UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended June 30, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission File Number: 0-4036
KREISLER MANUFACTURING CORPORATION
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(Name of small business issuer in its charter)
DELAWARE 22-1044792
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(State of other jurisdiction of I.R.S. employer
incorporation or organization) Identification Number)
5960 CENTRAL AVENUE, SUITE H., ST. PETERSBURG, FLORIDA 33707
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(Address of principal executive offices) (zip code)
Issuer's telephone number: 727-347-1144
Securities registered pursuant to Section 12(b) of the Exchange Act:
Not applicable
Securities registered pursuant to Section 12(g) of the Exchange Act:
COMMON STOCK, $.125 PAR VALUE PER SHARE
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(Title of Class)
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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. [X]
<PAGE>
The Issuer's revenues for its most recent fiscal year was $13,025,631.
The aggregate market value of the voting and non voting common equity held by
non-affiliates of the issuer is approximately $4,831,472(1).
The number of shares of Common Stock outstanding as of September 18, 1998 was
1,942,048 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Company's Annual Report to Shareholders for the fiscal
year ended June 30, 1998 are incorporated by reference in Parts I and II of this
Report. With the exception of the information incorporated by reference in Parts
I and II of this Report, the Company's Annual Report to Shareholders for the
fiscal year ended June 30, 1998 is not to be deemed "filed" with the Securities
and Exchange Commission for any purpose.
Certain portions of the Company's Proxy Statement to be filed in connection with
its 1998 Annual Meeting of Shareholders are incorporated by reference in Part
III of this Report.
Transitional Small Business Disclosure Format (check one)
[ ] Yes [X] No
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(1)The aggregate dollar amount of the voting and non-voting common equity stock
set forth equals the number of shares of Common Stock outstanding, reduced by
the number of shares of Common Stock held by executive officers, directors and
stockholders owning in excess of 10% of the registrant's common stock multiplied
by the last closing price for the Common Stock as quoted on the National
Association of Securities Dealers Automated Quotation System on September 18,
1998. The information provided shall in no way be construed as an admission that
any person whose holdings are excluded from this figure is an affiliate of the
registrant or that any person whose holdings are included in this figure is an
affiliate of the registrant or that any person whose holdings are included in
this figure is not an affiliate of the registrant and any such admission is
hereby disclaimed. The information provided herein is included solely for record
keeping purposes of the Securities and Exchange Commission.
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TABLE OF CONTENTS
FORM 10-KSB ANNUAL REPORT 1998
KREISLER MANUFACTURING CORPORATION
PAGE NO.
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PART I........................................................................1
ITEM 1. DESCRIPTION OF BUSINESS.....................................1
ITEM 2. DESCRIPTION OF PROPERTY.....................................2
ITEM 3. LEGAL PROCEEDINGS...........................................3
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........3
PART II.......................................................................3
ITEM 5. MARKET FOR THE COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.........................................3
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION...................................................4
ITEM 7. FINANCIAL STATEMENTS........................................4
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.........................5
PART III......................................................................5
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
ACT........................................................5
ITEM 10. EXECUTIVE COMPENSATION.....................................5
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.................................................5
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............5
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K...........................5
<PAGE>
PART I
ITEM 1. 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 on July 3, 1956 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.
Over the past three years, ninety percent of the Company's products were tubular
assemblies. For the fiscal year ended June 30, 1998, 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.
CUSTOMERS
Four customers of the Company accounted for 78% of the consolidated net sales of
the Company in the fiscal year ended June 30, 1998.
COMPETITION
The fields in which the Company operates are highly competitive and among the
Company's competitors are enterprises which are substantially larger than the
Company and possess greater financial, production and marketing resources, as
well as numerous smaller concerns. The Company is not a significant factor in
its fields. The principal methods of competition are price,
<PAGE>
quality and delivery. In today's market flexibility, quality, cost and speed of
delivery are required elements. The Company believes that it is competitive on
all the above elements.
