangible assets, net of amortization of $8,350
and $7,445 at March 31, 1998 and December 31,
1997, respectively 122,712 123,616
--------- ---------
Other assets . . . . . . . . . . . . . . . . . . . 11,744 11,909
--------- ---------
$ 468,901 $ 461,318
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt . . . . . . $ 2,153 $ 1,475
Accounts payable . . . . . . . . . . . . . . . 57,761 50,913
Accrued liabilities . . . . . . . . . . . . . 82,633 87,814
--------- ---------
Total current liabilities . . . . . . . . . . 142,547 140,202
--------- ---------
Long-term debt . . . . . . . . . . . . . . . . . . 112,519 116,257
--------- ---------
Accrued postretirement benefits . . . . . . . . . 19,844 19,573
--------- ---------
Other long-term liabilities. . . . . . . . . . . . 11,509 10,833
--------- ---------
Total liabilities . . . . . . . . . . . . . . 286,419 286,865
--------- ---------
Shareholders' equity:
Preferred stock, par value $1.00, authorized
2,000 shares, none issued; Junior
participating preferred stock, series A,
no par value, authorized 200 shares, none
issued . . . . . . . . . . . . . . . . . . . . --- ---
Common stock, par value $1.00, authorized
20,000 shares, issued 16,690 shares at
March 31, 1998 and 16,601 at December 31,
1997, respectively . . . . . . . . . . . . . . 16,690 16,601
Additional paid-in capital . . . . . . . . . . . 105,348 103,543
Retained earnings . . . . . . . . . . . . . . . 64,103 57,777
Accumulated other comprehensive income . . . . . (2,739) (2,548)
--------- ---------
183,402 175,373
Less - treasury shares at cost (72 shares at
March 31, 1998 and December 31, 1997). . . . . (920) (920)
--------- ---------
Total shareholders' equity . . . . . . . . . . 182,482 174,453
--------- ---------
$ 468,901 $ 461,318
========= =========
The Notes to Consolidated Financial Statements
should be read in conjunction with these statements.
KUHLMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
----------------------
1998 1997
--------- ---------
(Unaudited)
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . $ 8,817 $ 5,282
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . 6,321 3,988
Deferred income taxes, net . . . . . . . . . . (3) (539)
Provision for losses on accounts receivable . . 121 121
Non-cash charges and other, net . . . . . . . . 1,509 55
Changes in operating assets and liabilities: (1)
Accounts receivable . . . . . . . . . . . . . . (4,568) (4,216)
Inventories . . . . . . . . . . . . . . . . . . (2,853) (3,077)
Prepaid expenses and other current assets . . . 170 56
Accounts payable . . . . . . . . . . . . . . . 6,923 4,009
Accrued liabilities . . . . . . . . . . . . . . (5,036) 3,449
--------- ---------
Net cash provided by operating activities . . 11,401 9,128
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . (5,198) (2,606)
Acquisitions, net of cash acquired . . . . . . -- (85,375)
Proceeds from the sale of assets . . . . . . . 402 52
--------- ---------
Net cash used by investing activities . . . . (4,796) (87,929)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in revolving loan facility . . . . . (2,808) (4,319)
Proceeds from issuance of long-term debt . . . 51 90,000
Repayments of long-term debt . . . . . . . . . (322) (754)
Dividends paid . . . . . . . . . . . . . . . . (2,479) (2,060)
Stock options exercised and other . . . . . . . 736 443
--------- ---------
Net cash provided (used for) by financing
activities . . . . . . . . . . . . . . (4,822) 83,310
--------- ---------
Effect of exchange rate changes on cash . . . . . (102) 63
--------- ---------
Net increase in cash and cash equivalents . . . . 1,681 4,572
Cash and cash equivalents at beginning of period . 6,529 2,209
--------- ---------
Cash and cash equivalents at end of period . . $ 8,210 $ 6,781
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . $ 2,636 $ 2,076
========= =========
Income taxes, net of refunds . . . . . . . . . $ 1,905 $ 581
========= =========
(1)Net of the effects of acquisitions, where applicable.
