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 March 31, 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 March 31, 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
March 31, 2000, March 31, 1999, and
December 31, 1999 3
Consolidated Statements of Income for the Three
Months ended March 31, 2000 and 1999 4
Consolidated Statements of Cash Flows for the
Three Months ended March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 8
PART II
Item 1. Legal Proceedings 9
Item 2. Changes in Securities and Use of Proceeds 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security
Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
Index to Exhibits 11
<PAGE>
<TABLE>
<CAPTION>
THE KELLER MANUFACTURING COMPANY, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, 2000 and 1999, and December 31, 1999
March 31, 2000 March 31, 1999 December 31, 1999
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $2,016,538 $4,298,503 $2,840,242
Accounts receivable, less allowance for doubtful 7,570,621 6,047,949 6,659,480
accounts of $269,118
(March 31, 2000), $293,739
(March 31, 1999), and
$257,000 (December 31, 1999)
Inventories 18,508,009 17,261,399 17,693,432
Current deferred tax asset 104,956 253,339 101,932
Income taxes receivable 107,220 430,445
Other current assets 58,855 431,207 81,888
------ ------- ------
Total Current Assets 28,366,199 28,792,397 27,807,419
PROPERTY, PLANT AND EQUIPMENT - net 10,056,625 9,651,138 10,045,302
INVESTMENT SECURITY AVAILABLE FOR SALE 500,000
PREPAID PENSION COSTS 1,732,286 1,669,205 1,835,335
--------- --------- ---------
TOTAL ASSETS $40,155,110 $40,112,740 $39,688,056
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $1,575,460 $2,296,593 $1,670,349
Commissions, salaries 1,015,527 1,478,562 1,184,562
and withholdings
Accrued Vacation 495,547 518,849 383,824
Other current liabilities 1,119,761 1,202,730 1,037,096
--------- --------- ---------
Total Current Liabilities 4,206,295 5,496,734 4,275,831
LONG TERM LIABILITIES -
Deferred Income Taxes 1,145,873 1,078,859 1,196,217
--------- --------- ---------
Total Liabilities 5,352,168 6,575,593 5,472,048
--------- --------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - no par 1,728,753 1,003,485 1,712,638
value, authorized, 40,000,000 shares
Issued and Outstanding 5,612,109 (March 31, 2000),
5,804,190 (March 31, 1999) , and 5,619,363
(December 31, 1999)
Retained earnings 33,074,189 32,533,662 32,503,370
---------- ---------- ----------
Total Stockholders' equity 34,802,942 33,537,117 34,216,008
---------- ---------- ----------
TOTAL $40,155,110 $40,112,740 $39,688,056
=========== =========== ===========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
THE KELLER MANUFACTURING COMPANY, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
- --------------------------------------------------------------------------------
March 31, 2000 March 31, 1999
(Unaudited) (Unaudited)
<S> <C> <C>
NET SALES $14,682,577 $13,994,542
COST OF SALES 11,229,267 10,220,214
---------- ----------
GROSS PROFIT 3,453,310 3,774,328
SELLING, ADMINISTRATIVE & OTHER 2,164,180 2,167,743
---------- ---------
INCOME BEFORE TAXES 1,289,130 1,606,585
INCOME TAXES 467,594 561,300
------- -------
NET INCOME $821,536 $1,045,285
========== ==========
NET INCOME PER SHARE OF COMMON STOCK,
basic and dilutive -
based on weighted average number of shares
outstanding of 5,611,717 and 5,858,737
for the three months ended March 31,
2000 and 1999, respectively $0.15 $0.18
========== ==========
<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
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
- --------------------------------------------------------------------------------
March 31, 2000 March 31, 1999
-------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 821,536 $ 1,045,285
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation 425,700 394,050
Deferred income taxes (53,368) 1,300
Common stock awards 17,357 306,660
Changes in assets and liabilities:
Accounts receivable (911,141) 236,568
Inventories (814,577) (1,194,909)
Income taxes receivable 323,225 893,862
Other current assets 23,033 105,717
Prepaid pension costs 103,049 91,554
Accounts payable (94,889) 471,247
Commissions,
salaries and withholdings
and accrued vacation (57,312) (414,804)
Other current liabilities 82,665 (428,314)
---------- ----------
Net cash provided by
(used in) operating
activities (134,722) 1,508,216
---------- ----------
INVESTING ACTIVITIES:
Purchases of property,
plant and equipment (437,023) (247,014)
---------- ----------
FINANCING ACTIVITIES:
Redemption of common stock (54,149) (743,933)
Dividends paid (197,810) (204,552)
---------- ----------
Net cash used in
financing activities (251,959) (948,485)
---------- ----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (823,704) 312,717
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 2,840,242 3,985,786
---------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $2,016,538 $4,298,503
========== ==========
CASH PAID DURING THE YEAR FOR:
Interest $580 $100
========== ==========
Income Taxes $461,500 $561,300
========== ==========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
5
<PAGE>
