UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended June 30, 1999 .
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from to .
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Commission File Number: 000-25939
THE KELLER MANUFACTURING COMPANY, INC.
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(Exact name of registrant as specified in its charter)
Indiana 35-0435090
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
701 N. Water Street, Corydon, Indiana 47112
- ------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(812) 738-2222
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(Registrant's telephone number, including area code)
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
As of June 30, 1999, the registrant had 5,790,987 shares of Common Stock, no par
value, outstanding.
1
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THE KELLER MANUFACTURING COMPANY, INC.
AND SUBSIDIARY
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TABLE OF CONTENTS
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PART I FINANCIAL INFORMATION Page
Item 1. Financial Statements:
Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998 3
Consolidated Statements of Income for the Three Months and Six Months ended June
30, 1999 and 1998 4
Consolidated Statements of Cash Flows for the Six Months ended June 30, 1999 and
1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Index to Exhibits 14
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2
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
THE KELLER MANUFACTURING COMPANY, INC.
AND SUBSIDIARY
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<CAPTION>
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
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June 30, December 31,
1999 1998
----------- -----------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,098,806 $ 3,985,786
Accounts receivable, less allowance for doubtful accounts of
$294,000 (1999) and $291,000 (1998) 7,168,452 6,284,517
Inventories 17,053,781 16,066,490
Current deferred tax asset 253,339 259,533
Income taxes receivable 56,589 278,862
Other current assets 442,530 536,924
----------- -----------
Total current assets 29,073,497 27,412,112
PROPERTY, PLANT AND EQUIPMENT - net 9,689,139 9,798,174
INVESTMENT SECURITY AVAILABLE FOR SALE 500,000
PREPAID PENSION COSTS 1,577,644 1,760,759
----------- -----------
TOTAL $40,340,280 $39,471,045
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,792,524 $ 1,825,343
Commissions, salaries and withholdings 1,187,261 1,582,327
Accrued vacation 559,212 435,591
Other current liabilities 1,370,088 1,410,341
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Total current liabilities 4,909,085 5,253,602
LONG-TERM LIABILITIES -
Deferred income taxes 1,046,538 1,085,054
----------- -----------
Total liabilities 5,955,623 6,338,656
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - no par value, 40,000,000 shares authorized, 28,682 696,825
5,790,987 shares issued and outstanding as of
June 30, 1999 and 5,851,767 shares issued and
outstanding as of December 31, 1998
Retained earnings 34,355,975 32,435,564
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Total stockholders' equity 34,384,657 33,132,389
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TOTAL $40,340,280 $39,471,045
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<FN>
See notes to consolidated financial statements.
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3
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THE KELLER MANUFACTURING COMPANY, INC.
AND SUBSIDIARY
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CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED AND THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
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THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
NET SALES $15,683,326 $13,658,824 $29,677,868 $30,361,508
COST OF SALES 11,195,104 9,929,320 21,415,318 21,733,104
----------- ----------- ----------- -----------
GROSS PROFIT 4,488,222 3,729,504 8,262,550 8,628,404
SELLING, GENERAL AND ADMINISTRATIVE 2,405,843 1,675,498 4,574,586 3,736,703
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 2,081,379 2,054,006 3,687,964 4,891,701
INCOME TAXES 788,652 801,685 1,359,952 1,856,900
----------- ----------- ----------- -----------
NET INCOME $ 1,282,727 $ 1,252,321 $ 2,328,012 $ 3,034,801
=========== =========== =========== ===========
NET INCOME PER SHARE OF COMMON
STOCK,
basic and dilutive -
based on weighted average number of
shares outstanding of 5,830,796 and
5,856,160 for the six months ended
June 30, 1999 and 1998, respectively;
and 5,803,162 and 5,863,215 for the
three months ended June 30, 1999 and
1998, respectively. $ 0.22 $ 0.21 $ 0.40 $ 0.52
=========== =========== =========== ===========
<FN>
See notes to consolidated financial statements.
</FN>
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4
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THE KELLER MANUFACTURING COMPANY, INC.