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 Three Months Ended March 31, 1998
(Unaudited)
(In thousands)
Accumulated Other
Comprehensive Income
--------------------
Foreign
Additional Currency Minimum Compre-
Common Paid-in Retained Translation Pension Treasury hensive
Stock Capital Earnings Adjustment Liability Stock Total Income
-----------------------------------------------------------------
Balance at
December
31, 1997.... $16,601 $103,543 $57,777 $(1,364) $(1,184) $(920) $174,453
------- -------- ------- ------- ------- ----- --------
Net income... --- --- 8,817 --- --- --- 8,817 $8,817
Cash
dividends
declared
($0.15
per share).. --- --- (2,491) --- --- --- (2,491)
Foreign
currency
translation
adjustment.. --- --- --- (191) --- --- (191) (191)
Issuance of
common
stock....... 44 1,114 --- --- --- --- 1,158
Stock
options
exercised
and other... 45 691 --- --- --- --- 736
------- -------- ------- ------- ------- ----- -------- ------
Balance at
March 31,
1997........ $16,690 $105,348 $64,103 $(1,555) $(1,184) $(920) $182,482
======= ======== ======= ======= ======= ===== ========
Total Comprehensive Income for the
three months ended March 31, 1998 $8,626
======
The 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 Months Ended March 31, 1998
(Unaudited)
1. Consolidated Financial Statements
The consolidated balance sheet at March 31, 1998 and the related
consolidated statements of income, cash flows and shareholders' equity for the
three months ended March 31, 1998 and 1997, have been prepared by Kuhlman
Corporation (the "Company") without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position of the Company at March 31, 1998 and the
results of operations, cash flows and shareholders' equity for three months
ended March 31, 1998 and 1997, have been made. Certain amounts in the 1997
consolidated financial statements have been reclassified to conform with the
1998 presentation.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted from the accompanying financial statements.
These consolidated financial statements, including the notes thereto, should
be read in conjunction with the Company's audited consolidated financial
statements as of and for the three years in the period ended December 31, 1997
included in the Company's annual report on Form 10-K.
The results of operations for the three months ended March 31, 1998 are
not necessarily indicative of the results to be expected for the full year
1998.
2. Acquisitions
Kysor Transportation Products Group
On March 10, 1997, the Company purchased certain assets of the
Transportation Products Group ("Kysor") of Kysor Industrial Corporation, a
Michigan Corporation traded on the New York Stock Exchange. The purchase
price for Kysor was $86,000,000 in cash plus the assumption of approximately
$722,000 of debt. The purchase of Kysor was financed from borrowings under
the Company's existing credit facilities.
The transaction was accounted for as a purchase, and the goodwill
associated with the transaction is being amortized over 40 years. The purchase
price has been allocated to the assets based on their estimated fair market
value. The excess of the purchase price over the fair value of assets was
approximately $52,909,000. The results of operations for Kysor are included
in the consolidated financial statements of the Company from the date of
acquisition.
The following unaudited pro forma information for the periods shown
below gives effect to the Kysor acquisition as if it had occurred as of the
beginning of the period.
Quarter Ended
March 31, 1997
----------------
In thousands, except per share data
Net sales $ 160,957
Net income $ 6,107
Diluted per share amounts:
Net income $ 0.42
The unaudited pro forma information assumes the acquisition of the net
assets at the beginning of the period presented and, accordingly includes
adjustments for goodwill amortization, interest expense, certain
administrative costs and income taxes. The unaudited pro forma financial data
is presented for information purposes only and is not necessarily indicative
of the results of operations that actually would have been achieved had the
acquisition been consummated at the beginning of the period presented.
Snyder Tank Corporation
On November 14, 1997, a subsidiary of the Company acquired all of the
outstanding stock of Snyder Tank Corp. ("Snyder Tank") for approximately
$20,000,000 in cash plus the assumption of approximately $1,200,000 of debt.
Snyder Tank is a manufacturer of steel and aluminum fuel and air tanks for
medium and heavy-duty trucks, and metal tanks for liquified natural gas fuel
systems. Net sales of Snyder Tank for their fiscal year ended August 31, 1997
were approximately $45,700,000. The impact on operations of this acquisition
was not significant for any of the periods presented and, therefore, pro forma
amounts are not presented giving effect to the transaction.
3. Earnings and Dividends Per Share
Basic earnings per share are computed by dividing net income by the
weighted average shares outstanding for the period. Diluted earnings per
share includes the dilutive effects of common stock equivalents in the
weighted average shares outstanding. Dilutive shares used in the per share
calculation for the three months ended March 31, 1998 and 1997 included
approximately 852,000 and 733,000 shares, respectively, resulting from the
dilutive effects of common stock equivalents.
A cash dividend of $0.15 per share was declared during each of the first
quarters of 1998 and 1997.