THE KELLER MANUFACTURING COMPANY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 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. 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. The results of operations for the
three months ended March 31, 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:
March 31, 2000 March 31, 1999 December 31, 1999
-------------- -------------- -----------------
Raw Materials $6,035,287 $6,333,323 $6,211,692
Work-in-process 8,776,356 7,191,154 8,590,283
Finished Goods 3,696,366 3,736,922 2,891,457
----------- ----------- -----------
Net Inventories $18,508,009 $17,261,399 $17,693,432
=========== =========== ===========
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- -------------
This discussion contains statements that constitute forward looking statements
within the meaning of the securities laws. Such statements may include
statements regarding the intent, belief or current expectations of The Keller
Manufacturing Company, Inc. (the "Company") or its officers with respect to (i)
the Company's strategic plans, (ii) the policies of the Company regarding
capital expenditures, financing or other matters, and (iii) industry trends
affecting the Company's financial condition or results of operations. Readers of
this discussion are cautioned that any such forward looking statements are not
guarantees of future performance and involve risks and uncertainties and that
actual results may differ materially from those in the forward looking
statements as a result of various factors. This report should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations included its Form 10K filed by the Company with the
Securities and Exchange Commission.
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
------------------
MARCH 31
--------
2000 1999
---- ----
Net Sales 100.0% 100.0%
Cost of Sales 76.5% 73.0%
Gross Profit 23.5% 27.0%
Selling, General & Administrative 14.7% 15.5%
Operating Income 8.8% 11.5%
Other Expense * *
Income Before Taxes 8.8% 11.5%
Income Taxes 3.2% 4.0%
Net Income 5.6% 7.5%
* Less than 1%.
Three Months Ended March 31, 2000, compared to three months ended March 31, 1999
- --------------------------------------------------------------------------------
Net Sales. Net Sales increased approximately $0.7 million to approximately $14.7
million for the first quarter 2000 compared to approximately $14.0 million in
the first quarter 1999. This was an increase of approximately 4.9% in net sales.
The primary factor for the increase in sales was due to increases in lumber cut,
product built and packed. The second shifts in key bottleneck areas that are now
staffed at each plant has helped achieve the increases. The most measurable
effect is the decrease in firm orders backlog from $8.5 million at March 31,
1999 to $7.7 million at March 31, 2000, which is approximately a 9.1% decrease.
7
<PAGE>
Cost of Sales. Cost of Sales as a percentage of net sales increased
approximately 3.5% for the first quarter 2000, at 76.5% compared to 73.0% for
the first quarter 1999. Actual cost of sales rose from approximately $10.2
million for the first quarter 1999 to approximately $11.2 million for the first
quarter 2000. Direct labor and indirect labor costs were up approximately $0.4
million combined. Employee turnover continues to require training and has
resulted in some inefficiencies in the manufacturing process. The variable costs
were up approximately $0.5 million as parts loss and yield costs were affected
by the skill of the new employees.
Selling, General and Administrative Expenses. Selling, General and
Administrative Expenses was about the same for the first quarter of 1999 and
2000 at approximately $2.2 million. As a percent of net sales, Selling, General
and Administrative Expenses decreased from 15.5% for the first quarter 1999 to
14.7% for the first quarter 2000. Most of the reduction was due to advertising
costs which were committed in the first quarter of 1999 based on equal shipments
of the first quarter 1998. However, shipments were down $2.7 million the first
quarter 1999 which is a decrease of approximately 16.2% from the first quarter
of 1998.
Net Income. As a result of the above factors, net income for the first quarter
declined 21.5% to approximately $0.8 million in 2000 compared to approximately
$1.0 million in 1999.
Financial Condition and Liquidity
- ---------------------------------
There was no significant changes in the company's liquidity. Cash was down
approximately $0.8 million while accounts receivables were up approximately $0.9
million. The primary reason for the increase in accounts receivables was an
increase in shipments of approximately $0.6 million in March compared to
February. The primary factor for the decrease in cash is due to increased
inventories of approximately $0.8 million. This is primarily due to the mismatch
of inventory to fill orders. Working capital increased from $23.3 million in the
first quarter 1999 to $24.0 million in 2000, for an increase of approximately
3.0%. The current ratio increased from 5.2 to 1.0 for the first quarter 1999 to
6.7 to 1.0 in 2000. The Company anticipates funding its growth strategy with
cash generated from operations.