AND SUBSIDIARY
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<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
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Six Months Ended
June 30,
---------------------------
1999 1998
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OPERATING ACTIVITIES:
Net income $ 2,328,012 $ 3,034,801
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 788,100 760,200
Deferred income taxes (32,322) 28,549
Common stock awards 307,660 312,329
Changes in assets and liabilities:
Accounts receivable (883,935) 107,301
Inventories (987,291) (1,061,939)
Other current assets 94,394 (22,530)
Prepaid pension costs 183,115 98,600
Accounts payable (32,819) (436,448)
Commissions, salaries and withholdings (395,066) (569,645)
Other current liabilities 83,368 73,262
Income taxes receivable 222,273 (37,100)
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Net cash provided by operating activities 1,675,489 2,287,380
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INVESTING ACTIVITIES:
Purchases of property, plant and equipment (679,065) (1,268,027)
Sale of investment security available for sale 500,000 0
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Net cash used in investing activities (179,065) (1,268,027)
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FINANCING ACTIVITIES:
Purchases of common stock (975,803) (223,106)
Dividends paid (407,601) (351,340)
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Net cash used in financing activities (1,383,404) (574,446)
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NET INCREASE IN CASH AND CASH EQUIVALENTS 113,020 444,907
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 3,985,786 3,902,289
------------ ------------
CASH AND CASH EQUIVALENTS, END OF QUARTER $ 4,098,806 $ 4,347,196
============ ============
CASH PAID DURING THE YEAR FOR:
Interest $ 169 $ 2,765
============ ============
Income taxes $ 1,170,000 $ 1,894,000
============ ============
<FN>
See notes to consolidated financial statements.
</FN>
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5
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THE KELLER MANUFACTURING COMPANY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Note 1. Basis of Presentation
The interim financial statements are unaudited and reflect all adjustments
(consisting solely of normal recurring adjustments) that, in the opinion of
management, are necessary for a fair statement of results for the interim
periods presented. This report should be read in conjunction with the audited
consolidated financial statements included in the Form 10 filed by the Company
with the Securities and Exchange Commission ("SEC"). The results of operations
for the six months ended June 30,1999 are not necessarily indicative of the
results to be expected for the full year or any other interim period.
Note 2. Inventories
The following is a summary of the major classes of inventories:
June 30, 1999 December 31, 1998
------------- -----------------
(Unaudited)
Raw Materials $ 6,853,834 $ 6,801,656
Work-in-process 7,423,903 6,488,392
Finished Goods 2,776,044 2,776,442
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Net inventories $17,053,781 $16,066,490
=========== ===========
Note 3. Income Taxes
The Company made an overpayment of approximately $140,000 in federal income
taxes for the fiscal year ended December 31, 1998. This overpayment contributed
to a reduction in income taxes paid as reflected on the Company's Consolidated
Statement of Cash Flows for the Six Months Ended June 30, 1999 and 1998. The
major contributor to this reduction, however, is the drop in net income for the
first half of 1999 as compared to the first half of 1998.
6
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This discussion contains statements that constitute forward looking statements
within the meaning of the securities laws. Such statements may include
statements regarding the intent, belief or current expectations of The Keller
Manufacturing Company, Inc. (the "Company") or its officers with respect to (i)
the Company's strategic plans, (ii) the policies of the Company regarding
capital expenditures, financing or other matters, and (iii) industry trends
affecting the Company's financial condition or results of operations. Readers of
this discussion are cautioned that any such forward looking statements are not
guarantees of future performance and involve risks and uncertainties and that
actual results may differ materially from those in the forward looking
statements as a result of various factors. This report should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations included its Form 10 Registration Statement filed by the
Company with the Securities and Exchange Commission.
As has been the Company's historical practice, a quarterly newsletter was sent
to the stockholders of the Company on August 9, 1999, with preliminary
abbreviated financial information included. In finalizing the financial
statements, certain expenses were re-categorized between Selling, General and
Administrative Expenses and Cost of Sales. This re-classification created a
reduction in Selling, General and Administrative Expenses and an increase in
Cost of Sales of $281,000 for the second quarter and $649,000 for the first half
of 1999.
Results of Operations
The following table sets forth, for the periods indicated, consolidated
statement of income data as a percentage of net sales.
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THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
---- ---- ---- ----
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 71.4% 72.7% 72.2% 71.6%
Gross Profit 28.6% 27.3% 27.8% 28.4%
Selling, General & Administrative 15.3% 12.3% 15.4% 12.3%
Operating Income 13.3% 15.0% 12.4% 16.1%
Other Expense(1) * * * *
Income Before Taxes 13.3% 15.0% 12.4% 16.1%
Income Taxes 5.1% 5.9% 4.6% 6.1%
Net Income 8.2% 9.1% 7.8% 10.0%
<FN>
(1) *Less than 1%.
