UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999
[ ] 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 ST.
CORYDON, INDIANA 47112
- ---------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 812-738-2222
------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock - No Par Value
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ]
The aggregate market value of common stock, (the only class of equity
outstanding), held by non-affiliates of the registrant as of February 29, 2000
was $28,046,330.
The number of shares outstanding of the registrant's common stock as of February
29, 2000 was 5,609,266.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1999 Annual Report to Shareholders are incorporated by reference
into Parts I, II and IV. Portions of the definitive Proxy Statement dated March
24, 2000 to be delivered to shareholders in connection with the Annual Meeting
of Shareholders to be held April 28, 2000 are incorporated by reference into
Part III.
<PAGE>
TABLE OF CONTENTS
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Number Page
- ------ ----
PART I
ITEM 1 Business 3
ITEM 2 Properties 7
ITEM 3 Legal Proceedings 7
ITEM 4 Submission of Matters to a Vote of Security Holders 7
PART II
ITEM 5 Market for Registrant's Common Stock and Related Stockholder 8
Matters
ITEM 6 Selected Financial Data 8
ITEM 7 Management's Discussion and Analysis of Financial Conditions
and Results of Operations 8
ITEM 8 Financial Statements and Supplementary Data 8
ITEM 9 Changes in and Disagreements with Accounts on Accounting
and Financial Disclosures 8
PART III
ITEM 10 Directors and Executive Officers of the Registrant 9
ITEM 11 Executive Compensation 9
ITEM 12 Security Ownership of Certain Beneficial Owners and 9
Management
ITEM 13 Certain Relationships and Related Transactions 9
PART IV
ITEM 14 Exhibits, Financial Statement Schedules and Reports 10
on Form 8-K
Signatures 11
2
<PAGE>
PART I
This Form 10-K Annual Report (the "Report") contains certain statements
that are "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, as amended. Those statements appear in a number
of places in this Report and may include statements regarding the
intent, belief or current expectations of the Company or its officers
with respect to (i) the Company's strategic plans, (ii) the policies of
the Company regarding capital expenditures, financing and other
matters, and (iii) industry trends affecting the Company's financial
condition or results of operations. Readers of this Report are
cautioned that reliance on any forward-looking statement involves risks
and uncertainties. Although The Keller Manufacturing Company, Inc. (the
"Company") believes that the assumptions on which the forward-looking
statements contained herein are based are reasonable, any of those
assumptions could prove to be inaccurate given the inherent
uncertainties as to the occurrence or nonoccurrence of future events.
There can be no assurance that the forward looking statements contained
in this Report will prove to be accurate. The inclusion of a
forward-looking statement herein should not be regarded as a
representation by the Company that the Company's objectives will be
achieved.
Item 1. Business
General Development of Business
The Company's history dates back to 1866 when the "Keller Store" in Corydon,
Indiana was established. From that time, the operation entered into various
businesses, including running an electrical light plant, manufacturing spokes
for farm wagons, operation in a hub-mill, farm wagon production, building barns,
producing wooden porch furniture, wooden truck bodies and refrigerator boxes, as
well as making end tables, magazine racks, chair parts - and by 1933, a drop
leaf table. The Company was incorporated in 1906 under the laws of the State of
Indiana.
Over 300,000 wagons were built from 1901 - 1912. In 1942, however, the invention
of the farm tractor made the Keller wagon obsolete thereby causing the Company
to end its wagon production. In late 1943, the Company developed household
furniture, including breakfast room suites and dinettes. In the early 1960's,
Keller introduced its first bedroom group. A new plant was built at Culpeper,
Virginia in 1965 and a third plant was built in 1973 at New Salisbury, Indiana.
In 1979, the Company leased four trucks and trailers to deliver furniture
directly to their furniture dealers. In 1996, the Company formed Keller
Dedicated Trucking, Inc. ("Keller Trucking"), a wholly owned subsidiary of the
Company. Its primary function is to provide delivery services for the Company.
Keller Trucking also transfers materials between plants, provides delivery for
some purchased merchandise and provides backhaul services for other companies
when available. Keller Trucking operated 22 trucks in 1999 which delivered
approximately 80% of the Company's finished products.
Narrative Description of Business
The Company designs and manufactures various styles of solid wood dining room
and bedroom furniture using lumber which it has kiln dried at its facilities.
The Company dedicates certain production facilities to specific product lines
and generally manufactures products in response to customer orders. The dining
room furniture consists of chairs, tables, chinas, buffet/hutches and servers.
The primary items manufactured for the bedroom are chests, dressers, night
stands, beds, entertainment decks, mirrors and entertainment centers. There are
eight different product lines made of oak, one line made of cherry, and one of
maple (the Company commonly refers to product lines as "groups" and the terms
will be used interchangeably herein). Another new product line was introduced in
the Fall of 1998. This new line is a product licensed by the PGA TOUR(R) ("PGA
TOUR") and is marketed as such. The licensing agreement between the PGA TOUR and
the Company gives the Company an exclusive license with respect to its bedroom,
dining room and casual dining furniture and a nonexclusive license with respect
to its occasional furniture to use the verbiage "PGA TOUR" and "SENIOR PGA TOUR"
and the graphics associated with this verbiage in the design of said furniture.
The sale of the licensed products is limited to the United States, its
territories and possessions and the Commonwealth of Puerto Rico. The term of the
license extends to December 3, 2001, subject to certain events of default which
will grant the PGA TOUR the right of termination and subject to the Company's
option for an additional three year term subject to agreement of the parties and
the Company's satisfactory performance under the terms of the license. The PGA
TOUR group is an antique English style made of oak. The new group is priced
slightly higher than other groups offered due to the royalty fees required for
the PGA TOUR licensing. The signature product for the new group is a golf
locker.
3
<PAGE>
The Company's products are sold primarily in the middle to upper-middle price
range. Net sales from bedroom furniture have recently begun to exceed net sales
from dining room furniture. Bedroom furniture sales increased from 51.1% of net
sales in 1997 to 51.5% in 1998 and 51.6% in 1999. Sales for occasional furniture
were approximately 3.6% of total net sales in 1999. In 1999, the bedroom
furniture ranged in price from $1,599 to $4,099. Dining room sets ranged from
$1,099 to $4,999.
The Company sells its products nationwide through an exclusive sales force of
commissioned employees to approximately 1,600 national, regional and local
furniture chains, independent furniture retailers and warehouse showrooms.
According to Furniture Design & Manufacturing Magazine, Keller Manufacturing is
ranked 106th in sales among furniture manufacturers in North America. The
Company's Multi-Media Plan is a pre-established fund used to advertise and
promote the Company's products. The Multi-Media Plan is budgeted for $1,200,000
in 2000 and is included in the Company's advertising budget. The Company also
promotes its products at the International Home Furnishings Center at High
Point, North Carolina by leasing showroom space to display its products at home
furnishings trade shows. The Company also enhances its name recognition through
its sponsorship of the PGA TOUR.
Raw Materials
The Company purchases lumber from approximately 50 suppliers with no single
supplier representing over 10% of purchases. There has been no difficulty
experienced in obtaining lumber. Material prices had declined in 1999 compared
to 1998. The usage of #2 grade lumber, the Company's primary grade of lumber,
has continued to increase, causing its overall costs to increase. There are
three primary grades of hardwood; #1, #2 and #3. #1 is the highest quality with
the least defects while #3 has the greatest number of defects. The Company
purchases #2 grade lumber, cuts out any defects and uses this refined #2 in its
manufacturing process. This practice allows the Company to manufacture furniture
of comparable quality to furniture made from #1 grade lumber but on a more cost
efficient basis.
Patents, Trademarks, Licenses or Franchises
The Company currently holds no patents, licenses or franchises. The company logo
has been used for approximately forty years, but it is not considered to provide
any financial benefit to the Company.
Seasonal Effects
In the previous three years the Company has experienced some seasonal effects on
sales. The slowest period for sales has traditionally been the second quarter.
