UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report under Section 13 or 15 (d) of the Securities Exchange Act
of 1934
For the quarterly period ended SEPTEMBER 30, 1998
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[ ] Transition Report under Section 13 or 15 (d) of the Exchange Act
For the transition period from ______________________to ______________________
Commission File Number: 0-4036
KREISLER MANUFACTURING CORPORATION
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(Exact name of small business issuer as specified in its charter)
DELAWARE 22-1044792
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(State of other jurisdiction of (I.R.S. employer
incorporation or organization) Identification No.)
5960 CENTRAL AVENUE, SUITE H., ST. PETERSBURG, FLORIDA 33707
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(Address of principal executive offices)
(813) 347-1144
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(Issuer's telephone number)
NOT APPLICABLE
- -------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 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.
[X] Yes [ ] No
The number of shares outstanding of issuer's Common Stock, par value $.125 per
share, as of September 30,1998 was 1,942,048 shares.
Transitional small business disclosure format (check one): Yes [ ] No [X]
<PAGE>
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PART I Financial Information
Item 1 Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Notes To Financial Statements
Item 2 Management Discussion and Analysis of Financial Condition
and Results of Operations
PART II Other Information
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to Vote of Security Holders
Item 5 Other Information
Item 6 Exhibits and Reports of Form 8-K
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
FIRST QUARTER ENDED YEAR ENDED
9/30/98 6/30/98
------------------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $2,842,288 $1,909,048
Certificates of deposit - current -- 587,609
Accounts receivable - trade 2,090,135 2,456,788
Inventories
Raw Materials 1,453,840 1,441,560
Work in Process 412,576 412,500
Finished Goods 98,233 91,740
---------- ----------
1,964,649 1,945,800
Deferred tax asset 125,700 125,700
Other current assets 29,148 28,056
---------- ----------
Total current assets 7,051,920 7,053,001
---------- ----------
Property, plant & equip., at cost, less accum.deprec 308,237 322,857
---------- ----------
$7,360,157 $7,375,858
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LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable - trade $ 552,421 $ 756,057
Accrued expenses 385,046 599,252
---------- ----------
Total current liabilities 937,467 1,355,309
---------- ----------
Stockholders' Equity
Common Stock, $.125 par value - 3,000,000 shares authorized
1,942,048 shares issued and outstanding for 1998 242,756 242,756
Additional paid-in capital 1,571,703 1,571,703
Retained earnings 4,608,231 4,206,090
---------- ----------
Total Stockholders' Equity 6,422,690 6,020,549
---------- ----------
$7,360,157 $7,375,858
---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended September 30 1998 1997
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Revenues $ 3,438,408 $ 2,392,533
----------- -----------
Cost of goods sold 2,699,013 2,100,307
Selling, general and administrative expenses 93,708 68,913
----------- -----------
2,792,721 2,169,220
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Earnings from operations 645,687 223,313
Other income :
Interest and other earnings 24,066 20,503
----------- -----------
Earnings before income taxes 669,753 243,816
Provision (benefit) for income tax 267,613 (100,000)
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Net earnings $ 402,140 $ 343,816
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Earnings per share:
Net earnings basic shares $ .21 $ .18
Net earnings diluted shares $ .20 $ .18
----------- -----------
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30 1998 1997
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 402,140 $ 343,816
Adjustments to reconcile net income to
cash provided (used) by operating activities:
Depreciation and amortization 18,974 11,732
(Increase) decrease in operating assets:
Accounts receivable - trade 366,654 218,739
Inventories (18,848) (76,682)
Other current assets (1,092) 3,858
Deferred tax asset -- (100,000)
Increase (decrease) in operating liabilities:
Accounts payable - trade (203,636) 91,325
Accrued expenses (214,206) (86,311)
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Net adjustments (52,154) 62,661
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Cash provided (used) by operating activities 349,986 406,477
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments and certificates of deposit -- (7,125)
Proceeds from redemption of certificates of deposit
587,609 --
Purchase of property and equipment (4,355) (37,941)
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Cash provided (used) by investing activities 583,254 (45,066)
Increase in cash and cash equivalents 933,240 361,411
Cash and cash equivalents at beginning of year 1,909,048 691,916
----------- -----------
Cash and cash equivalents at September 30 $ 2,842,288 $ 1,053,327
----------- -----------
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Principles of Consolidation
The financial statements include the accounts of the Company and its
wholly-owned subsidiaries after elimination of significant intercompany
transactions. The consolidated balance sheet as of September 30, 1998 and the
related consolidated statements of operations and retained earnings and cash
flows for the three month period ended September 30,1998 and 1997 are unaudited.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of management's estimates. In the opinion
of management all adjustments necessary for a fair presentation of such
financial statements have been included. Such adjustments consisted only of
normal recurring items. Interim results are not necessarily indicative of
results for a full year.