4. Inventories
Inventories consisted of the following, in thousands:
March 31, December 31,
1998 1997
------------- ------------
(unaudited)
FIFO cost:
Raw materials $ 31,475 $ 32,904
Work-in-process 18,999 17,270
Finished goods 23,739 21,662
--------- ---------
Total 74,213 71,836
Excess of FIFO
over LIFO cost (58) (554)
--------- ---------
Net inventories $ 74,155 $ 71,282
========= =========
5. Long-Term Incentive Plan
On October 21, 1997 and March 6, 1998 under awards granted pursuant to
the Company's Long-Term Incentive Plan, the Company achieved the $36 and $42
thresholds, respectively. The total pre-tax cost of such awards are expected
to be approximately $8,900,000, the majority of which will be expensed in 1998.
The awards consist of two-thirds Kuhlman stock and one-third cash with the
value of award varying by participant. The payout to the eligible participants
pursuant to such awards will be made in four quarterly installments subject to
certain vesting requirements and other factors. The related compensation
expense will be recorded as the awards vest over the defined service period.
In February 1998, the Board of Directors approved additional award
levels whereby certain key employees would receive a payout if certain
stock price targets are achieved within a specified period, and certain
other requirements are met. The stock price thresholds approved were
$48 and $56 per share. Pursuant to such awards, the total pre-tax cost of
such awards would be approximately $8,800,000, with approximately $4,400,000
to be paid after the attainment of each of the price thresholds. The awards
would be paid to the eligible participants in the same manner and subject
to the same requirements as previous awards under the Long-Term
Incentive Plan.
6. Comprehensive Income
On January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS No.
130"). This statement establishes standards for reporting and displaying of
comprehensive income and its components in the financial statements. The
requirements of SFAS No. 130 are incorporated in the Company's Consolidated
Balance Sheets and Statements of Shareholders' Equity.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company generated $11,401,000 in cash flow from operations in the
first quarter of 1998 compared to $9,128,000 for the same period in 1997, an
increase of $2,273,000 (25%). The increase was due primarily to the record
earnings reported in the first quarter of 1998, partially offset by higher
working capital requirements. Working capital (net of cash) was $58,900,000
at March 31, 1998 compared to $53,536,000 at December 31, 1997, an increase of
$5,364,000 (10%). The increase in working capital was due primarily to
additional working capital assets required to support the Company's record
volume and the payment of certain accrued liabilities. Cash and cash
equivalents increased to $8,210,000 at March 31, 1998 from $6,529,000 at
December 31, 1997 due to the timing of certain payments. Accounts receivable,
net was $108,369,000 at March 31, 1998 compared to $104,190,000 at December
31, 1997, an increase of $4,179,000 (4%). The increase was due primarily to
the Company's record sales volume in the first quarter of 1998. Similarly,
inventories increased $2,873,000 (4%) to $74,155,000 at March 31, 1998 from
December 31, 1997 primarily to support higher anticipated sales activity.
Deferred taxes and prepaid expenses and other current assets increased
$657,000 (4%) to $18,923,000 at March 31, 1998 from the end of 1997 primarily
because of adjustments for certain tax attributes associated with the
acquisition of Kysor. Accounts payable and accrued liabilities were
$140,394,000 at March 31, 1998 compared to $138,727,000 at December 31, 1997,
an increase of $1,667,000 (1%). The increase was because of higher accounts
payable to vendors caused by the greater level of inventories, partially
offset by lower accrued expenses due to the payment of certain items accrued
throughout 1997 and paid in the first quarter of 1998.
Total debt outstanding at March 31, 1998 was $114,672,000, down
$3,060,000 (3%) from the end of 1997. The decrease was due to the repayment
of revolving bank debt from the excess cash flow generated by the Company in
the first quarter of 1998. At March 31, 1998, shareholders' equity was
$182,482,000, an increase of $8,029,000 (5%) from the end of 1997. The
increase was primarily due to the record earnings in the first quarter of
1998, partially offset by the payment of dividends. Total dividends paid in
each of the first quarters of 1998 and 1997 were $0.15 per share, or
$2,479,000 and $2,060,000, respectively. Total debt to capitalization fell to
38.6% at March 31, 1998 from 40.3% at the end of 1997 due to the reduction in
debt and the increase in equity.
Capital expenditures for the first three months of 1998 were $5,198,000
compared to $2,606,000 reported in the same period last year. Expenditures in
the first quarter of 1998 were primarily for normal replacements and additions
to machinery and equipment.