In 1999, the third and fourth quarters were approximately equal with the lowest
sales. This was due to the shipments being lower than the previous year and the
backlog increasing as a result. The third quarter is traditionally the strongest
quarter for sales. In 1999, the first quarter was the highest for orders. This
was due in part to the PGA orders taken, and the highest shipments for the year
occurred in the first quarter.
4
<PAGE>
Working Capital
The furniture manufacturing industry has no standard guideline for carrying
working capital and the Company does not require its retailers to maintain
minimum working capital. The Company meets dealer demand by scheduling packages
based on current and estimated sales mixes with high volume dealers receiving
priority on quick shipment of merchandise.
The Company offers extended payment terms to customers for damaged items that
are repairable. Each retailer is provided a list of items that are deemed
replaceable and will be given an allowance for shop time to repair. Usually, any
defect to merchandise that would require larger than a 25% discount will be
returned to the Company. Since the Company has its own trucking subsidiary, it
is better equipped than the industry in general to receive returned merchandise
on a cost-effective basis. Due to the high shipping costs by outside sources,
most of the industry offers discounts for dealers to keep defective merchandise.
Customers
The Company's ten largest customers accounted for approximately 38% of its net
sales in 1999. The Company's largest customer, Havertys Furniture ("Havertys"),
accounted for approximately 16% of the Company's net sales in 1999. The loss of
Havertys or another large customer could have a material adverse effect on the
Company. Havertys orders increased $1,124,507 in 1999 due to a change in
advertising circulars from individual stores to a corporate level program.
Backlog
Backlog orders believed to be firm as of December 31, 1999 were approximately
$8,508,000 compared to $6,286,000 in 1998. The Company expects the backlog to be
reduced to previous levels or less in 2000. Currently, all orders placed with
the Company are expected to be filled and shipped as ordered and are considered
firm. The Company does, however, allow modifications or cancellations of orders
up to the time the product is loaded for shipment. A cancellation at such a late
stage is subject to a monetary penalty and occurs only infrequently.
Competition
As the Company continues to expand its product line, it becomes more difficult
to identify a specific competitive market. The Company currently manufactures
and competes in lines of bedroom, dining room and occasional furniture, and
sells to retailers nationwide. The Company's products fall in the middle to
upper-middle price line. The Company's direct competitors include Kincaid
Furniture Co. ("Kincaid"), Cochrane Furniture ("Cochrane"), Sumter Cabinet Co.
("Sumter"), Mobel, Inc. ("Mobel"), Durham Furniture Inc. ("Durham"), Richardson
Brothers Co. ("Richardson Brothers") and Kimball Furniture ("Kimball"). Kincaid
is considered the Company's most direct competitor, and its dining, bedroom and
occasional groups are the strongest competing products against the Company's
product lines. Cochrane and Sumter are the next most competitive companies. They
both compete in the dining and bedroom categories. Cochrane is strongest in the
dining room lines and Sumter is strongest in the bedroom lines. Both Mobel and
Durham compete directly with the Company in bedroom lines. Richardson Brothers
and Kimball both offer lines in dining room and bedroom categories but don't
offer the number of products within these groups as the aforementioned direct
competitors.
There are three primary methods of competition in the furniture manufacturing
industry:
1. Product Quality;
2. Price; and
3. Customer Service.
The Company has several attributes which it believes, when combined, afford it a
competitive advantage. The Company specializes in dining room and bedroom
furniture made of solid wood. Solid wood furniture is considered higher quality
than furniture made from composite materials. This is a valuable marketing tool
in selling to consumers. Moreover, the Company applies a protective finish to
its products which is more durable than that of most of its competitors. The
Company's products are priced competitively for high quality furniture and the
range of retail prices available for various product lines makes its products
available to a wide range of customers. The Company also believes it is
positioned to effectively compete in customer service areas. The Company's
entire product lines may be made available in six to eight weeks. Products are
cut based on demand, which also improves the average delivery time. Moreover,
the Company manufactures most of its own parts and dries all of its own lumber.
All bendings for chairs, headrests and bows are also processed internally.
Finally, Keller Trucking delivers 80% of the Company's merchandise which is
shipped. This allows the furniture to be delivered faster and at a lower cost
than using outside resources. These factors allow the Company to produce quality
furniture at competitive prices.
5
<PAGE>
Research and Technical Development
The Company's expenditures on research and development activities can be broken
down into two categories, product development and tooling. Product development
consists of research and design, with some design being outsourced. Tooling
entails the purchase of tools, patterns, equipment and labor associated with the
introduction of a new group. Product Development expenses decreased slightly
from $56,756 in 1996 to $54,171 in 1997, and tooling decreased considerably from
$396,756 in 1996 to $272,700 in 1997. In 1998, product development cost remained
relatively stable, at $52,125, and tooling cost increased to $386,471. Tooling
costs in 1999 consisted of $91,897 for occasional items and $294,574 for the
introduction of the PGA TOUR group. Product development costs increased to
$99,000 for 1999 due to an arrangement for the product designer receiving a
percentage for all PGA TOUR group orders. Tooling costs decreased to $275,310 in
1999, all for the PGA TOUR group.
Environmental Matters
The Company has made no material expenditures in 1999 due to fines or corrective
actions for environmental violations at any of its facilities through 1999. A
project was nearly completed in 1999 to install a new dust collection system at
the Corydon, Indiana facility intending to eliminate any potential OSHA
violations for dust particles in the Mill Departments. This system reduces the
amount of solids found in the water drainage, and keeps the Company within the
City of Corydon's Water Department's standards. Both the Corydon and New
Salisbury facilities have been granted air permits from the state of Indiana and
the Culpeper facility has applied for an air permit from Virginia.
Employees
The Company employed 718 individuals as of December 31, 1999, consisting of 615
hourly employees, 69 salaried employees, 25 salesmen and nine executive
officers. None of the employees belong to a labor union. The Company believes
its relations with its employees are good.
6
<PAGE>
Item 2. Properties
The following table sets forth certain information concerning the Company's
manufacturing facilities: All manufacturing facilities and properties listed
below are owned by the Company.
Approximate Size
Location Description In Sq. Ft. Acres
-------- ----------- ---------- -----
Corydon, Indiana Corporate Office 236,681 63.07
& Manufacturing
New Salisbury, Indiana Manufacturing 185,004 91.39
Culpeper, Virginia Manufacturing 185,660 60.18
The Corydon, Indiana plant is the original facility that the Company has
operated since its incorporation in 1906. In 1966, the Culpeper, Virginia plant
was built, and its twin plant in New Salisbury, Indiana was built in 1974. The
two newest locations have not had any significant changes to the structure or
size of the buildings. The Company , as a whole, at the end of 1999, was
estimated to be at 100% capacity for a single shift, 65% for a double shift.
Item 3. Legal Proceedings
Clark v. The Keller Manufacturing Company, Inc. and Ray Menefee; pending in the
United States District Court for the Eastern District of Virginia, Richmond
Division. The plantiff claims race discrimination in an action filed on December
29, 1998. 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. The complaint was dismissed by order of the District Court
dated February 17, 2000. Plaintiff has approximately 30 days from the date of
dismissal within which to appeal.
Oakes v. The Keller Manufacturing Company, Inc., in the United States District
Court for the Southern District of Indiana. This is an action which was filed
June 9, 1999 in which 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's counsel agreed to voluntarily dismiss
the complaint and the parties have filed a joint stipulation of dismissal to
this effect, file stamped on January 19, 2000. We are now awaiting the Court's
order of dismissal.
Brown v. The Keller Manufacturing Company, Inc., in the United States District
Court for the Southern District of Indiana, New Albany Division. The plaintiff
claimed sexual harassment by a Company employee, negligent retention and
supervision of such employee by the Company, negligent inflection of emotional
stress, constructive discharge and retaliatory action by the Company in
violation of her rights under state law and under Title VII of the Civil Rights
Act of 1964, as amended by the Civil Rights Act of 1991. The plaintiff sought
compensatory damages, consequential damages and punitive damages in such amounts
as might be determined at trial, together with costs and attorneys fees. The
parties filed their joint stipulation for dismissal on January 25, 2000 and the
court issued its order of Dismissal on January 28, 2000.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders of the Company during
the fourth quarter of 1999.
