<PAGE>
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 December 31, 1997
[ ] 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
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(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 December 31, 1997, 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 and Retained Earnings
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
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PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Kreisler Manufacturing Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited) (Audited)
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Second Quarter Ended Year Ended
12/31/97 6/30/97
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<S> <C> <C>
Assets
Cash and cash equivalents $ 964,310 $ 691,916
Certificates of deposit - current 569,630 ---
Accounts receivable - trade 1,613,253 1,609,913
Inventories
Raw Materials 1,437,552 1,232,044
Work in process 531,908 528,880
Finished goods 58,313 61,646
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2,027,773 1,822,570
Deferred tax asset 359,040 300,000
Other current assets 36,591 22,987
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Total current assets 5,570,597 4,447,386
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Certificates of deposit --- 554,934
Property, plant & equip., at cost, less accum.deprec. 299,392 197,246
- ------------------------------------------------------------------------------ ----------------- ------------------------------
$ 5,869,989 $ 5,199,566
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Liabilities and Stockholders' Equity
Accounts payable - trade $ 511,862 $ 552,959
Accrued expenses 169,581 174,216
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Total current liabilities 681,443 727,175
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Stockholders' Equity
Common Stock, $.125 par value - 3,000,000 shares authorized 1,942,048 and
485,512 shares issued and outstanding
for 1998 and 1997, respectively 242,756 242,756
Additional paid-in capital 1,571,702 1,571,703
Retained earnings 3,374,088 2,657,932
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Total Stockholders' Equity 5,188,546 4,472,391
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$ 5,869,989 $ 5,199,566
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</TABLE>
See accompanying Notes to Financial Statements
<PAGE>
Kreisler Manufacturing Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
(Unaudited)
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Three Months Ended December 31 1997 1996
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<S> <C> <C>
Sales $ 3,271,035 $ 2,454,638
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Cost of goods sold 2,721,733 2,490,503
Selling, general and administrative expenses 155,168 80,170
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2,876,901 2,570,673
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Profit (loss) from operations 394,134 (116,035)
Other income (expense):
Interest and other earnings 21,889 25,901
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Profit (loss) before income taxes 416,023 (90,134)
Provision (benefit) for income tax 43,684 ----
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Net Profit (loss) $ 372,339 $ (90,134)
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Earnings per share of:
common stock and equivalents
Net Profit (loss) $ .19 $ (.05)
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Six Months Ended December 31 1997 1996
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Sales $ 5,663,567 $ 4,285,479
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Cost of goods sold 4,801,377 4,238,101
Selling, general and administrative expenses 238,743 144,823
- ------------------------------------------------------------------------------ ------------------------ -----------------------
5,040,120 4,382,924
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Profit (loss) from operations 623,447 (97,445)
Other income (expense):
Interest and other earnings 42,392 31,945
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Profit (loss) before income taxes 665,839 (65,500)
Provision (benefit) for income tax (50,316) ----
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Net Profit (loss) $ 716,155 $ (65,500)
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Earnings per share of:
common stock and equivalents
Net Profit (loss) $ .36 $ (.03)
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</TABLE>
See accompanying Notes to Financial Statements
<PAGE>
Kreisler Manufacturing Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
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Six Months Ended December 31 1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net profit (loss) $ 716,155 $ (65,500)
Adjustments to reconcile net profit (loss) to cash (used) provided by operating
activities:
Depreciation and amortization 23,464 26,479
Gain on sale of assets ---- ----
Decrease (increase) in accounts receivable - trade (3,340) (571,646)
Decrease (increase) in inventories (205,203) 304,435
Decrease (increase) in deferred tax asset (59,040) ----
Decrease (increase) in other current assets (13,604) 6,859
Increase (decrease) in accounts payable - trade (41,097) 18,545
Increase (decrease) in accrued expenses (4,635) (23,226)
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Net adjustments (303,455) (238,554)
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Net cash provided (used) by operations 412,700 (304,054)
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Cash flows from investing activities:
Purchase of investments (14,696) (14,704)
Proceeds from sale of investments ---- 300,000
Purchase of property and equipment (125,610) (7,318)
Proceeds from sale of equipment ---- ----
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Net cash provided (used) by investing activities (140,306) 277,978
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Net increase (decrease) in cash and cash equivalents 272,394 (26,076)
Cash and cash equivalents at beginning of year 691,916 587,064
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Cash and cash equivalents at December 31 $ 964,310 $ 560,988
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</TABLE>
See accompanying Notes to Financial Statements
<PAGE>
Kreisler Manufacturing Corporation and Subsidiaries
NOTES TO 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 December 31, 1997, and the
related consolidated statements of operations and retained earnings and cash
flows for the three and six month periods ended December 31,1997 and 1996 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,
1997.
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 December 31, 1997.
3. Income Tax Provision (Benefit)
Changes in economic circumstances made the utilization of a portion of the net
operating loss carryforwards likely, resulting in a reduction of the valuation
allowance and generating a tax benefit.
The income tax on earnings has been reduced by decreases in the income tax
benefit allowance of $125,449 for the three months and $323,449 for the six
months ended December 31, 1997. The result is a net income tax expense of
$43,684 and a net benefit of $50,316 for the three months and the six months
ended December 31, 1997, respectively.
At December 31, 1997, the deferred tax benefit balance was $456,591 and the
offsetting valuation allowance account balance was $97,551.
<PAGE>
Item 2. Management's Discussion and Analysis
Kreisler Manufacturing Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS
THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 1997
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") manufacture precision metal components and assemblies at Elmwood
Park, New Jersey for use in military and commercial aircraft engines.