The financial statements and notes are presented as permitted by Form 10-QSB,
and do not contain certain information included in the Company's annual
financial statements and notes. Accordingly, these statements should be read in
conjunction with the consolidated financial statements and notes thereto
appearing in the Annual Report of the Company for the fiscal year ended June 30,
1998.
2. Inventories
On interim reports the inventory is determined on a cost of goods sold basis.
Material usage is based on historical cost. Any change in year end physical
inventory compared with that based on cost of goods sold could materially effect
increasing or decreasing profits. A physical inventory was completed for the
period ended June 30, 1998.
3. Income Tax Provision
At September 30, 1998 the company had fully utilized net operating loss
carryforward for federal income tax purposes, a net operating loss carryforward
of approximately $642,000 for New Jersey state income tax purposes, expiring
over a period of years through 2003; and a net operating loss carryforward for
Florida state income tax purposes of approximately $142,000 expiring over a
period of years through 2011. The provision for income taxes for the three month
period ended September 30, 1998 was $268,000.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
THREE MONTHS ENDED SEPTEMBER 30, 1998
Description of Business
Kreisler Manufacturing Corporation is a Delaware business corporation which
was incorporated on December 13, 1968. Kreisler Manufacturing Corporation and
its wholly-owned subsidiary, Kreisler Industrial Corporation (collectively the
"Company") which was incorporated in New Jersey July 3, 1956 manufacture
precision metal components and assemblies at Elmwood Park, New Jersey for use in
military and commercial aircraft engines.
Forward Looking Statements
This Quarterly Report on Form 10QSB contains forward looking statements,
particularly with respect to the Liquidity and Capital Resources section of
Management's Discussion and Analysis of Financial Condition and Results of
Operations. Additional written or oral forward-looking statements may be made by
the Company from time to time, in filings with the SEC or otherwise. Such
forward-looking statements are within the meaning of that term in Section 27A of
the Securities Act of 1933 and Section 21 E of the Securities Exchange Act of
1934. Such statements may include, but not be limited to, projections of
revenue, income, losses, cash flows, capital expenditures, plans for future
operation, financing needs or plans, plans relating to products or services of
the Company, estimates concerning the effects of litigation or other disputes,
as well as assumptions to any of the foregoing.
Forward looking statements are inherently subject to risks and uncertainties,
some of which can not be predicted. Future events and actual results could
differ materially from those set forth in or underlying the forward looking
statements.
Products
The Company fabricates precision metal components and assemblies primarily for
aircraft engines with both military and commercial applications. The primary
function of the Company's products is to transport fluids (including air) to
various parts of the aircraft or aircraft engine. The redirection of air is a
major element in reducing high temperatures generated by aerospace propulsion.
High temperatures are a limiting factor in increasing thrust in jet engines.
Tube assemblies may be made of various materials and configurations. Materials
include titanium, inconel and stainless steel. Configurations include quality
controlled and highly engineered manifold assemblies to transfer fuel for
combustion, oil for lubrication, hydraulic fluid to activate thrust reversers
and impingement tubes or baffles to cool vanes in the combustion section of the
engine.
For the three months ended September 30, 1998, sales activity was
approximately thirty-five percent military aircraft engines and sixty-five
percent commercial aircraft engines.
<PAGE>
Substantially all sales of products are made through an in-house sales staff
supported by a government sales representative. All products are manufactured to
the blueprints and specifications of the particular customer. Orders are
received through competitive proposals which are made in response to requests
for bids from contractors who are frequently supplying engines for commercial
businesses or various branches of the United States Government.