SOURCES OF SUPPLY
The Company does not have any long-term or fixed requirement agreements with its
suppliers.
Materials for the products within the Company are purchased, as required, from
various suppliers. At times, approved vendors are designated by the Company's
customers. The Company believes alternative sources of supply for material are
available at reasonable prices.
PRODUCTION
Fabricated precision metal components or assemblies are manufactured and
assembled by the Company to customer specifications. To meet the exacting
requirements of its customers, the Company must exercise rigid quality control.
EMPLOYEES
At June 30, 1998, the Company employed approximately 100 persons, all of whom
are full-time employees. Approximately 60 are subject to a collective bargaining
agreement with the United Service Employees Union which terminates on December
4, 2000.
GOVERNMENT REGULATIONS
The Company is subject to various Federal and State regulations concerning the
conduct of its business including regulations under the Occupational Health and
Safety Act and various acts dealing with the environment.
A material portion of the business of the Company is subject to provisions which
permit the termination of contracts at the election of the U.S Government or its
prime contractors. Contracts with the U.S. Government and with suppliers to the
U.S. Government generally provide for termination at any time for the
convenience of the U.S. Government and its prime contractors, and upon such
termination a contractor is entitled to receive payment for the work performed
plus a pro rata portion of the profit it would have earned but for the
termination.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's industrial plant is located at Elmwood Park, New Jersey and
consists of 52,000 square feet of leased space. The facility is approximately 40
years old and the average age of the equipment is 15 years. The lease expires
October 1, 2000. The annual lease expense on the plant facilities is $79,992.
2
<PAGE>
During fiscal 1998, $210,000 of capital expenditures were made. Management
believes that the Company's present industrial plant facilities are suitable for
the Company's current and near term operations and that these properties are
adequately covered by insurance.
ITEM 3. LEGAL PROCEEDINGS.
By letter dated June 22, 1993 from the Environmental Protection Agency, the
Agency notified the Company that it had evaluated information relating to the
transportation of waste in 1962-1963-1964 to the Caldwell Trucking Company
Superfund Site and based upon this information EPA believes that the Company is
a Potentially Responsible Party ("PRP") pursuant to Section 107(a) of the
Comprehensive Environmental Response compensation and Liability Act, 42 U.S.C.
Section 9607(a). The letter from EPA notified Kreisler of its potential
liability for all costs incurred and to be incurred by the government relating
to the Site. According to the letter, under CERCLA, and other laws, potentially
liable parties, such as Kreisler, may be ordered to perform response actions
deemed necessary by EPA to protect the public health, welfare or the
environment, and may be liable for all costs incurred by the government in
responding to any release or threatened release at the Site.
The EPA and a PRP Group have filed suit against the Company for its costs with
regard to the Site. Both cases are currently under a stay. The Company does not
know the amount which will be sought in these cases. Pursuant to the terms of
several insurance policies, the legal defense burden is being shared by these
insurance companies.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded in over the counter market and is quoted on
the national Association of Securities Dealers, Inc. Automated Quotation System
(NASDAQ). The following table sets forth the sales prices for the Common Stock
for each quarter in the two year period June 30, 1998.
3
<PAGE>
Quarter 1998 1997
High Low High Low
First September 30 7.00 1.69 .88 .66
Second December 31 17.75 5.25 1.16 .91
Third March 31 13.00 6.25 1.81 1.16
Fourth June 30 10.63 6.75 1.78 1.25
The Company has not paid any dividends during the last two fiscal years. The
holders of the Company's Common Stock are entitled to receive dividends when, as
and if declared by the Board of Directors out of funds legally available
therefore. It is the Company's current policy not to pay dividends and to retain
earnings for future growth of the Company.