7
<PAGE>
Part II
Item 5. Market for Registrants Common Equity and Related
Stockholder Matters
The Company's Common Stock has been traded over-the-counter through Hilliard &
Lyons, Inc. in Louisville, Kentucky. The following prices have been provided by
Hilliard & Lyons, Inc. based upon actual trades (selling price during the
applicable period).
1st Qtr 2nd Qtr. 3rd Qtr. 4th Qtr.
High Low High Low High Low High Low
--------------- --------------- ----------- ----------------
1999 13 9/16 9 3/8 9 7/8 8 5/8 9 8 8 1/8 5 1/4
1998 18 2/3 16 1/2 18 14 5/8 15 11 1/2 12 5/8 10 1/4
As of December 31, 1999, there were 533 record shareholders of the
Company's Common Stock.
Quarterly Dividends Per Share
1st Qtr 2nd Qtr. 3rd Qtr. 4th Qtr. Special Total
-------- ------- --------- -------- -------- -----
1999 .035 .035 .035 .035 .14
1998 .03 .03 .03 .03 .06 .18
Dividends are determined on an annual basis by Board Approval.
The Board of Directors have decided to only pay four quarterly
dividends in December 1999. The Company expects this practice to
continue, although these dividends are payable at the discretion of the
Board of Directors.
Item 6. Selected Financial Data and Supplementary Data
The information set forth on Page 1 of the 1999 Annual Report to Shareholders is
incorporated herein by reference and is filed herewith as Exhibit 13-01.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The information set forth on pages 2-8 of the 1999 Annual Report to Shareholders
is incorporated herein by reference as filed herewith as Exhibit 13.02.
Item 8. Financial Statements
The following financial statements for the Company and independent auditors
report set forth on pages 9-19 of the 1999 Annual Report to Shareholders is
incorporated herein by reference and is filed herewith as Exhibit 13.03.
o Independent Auditor's Report
o Consolidated Balance Sheets as of December 31, 1999 and 1998
o Consolidated Statements of Income for the three years ended
December 31, 1999
o Consolidated Statements of Stockholders' Equity for the three
years ended December 31, 1999
o Consolidated Statements of Cash Flows for the three years
ended December 31, 1999
o Notes to Consolidated Financial Statements
Item 9. Changes in Disagreements with Accounts on Accounting and
Financial Disclosure
None.
8
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to Directors may be found under the caption "Directors
& Executive Officers" on pages 4 and 5 of the Company's Proxy Statement dated
March 24, 2000, for the Annual Meeting of Shareholders to be held on April 28,
2000 (the "Proxy Statement"). Such information is incorporated herein by
reference and is filed herewith as Exhibit 19.01.
Item 11. Executive Compensation
The information in the Proxy Statement set forth under the caption "Executive
Compensation" on page 6 is incorporated herein by reference and is filed
herewith as Exhibit 19.02.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information set forth in the Proxy Statement under the caption "Security
Ownership of Certain Beneficial Owners and Management" on pages 2 and 3 are
incorporated herein by reference and is filed herewith as Exhibit 19.03.
Item 13. Certain Relationships and Related Transactions
None.
9
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The financial statements set forth under Item 8 of this report on Form
10-K are incorporated herein by reference.
(b) Reports on Form 8-K filed in fourth quarter of 1999.
Press Release issued on December 21,1999, by The Keller Manufacturing
Company, Inc. announcing that Steven W. Robertson has been named the
Company's new President and Chief Executive Officer, replacing Robert
W. Byrd who will remain as Chairman of the Board
(c) Financial Statement Schedule
Schedules for the year ended December 31, 1999 & 1998 are included
herein.
II. Valuation and Qualifying Accounts
All other schedules are omitted, as the required information
is inapplicable or the information is presented in the
consolidated financial statements or the related notes.
10
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) 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.
By /s/Steven W. Robertson
----------------------
Steven W. Robertson
President and Chief Executive Officer
Date March 27, 2000
--------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By /s/Steven W. Robertson
-----------------------------------------------
Steven W. Robertson
President, Chief Executive Officer and Director
Date March 27, 2000
--------------
By /s/Robert W. Byrd
--------------------------------------
Robert W. Byrd - Chairman and Director
Date March 23, 2000
--------------
By /s/Danny L. Utz
------------------------------------------
Danny L. Utz - Vice President-Finance
(Principal Executive Officer) and Director
Date March 23, 2000
--------------
By ______________________________________
Gregory E. Fischer - Director
Date ______________________________________
By /s/Ronald W. Humin
--------------------------
Ronald W. Humin - Director
Date March 24, 2000
--------------
By ______________________________________
Philip L. Jacobs - Director
Date ______________________________________
By ______________________________________
Marvin C. Miller - Director
Date ______________________________________
By /s/John C. Schenkenfelder
---------------------------------
John C. Schenkenfelder - Director
Date March 24, 2000
--------------
11
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SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS THE KELLER MANUFACTURING
COMPANY, INC.
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col.E
BALANCE AT CHARGED TO COLLECTION ON
BEGINNING OF COSTS & WRITTEN OFF DEDUCTIONS (BAD BALANCE AT
DESCRIPTION PERIOD EXPENSES ACCTS. DEBTS WRITE OFFS) END OF PERIOD
----------- ------ -------- ------ ----------------- -------------
YEAR ENDED DECEMBER 31, 1999
<S> <C> <C> <C> <C> <C>
Deducted from asset accts ................ $291,450 $ -- $ 2,875 $ 37,207 $257,118
Allowance for doubtful accounts
YEAR ENDED DECEMBER 31, 1998
Deducted from asset accts ................ $336,716 $ -- $ 119 $ 45,385 $291,450
Allowance for doubtful accounts
</TABLE>
12
<PAGE>
(d) Exhibit Listing
<TABLE>
<CAPTION>
Sequential Numbering
Number Assigned in System Page Number
Regulation S-K Item 601 Description of Exhibit of Exhibit
- ----------------------- ---------------------- ----------
<S> <C> <C>
(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).
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).
13
<PAGE>
(9) No Exhibit
(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).
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 10.04 and 10.05. (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).
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).
14
<PAGE>
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
(12) No Exhibit
(13) 13.01 Selected Financial Data Incorporated by Reference to Page 1 of
1999 Annual Report to Shareholders ("1999 Annual Report")
13.02 Management's Discussion and Analysis of Financial Condition and
Results of Operations Incorporated by Reference to Pages 2-8 of
1999 Annual Report.
13.03 Financial Statements Incorporated by Reference to pages 9-19 of
1999 Annual Report
(15) No Exhibit
(18) No Exhibit
(21) Subsidiaries of Company
(22) No Exhibit
(23) 23.01 Consent of Deloitte & Touche LLP Independent Auditors
(24) No Exhibit
(27) 27.01 Financial Data Schedule
(99) No Exhibit
</TABLE>
Selected Financial Data
The following table sets forth selected consolidated financial data as of and
for the years ended December 31, 1999, 1998, 1997, 1996 and 1995 and are derived
from the audited, consolidated financial statements of the Company. These
selected financial data are not covered by the auditors' report and are
qualified in their entirety by reference to, and should be read in conjunction
with, "Management's Discussion and Analysis of Financial Condition and Results
of Operations," and the Consolidated Financial Statements of the Company and the
related notes thereto included herein.