Results of Operations
Kreisler Manufacturing Corporation revenues and earnings continue to improve
compared to the same period in the prior year. The Company's goal is to build
shareholder value via expanded marketing and sales growth and increased
productivity and competitiveness. Revenues increased $1,046,000 or 44% compared
to the first quarter of the prior year. Our customer base was expanded with the
addition of four new accounts.
Income before taxes was $669,000 or 19.5% for the three months ended September
30, 1998 compared with $244,000 or 10% for the three months ended September 30,
1997. An increase of $425,000 or 174%.
Earnings before taxes improved primarily with a productivity increase of 21%. An
improved production control system was implemented during the quarter which
improved productivity by making material available when needed. Factory expenses
increased 3% on a revenue increase of 44%. Net earnings were impacted by a
provision for taxes of $268,000 for the period ended September 30, 1998 compared
to a tax benefit of $94,000 for the same period in the prior year. Net earnings
were $402,400 in the current year compared with $344,000 for the comparable
period in the prior year. Earnings per share increased 11% for the three months
on an adjusted shares basis: $.20 this year compared to $.18 for the same period
in the prior year.
Selling, general and administrative expenses increased $10,000 or 10% for the
three months ended September 30, 1998 compared to September 30, 1997. Salaries
and audit expenses were the primary increases.
Income tax expense for the first quarter was $268,000 compared to a tax benefit
of $94,000 in the first quarter of the prior year or a change of $362,000. All
tax allowances against deferred tax benefits have been used and the first
quarter provision is at the combined federal and state income tax rate of 40%.
Deferred tax benefits for income tax purposes is $126,000.
Cash and cash equivalents since June 30, 1998 increased $933,000 or 49% to
$2,843,000: including the $587,600 certificate of deposit redemption. The cash
flow for the quarter was $345,000. Accounts receivables decreased 367,000 or
15%. The balance sheet has no long term debt and a current ratio of 7.5:1.
Management believes there are sufficient funds available to take care of both
its short term and long term requirements by internally generated funds or
reserves.
Capital equipment will be purchased on an as needed basis. Current backlog
remains the same as that of June 30, 1998.
Stockholder equity since June 30, 1998 increased 6.8% from $3.10 per share to
$3.31. For the year ended September 30, 1998 from September 30, 1997 stockholder
equity increased 34% or $.82 per share.
<PAGE>
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
None
ITEM 2 CHANGES IN SECURITIES
None
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 OTHER INFORMATION
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8K
(a) Part I Exhibits
11. Statement re: computation of per share earnings
27. Financial data schedule
<PAGE>
SIGNATURE
Pursuant to the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
KREISLER MANUFACTURING CORPORATION
(Registrant)
BY /s/ EDWARD L. STERN
-- -------------------
Edward L. Stern
President, Treasurer
October 21, 1998
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
BASIC EARNINGS PER SHARE SHARES
------------------------ ------
Basic shares outstanding at September 30, 1998 1,942,048
NET EARNINGS $ 402,140 $.21 per share
------------------------ ----------
Basic shares outstanding 1,942,048
DILUTED EARNINGS PER SHARE SHARES
-------------------------- ------
Basic shares outstanding at September 30, 1998 1,942,048
Stock Options-common stock equivalents 98,689
Diluted shares outstanding at September 30, 1998 2,040,737
NET EARNINGS $ 402,140 $.20 per share
------------------------ ----------
Diluted shares outstanding 2,040,737
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,842,288
<SECURITIES> 0
<RECEIVABLES> 2,090,135
<ALLOWANCES> 0
<INVENTORY> 1,964,649
<CURRENT-ASSETS> 7,051,920
<PP&E> 3,136,763
<DEPRECIATION> 2,828,526
<TOTAL-ASSETS> 7,360,157
<CURRENT-LIABILITIES> 937,467
<BONDS> 0
<COMMON> 242,756
0
0
<OTHER-SE> 6,179,934
<TOTAL-LIABILITY-AND-EQUITY> 7,360,157
<SALES> 3,438,408
<TOTAL-REVENUES> 3,438,048
<CGS> 2,792,721
<TOTAL-COSTS> 2,792,721
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 669,753
<INCOME-TAX> 267,613
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 402,140
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.20
</TABLE>