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 the high temperatures generated by aerospace
propulsion. These high temperatures are a limiting factor in increasing thrust
in jet engines.
Tube assemblies may be made of various materials and configurations, including
titanium, inconel and stainless steel. These quality controlled and highly
engineered manifold assemblies 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 six months ended December 31, 1997, the sales activity was approximately
thirty-five percent for military aircraft engines and sixty-five percent for
commercial aircraft engines.
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 for these
are received through competitive proposals, which are made in response to
requests for bids from contractors who are frequently supplying engines to
various branches of the Untied States Government or to commercial businesses.
Results of Operations
Kreisler Manufacturing Corporation sales and profits continue to improve
compared to the same periods in the prior year. The Company's mission is to
increase the productivity and competitiveness of Kreisler, to accelerate
profitable growth and broaden our customer base. Sales increased $816,000 or 33%
and $1,378,000 or 32% compared to the second quarter and first half of fiscal
year 1997. As airline profitability improved so has the demand for new aircraft.
At the present time there are well over 2,000 jet transports on backlog and 700
scheduled for delivery in 1998
Profit before income taxes of $416,000 for the second quarter and $666,000 for
the six months compared with losses of $90,000 and $66,000 in the second quarter
and six months of fiscal year 1997.
<PAGE>
Profits improved with increased sales, improved pricing and efficiencies derived
from higher unit volume. Profit before income taxes of $666,000 for the period
ended December 31, 1997, compares to $676,000 for the fiscal year ended June 30,
1997.
Selling, general and administrative expenses increased for the three months
ended December 31, 1997, $75,000 as compared to the same period in the prior
fiscal year. Most of the increase, or $51,000, is bonus accruals. For the six
months ended December 31, 1997, selling, general and administrative expenses
increased $94,000 compared to the same period in the prior year. Bonus accrual
was $65,000 of the six month increase. The balance of increase for both three
month and six month periods was increased salaries, legal expenses and stock
administration fees.
Income tax expense for the second quarter was $44,000 compared to none in the
second quarter of the prior year. For the six months ended December 31, 1997
there was a tax benefit of $50,000. It is estimated that at the end of the third
quarter all tax allowances against the deferred tax benefit will have been used,
and the fourth quarter will reflect only an income tax expense at a 40% tax
rate. Tax benefits for tax purposes continues to be available, so the provision
for taxes for the balance of the year will be a non-cash item.
With improved sales and profits our cash flow is positive with cash and cash
equivalents increasing $272,000 since June 30, 1997. Accounts receivable has
increased slightly and accounts payable decreased by $41,000 since June 30,
1997. The balance sheet continues to show no long term debt with a current ratio
of 8:1. 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 of
over $12,000,000 as of December 31, 1997, is approximately the same as that of
June 30, 1997.
Stockholder equity increased 16% from $2.25 as of June 30, 1997, to $2.61 as of
December 31, 1997. After the December 2, 1997 four for one stock split,
outstanding shares are 1,984,858 (including 42,810 common stock equivalents for
stock options).
<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
At the Annual Meeting on November 25, 1997, stockholders approved
the following:
(a) Election of the following persons to serve as Directors of
Kreisler Manufacturing Corporation for a term of one year
each, and until their successors are duly elected and
qualified: Number of Votes
Withhold
For Authority
------- ---------
Edward L. Stern 395,158 115
Robert S. Krupp 395,158 115
Harry Brill-Edwards 394,928 345
Edward A. Stern 395,158 115
Michael D. Stern 395,158 115
(b) 1997 Stock Option Plan
The purpose of the plan is to provide additional incentive to
employees of the Company and an increased personal interest in the company's
success and progress.
For Against Abstain
------- ------- -------
280,740 815 100
(c) To amend the Company's Certificate of Incorporation from $.50
par value to $.125 par value in connection with a four for one split of the
Company's Common Stock. After the split, outstanding common shares are
1,942,048.
For Against Abstain
------- ------- -------
393,792 115 0
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
January 23, 1998
<PAGE>
EXHIBIT 11
Statement re computation of per share earnings
BASIC EARNINGS PER SHARE SHARES
- ------------------------ ------
Basic shares outstanding at December 31, 1997 1,942,048
Net profit after tax $ 716,155 = $0.37 per share
-------------------- ----------
Basic shares outstanding 1,942,048
DILUTED EARNINGS PER SHARE SHARES
- -------------------------- ------
Basic shares outstanding at December 31, 1997 1,942,048
Stock Options-common stock equivalents 42,810
-----------
Diluted shares outstanding at December 31, 1997 1,984,858
Net profit after tax $716,155 = $0.36 per share
-------------------- ----------
Diluted shares outstanding 1,984,858
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,533,940
<SECURITIES> 0
<RECEIVABLES> 1,613,253
<ALLOWANCES> 0
<INVENTORY> 2,027,773
<CURRENT-ASSETS> 5,570,597
<PP&E> 3,047,437
<DEPRECIATION> 2,748,045
<TOTAL-ASSETS> 5,869,989
<CURRENT-LIABILITIES> 681,443
<BONDS> 0
<COMMON> 242,756
0
0
<OTHER-SE> 4,945,790
<TOTAL-LIABILITY-AND-EQUITY> 5,869,989
<SALES> 5,663,567
<TOTAL-REVENUES> 5,663,567
<CGS> 5,040,120
<TOTAL-COSTS> 5,040,120
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 665,839
<INCOME-TAX> (50,316)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 716,155
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.36
</TABLE>