</FN>
</TABLE>
Three Months Ended June 30, 1999, compared to three months ended June 30, 1998.
Net Sales. Net sales increased approximately $2.0 million to approximately $15.7
million for the second quarter 1999 compared to approximately $13.7 million in
the second quarter 1998. This was an increase of approximately 14.8% in net
sales. The primary factor for the increase in net sales was due to the first
shipments of the PGA TOUR(R) group. The increased sales of the PGA TOUR group in
the second quarter over the first quarter were due, in large part, to a build up
in inventory of certain items which occurred in the first quarter while the
matching items were finished in the second quarter. The Company was able to ship
approximately $2.6 million of PGA TOUR product in the second quarter.
7
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Cost of Sales. Cost of sales as a percentage of net sales decreased
approximately 1.3% for the second quarter 1999, at 71.4% compared to 72.7% for
the second quarter 1998. Actual cost of sales rose from $9.9 million for the
second quarter 1998 to $11.2 million for the second quarter 1999. This dollar
increase was primarily due to the increase in sales during the same time period.
Another contributing factor to the higher cost of sales in the second quarter of
1999, which also accounted for, in part, a more than $130,000 increase in
material costs for the second quarter 1999 as compared to 1998's second quarter,
was the increased cost of lumber during 1998 which was not recognized until
1999. This lag in the recognition of higher lumber prices is due to the fact
that once lumber is purchased, almost a full year will pass until that same
lumber has passed completely through the Company's manufacturing process and
emerges as finished furniture. Lumber prices for 1999 have fallen as compared to
1998 averaging approximately $100 per 1,000 board feet; however, the Company
will not begin to realize these cost reductions until the fourth quarter 1999.
The percentage decrease in Cost of Sales was due primarily to the improved cost
efficiencies resulting from the higher sales volume.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $0.7 million from the second
quarter 1998 to the second quarter 1999. As a percent of net sales, Selling,
General and Administrative Expenses increased approximately 3.0% from 12.3% for
the second quarter 1998 to 15.3% for the second quarter 1999.
Selling expenses for the second quarter 1999 increased approximately $400,000 as
compared to the second quarter 1998. The two most significant factors included
funds advanced to certain furniture retailers carrying the Company's PGA TOUR
furniture line for PGA TOUR events and sweepstakes, as well as royalties to the
PGA TOUR. These two items contributed to greater than half of the increased
selling expenses for the second quarter. Another contributing factor was
catalogs printed for the new PGA TOUR group. Expenses for PGA TOUR events and
catalogs are one time events and should not generate further significant
expenditures.
Another factor responsible for the increase in Selling, General and
Administrative Expenses was increases of approximately $150,000 for expenditures
involving implementation of the EMS Information System. The largest expense was
for training of office employees for installation of the accounts receivable,
accounts payable and the general ledger for the new 608 system. The 608 system
is a customized segment of the Company's EMS Information System and is designed
for use in the Company's accounting functions listed above. Developing this
custom software for the 608 system to be used in the office was also a major
expense. A final factor relating to the Company's computer systems, which is
also partially responsible for the rise in Selling, General and Administrative
Expenses, was added consulting necessary to upgrade the old information system
being used in certain areas.
Another factor contributing to the increase in Selling, General and
Administrative Expenses was a $207,000 reduction in certain expenses in the
second quarter 1998. The Company had previously set aside $207,000 for a
potential bad debt expense due to Smith's Home Furnishings, a furniture retailer
who filed for bankruptcy protection. A claim stemming from this filing alleged
Smith's Home Furnishings made a preferential payment to the Company of $207,000.
The bankruptcy court ruled that the Company is not liable for the claim. The
Company recognized a reduction in Selling, General and Administrative Expenses
in the second quarter 1998 to reverse the expense previously recorded.
Net Income. As a result of the above factors, the Company's net income for the
second quarter 1999 was $1,282,727. This is $30,406 greater than 1998's second
quarter net income of $1,252,321.
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
Net Sales. Net sales decreased approximately $700,000 to approximately $29.7
million from the first half of 1999 compared to $30.4 million in the first half
of 1998, a reduction of approximately 2.3%. The primary reason for the reduction
in sales was the introduction of the PGA Tour group. As is typical with the
introduction of any new group, efficiencies during the beginning of production
are lower than the Company's average but are expected to rise as production
continues in line with a typical learning curve.