At June 30, 1998, the Company had approximately 1000 stockholders of record.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
"Management's Discussion and Analysis" on page 9 of the Annual Report to
Stockholders is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS
The following consolidated financial statements of the Company and its
subsidiaries and the Auditor's Report included on pages 1 through 8 of the
Annual Report to Stockholders for the year ended June 30,1998 are incorporated
herein by reference:
Consolidated Balance Sheets - June 30, 1998 and 1997
Consolidated Statements of Operations - Years Ended June 30, 1998 ,1997 and 1996
Consolidated Statements of Changes in Stockholders' Equity - June 30, 1998, 1997
and 1996
Consolidated Statements of Cash Flows - Years Ended June 30, 1998 and 1997
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
4
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Incorporated by reference to the Company's Proxy Statement relating to the 1998
Annual Meeting of Stockholders.
ITEM 10. EXECUTIVE COMPENSATION
Incorporated by reference to the Company's Proxy Statement relating to the 1998
Annual Meeting of Stockholders.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to the Company's Proxy Statement relating to the 1998
Annual Meeting of Stockholders.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to the Company's Proxy Statement relating to the 1998
Annual Meeting of Stockholders.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed with this Report.
1 FINANCIAL STATEMENTS.
10.3 Union Agreement
11 Statement re computation of per share earnings.
13 Annual Report to Stockholders for the fiscal year ended June 30, 1998
(such report, except for those portions expressly incorporated by
reference to this Annual Report on Form 10-KSB, is furnished for the
information of the Commission and is not to be deemed filed as part of
this Report).
21 Subsidiaries of the Registrant.
5
<PAGE>
27 Financial Data Schedule
(b) Reports on 8-K
No reports on Form 8-K were filed during the last period covered by this report.
6
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
KREISLER MANUFACTURING CORPORATION
By: /s/ EDWARD L. STERN
---------------------------
Edward L. Stern, President
Date: September 24, 1998
In accordance with the Securities Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---- ----- ----
<S> <C> <C>
/s/ EDWARD L. STERN Director, President and Chief Financial September 24, 1998
- ------------------- Officer (Principal Executive Officer,
Edward L. Stern Principal Financial Officer and Principal
Accounting Officer)
/s/ ROBERT S. KRUPP Director September 24, 1998
- ----------------------
Robert S. Krupp
/s/ HARRY BRILL-EDWARDS Director September 24, 1998
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Harry Brill-Edwards
/s/ EDWARD A. STERN Director, Vice President September 24, 1998
- -----------------------
Edward A. Stern
/s/ MICHAEL D. STERN Director, Vice President September 24, 1998
- -----------------------
Michael D. Stern
</TABLE>
7
<PAGE>
EXHIBIT INDEX
10.3 Union Agreement
11 Statement re computation of per share earnings.
13 Annual Report to Stockholders for the fiscal year ended June
30, 1998 (such report, except for those portions expressly incorporated by
reference to this Annual Report on Form 10-K, is furnished for the information
of the Commission and is not to be deemed filed as part of this Report).
21 Subsidiaries of the Registrant.
27 Financial Data Schedule
8
EXHIBIT 13
AGREEMENT
Between
KREISLER INDUSTRIAL CORPORATION, A DIVISION
OF KREISLER MANUFACTURING CORPORATION
-AND-
LOCAL 377, RWDSU, AFFILIATED WITH AFL-CIO
December 5, 1997 - December 4, 2000
<PAGE>
INDEX
ARTICLE PAGE
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DEPARTMENTAL SUPERVISORS XII 14
DISCHARGE XI 13
GRIEVANCE PROCEDURE XIV 15
HOLIDAY PAY V 6
HOSPITALIZATION AND INSURANCE XIII 14
HOURS OF WORK III 3
INTERFERENCE, DISCRIMINATION, COERCION XV 16
LAYOFFS VIII 10
LEAVE OF ABSENCE X 11
MANAGEMENT RIGHTS 1
MISCELLANEOUS XVII 16
NO STRIKES, LOCKOUTS XVI 16
RATE OF PAY IV 4
RECOGNITION I 2
SECURITY XVIII 17
SENIORITY VII 8
TERM OF AGREEMENT XIX 17
TRANSFERS IX 10
UNION MEMBERSHIP AND DUES DEDUCTION II 2
VACATION PAY VI 7
WAGE RATES 19-27
-i-
<PAGE>
UNION AGREEMENT
AGREEMENT entered into this ____________ day of ________________, 1998,
as of December 5, 1997, between KREISLER INDUSTRIAL CORPORATION, A Division of
KREISLER MANUFACTURING CORPORATION, for the plant located at 180 Van Riper
Avenue, Elmwood Park, State of New Jersey, hereinafter known as the "Employer,"
and LOCAL 377, RWDSU, affiliated with AFL-CIO, located at 29-27 41st Avenue,
Long Island City, New York 11101, hereinafter known as the "Union," and on
behalf of said Union and on behalf of the covered employees of the Union now
employed and hereafter to be employed by the Company at its Elmwood Park, New
Jersey plant.
