UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For quarterly period ending September 30, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from
__________________ to _________________
Commission File Number: 000-25939
THE KELLER MANUFACTURING COMPANY, INC.
--------------------------------------
(Exact name of registrant as specified in its charter)
Indiana 35-0435090
------- ----------
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) identification No.)
701 N. Water Street, Corydon, Indiana 47112
------------------------------------- -----
(Address of principal executive offices) (Zip Code)
812-738-2222
------------
(Registrant's telephone number, including area code)
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 November 9, 2000, the registrant had 5,610,157 shares of Common Stock, no
par value, outstanding.
<PAGE>
TABLE OF CONTENTS
-----------------
Page Number
-----------
PART I
Item 1. Financial Statements:
Consolidated Balance Sheets as of
September 30, 2000 and 1999, and December 31, 1999 3
Consolidated Statements of Income for the Three
Months Ended and the Nine Months Ended
September 30, 2000 and 1999 4
Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 2000 and 1999 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 8
PART II
Item 1 Legal Proceedings 9
Item 2. Changes in Securities and Use of Proceeds 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
Index to Exhibits 11
<PAGE>
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, 2000 and 1999 and December 31, 1999
-----------------------------------------------------------------------------------------------
September 30 December 31
2000 1999 1999
--------------------- ----
(Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 468,579 $ 3,561,379 $ 2,840,242
Accounts receivable, less allowance
for doubtful accounts of
$319,000 (September 30, 2000),
$294,000 (September 30, 1999) and
$257,000 (December 31, 1999) 8,381,289 6,807,155 6,659,480
Inventories 19,845,715 17,527,745 17,693,432
Other current assets 636,984 651,115 614,265
----------- ----------- -----------
Total current assets 29,332,567 28,637,394 27,807,419
PROPERTY, PLANT AND EQUIPMENT - net 10,779,412 9,861,973 10,045,302
PREPAID PENSION COSTS 1,697,722 1,686,097 1,835,335
----------- ----------- -----------
TOTAL $41,809,701 $40,185,464 $39,688,056
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,766,572 $ 1,658,729 $ 1,670,349
Commissions, salaries and withholdings 1,274,717 1,631,870 1,184,562
Accrued vacation 599,776 587,625 383,824
Other current liabilities 1,074,584 987,533 1,037,096
----------- ----------- -----------
Total current liabilities 4,715,649 4,865,757 4,275,831
LONG-TERM LIABILITIES -
Deferred income taxes 1,189,588 1,105,433 1,196,217
----------- ----------- -----------
Total liabilities 5,905,237 5,971,190 5,472,048
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - no par value, authorized
40,000,000 shares, issued and outstanding
5,610,157 (September 30, 2000),
5,677,363 (September 30, 1999), and
5,619,363 (December 31, 1999) 1,728,513 (808,017) 1,712,638
Retained earnings 34,175,951 35,022,291 32,503,370
----------- ----------- -----------
Total stockholders' equity 35,904,464 34,214,274 34,216,008
----------- ----------- -----------
TOTAL $41,809,701 $40,185,464 $39,688,056
=========== =========== ===========
See notes to consolidated financial statements
</TABLE>
- 3 -
<PAGE>
<TABLE>
<CAPTION>
THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended and Nine Months Ended September 30, 2000 and September 30, 1999
(Unaudited)
---------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
2000 1999 2000 1999
<S> <C> <C> <C> <C>
NET SALES $13,147,371 $13,138,745 $42,771,207 $42,816,613
COST OF SALES 9,918,110 9,721,651 32,388,760 31,136,969
----------- ----------- ----------- -----------
GROSS PROFIT 3,299,261 3,417,094 10,382,447 11,679,644
SELLING, GENERAL, AND ADMINISTRATIVE 2,135,573 1,961,156 6,571,730 6,535,742
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 1,093,688 1,455,938 3,810,717 5,143,902
INCOME TAXES 477,277 590,068 1,487,969 1,950,020
----------- ----------- ----------- -----------
NET INCOME $ 616,411 $ 865,870 $ 2,322,748 $ 3,193,882
=========== =========== =========== ===========
NETINCOME PER SHARE OF COMMON STOCK,
basic and dilutive - based on weighted
average number of shares outstanding of
5,611,466 and 5,789,333 for the nine
months ended September 30, 2000 and
September 30, 1999, respectively; and
5,610,958 and 5,708,637 for the three
months ended September 30, 2000 and
September 30, 1999, respectively. $0.11 $0.15 $0.41 $0.55
=========== =========== =========== ===========
See notes to consolidated financial statements.