8
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Cost of Sales. Total cost of sales decreased approximately $300,000 for the
first half of 1999. As a percent of net sales, cost of sales increased from
71.6% in the first half of 1998 to 72.2% for 1999. The main cause for the
percentage increase is the increase in the cost of lumber by $388,000 in the
first half of 1999 as compared to the first half of 1998. As mentioned above, a
reduction in lumber costs should be recognized in the fourth quarter of this
year.
Selling, General and Administrative Expenses. Selling, General and
Administrative Expenses increased approximately $840,000 for the first six
months of 1999 as compared to 1998. This was a 3.1% increase as a percent of
sales, increasing from 12.3% in the first six months of 1998 to 15.4% in the
first six months of 1999. Non-recurring events including advances to furniture
retailers carrying the Company's PGA TOUR product line for PGA TOUR events and
sweepstakes and printing of catalogs for the PGA TOUR line were major factors of
the increase in the second quarter of 1999. Also, in the first quarter of 1999,
over $219,000 of advertising enticements for the Home Display Program were
incurred. This was a one time event in which approximately three-fourths of the
cost of the program was recognized. A $70,000 reduction in bad debt expense for
the first quarter of 1998 was recognized and a $207,000 reduction was recognized
in 1998 compared to 1999 relating to the bankruptcy court's ruling in 1998 that
no preferential payments were made to Smith's Home Furnishings.
Net Income. As a result of the above factors, the net income for the first six
months of 1999 was $2,328,012. This is $706,789 less than 1998's first half net
income of $3,034,801.
Liquidity and Capital Resources. There was no significant change in the
Company's liquidity. The largest shift was in Accounts Receivable which
increased approximately $800,000. This is due, primarily, to the increase in
sales for the second quarter 1999 of approximately $2.0 million compared to the
second quarter 1998. Cash for the same period dropped $200,000 which is
attributed to the redemption of approximately $232,000 in Company stock.
Accounts Payable was reduced by over $500,000. An increase and subsequent
reduction in Accounts Payable is due to the Company's practice of purchasing
large quantities of outsourced parts in one period in order to obtain favorable
pricing and shipping terms and paying for such purchases in a subsequent period.
A $500,000 Certificate of Deposit matured during this quarter and the Company
chose not to renew the investment, converting the Certificate of Deposit to
cash.
Year 2000
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
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar ordinary business activities.
"Year 2000 compliant," as used in this discussion, means that a date-handling
problem relating to the Year 2000 date change that would cause computers,
software or other equipment to fail to correctly perform, process and handle
date-related data for the dates within and between the 20th and 21st centuries,
is not expected to interfere with normal business operations.
Since 1996 the Company has been steadily reengineering its information systems
to prepare for the conversion to the year 2000. This effort began with the
purchase of a comprehensive enterprise information system ("EMS Information
System") that is designed to be year 2000 compliant. The EMS Information System
is a comprehensive Company wide information system encompassing a high majority
of the Company's computerized operations. Implementation has been progressing
well and is scheduled to be completed by the fourth quarter of 1999. Testing of
this system is scheduled to be completed by September 30, 1999. The Company has
engaged a consulting company to advise and assist it in the installation and
implementation of the system.
In the event that all applications have not been replaced by the end of the
year, the Company intends for both the old and the new systems to be capable of
handling the Year 2000 issues. Another consulting company was engaged to
ascertain that the old information system is Year 2000 compliant. Testing of
this system was completed on July 31, 1999. The old system is gradually being
phased out as each application is replaced by the new system but is still
expected to be in operation on some peripheral applications at year end.
9
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The Company formed a Year 2000 Project Team in 1998 to identify and correct Year
2000 problems with hardware, software, and imbedded microprocessors throughout
the Company. This team is cross-functional and is composed of eleven people.
They have identified many suspected problems and are now involved in the testing
and correction of these problems. This team is also working with key suppliers
and third-party service providers to identify external weaknesses and provide
solutions to prevent the disruption of business activities. Key suppliers and
service providers are identified by the Company as being those that would
materially affect the operations of the Company if the Company experienced
disruptions in materials or services from these suppliers. These include, but
are not limited to, suppliers of raw materials, utility providers, banking
services and insurance providers (particularly medical).
