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 June 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 June 30, 2000, the registrant had 5,612,109 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
June 30, 2000 and 1999, and December 31, 1999 3
Consolidated Statements of Income for the Three Months
Ended and the Six Months ended June 30, 2000 and 1999 4
Consolidated Statements of Cash Flows for the Six
Months ended June 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
2
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PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
<CAPTION>
THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND 1999 AND DECEMBER 31, 1999
JUNE 30 DECEMBER 31,
2000 1999 1999
--------------------- ------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,645,376 $4,098,806 $2,840,242
Accounts receivable, less allowance for doubtful accounts of
$287,000 (June 30, 2000). $294,000 (June 30, 1999) and
$257,000 (December 31, 1999) 8,034,020 7,168,452 6,659,480
Inventories 18,829,790 17,053,781 17,693,432
Other current assets 417,736 752,458 614,265
----------- ----------- -----------
Total current assets 28,926,922 29,073,497 27,807,419
----------- ----------- -----------
PROPERTY, PLANT AND EQUIPMENT - net 10,457,369 9,689,139 10,045,302
PREPAID PENSION COSTS 1,629,242 1,577,644 1,835,335
----------- ----------- -----------
TOTAL $41,013,533 $40,340,280 $39,688,056
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $1,774,957 $1,792,524 $1,670,349
Commissions, salaries and withholdings 1,000,097 1,187,261 1,184,562
Accrued vacation 568,699 559,212 383,824
Other current liabilities 1,044,833 1,370,088 1,037,096
----------- ----------- -----------
Total current liabilities 4,388,586 4,909,085 4,275,831
LONG-TERM LIABILITIES -
Deferred income taxes 1,133,628 1,046,538 1,196,217
----------- ----------- -----------
Total liabilities 5,522,214 5,955,623 5,472,048
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - no par value, authorized 40,000,000 shares,
issued and outstanding 5,612,109 (June 30, 2000), 5,779,087
(June 30, 1999) and 5,619,363 (December 31, 1999) 1,728,753 28,682 1,712,638
Retained earnings 33,762,566 34,355,975 32,503,370
----------- ----------- -----------
Total stockholders' equity 35,491,319 34,384,657 34,216,008
----------- ----------- -----------
TOTAL $41,013,533 $40,340,280 $39,688,056
=========== =========== ===========
<FN>
See notes to consolidated financial statements
</FN>
</TABLE>
3
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<TABLE>
<CAPTION>
THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
2000 1999 2000 1999
<S> <C> <C> <C> <C>
NET SALES $14,941,259 $15,683,326 $29,623,836 $29,677,868
COST OF SALES 11,241,393 11,195,104 22,470,660 21,415,318
----------- ----------- ----------- -----------
GROSS PROFIT 3,699,866 4,488,222 7,153,176 8,262,550
SELLING, GENERAL, AND ADMINISTRATIVE 2,271,967 2,405,843 4,436,147 4,574,586
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 1,427,899 2,082,379 2,717,029 3,687,964
INCOME TAXES 543,098 788,652 1,010,692 1,359,952
----------- ----------- ----------- -----------
NET INCOME $884,801 $1,293,727 $1,706,337 $2,328,012
=========== =========== =========== ===========
NETINCOME PER SHARE OF COMMON STOCK,
basic and dilutive - based on weighted average
number of shares outstanding of 5,611,717 and
5,830,796 the six months ended June 30, 2000 and
1999, respectively; and 5,611,717 and 5,803,162
for the three months ended June 30, 2000 and
1999, respectively. $0.16 $0.22 $0.31 $0.40
=========== ============ =========== ==========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
SIX MONTHS ENDED
JUNE 30
2000 1999
--------------------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $1,706,337 $2,328,012
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 851,400 788,100
Deferred income taxes (72,633) (32,322)
Common stock awards 17,357 307,660
Changes in assets and liabilities:
Accounts receivable (1,374,540) (883,935)
Inventories (1,136,358) (987,291)
Other current assets 206,573 316,667
Prepaid pension costs 206,093 183,115
Accounts payable 104,608 (32,819)
Commissions, salaries, withholdings and accrued vacation 410 (271,445)
Other current liabilities 7,737 (40,253)
---------- ----------
Net cash provided by operating activities 516,984 1,675,489
---------- ----------
INVESTING ACTIVITIES -
Purchases of property, plant and equipment (1,263,467) (679,062)
Sale of investment securities available for sale --- 500,000
---------- ----------
Net cash used in investing activities (1,263,467) (179,062)
---------- ----------
FINANCING ACTIVITIES:
Redemptions of common stock (54,149) (975,803)
Dividends paid (394,234) (407,601)
---------- ----------
Net cash used in financing activities (448,383) (1,383,404)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,194,866) 113,023
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,840,242 3,985,786
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $1,645,376 $4,098,809
========== ==========
CASH PAID DURING THE YEAR FOR:
Income taxes $923,000 $1,170,000
========== ==========
<FN>
See notes to the consolidated financial statements
</FN>
</TABLE>
5
<PAGE>
THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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"). The results of
operations for the six months ended June 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:
June 30, 2000 June 30, 1999 December 31, 1999
------------- ------------- -----------------
(Unaudited) (Unaudited)
Raw Materials $6,165,041 $6,853,834 $6,211,692
Work-in-process 9,042,511 7,423,903 8,590,283
Finished Goods 3,622,238 2,776,044 2,891,457
----------- ----------- -----------
$18,829,790 $17,053,781 $17,693,432
=========== =========== ===========
Note 3. Income Taxes
The major contributor to the reduction in taxes is due to the decrease in net
income for the first half of 2000 as compared to the first half of 1999. The tax
liability decreased by 25.7% for the six month comparison.