<TABLE>
<CAPTION>
YEAR ENDED
December 31,
------------------------------------------------------------------------------------
Statements of Income Data:
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Net Sales $55,751,215 $60,144,243 $58,736,617 $54,168,278 $50,329,631
Cost of Goods Sold $41,335,806 $43,076,105 $40,955,515 $38,948,486 $35,840,211
------------------------------------------------------------------------------------
Gross Profit $14,415,409 $17,068,138 $17,781,102 $15,219,792 $14,489,420
Selling, General &
Administrative $8,257,146 $7,897,383 $8,834,796 $7,561,206 $7,629,843
Income Before Income
Taxes $6,158,263 $9,170,755 $8,946,306 $7,658,586 $6,859,577
Income Taxes $2,377,494 $3,514,750 $3,448,011 $2,988,903 $2,794,809
------------------------------------------------------------------------------------
Net Income $3,780,769 $5,656,005 $5,498,295 $4,669,683 $4,064,768
=========== =========== =========== =========== ===========
Net Income Per Share Of
Common Stock - $0.66 $0.97 $0.94 $0.79 $0.69
Weighted Average Number of
Shares Outstanding 5,753,211 5,853,954 5,847,325 5,883,603 5,882,229
Cash Dividends Declared Per
Common Share $0.14 $0.18 $0.16 $0.14 $0.12
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data: 1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Working Capital (1) $23,531,588 $22,158,510 $19,168,410 $15,963,428 $13,738,355
Property, Plant & Equipment $10,045,302 $9,798,174 $8,707,855 $7,844,115 $6,847,753
Investment Security
Available For Sale $0 $500,000 $0 $0 $0
Other Assets $1,835,335 $1,760,759 $1,584,469 $1,340,321 $871,228
Total Assets $39,688,056 $39,471,045 $35,545,608 $31,137,030 $27,855,316
Long Term Debt $0 $0 $0 $0 $0
<FN>
(1) Reflects the excess of current assets over current liabilities as set forth in the Consolidated Financial Statements
</FN>
</TABLE>
1
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion and analysis should be read in conjunction with the
Selected Consolidated Financial Data and the Company's Consolidated Financial
Statements and notes thereto included herein. In addition to the historical
information contained herein, the following discussions may contain forward
looking statements that involve risks and uncertainties. The Company's actual
results could differ materially from those discussed herein.
Results of Operations
The following table sets forth, for the periods indicated, consolidated
statement of income data as a percentage of net sales.
YEAR ENDED DECEMBER 31,
1999 1998 1997
---- ---- ----
Net Sales 100.0% 100.0% 100.0%
Cost of Sales 74.1% 71.6% 69.7%
Gross Profit 25.9% 28.4% 30.3%
Selling, General & Administrative 14.8% 13.2% 15.0%
Operating Income 11.1% 15.2% 15.2%
Income Before Taxes 11.1% 15.2% 15.2%
Income Taxes 4.3% 5.8% 5.9%
Net Income 6.8% 9.4% 9.3%
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Net Sales. The Company had an approximate 7.3% decrease in net sales in 1999
compared to 1998. This was partially due to approximately a $2 million decrease
in shipments in the second quarter, caused by engineering and manufacturing
demands brought about by the introduction of the new PGA TOUR(R) group.
Efficiencies dropped further in the second half of the year, as shipments were
down approximately $3.7 million compared to the same period in 1998. Partly due
to the tightening job market, employee turnover for the Company increased by 45%
compared to 1998. Training of a large percentage of new employees was the
primary factor in the reduction in efficiencies. Actual orders received were
down 4.3% from 1998, partially due to not getting follow-up orders because of
the delayed shipments.
The Company forecasts an increase of orders for 2000 compared to 1999 but it
cannot clearly be estimated until improvements in efficiencies occur. In order
to increase Year 2000 orders, the concentration will be in growing current
product sales in current accounts, adding new product introductions to existing
dealers, opening new accounts, reviewing new channels of distribution, and
introducing a new product style category in the Fall. Key factors will be the
improvement of sales for the PGA TOUR(R) Group as well as the addition of iron
pieces to the current Chestnut Creek and Colonial Heirloom dining room
collections.
Returns & allowances have decreased from 1.96% in 1998 to 1.71% in 1999. This is
the second consecutive year for a decrease. The reduction is a result of a
continuous improvement effort to increase the quality of Keller products going
to the customer.
2
<PAGE>
Cost of Sales. Cost of sales as a percent of net sales increased to 74.1% in
1999 compared to 71.6% in 1998 due mainly to the cost of materials. Material
costs, as a percent of net sales, increased from 23.9% in 1998 to 26.4% in 1999.
Lumber costs recognized provided one of the reasons for the increase in material
costs. Though lumber prices for oak have actually decreased from 1998 average
costs, it has taken approximately nine months for all of the lumber in inventory
from 1998 to cycle through. There has also been an increase in the purchasing of
dimension stock for 1999. Part of this is due to the introduction of the PGA
TOUR(R) group. Also, some key parts are now being purchased in rough dimensions
to help improve yield. Parts such as tops and items with longer lengths are
difficult to cut in certain packages in the cutting lines. The length mixes make
it difficult to maintain established yield standards. Another factor
contributing to the increase was cardboard packing materials which had two price
increases for 1999. There was a total price increase of approximately 11% for
the year.
Selling, General and Administrative Expenses. Selling, General and
Administrative Expenses increased from 13.2% of net sales in 1998 to 14.8% in
1999. Administrative expenses had the largest increase of approximately $0.4
million. This was an increase as a percent of net sales from 2.6% in 1998 to
3.5% in 1999. Professional support fees for implementation of the EMS
Information System accounted for half of the increase. Costs for making the
Company Y2K compliant ran higher than originally anticipated. The other major
administrative expense increase was for costs, such as legal and audit fees,
related to the Company registering its stock under the Securities Exchange Act
of 1934 as required by SEC regulations.
Selling expenses, as a percent of net sales, increased from 10.4% in 1998 to
11.0% in 1999. Even though actual expenses were down approximately $0.2 million
from 1998, there were certain costs locked in, based on sales forecasts for
1999. There were marketing programs put into place at the beginning of the year
as well as PGA promotions that were incurred before the Company experienced
production problems and reduced shipments.
Net Income. As a result of the above factors, the Company recognized net income
of approximately $3.8 million in 1999 compared to approximately $5.7 million in
1998. Net income decreased 33.2% from 1998, which had a 2.9% increase compared
to 1997. This was the first decrease in net income for the Company since 1990.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Net Sales. The Company had an approximate 2.4% increase in net sales from 1997
to 1998, and a 2.9% increase in the Company's net income for this period. The
1998 increase in net sales is less than the 1997 increase of 8.4%. This is due,
in part, to the decrease in Haverty's orders.
Cost of Sales. Cost of sales as a percentage of net sales increased to 71.6% in
1998 from 69.7% in 1997 due mainly to increases in the cost of raw materials.
Total material costs increased by approximately $1.7 million in 1998, largely
due to a 15 % increase in the cost of lumber. Labor costs were relatively steady
with an annual raise approximately equal to the rate of inflation.
Selling,General and Administrative Expenses. Selling, General and Administrative
expenses decreased from 15.0% of net sales in 1997 to 13.2% in 1998. There was a
total decrease of approximately $0.9 million from 1997 to 1998. There was a
reduction of approximately $0.3 million in expenditures involving implementation
of the EMS Information System. These expenses included consulting fees and
training of employees in using the new system. Other factors contributing to the
reduction in 1998 were the recognition of approximately $0.3 million flood loss
in 1997, and a $70,000 reduction in bad debt expense.
Net Income. As a result of the above factors, the Company recognized net income
for 1998 of approximately $5.7 million, compared to net income of approximately
$5.5 million in 1997.
3
<PAGE>
Liquidity and Capital Resources
The Company's principal source of cash is income from operations. The Company
has no material outstanding debt and is not expecting to incur any significant
debt in the near future. The cash account has decreased slightly over $1 million
in 1999 compared to 1998, while accounts receivable increased slightly. One
reason for the reduction in cash was due to an increase in inventories of
approximately $1.6 million. Due to the problems in manufacturing, certain
bottlenecks occurred in key mill departments. This in turn caused an increase of
work in process.