Management believes that the Company's liquidity, forecasted cash flows,
available borrowing capacity and other financial resources are adequate to
support the anticipated operations, to finance future capital expenditures as
previously planned and to service all existing debt requirements.
RESULTS OF OPERATIONS
The following table summarizes net sales and operating earnings by
segment, in thousands:
Three Months Ended
March 31,
-----------------------
1998 1997
--------- ---------
(unaudited)
Net sales:
Electrical $ 70,843 $ 72,483
Industrial 113,259 61,665
--------- ---------
$ 184,102 $ 134,148
========= =========
Income before taxes:
Electrical $ 5,716 $ 4,170
Industrial 14,711 8,843
--------- ---------
Operating earnings(1) 20,427 13,013
Corporate (4,086) (2,077)
Interest expense, net (1,850) (1,938)
--------- ---------
$ 14,491 $ 8,998
========= =========
(1) Operating earnings is defined as operating profit plus other, net
directly attributable to each segment.
Three Months Ended March 31, 1998 and 1997
Consolidated Results
The Company reported record quarterly results in the first quarter of
1998 in several key financial areas, including net sales, operating profit,
net income and earnings per share. Net income and earnings per share advanced
67% and 42%, respectively, in the first quarter of 1998 when compared to the
same period in 1997. These increases were attributable to the positive
operating performance reported in each of the Company's two segments and the
beneficial impact of acquisitions completed in 1997.
Net sales in the first quarter of 1998 were a record high of
$184,102,000 compared to $134,148,000 reported in the same period in 1997, an
increase of $49,954,000 (37%). The increase in net sales was due primarily to
robust demand in the Industrial Products Segment and to the full period impact
in 1998 of the Kysor and Snyder Tank acquisitions.
Operating profit for the first quarter of 1998 reached a record high of
$16,722,000 compared to $11,251,000 reported for the same period in 1997, an
increase of $5,471,000 (49%). Consolidated operating profit margins in the
first quarter of 1998 advanced to 9.1% of net sales from 8.4% reported in the
year-ago period. The increase in consolidated operating profit and operating
profit margins were due to the record sales volume and improved gross profit
margins for certain products. Gross profit margins in the first quarter of
1998 advanced to 22.9% from 22.2% reported in the year-ago period. Overall,
operating expenses increased $6,874,000 (37%) to $25,365,000, or 13.8% of net
sales, in the first quarter of 1998 compared to $18,491,000, or 13.8% of net
sales reported in the year-ago period. The increase in operating expenses was
due primarily to the higher sales noted above, greater corporate expenses due
to the $1,755,000 pre-tax charge for the Company's Long-Term Incentive Plan
("LTIP") and the acquisitions noted above. Operating expenses, excluding the
LTIP, in the first quarter of 1998 were 12.8% of net sales compared to 13.8%
reported in the year-ago period.
Interest expense, net was $1,850,000 in the first quarter of 1998
compared to $1,938,000 for the same period in 1997, a decrease of $88,000
(5%). The decrease was due to lower levels of debt outstanding throughout the
1998 period compared to the first quarter of 1997. Other, net was an expense
of $381,000 in the first quarter of 1998 compared to a $315,000 expense
reported in the same period in 1997, an increase of $66,000 (21%). The
increase was due to higher miscellaneous, non-operating expenses, none of
which were significant, in the first quarter of 1998 compared to the year-ago
period.
Net income for the first quarter of 1998 was a record $8,817,000
compared to $5,282,000 reported in the same period in 1997, an increase of
$3,535,000 (67%). Earnings per share (diluted) in the first quarter of 1998
were $0.51 compared to $0.36 for the first quarter of 1997, an increase of
42%. The increase in earnings per share was due to the higher net income
noted above, partially offset by more shares outstanding throughout the
period. The increase in the number of shares outstanding for the earnings per
share calculation was due to higher common stock equivalents as a result of an
increase in the Company's stock price and the impact of additional common
stock issued primarily in June 1997. The Company's effective tax rate for the
first quarter of 1998 and 1997 was 39.2% and 41.3%, respectively. The
difference in rates was due primarily to the impact of higher pre-tax earnings
which lessened the impact of non-deductible goodwill and a change in the
source of earnings between various taxing authorities.
The Company's consolidated backlog was $159,835,000 at March 31, 1998
compared to $170,970,000 and $153,782,000 at December 31, 1997 and March 31,
1997, respectively. The decline in the backlog from the end of 1997 was due
primarily to lower orders for certain electrical products, including medium
power transformers, while the increase from the prior year was due to the
addition of Snyder Tank, partially offset by the beneficial impact of improved
delivery times.