</TABLE>
- 4 -
<PAGE>
<TABLE>
<CAPTION>
THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2000 and 1999
(Unaudited)
-------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 2,322,748 $ 3,193,882
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,282,270 1,195,094
Deferred income taxes (263,019) 38,312
Common stock awards 17,357 307,660
Changes in assets and liabilities:
Accounts receivable (1,721,809) (522,638)
Inventories (2,152,283) (1,461,255)
Other current assets 233,671 130,602
Prepaid pension costs 137,613 74,662
Accounts payable 96,223 (166,614)
Commissions, salaries, withholdings and accrued vacation 306,107 201,577
Other current liabilities 37,488 (422,808)
Income tax receivable _______ 275,669
------------- -------------
Net cash provided by operating activities 296,366 2,844,143
------------- -------------
INVESTING ACTIVITIES -
Purchases of property, plant and equipment (2,016,380) (1,258,895)
Sale of investment securities available for sale _______ 500,000
------------- -------------
Net cash used in investing activities (2,016,380) (758,895)
------------- -------------
FINANCING ACTIVITIES:
Redemption of common stock (60,981) (1,812,502)
Dividends paid (590,668) (607,153)
------------- -------------
Net cash used in financing activities (651,649) (2,419,655)
------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,371,663) (334,407)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,840,242 3,985,786
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 468,579 $ 3,651,379
============= =============
CASH PAID DURING THE PERIOD FOR:
Income taxes $ 1,131,000 $ 1,170,000
============= =============
See notes to the consolidated financial statements
</TABLE>
- 5 -
<PAGE>
THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000 and 1999 and December 31, 1999
--------------------------------------------------------------------------------
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 in conformity with accounting principles generally accepted in
the United States of America. This report should be read in conjunction with the
audited consolidated financial statements included in the Form 10K filed by the
Company with the Securities and Exchange Commission ("SEC") on March 29, 2000.
The results of operations for the nine months ended September 30, 2000 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:
<TABLE>
<CAPTION>
September 30, 2000 September 30, 1999 December 31, 1999
------------------ ------------------ -----------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Raw Materials $ 6,089,300 $ 6,752,886 $ 6,211,692
Work-in-process 10,253,610 8,053,095 8,590,283
Finished Goods 3,502,805 2,721,764 2,891,457
----------- ----------- -----------
$19,845,715 $17,527,745 $17,693,432
=========== =========== ===========
</TABLE>
Note 3. Income Taxes
The major contributor to the reduction in taxes is due to the decrease in net
income for the first nine months of 2000 as compared to the first nine months of
1999.
Note 4. New Accounting Standards
The Company plans to adopt Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" on January 1,
2001. The Company does not expect adoption of this standard will have a material
impact on its results of operations or financial condition.
- 6 -
<PAGE>
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 10K filed by the Company with the
Securities and Exchange Commission on March 29, 2000.