The other significant factor causing the reduction in cash was due to the
repurchase of approximately $2.2 million in Keller stock by the Company in 1999.
This was approximately a $2 million increase compared to stock repurchased in
1998.
The Company's liquidity ratio (cash and cash equivalents plus accounts
receivable divided by current liabilities) increased to 2.22 in 1999. This
compares to 1.95 in 1998 and 1.60 in 1997. The other factors causing the
increase in liquidity ratio was a significant decrease of nearly $1 million in
current liabilities. There were decreases in accruals of approximately $0.4
million each for the Multi Media Plan and employee bonuses as well as an
approximate $0.2 million decrease in accounts payable. The drop in sales for the
year was the root cause for the large decreases in these accounts.
Total capital expenditures for the Company were approximately $1.9 million, $2.6
million and $2.2 million for 1999, 1998 and 1997, respectively. Capital
expenditures include purchases of equipment, hardware or software, expansion of
facilities, and purchase of buildings. Major expenditures for the Company are
tracked separately for each of the three locations. The largest single capital
expenditure for 1997 was for Phase I of a dust collection system at Corydon for
approximately $0.4 million. Also in 1997, Culpeper purchased a planer sander for
approximately $0.2 million, and New Salisbury purchased a moulder and grinder
for approximately $0.2 million and installed approximately $0.2 million on the
EMS computers and software. In 1998, the largest expenses related to Corydon's
purchases of Phase II and III of the dust collection system for approximately
$0.4 million. Corydon also purchased a Computer Numerical Control Machine Center
("CNC Machine Center") for approximately $0.3 million and New Salisbury spent
approximately $0.3 million on construction of a new kiln. There were no
significant projects at Culpeper in 1998.
In 1999, the largest capital expenditure was approximately $0.1 million for a
rough planer at Corydon. Modifications for the sorter line are being implemented
as well but were not completed in 1999. Corydon purchased a paint storage
building for $71,000. This was a proactive measure for future environmental
regulation compliance. At New Salisbury, $90,000 was spent on replacement of a
fire reservoir liner for the sprinkler system. An additional $76,000 was spent
for a mezzanine in the shipping department for more storage area. The tempering
room was not expanded as originally planned, rather, some adjustments were made
in the kilns. This allowed dried lumber to still be stored but at a much lower
capital expense. There were no significant projects completed at Culpeper in
1999.
The estimated expenditures for 2000 are approximately $2.2 million, consisting
mainly of new equipment purchases for the three manufacturing facilities. The
largest single expenditure planned is approximately $0.6 million to expand the
warehouse facilities at New Salisbury. The CNC Machine Center at New Salisbury
is expected to be completed in 2000 at a cost of approximately $0.3 million. At
Corydon, a finish planer will be purchased at an estimated cost of approximately
$0.2 million. A moulder will be purchased for the Culpeper facility at a cost of
approximately $0.2 million. The EMS Information System is expected to be
completed in 2000 at a cost of less than $150,000 for the three plants
cumulatively.
The product turnover ratio (net sales divided by inventories) decreased from 3.7
in 1998 to 3.2 in 1999. This was due to a 7.3% decrease in net sales and a 10.1%
increase in inventory. The product turnover ratio decreased to 3.7 in 1998 from
3.9 in 1997. As mentioned previously, there was a reduction in productivity in
1999 due to a combination of inefficiencies with the introduction of the PGA
TOUR(R) Group and the increase in employee turnover for the Company. The Company
expects efficiencies to improve with the emphasis of getting new employees
trained better and faster. The goal is to improve the product turnover ratio
compared to recent years prior to 1999.
4
<PAGE>
After having three fairly level years of selling expenses, there was an increase
to 11.0% of net sales for 1999. It was 10.4% of net sales in 1998 and 10.6% in
1997. There will be a review of selling expenses before mid-year to evaluate how
sales and shipment levels are doing. Programs will be spread out over a longer
period throughout the year and will be adjusted according to sales and shipment
results. Advertisement has been done primarily at the regional level rather than
the national level. The Multi-Media Plan introduced last year will continue to
focus on regional advertising. The Company also plans to continue its
sponsorship of the PGA TOUR(R) through 2000, and its displays at the trade shows
held at High Point, North Carolina and one at San Francisco, California for
January 2000 only.
The key area of focus for 2000 is to improve efficiencies and try to return to
previous levels. Training of new employees will be an area of importance in
making this happen. The number of employees with less than one year experience
is at its highest level in several years. Training these employees properly and
quickly is of major importance.
The Company believes that it cannot afford to increase prices by a margin much
more than the rate of inflation and still remain competitive. The Company's
total price increase for the years of 1997, 1998 and 1999 was 7.5% compared to
cumulative inflation of 5.5% for the same three year period. The Company
believes that this pricing policy has not had a material adverse effect on its
net sales and has contributed to the Company remaining a viable competitor.
The Company has had no material short term or long term debt since 1994 compared
to a 1998 16.8% Industry average of long term debt in relation to net worth(2).
This has helped the Company maintain its cash flow and liquidity levels. Because
of Keller's financial stability, the Company does not currently anticipate the
need to issue any new stock other than stock bonus awards or pursuant to the
exercise of employee stock options. The Company anticipates funding its growth
strategy with cash generated from operations. Construction of a new facility is
not currently part of the Company's growth strategy but the further utilization
of current facilities through additional shifts is currently contemplated. As
mentioned previously, there will be an expansion to the New Salisbury warehouse
facilities at an approximate cost of $0.6 million.
The Company has available lines of credit totaling $5.0 million. This includes a
$3.0 million line of credit with Union Planters Bank of Corydon, Indiana which
expires July 31, 2000. Interest is charged at the prime lending rate. The
Company also has a $2.0 million line of credit available with Bank One of
Louisville, Kentucky which expires July 31, 2000. Interest is charged at LIBOR
plus 2%. These lines are not collateralized. As of December 31, 1999 , these
lines of credit were unused.
Inflation
To date, the Company believes that the effects of inflation have not had a
material adverse effect on its business, operations or financial condition.
- ---------------------------------------------
(2) Dun & Bradstreet Business Scope Report. November 23, 1999. The information
regarding the furniture manufacturing industry contained in this report was as
of December 31, 1998.
5
<PAGE>
Year 2000
The Company experienced no disruptions or problems of any kind due to any Year
2000 computer problems. All components of the Company's information system and
other digitally controlled equipment performed as expected. There were no
interruptions of supplies from any vendors. All Year 2000 hardware and system
installations were completed as of December 31, 1999 as forecasted. Since all
Y2K actions have been completed, no further Y2K costs will be incurred. The
total cost of Year 2000 preparations was approximately $0.5 million. Of the
total, approximately $0.3 million was for capital costs and approximately $0.2
million was for programming and consulting expenses.
Risk Factors
The business, financial condition, results of operations and prospects of the
Company are subject to a number of risks, including those identified below.
Reviewers of this report should read carefully the information on risk factors
set forth below as well as the other information set forth in this report and in
the Company's filings with the Securities and Exchange Commission, a copy of any
of which will be provided by the Company upon request.
1. Competition
The furniture industry is characterized by highly intense competition.
The Company competes with many nationally recognized and financially
successful manufacturers of high quality furniture. Many companies with
which the Company competes, both domestic and foreign, have
substantially larger production capacities, distribution networks and
greater financial resources than the Company.
The furniture industry is a segmented industry whereby design, quality
and price place each manufacturer into one or more competitive market
niches. The Company competes in the middle to upper-middle price
market, which normally requires a larger number of items in the product
line, smaller production lot sizes and higher inventory requirements to
maintain a competitive delivery cycle. Certain of the Company's
competitors may have greater financial and other resources than the
Company in particular industry segments. Competition could materially
adversely affect the Company's operating results by forcing it to
reduce its sales prices, offer enhanced credit terms, increase customer
discounts or incentives, increase spending for co-operative advertising
arrangements with customers or provide other services.