Electrical Products Segment
In the Electrical Products Segment, net sales in the first quarter of
1998 were $70,843,000 compared to $72,483,000 compared to the year-ago period,
a decrease of $1,640,000 (2%). The decrease was due primarily to lower
shipments of security wire because of increased competition and lower sales of
battery booster cables caused by the mild winter experienced in much of the
United States. This was partially offset by higher shipments of certain
electrical and electronic wire products due to improved market penetration and
record sales of medium power transformers.
Operating earnings in the Electrical Products Segment increased
$1,546,000 (37%) to $5,716,000 in the first quarter of 1998 over the same
period in 1997. The increase was due to strong gains in both transformers and
wire and cable products. Kuhlman Electric reported the highest operating
earnings in its history as net sales advanced over the year-ago period on
higher operating margins. Operating earnings at Coleman Cable advanced 41% in
the first quarter of 1998 compared to that reported in the first quarter of
1997. The increase was due primarily to improved gross profit margins
resulting from a better sales mix and greater manufacturing efficiencies due
to programs implemented in 1997.
Industrial Products Segment
Net sales for the Industrial Products Segment in the first quarter of
1998 were a record $113,259,000 compared to $61,665,000 reported in the same
period in 1997, an increase of $51,594,000 (84%). The increase was due
primarily to record sales of engine components and fuel tanks and the full
period impact of the acquisitions of Kysor and Snyder Tank, which occurred in
March and November 1997, respectively. The record level of sales in the
quarter were due primarily to continued robust demand domestically for
turbochargers, fuel tanks and other engine components from original equipment
manufacturers.
Operating earnings in the Industrial Products Segment improved
$5,868,000 (66%) to a record $14,711,000 in the first quarter of 1998 when
compared to the same period in 1997. The increase was due primarily to the
record shipments of engine component products and fuel tanks, improved
operating efficiencies, and the acquisitions noted above.
OTHER MATTERS
Kuhlman is currently working to resolve the potential impact of the year
2000 on the processing of date-sensitive information by the Company's
computerized information systems. The year 2000 issue is the result of
computer programs being written using two digits, rather than four, to define
the applicable year. Any of the Company's programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000, which could result in miscalculations or system failures. Based on
preliminary information, costs of addressing potential problems are not
currently expected to have a material adverse impact on the Company's
financial position, results of operations, cash flows, liquidity or capital
resources in future periods. However, if the Company, its customers or
vendors are unable to resolve such processing issues in a timely manner, it
could result in a material financial risk. Accordingly, the Company plans to
devote the necessary resources to resolve all significant year 2000 issues in
a timely manner. While the Company does not expect expenditures associated
with year 2000 compliance to be material, necessary cash outlays will be
funded through the Company's operating cash flow.
OUTLOOK FOR 1998
Management believes that the results in the first quarter support its
view that the Company is positioned to prosper in 1998. However, management's
optimism about the future continues to be tempered somewhat by matters
including, but not limited to the potential impact of fluctuating raw material
costs, an uncertain economic environment in certain key markets and the
potential for rising interest rates. Management will continue to focus on
these variables very carefully.
SAFE HARBOR STATEMENT
The statements contained under the caption "Outlook For 1998" and
certain other information contained in this report, which can be identified by
the use of forward-looking terminology such as "believes," or the negative
thereof or other variations thereon or comparable terminology, constitute
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, and are subject to the safe harbors created thereby.
These statements should be considered as subject to the many risks and
uncertainties that exist in the Company's operations and business environment.
Such risks and uncertainties could cause actual results to differ materially
from those projected. These uncertainties include, but are not limited to,
economic conditions, market demand and pricing, competitive and cost factors,
raw material prices, global interest rates, foreign exchange rates, and other
risk factors.
PART II. OTHER INFORMATION
ITEM 6 Exhibits
(a) Exhibits
10.1 Amended Kuhlman Corporation Long-Term Incentive Plan.
27.0 Financial Data Schedule for the three month period
ended March 31, 1998.
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Kuhlman Corporation
---------------------------------
(Registrant)
/s/ Robert S. Jepson, Jr.
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Robert S. Jepson, Jr.
Chairman and Chief Executive Officer
/s/ Vernon J. Nagel
---------------------------------
Vernon J. Nagel
Executive Vice President of Finance,
Chief Financial Officer and Treasurer
Date: May 12, 1998