The team's work is proceeding well and is intended to be substantially completed
by November 1, 1999. The Company is in the process of receiving readiness
evaluations from key suppliers and have received responses from approximately
75% of its key suppliers. The Company expects to have responses from as many
suppliers as will fully respond by September 30, 1999. The Company is in the
process of evaluating those readiness evaluations it has received. The team's
estimated percentages of completion are as follows:
Present November 1, 1999
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New system installation 79% 85%
Old system modification 100% 100%
Operating systems 98% 100%
Hardware and Imbedded Chips 97% 100%
New system installation is not expected to be completed by December 31, 1999.
This is not expected to have a material adverse effect on Company results or
operations since the old systems which are slated for replacement after December
31, 1999 have been tested and are Year 2000 compliant.
Through 1998, the Company has incurred capital costs on the Year 2000 project of
approximately $1,018,000 and expenses of approximately $353,000. Capital costs
for 1999 are budgeted at $196,000 and expected expenses for programing and
consulting have been revised upward to $300,000 from the $100,000 estimation
previously disclosed due to unforseen programming and consulting costs due to
increased system integrations. Almost all of these costs are associated with the
new information system software and hardware which were purchased primarily to
provide management with information and tools to better manage the Company and
serve its customers. The expenses relating to Year 2000 compliance are expected
to be paid from existing capital and the Company does not expect these costs to
have a material adverse effect on its future results of operations, liquidity,
or capital resources.
Management believes that the most likely "worst-case" scenario will involve the
failure of business partners or service providers to be compliant, thereby
potentially causing temporary business interruptions and possibly affecting the
Company's normal operations. Management does not expect such disruptions to be
long-term, to materially affect the operations of the Company. The Company
cannot guarantee, however, that Year 2000 issues of all business partners will
be corrected in a timely manner or that the failure of its business partners to
correct these issues would not have a material adverse effect on its future
results of operations or financial condition.
The Company's Year 2000 contingency plan (the "Plan") was completed on July 30,
1999. The objective of the Plan is to provide the minimum level of acceptable
output and services in the event of a system or process failure. The Plan covers
the following areas: 1) utilities; 2) trucking operations; 3) manufacturing
equipment; 4) engineering applications; 5) personnel; 6) purchasing; 7) payroll;
8) accounting; 9) production scheduling; 10) the IBM, EMS and Windows NT
systems; and 11) the Company's wide area network. For each of the above listed
areas, the plan contains:
1. A Response Team. The names of members who are assigned to react in the
event of a failure.
2. A Team Leader. A party who is responsible for ensuring that the proposed
actions are carried out.
3. A Communication Plan. A list of individuals to contact in the event of a
failure.
10
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4. A Contact Number. The telephone number(s) of a software vendor or service
provider which is to be contacted.
5. Activation Threshold. At what point and who is to decide to activate the
Plan.
6. Procedure. The recovery procedure to be followed after the Plan is
activated due to a degraded system and/or operation.
The Company also has a Year 2000 Command Team which is the first to be contacted
in the event of a Year 2000 related failure. The Command Team is responsible for
coordinating the various response teams in the event of a system(s) and/or
operation(s) failure. The Command Team is also scheduled to report to work on
January 1, 2000, in order to test various critical functions of the Company. The
Company believes it is taking the necessary steps to prevent major interruptions
to its business resulting from the Year 2000 issues.
Year 2000 Risks
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third-party suppliers and customers,
the Company is unable to determine at this time whether the consequences of Year
2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition. The Company's efforts are expected
to significantly reduce the Company's level of uncertainty about the Year 2000
problem and, in particular, about the Year 2000 compliance and readiness of its
material external agents. The Company believes that, with the implementation of
new business systems and the completion of its projects as scheduled, the
possibility of significant interruptions of normal operations should be reduced.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
(The remainder of this page intentionally left blank.)