2. Industry Conditions.
The furniture industry historically has been cyclical, with operating
results fluctuating sharply with the business cycle of the national
economy. During economic downturns, the furniture industry tends to
experience longer periods of recession and greater declines than does
the general economy. The Company believes that the industry is
influenced significantly by economic conditions generally and more
specifically by consumer behavior and confidence, the level of personal
discretionary spending, housing activity, interest rates and credit
availability. These factors affect not only the ultimate consumer, but
also furniture retailers, the industry's primary direct customers. The
cyclical nature of the industry has contributed historically to
fluctuations in the Company's results of operations, and such
fluctuations can be expected to occur in the future.
3. Employee Turnover.
The Company experienced unusually high employee turnover in 1999, which
caused inefficiencies in the manufacturing process and contributed to a
decline in shipments. While the Company has implemented programs to
address issues raised by employee turnover there can be no guarantee
that the Company will not experience significant employee turnover in
2000 and thereafter, which could materially adversely affect the
Company's financial condition, results of operations and prospects.
6
<PAGE>
4. Governmental Regulations and Environmental Considerations.
The Company's operations must meet extensive federal, state and local
regulatory standards in the areas of safety, health and environmental
pollution controls. Historically, these standards have not had a
material adverse effect on the Company's sales or operations. Under the
provisions of the Clean Air Act Amendments of 1990 (the "CAA"), in
December 1995, the United States Environmental Protection Agency
promulgated hazardous air emission standards for the wood furniture
industry. These regulations, known as the National Emission Standards
for Hazardous Air Pollutants ("NESHAPs"), require the Company to reduce
emissions of certain volatile organic compounds. The Company has not
been assessed with any material violations of any federal, state or
local environmental regulations through the year 1999. The Company
expects these regulations to become even more stringent in the future
and cannot predict the costs of effects on its operations which will
result from its compliance with these regulations.
5. Fluctuations in Price and Supply of Raw Materials.
The Company is dependent upon outside suppliers for all of its raw
material needs and, therefore, is subject to price increases and delays
in receiving supplies of such materials. An increase in demand for raw
materials could increase delivery times for supplies and possibly
further affect prices. No assurance can be given that the Company will
continue to have available necessary raw materials at a reasonable
price or that any increases in raw material costs would not have a
material adverse effect on the Company.
6. Potential Stock Price Volatility.
Currently there is one brokerage firm, Hilliard & Lyons, Inc. in
Louisville, Kentucky, making a market in the Company's shares. There
can be no guarantee that this firm will continue to make a market in
the Company's shares, nor can there be any assurances that an active
trading market will develop or be sustained in its absence.
The market price of the Company's shares has experienced some
significant fluctuations in response to variations in operating results
from quarter to quarter, changes in earnings estimates by analysts,
market conditions in the industry and general economic conditions.
Furthermore, the stock market has experienced significant price and
volume fluctuations unrelated to the operating performance of
particular companies. These market fluctuations may have a material
adverse effect on the market price of the Common Shares.
7. Dividend Policy.
The Board of Directors has established, in 2000, four (4) cash
dividends per year to holders of its common shares. The amount of these
dividends for 1998 and 1999 is reflected in Market Price and Dividends
on the Registrants Common Equity and Related Stockholder Matters,
herein. The Board of Directors, however is not bound in any manner to
continue such dividends. Any future determination as to the payment of
dividends will be made at the discretion of the Board of Directors and
will depend upon the Company's operating results, financial condition,
capital requirements, general business conditions and such other
factors as the Board of Directors deems relevant.
7
THE KELLER MANUFACTURING
COMPANY, INC.
and
subsidiary
Consolidated Financial Statements for
the Years Ended December 31, 1999, 1998 and 1997
and
Independent Auditors' Report
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
The Keller Manufacturing Company, Inc. and Subsidiary
Corydon, Indiana
We have audited the accompanying consolidated balance sheets of The Keller
Manufacturing Company, Inc. and subsidiary (the Company) as of December 31, 1999
and 1998, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of The Keller
Manufacturing Company, Inc. and subsidiary as of December 31, 1999 and 1998 and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States of America.
DELOITTE & TOUCHE LP
February 18, 2000
Louisville, Kentucky
<PAGE>
<TABLE>
<CAPTION>
THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<S> <C> <C>
1999 1998
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,840,242 $ 3,985,786
Accounts receivable, less allowance for doubtful accounts of
$257,000 (1999) and $291,000 (1998) 6,659,480 6,284,517
Inventories 17,693,432 16,066,490
Current deferred tax asset 101,932 259,533
Income taxes receivable 430,445 278,862
Other current assets 81,888 536,924
----------- ----------
Total current assets 27,807,419 27,412,112
----------- ----------
PROPERTY, PLANT AND EQUIPMENT - net 10,045,302 9,798,174
INVESTMENT SECURITY AVAILABLE FOR SALE 500,000
PREPAID PENSION COSTS 1,835,335 1,760,759
----------- ----------
TOTAL $39,688,056 $39,471,045
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,670,349 $ 1,825,343
Commissions, salaries and withholdings 1,184,562 1,582,327
Accrued vacation 383,824 435,591
Other current liabilities 1,037,096 1,410,341
----------- ----------
Total current liabilities 4,275,831 5,253,602
LONG-TERM LIABILITIES -
Deferred income taxes 1,196,217 1,085,054
----------- ----------
Total liabilities 5,472,048 6,338,656
----------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - no par value, authorized, 40,000,000 shares 1,712,638 1,437,276
Retained earnings 32,503,370 31,695,113
----------- ----------
Total stockholders' equity 34,216,008 33,132,389
----------- ----------
TOTAL $39,688,056 $39,471,045
=========== ===========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<S> <C> <C> <C>
1999 1998 1997
NET SALES $ 55,751,215 $ 60,144,243 $ 58,736,617
COST OF SALES 41,335,806 43,076,105 40,955,515
------------ ------------ ------------
GROSS PROFIT 14,415,409 17,068,138 17,781,102
SELLING, GENERAL AND ADMINISTRATIVE 8,257,146 7,897,383 8,834,796
------------ ------------ ------------
INCOME BEFORE INCOME TAXES 6,158,263 9,170,755 8,946,306
INCOME TAXES 2,377,494 3,514,750 3,448,011
------------ ------------ ------------
NET INCOME $ 3,780,769 $ 5,656,005 $ 5,498,295
=========== =========== ===========
NET INCOME PER SHARE OF COMMON STOCK,
basic and dilutive -
based on weighted average number of shares outstanding
of 5,753,211 (1999), 5,853,954 (1998), and 5,847,325 (1997) $ 0.66 $ 0.97 $ 0.94
=========== =========== ===========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
Common Stock
-----------------------------------
Retained
Shares Amount Earnings Total