Year 2000
- ---------
The Company experienced no material disruptions or problems 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 material
interruptions of supplies from any vendors. All Year 2000 hardware and system
installations were completed as of December 31, 1999 as forecasted. Since all
Year 2000 actions have been completed, we anticipate no further Year 2000 costs
will be incurred.
Dividend Action
- ---------------
The Board of Directors approved a dividend of $0.035 per share for the first
quarter 2000 at their April 28, 2000 meeting.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- ------------------------------------------------------------------
Not applicable.
8
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
William Clark v. The Keller Manufacturing Company, Inc. and Ray Menefee; in the
United States District Court for the Eastern District of Virginia, Richmond
Division. The plaintiff claimed race discrimination. The complaint was dismissed
by order of the District Court dated February 17, 2000. Plaintiff had
approximately 30 days from the date of dismissal within which to appeal. To our
knowledge, no appeal was made. We therefore consider this matter closed.
Tammy L. Oakes v. The Keller Manufacturing Company, Inc. in the United States
District Court for the Southern District of Indiana. The plaintiff claimed that
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 filed a
joint stipulation of dismissal to this effect, file stamped on January 19, 2000.
We have now received the Court's order of dismissal, dated January 31, 2000. We
therefore consider this matter closed.
Item 2. Changes in Securities and Use of Proceeds
- --------------------------------------------------
Not Applicable
Item 3. Defaults Upon Senior Securities
- ----------------------------------------
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Not Applicable
Item 5. Other Information
- --------------------------
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits. See Index to Exhibits
(b) Reports on Form 8-K. No report on Form 8-K was filed during the
quarter for which this report is filed.
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.
/s/ Steven W. Robertson
------------------------------------------------
Steven W. Robertson
President and Chief Executive Officer
/s/ Danny L. Utz
------------------------------------------------
Danny L. Utz
Vice President, Finance Chief
Financial Officer
10
<PAGE>
<TABLE>
INDEX TO EXHIBITS
<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) 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).
11
<PAGE>
4.03 See Article II of the Bylaws of
the Company found in Exhibit 3.04
(Incorporated by reference to
Exhibit 4.03 to the Company's
Amendment number 2 Form 10, filed
July 23, 1999, File No.
000-25939).
(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).
12
<PAGE>
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).
13
<PAGE>
10.10 The Keller Manufacturing Company,
Inc. Incentive Program for
Executive Personnel (Incorporated
by reference to Exhibit 10.10 to
the Company's Amendment number 2
Form 10, filed July 23, 1999, File
No. 000-25939).
10.11 License Agreement by and between
the Company and PGA TOUR Licensing
(Incorporated by reference to
Exhibit 10.11 to the Company's
Amendment number 2 Form 10, filed
July 23, 1999, File No.
000-25939).
10.12 Sponsorship Agreement by and
between the Company and PGA TOUR,
Inc. (Incorporated by reference to
Exhibit 10.12 to the Company's
Amendment number 2 Form 10, filed
July 23, 1999, File No.
000-25939).
(11) No Exhibit
(12) No Exhibit
(13) No Exhibit
(15) No Exhibit
(18) No Exhibit
(21) No Exhibit
(22) No Exhibit
(23) No Exhibit
(24) No Exhibit
(27) 27.01 Financial Data Schedule
(99) No Exhibit
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27.01
THE KELLER MANUFACTURING COMPANY, INC.
financial data schedule
The schedule contains summary financial information extracted from the
consolidated financial statements of The Keller Manufacturing Company, Inc. and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,016,538
<SECURITIES> 0
<RECEIVABLES> 7,839,739
<ALLOWANCES> 269,118
<INVENTORY> 18,508,009
<CURRENT-ASSETS> 28,366,199
<PP&E> 21,895,484
<DEPRECIATION> 11,838,859
<TOTAL-ASSETS> 40,155,110
<CURRENT-LIABILITIES> 4,206,295
<BONDS> 0
0
0
<COMMON> 1,728,753
<OTHER-SE> 33,074,189
<TOTAL-LIABILITY-AND-EQUITY> 40,155,110
<SALES> 14,682,577
<TOTAL-REVENUES> 14,682,577
<CGS> 11,229,267
<TOTAL-COSTS> 13,393,447
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,289,130
<INCOME-TAX> 467,594
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 821,536
<EPS-BASIC> 0.15
<EPS-DILUTED> 0.15
</TABLE>