11
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PART II OTHER INFORMATION
Item 1. Legal Proceedings
In Clark v. The Keller Manufacturing Company, Inc. and Ray Menefee, filed on
December 29, 1998, in the United States District Court for the Eastern District
of Virginia, Richmond Division, the plaintiff claims racial harassment and
intentional infliction of emotional distress by the Company's employees. The
plaintiff seeks relief in the amount of $100,000 in compensatory damages, and
$1,000,000 in punitive damages, together with all costs and attorney's fees. In
Brown v. The Keller Manufacturing Company, Inc., filed on September 30, 1998, in
the United States District court for the Southern District of Indiana, the
plaintiff claims sexual harassment by a Company employee, negligent retention
and supervision of such employee by the Company, negligent infliction of
emotional distress, constructive discharge and retaliatory actions by the
Company in violation of her rights protected by state law and Title VII of the
Civil Rights Act of 1964, as amended by the Civil Rights Act of 1991. The
plaintiff seeks compensatory damages, consequential damages and punitive damages
in such amount as to be determined at trial, together with costs and attorney's
fees. In Oakes v. The Keller Manufacturing Company, Inc., filed June 9, 1999, in
the United States District Court for the Southern District of Indiana, the
plaintiff claims she was wrongfully terminated from her employment with the
Company in violation of the Americans with Disabilities Act of 1990, as amended.
The plaintiff seeks an award for lost wages and benefits, compensatory and
punitive damages, costs and attorney's fees.
The Company intends to vigorously contest these claims and believes that the
outcome of the above actions will not have a material adverse effect on its
business, operations or financial condition.
In addition to matters described in the foregoing paragraphs, the Company is
involved in routine litigation incidental to the conduct of its business. The
Company believes that the outcome of these routine matters will not have a
material adverse effect on its business, operations or financial condition.
Item 2. Changes in Securities and Use of Proceeds
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. See Index to Exhibits
(b) Reports on Form 8-K. No report on Form 8-K was filed during the
quarter for which this report is filed.
12
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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.
THE KELLER MANUFACTURING COMPANY, INC.
/s/ Robert W. Byrd
-------------------------------------
Robert W. Byrd
President and Chief Executive Officer
/s/ Danny L. Utz
-------------------------------------
Danny L. Utz
Vice President, Finance
Chief Financial Officer
Date: August 16, 1999
---------------
13
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
<S> <C> <C> <C>
Sequential Numbering
Number Assigned in System Page Number of
Regulation S-K Item 601 Description of Exhibit Exhibit
(2) No Exhibit
(3) 3.01 Restated Articles of
Incorporation of the Company
(Incorporated by reference to
Exhibit 3.01 to the Company's
Amendment number 2 Form 10,
filed July 23, 1999, File No.
000-25939).
3.02 Articles of Amendment
of the Restated Articles
of Incorporation of the
Company (Incorporated
by reference to Exhibit
3.02 to the Company's
Amendment number 2
Form 10, filed July 23,
1999, File No. 000-25939).
3.03 Articles of Amendment
of the Restated Articles
of Incorporation of the
Company (Incorporated
by reference to Exhibit
3.03 to the Company's
Amendment number 2
Form 10, filed July 23,
1999, File No. 000-25939).
3.04 Bylaws of the Company
(Incorporated by reference to
Exhibit 3.04 to the Company's
Amendment number 2 Form 10,
filed July 23, 1999, File No.
000-25939).
(4) 4.01 Form of Shareholders
Rights Agreement, dated
as of December 18,
1998, by and between
the Company and J.J.B.
Hilliard, W.L. Lyons,
Inc. as Rights Agent
(Incorporated
by reference to Exhibit
4.01 to the Company's
Amendment number 2
Form 10, filed July 23,
1999, File No. 000-25939).
4.02 See Article IV of the
Restated Articles of
Incorporation of the
Company found in
Exhibit 3.01 (Incorporated
by reference to Exhibit
4.02 to the Company's
Amendment number 2
Form 10, filed July 23,
1999, File No. 000-25939).
14
<PAGE>
4.03 See Article II of the
Bylaws of the Company
found in Exhibit 3.04
(Incorporated
by reference to Exhibit
4.03 to the Company's
Amendment number 2
Form 10, filed July 23,
1999, File No. 000-25939).
(10) 10.01 Form of "Lease of Space
in International Home
Furnishings Center"
dated as of May 1, 1999,
by and between the
Company and
International Home
Furnishings Center, Inc.
(Incorporated
by reference to Exhibit
10.01 to the Company's
Amendment number 2
Form 10, filed July 23,
1999, File No. 000-25939).
10.02 Form of Lease
Agreement by and
between 1355 Market
Street Associates, L.P.
d/b/a San Francisco Mart
and the Company.
(Incorporated
by reference to Exhibit
10.02 to the Company's
Amendment number 2
Form 10, filed July 23,
1999, File No. 000-25939).