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 5,855,319 $ 848,200 $ 23,270,008 $ 24,118,208
Net income 5,498,295 5,498,295
Cash dividends declared ($.16 per share) (935,189) (935,189)
Stock issued as awards 7,770 53,495 53,495
Stock issued under employee
incentive plan 38,751 232,506 232,506
Redemption of common stock (59,905) (7,352) (517,912) (525,264)
----------- ------------- -------------- -------------
BALANCE, DECEMBER 31, 1997 5,841,935 1,126,849 27,315,202 28,442,051
Net income 5,656,005 5,656,005
Cash dividends declared ($.18 per share) (1,053,555) (1,053,555)
Stock issued as awards 3,111 38,369 38,369
Stock issued under employee
incentive plan 22,219 273,960 273,960
Redemption of common stock (15,498) (1,902) (222,539) (224,441)
----------- ------------- -------------- -------------
BALANCE, DECEMBER 31, 1998 5,851,767 1,437,276 31,695,113 33,132,389
Net income 3,780,769 3,780,769
Cash dividends declared ($.14 per share) (802,045) (802,045)
Stock issued as awards 2,600 26,000 26,000
Stock issued under employee
incentive plan 28,166 281,660 281,660
Redemption of common stock (263,170) (32,298) (2,170,467) (2,202,765)
----------- ------------- -------------- -------------
BALANCE, DECEMBER 31, 1999 5,619,363 $ 1,712,638 $ 32,503,370 $ 34,216,008
=========== ============= ============== =============
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<S> <C> <C> <C>
1999 1998 1997
OPERATING ACTIVITIES:
Net income $ 3,780,769 $ 5,656,005 $ 5,498,295
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 1,655,277 1,539,708 1,335,774
Deferred income taxes 268,764 28,550 (28,549)
Common stock awards 307,660 312,329 286,001
Changes in assets and liabilities:
Accounts receivable (374,963) (469,193) 36,478
Inventories (1,626,942) (887,879) (1,678,870)
Income taxes receivable (151,583) (185,278) (11,736)
Other current assets 455,036 (495,160) 3,079
Prepaid pension costs (74,576) (176,290) (244,148)
Accounts payable (154,994) (384,755) 273,795
Commissions, salaries and withholdings and accrued vacation (449,532) (195,052) 47,318
Other current liabilities (373,245) (251,465) (263,783)
------------- ------------- ------------
Net cash provided by operating activities 3,261,671 4,491,520 5,253,654
------------- ------------- ------------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (1,902,405) (2,630,027) (2,199,514)
Sale (purchase) of investment security available for sale 500,000 (500,000)
------------- ------------- ------------
Net cash used in investing activities (1,402,405) (3,130,027) (2,199,514)
------------- ------------- ------------
FINANCING ACTIVITIES:
Redemption of common stock (2,202,765) (224,441) (525,264)
Dividends paid (802,045) (1,053,555) (896,811)
------------- ------------- ------------
Net cash used in financing activities (3,004,810) (1,277,996) (1,422,075)
------------- ------------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,145,544) 83,497 1,632,065
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 3,985,786 3,902,289 2,270,224
------------- ------------- ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,840,242 $ 3,985,786 $ 3,902,289
============ ============= =============
CASH PAID DURING THE YEAR FOR:
Interest $ $ 9,059 $ 7,395
============ ============= =============
Income taxes $ 2,240,800 $ 3,602,000 $ 3,506,100
============ ============= =============
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Business - The Company operates in one business segment, which is the
manufacturing of dining room and bedroom furniture. Sales are made to
retailers located in approximately 30 states across the United States on
an unsecured basis.
Basis of Presentation - The consolidated financial statements include the
accounts of The Keller Manufacturing Company, Inc. and its wholly-owned
subsidiary, Keller Dedicated Transportation Company. All significant
intercompany transactions and balances have been eliminated.
Revenue Recognition - Sales are recorded when goods are delivered to the
customer. The Company provides for estimated customer returns and
allowances by reducing sales in the period of the sale.
Significant Customers - The Company had one significant customer, which
accounted for $8,850,701 (16%), $7,727,102 (13%), and $9,937,000 (17%) of
net sales and percentage of total net sales in 1999, 1998 and 1997,
respectively.
Cash and Cash Equivalents - Cash and cash equivalents are defined as cash
in banks and investment instruments having maturities of three months or
less from their acquisition date.
Inventories - Inventories are stated at the lower of cost (first-in,
first-out method) or market.
Property, Plant, and Equipment - Property, plant, and equipment are
recorded at cost. Depreciation is provided by the straight-line method
over the estimated useful lives of the depreciable assets. Estimated lives
are 30-40 years for buildings, and 3-15 years for machinery and equipment.
Investment - The investment security is an industrial revenue bond and is
classified as available for sale. The investment is reported at cost,
which approximates its fair value. The bond was sold in 1999.
Income Taxes - The Company follows SFAS 109 - "Accounting for Income
Taxes," which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have
been recognized in the consolidated financial statements or income tax
return. In estimating future tax consequences, SFAS 109 generally
considers all expected future events other than enactments of changes in
the tax laws or rates.
Fair Value of Financial Instruments - The fair values of the Company's
current assets and current liabilities approximate their reported carrying
values, due to their short-term maturities.
Recent Accounting Pronouncements - SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," establishes accounting and
reporting standards for hedging activities and for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives). It requires that an entity
recognize all derivatives as either assets or liabilities in the statement
of financial position and measure those instruments at fair value. The
Company will adopt the new standard in fiscal 2001. The Company does not
expect adoption of this standard will have a material impact on its
financial statements.
<PAGE>
Use of Estimates - Financial statements prepared in conformity with
generally accepted accounting principles require management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the
dates of the financial statements, and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ
from these estimates.
Reclassifications - Certain reclassifications have been made to 1998
amounts to conform to the 1999 classifications.
2. INVENTORIES
1999 1998
Raw materials $ 6,211,692 $ 6,801,656
Work in process 8,590,283 6,488,392
Finished goods 2,891,457 2,776,442
----------- ----------
Total $17,693,432 $16,066,490
=========== ===========
3. PROPERTY, PLANT AND EQUIPMENT
1999 1998
Land $ 337,535 $ 338,835
Land improvements 627,808 515,177
Buildings and leasehold improvements 7,322,681 6,633,339
Machinery and equipment 13,144,207 11,985,601
Construction in progress 26,130 83,004
------------- ------------
Total cost 21,458,361 19,555,956
Less accumulated depreciation (11,413,059) (9,757,782)
------------- ------------
Net $ 10,045,302 $ 9,798,174
============= ============
4. LINES OF CREDIT
At December 31, 1999, the Company had unsecured line of credit agreements
that provide for borrowings up to an aggregate of $5,000,000, with
variable interest rates based on prime rate of 8.5% at December 31, 1999
or 200 Basic Points in excess of the LIBOR rate of 6.5% at December 31,
1999 at year end, through July 31, 2000. There were no borrowings on the
line of credit agreements at December 31, 1999 and 1998.