Results of Operations
The following table sets forth, for the periods indicated, consolidated
statement of income data as a percentage of net sales.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER, 30 SEPTEMBER, 30
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 75.4% 74.0% 75.7% 72.7%
Gross Profit 24.6% 26.0% 24.3% 27.3%
Selling, General & Administrative 16.2% 14.9% 15.4% 15.3%
Operating Income 8.4% 11.1% 8.9% 12.0%
Income Before Taxes 8.4% 11.1% 8.9% 12.0%
Income Taxes 3.6% 4.5% 3.5% 4.6%
Net Income 4.8% 6.6% 5.4% 7.5%
</TABLE>
Three Months Ended September 30, 2000, compared to three months ended September
30, 1999
Net Sales. Net Sales increased approximately $8,000 to approximately $13,147,000
for the third quarter 2000 compared to approximately $13,139,000 in the third
quarter 1999.
Cost of Sales. Cost of Sales as a percentage of net sales increased
approximately 1.4% for the third quarter 2000, at 75.4% compared to 74.0% for
the third quarter 1999. Actual cost of sales increased from approximately $9.7
million for the third quarter 1999 to approximately $9.9 million for the third
quarter 2000. The employee turnover continues to require training and continues
to result in some inefficiencies in the manufacturing process. Some of the
inefficiencies have resulted in higher cost of indirect labor, parts loss due to
poor quality and higher supervision cost due to the added night shift. The
employee benefit costs have also increased, largely due to increased health care
costs. In the third quarter, the Company agreed to absorb approximately $460,000
more in increased health care costs rather than raise employee premiums.
- 7 -
<PAGE>
Selling, General and Administrative Expenses. Selling, General and
Administrative Expenses increased for the third quarter of 2000 by approximately
$174,000. As a percent of net sales, Selling, General and Administrative
Expenses increased from 14.9% for the third quarter 1999 to 16.2% for the third
quarter 2000. Most of the increase was due to higher cost of bad debt and
professional fees.
Net Income. As a result of the above factors, net income for the third quarter
declined 28.8% to approximately $0.6 million in 2000 compared to approximately
$0.9 million in 1999.
Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999
Net Sales Net sales remained about the same at approximately $42,771,000 for the
first nine months of 2000 compared to approximately $42,817,000 in the first
nine months of 1999.
Cost of Sales. Total cost of sales increased approximately $1.3 million for the
first nine months of 2000. As a percent of net sales, cost of sales increased
from 72.7% in the first nine months of 1999 to 75.7% for the first nine months
of 2000. Material cost and direct labor cost remained approximately the same
while indirect cost increased approximately $1.6 million. Indirect cost
increased primarily due to continued employee turnover in a very tight labor
market, this has resulted in some inefficiencies in the manufacturing process,
higher supervision costs, increased health care costs, and higher indirect labor
costs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses remained approximately the same for the first nine
months of 2000 as compared to the first nine months of 1999. Only a slight
increase from 15.3% in the first nine months of 1999 to 15.4% in the first nine
months of 2000.
Net Income. As a result of the above factors, the net income for the first nine
months of 2000 was approximately $2.3 million. This is approximately $871,000
less than 1999's first nine months income of approximately $3.2 million.
Liquidity and Capital Resources. The most noticeable change in the Company
liquidity was the increase in receivables and inventory resulting in a decrease
in cash. Current ratio was 6.2 to 1 for the first nine months of 2000, compared
to 5.9 to 1 for the same nine months in 1999. The liquid ratio was 1.9 to 1 for
the first nine months of 2000 and for the first nine months of 1999 was 2.1 to
1. Expenditures on capital assets was up approximately $753,000, a 55% increase
over the first nine months of 1999; this was mostly due to a warehouse
constructed at the Company's New Salisbury location.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
None.
- 8 -
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
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. (27) 27.01 Financial Data Schedule
(b) Reports on Form 8-K. No report on Form 8-K was filed
during the quarter for which this report is filed.
- 9 -
<PAGE>
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.
11/13/00
------------------- BY: /s/ Steven W. Robertson
Date -------------------------------------------
Steven W. Robertson
President and Chief Executive Officer
11/13/00
------------------- /s/ Danny L. Utz
Date -------------------------------------------
Danny L. Utz
Vice President, Finance
Principle Financial Officer
- 10 -