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 section presents an analysis of
the consolidated financial condition of the Company as of June 30, 2000, June
30, 1999, and December 31, 1999 and the consolidated results of operations for
the three and six month periods ended June 30, 2000 and 1999. This discussion
should be read in conjunction with the consolidated financial statements and
other financial data presented elsewhere herein and with the financial
statements and other financial data, as well as the Management's Discussion and
Analysis of Financial Condition and Results of Operations included in the
Company's December 31, 1999 Annual Report to Shareholders.
Results of Operations
The following table sets forth, for the periods indicated, consolidated
statement of income data as a percentage of net sales.
THREE MONTHS ENDED SIX MONTHS ENDED
2000 1999 2000 1999
---- ---- ---- ----
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 75.2% 71.4% 75.9% 72.2%
Gross Profit 24.8% 28.6% 24.1% 27.8%
Selling, General &
Administrative 15.2% 15.3% 14.9% 15.4%
Operating Income 9.6% 13.3% 9.2% 12.4%
Other Expense(1) * * * *
Income Before Taxes 9.6% 13.3% 9.2% 12.4%
Income Taxes 3.7% 5.1% 3.5% 4.6%
Net Income 5.9% 8.2% 5.7% 7.8%
* Less than 1%.
Three Months Ended June 30, 2000, compared to three months ended June 30, 1999
Net Sales. Net sales decreased approximately $0.8 million to approximately $14.9
million for the second quarter 2000 compared to approximately $15.7 million in
the second quarter 1999. The firm order backlog was reduced $0.5 million from
$6.0 million June 30, 1999 to $5.5 million June 30, 2000.
Cost of Sales. Cost of sales as a percentage of net sales increased
approximately 3.8% for the second quarter 2000 at 75.2% compared to 71.4% for
the second quarter 1999. Actual cost of sales remained the same at approximately
$11.2 million for the second quarter 1999 to approximately $11.2 milion for the
second 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
costs.
7
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased for the second quarter of 2000 by
approximately $0.1 million. As a percent of net sales, selling, general and
administrative expenses decreased from 15.3% for the second quarter 1999 to
15.2% for the second quarter 2000. Most of the reduction was due to lower
advertising costs. The Company plans to reduce advertising for the remainder of
2000.
NetIncome. As a result of the above factors, net income for the second quarter
declined 31.0% to approximately $0.9 million in 2000 compared to approximately
$1.3 million in 1999.
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
Net Sales. Net sales remained about the same at $29.6 million for the first half
of 2000 compared to $29.7 million in the first half of 1999.
Cost of Sales. Total cost of sales increased approximately $1.1 million for the
first half of 2000. As a percent of net sales, cost of sales increased from
72.2% in the first half of 1999 to 75.9% for the first half of 2000. Material
cost and direct labor cost remained about the same while fixed cost increased
approximately $0.4 million and variable cost increased approximately $0.8
million. As mentioned earlier, employee turnover continues to result in some
inefficiencies in the manufacturing process.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased approximately $138,000 for the first six
months of 2000 as compared to the first six months of 1999. This was a 0.5%
decrease as a percent of net sales, decreasing from 15.4% in the first six
months of 1999 to 14.9% in the first six months of 2000. Costs that have been
reduced are advertising, legal fees and upgrading the information system.
Net Income. As a result of the above factors, the net income for the first six
months of 2000 was approximately $1.7 million. This is approximately $622,000
less than 1999's first half net income of approximately $2.3 million.
Liquidity and Capital Resources. There was no significant change in the
Company's liquidity. The most noticeable change was the increase in receivables
and inventory causing a decrease in cash on hand. Working capital increased
12.5% from approximately $24.2 million in the first six months of 1999 to
approximately $24.5 million for the first six months of 2000. Current ratio was
6.6 to 1 for the first six months of 2000, compared to 5.9 to 1 for the same six
months in 1999. The liquid ratio was 2.3 to 1 for the first six months of 2000
and for the first six months of 1999 was 2.3 to 1. Expenditures on capital
assets was up approximately $550,000, a 75% increase over the first six months
of 1999.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable
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
The Company held its Annual Meeting of Shareholders on April 28, 2000.
At the Annual Meeting the shareholders elected as Directors for an additional
three year term the three nominees proposed by the Board of Directors.
Votes Votes Broker
Cast for Withheld Non-Votes
Ronald W. Humin 5,022,601 26,933 0
John C. Schenkenfelder 5,022,745 26,789 0
Scott A. Armstrong 4,814,559 234,975 0
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. See Index to Exhibits which is incorporated by
reference herein.
(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.
8/14/2000 /s/Steven W. Robertson
-------------- BY: ------------------------------------------
Date Steven W. Robertson
President and Chief Executive Officer
8/14/2000 /s/Danny L. Utz
-------------- ------------------------------------------
Date Danny L. Utz
Vice President, Finance
Principle Financial Officer
10
<PAGE>
INDEX TO EXHIBITS
Number Assigned in
Regulation S-K Item 601 Description of 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).
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).
(27) 27.01 Financial Data Schedule
11