<PAGE>
5. INCOME TAXES
Income tax expense consists of:
1999 1998 1997
Currently payable:
Federal $ 2,016,918 $ 2,963,270 $ 2,955,076
State 91,812 522,930 521,484
----------- ----------- -----------
Total currently payable 2,108,730 3,486,200 3,476,560
----------- ----------- -----------
Deferred:
Federal 249,950 24,268 (24,267)
State 18,814 4,282 (4,282)
----------- ----------- -----------
Total deferred 268,764 28,550 (28,549)
----------- ----------- -----------
Total $ 2,377,494 $ 3,514,750 $ 3,448,011
=========== =========== ===========
The state income tax expense for 1999 includes refunds of prior years
state taxes paid. The tax effect of temporary differences that give rise
to significant portions of the net deferred tax liability at December 31
are as follows:
1999 1998
Current deferred tax asset -
Allowance for doubtful accounts $ 101,932 $ 259,533
========== ==========
Noncurrent deferred tax liability:
Pension costs $ 734,134 $ 704,304
Depreciation 304,869 253,803
Other 157,214 126,947
---------- ----------
Total noncurrent deferred tax liability $1,196,217 $1,085,054
========== ==========
The difference between taxes computed at the federal statutory tax rate
and the Company's effective tax rate are as follows:
1999 1998 1997
Statutory federal income tax rate 34.0 % 34.0 % 34.0 %
State taxes, net of federal income
tax benefit 5.0 5.0 5.0
Other (0.4) (0.7) (0.5)
------- ------- ------
Effective income tax rate 38.6 % 38.3 % 38.5 %
======= ======= ======
<PAGE>
6. PENSION PLANS
<TABLE>
<CAPTION>
The Company has a defined benefit plan that provides retirement benefits
for substantially all employees. Annual contributions to the plan is
sufficient to satisfy legal funding requirements. The changes in benefit
obligations and plan assets, as well as the funded status of the plan at
December 31, 1999 and 1998 were as follows:
<S> <C> <C>
1999 1998
Change in benefit obligation:
Benefit obligation at beginning of year $ 12,036,137 $ 10,689,931
Service cost 442,270 395,693
Interest cost 812,440 748,295
Benefits paid (682,455) (652,696)
Actuarial loss (gain) (1,531,967) 854,914
------------ ------------
Benefit obligation at end of year $ 11,076,425 $ 12,036,137
============ ============
Change in plan assets:
Fair value of plan assets at the beginning of year $ 11,771,910 $ 11,371,412
Actual return on plan assets (541,924) 664,151
Employer contributions 440,792 389,043
Benefits paid (682,455) (652,696)
------------ ------------
Fair value of plan assets at the end of year $ 10,988,323 $ 11,771,910
============ ============
Funded status $ (88,102) $ (264,227)
Unrecognized net actuarial loss 2,044,442 2,215,204
Unrecognized prior service cost (54,530) (71,179)
Unrecognized net asset being amortized over 15 years (66,475) (119,039)
------------ ------------
Prepaid pension cost $ 1,835,335 $ 1,760,759
============ ============
</TABLE>
The following weighted-average assumptions were used to determine the
Company's obligations under the plan:
Weighted-average assumptions as of December 31:
Discount rate 7.50 % 6.75 %
Expected return on plan assets 7.50 % 7.50 %
Rate of compensation increase 3.50 % 3.50 %
<TABLE>
<CAPTION>
The components of net pension expense are as follows:
<S> <C> <C> <C>
1999 1998 1997
Components of net periodic benefit cost:
Service cost - benefits earned during the year $ 442,270 $ 395,693 $ 343,521
Interest cost on projected benefit obligation 794,068 729,347 695,651
Expected return on plan assets (882,312) (845,054) (707,972)
Net amortization and deferral 12,190 (67,233) 35,329
--------- --------- ---------
Net pension expense $ 366,216 $ 212,753 $ 366,529
========= ========= =========
</TABLE>
<PAGE>
The Company has implemented a defined contribution savings plan under the
provisions of Section 401(k) of the Internal Revenue Code that provides
retirement benefits to substantially all employees. The Company's
contribution, which is based upon the salary redirection contributions of
the eligible employees, totaled approximately $38,000, $35,000 and $28,000
in 1999, 1998 and 1997, respectively.
7. LEASE COMMITMENTS
The Company has operating lease agreements for marketing showroom and
trucking equipment. The equipment lease requires additional rentals based
upon miles driven at varying fixed rates per mile and requires the Company
to pay for maintenance, tires, taxes, licenses and permits.
Minimum annual rental payments are as follows:
Year Ended
December 31
2000 $ 828,520
2001 819,763
2002 794,980
2003 748,274
2004 623,840
2005 and thereafter 458,243
----------
Total $4,273,620
==========
Total rental expense was approximately $851,000 (including $136,000 of
contingent rentals) for 1999, $950,000 (including $98,000 of contingent
rentals) for 1998 and $936,000 (including $143,000 of contingent rentals)
for 1997.
8. EMPLOYEE INCENTIVE AND AWARD PROGRAMS
The Company has incentive programs for executives and key middle
management personnel. The programs provide for payment of bonuses in cash
and common stock in amounts not to exceed 12% of the annual pre-tax
profits of the Company before interest expense and incentive expense. The
bonus accrued for 1999, 1998 and 1997 was approximately $815,000,
$1,216,000 and $1,183,000, respectively, which represents the fair value
of 31,139 (1999), 28,166 (1998) and 22,219 (1997) shares of common stock
and the cash bonus.
Additionally, the Company has award programs which involve the
distribution of common stock to employees based on outstanding service.
The cost of these awards for 1999, 1998 and 1997 was approximately
$26,000, $38,000 and $53,000, respectively, which represents the fair
value of 2,600 (1999) 3,111 (1998) and 7,770 (1997) shares of common stock
issued.
9. CONTINGENCY
A claim by a former employee alleging certain employment issues has been
asserted against the Company. The ultimate cost to the Company from the
claim is not possible to predict at this time and the claim may not be
solved for a number of years. It is the opinion of the Company's
management, based upon the information available at this time, that the
expected outcome of this matter will not have a material adverse effect on
the consolidated results of operations and financial condition or cash
flows of the Company.
<PAGE>
10. EMPLOYEE HEALTH PLAN
The Company has a medical indemnity plan providing comprehensive major
medical benefits for eligible employees and retirees and members of their
immediate families (participants) and is subject to the provisions of the
Employee Retirement Income Security Act of 1974. The Company's
contribution, which is based upon the contributions of currently employed
participants and any additional amounts required to pay benefits for
participants, totaled approximately $756,000, $818,000 and $573,000 in
1999, 1998 and 1997, respectively.
11. STOCK OPTION PLAN
In January 1999, a stock option plan for eligible employees was approved
by the Company. Under the terms of the plan, the Company is authorized to
grant options of common shares, not to exceed 200,000 shares, to eligible
employees and members of the Board of Directors. Options outstanding are
generally exercisable immediately upon grant date. All options expire four
years after the date of the grant.
During 1999, 34,700 shares were granted of which 850 were forfeited. A
total of 33,850 shares at an average option price per share of $8.00 were
exercisable and 166,150 shares were available for future grants at
December 31, 1999.
The weighted average fair value of options granted during 1999 was $3.75.
The fair value of each stock option grant in 1999 was estimated as of the
date of the grant using the Black-Scholes option-pricing model with the
following assumptions: dividend yield of .44%; volatility factor of 43%;
risk-free interest rate of 6.58%; and expected life of 4 years.
In accordance with APB 25, "Accounting for Stock Issued to Employees", the
Company has not recognized any compensation cost for the stock option
plan. Had compensation cost for the Company's stock option plan been
determined based on the fair value at the grant date for awards under the
plan consistent with the method of SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company's net income and earnings per share
would have been reduced to the pro forma amounts indicated below:
1999
Net income As reported $3,780,769
Pro forma $3,653,864
Earnings per share As reported $ 0.66
Pro forma $ 0.64
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts.
EXHIBIT 21.01
THE KELLER MAUFACTURING COMPANY, INC.
SUBSIDIARIES OF THE REGISTRANT
Name Under Which
Name State of Incorporation Subsidiary Does Business
---- ---------------------- ------------------------
Keller Dedicated Indiana Keller Dedicated
Transportation Co. Transportation Co.
Exhibit 23.01
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement of
The Keller Manufacturing Company, (the Company) on Form S-8 (File No. 000-25939)
of our reports dated February 18, 2000, appearing in, and incorporated by
reference to, in the Annual Report on Form 10-K of The Keller Manufacturing
Company, Inc. for the year ended December 31, 1999.
DELOITTE & TOUCHE LLP
March 28, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This 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 YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 2,840,242 3,985,786
<SECURITIES> 0 500,000
<RECEIVABLES> 6,659,480 6,284,517
<ALLOWANCES> 257,000 291,000
<INVENTORY> 17,693,432 16,066,490
<CURRENT-ASSETS> 27,807,419 27,412,112
<PP&E> 21,458,361 19,555,956
<DEPRECIATION> 11,413,059 9,757,782
<TOTAL-ASSETS> 39,688,056 39,471,045
<CURRENT-LIABILITIES> 4,275,831 5,253,602
<BONDS> 0 0
0 0
0 0
<COMMON> 1,712,638 1,437,276
<OTHER-SE> 32,503,370 31,695,113
<TOTAL-LIABILITY-AND-EQUITY> 39,688,056 39,471,045
<SALES> 55,751,215 60,144,243
<TOTAL-REVENUES> 55,751,215 60,144,243
<CGS> 41,335,806 43,076,105
<TOTAL-COSTS> 49,592,952 50,973,488
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 6,158,263 9,170,755
<INCOME-TAX> 2,377,494 3,514,750
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,780,759 5,656,005
<EPS-BASIC> 0.66 0.97
<EPS-DILUTED> 0.66 0.97
</TABLE>