10.03 Form of "Effective
Management Systems,
Inc. Software License,
Professional Services
and Support Purchase
Agreement" dated as of
July 6, 1998, by and
between the Company
and Effective
Management Systems, Inc.
(Incorporated
by reference to Exhibit
10.03 to the Company's
Amendment number 2
Form 10, filed July 23,
1999, File No. 000-25939).
10.04 Form of "Extended Hour
Support Agreement" by
and between the
Company and Effective
Management Systems, Inc.
(Incorporated
by reference to Exhibit
10.04 to the Company's
Amendment number 2
Form 10, filed July 23,
1999, File No. 000-25939).
15
<PAGE>
10.05 Form of "Lease
Agreement" by and
between the Company
and Trailer Leasing Company.
(Incorporated
by reference to Exhibit
10.05 to the Company's
Amendment number 2
Form 10, filed July 23,
1999, File No. 000-25939).
10.06 Form of "Ryder Truck
Rental, Inc Truck Lease
and Service Agreement"
by and between the
Company and Ryder
Truck Rental, Inc. with
accompanying schedules
(Incorporated
by reference to Exhibit
10.06 to the Company's
Amendment number 2
Form 10, filed July 23,
1999, File No. 000-25939).
10.07 Schedules to Exhibits
10.05 and 10.06.
(Incorporated
by reference to Exhibit
10.07 to the Company's
Amendment number 2
Form 10, filed July 23,
1999, File No. 000-25939).
10.08 The Keller
Manufacturing
Company, Inc.
Craftsman Stock Option
Plan (Incorporated
by reference to Exhibit
10.08 to the Company's
Amendment number 2
Form 10, filed July 23,
1999, File No. 000-25939).
10.09 The Keller
Manufacturing
Company, Inc. Board of
Directors' Stock Bonus
Awards Plan (Incorporated
by reference to Exhibit
10.09 to the Company's
Amendment number 2
Form 10, filed July 23,
1999, File No. 000-25939).
16
<PAGE>
10.10 The Keller
Manufacturing
Company, Inc. Incentive
Program for Executive
Personnel (Incorporated
by reference to Exhibit
10.10 to the Company's
Amendment number 2
Form 10, filed July 23,
1999, File No. 000-25939).
10.11 License Agreement by
and between the
Company and PGA
TOUR Licensing
(Incorporated
by reference to Exhibit
10.11 to the Company's
Amendment number 2
Form 10, filed July 23,
1999, File No. 000-25939).
10.12 Sponsorship Agreement
by and between the
Company and PGA
TOUR, Inc. (Incorporated
by reference to Exhibit
10.12 to the Company's
Amendment number 2
Form 10, filed July 23,
1999, File No. 000-25939).
(11) No Exhibit
(15) No Exhibit
(18) No Exhibit
(19) No Exhibit
(22) No Exhibit
(23) No Exhibit
(24) No Exhibit
(27) 27.01 Financial Data Schedule
(99) No Exhibit
17
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
THE KELLER MANUFACTURING COMMPANY, INC. FINANCIAL DATA SCHEDULE
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements of The Keller Manufacturing Company, Inc. and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-END> DEC-31-1998 JUN-30-1999
<CASH> 3,985,786 4,098,806
<SECURITIES> 0 0
<RECEIVABLES> 6,284,517 7,168,452
<ALLOWANCES> 291,000 294,000
<INVENTORY> 16,066,490 17,053,781
<CURRENT-ASSETS> 27,412,112 29,073,497
<PP&E> 19,555,956 20,235,021
<DEPRECIATION> 9,757,782 10,545,882
<TOTAL-ASSETS> 39,471,045 40,340,280
<CURRENT-LIABILITIES> 5,253,602 4,909,085
<BONDS> 0 0
0 0
0 0
<COMMON> 696,825 28,682
<OTHER-SE> 32,435,564 34,355,975
<TOTAL-LIABILITY-AND-EQUITY> 39,471,045 40,340,280
<SALES> 60,144,243 29,677,868
<TOTAL-REVENUES> 60,144,243 29,677,868
<CGS> 43,076,105 21,415,318
<TOTAL-COSTS> 50,964,429 25,989,904
<OTHER-EXPENSES> 9,059 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 9,170,755 3,687,964
<INCOME-TAX> 3,514,750 1,359,952
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,656,005 2,328,012
<EPS-BASIC> 0.97 0.40
<EPS-DILUTED> 0.97 0.40
</TABLE>