PREAMBLE
PART I: WHEREAS, the parties hereto have mutually agreed on the terms
and conditions governing employment of employees in the bargaining unit, the
parties agree to perform in good faith all the provisions of this Agreement and
avoid work interruptions during the term thereof.
NOW, THEREFORE, it is agreed:
MANAGEMENT RIGHTS
PART II: Except as delegated, modified or abridged by this Agreement,
all rights, powers and authorities management had prior to this execution of
this Agreement remain and reside in management. The listing of specific rights,
hereafter in this Agreement is not intended to be, nor shall be considered,
restrictive of, or a waiver of any right of management not listed and not
specifically surrendered herein, whether or not such rights have been exercised
by the Company in the past. Included in the rights of management, but not
limited thereto, is the right of the Company to manage the plant; to direct the
working force; to determine the working force; to plan, direct or control
operations; to determine the work to be done in the plant; to determine the
products to be manufactured in the plant; to transfer or discharge employees; to
maintain efficiency of production and/or operations; to introduce new or
improved methods, to introduce new equipment; to decide the nature of equipment
or machinery to be used in the plant and the manning of the same; to automate;
to determine the methods and processes of manufacturing or operations; to
subcontract for such work or service as the Company deems necessary; to schedule
production, to determine the methods of training employees; to determine all
matters concerned with the designing and engineering of products; to determine
the control of raw materials; to determine the methods of material handling and
shipping; to move or transfer any equipment, operation, processes, methods or
products that the Company determines is required.
-1-
<PAGE>
ARTICLE I
RECOGNITION
Section 1. The Employer recognizes LOCAL 377, RWDSU, affiliated with
AFL-CIO, as the sole collective bargaining agent for all of its leadmen,
production, inspection, shipping, maintenance and machine shop employees.
Excluding all non-production employees, e.g. engineering, professional,
administrative, designing, sample-making, clerical ( a term including clerks,
material control clerks, and any other factory office clerical positions),
foremen, assistant foremen, and all supervisory employees who have the authority
to hire, promote, discharge, discipline or otherwise affect changes in the
status of employees or who may effectively recommend such action.
Section 2. Part-time employees may perform bargaining unit work. All
part-time employees who normally work twenty-five (25) hours or more in their
normal work week must make application to join the Union and must pay Union dues
as provided in Article II. A part-time employee working less than twenty-five
(25) hours a week shall not be covered by this Agreement and shall not be
entitled to the benefits hereunder, with the exception of the wage rate provided
in Schedule I, annexed hereto.
ARTICLE II
UNION MEMBERSHIP AND DUES DEDUCTION
Section 1. All employees covered by this Agreement shall be or become
members of the Union on or after the thirtieth (30th) calendar day following the
date of this Agreement or the date of their employment, whichever is later, in
accordance with Article VII, "Seniority," Section "1," and all such employees
shall thereafter maintain their Union membership in good standing with respect
to Union Membership dues and initiation fees for the duration of this Agreement
as a condition of their continued employment. Employees whose probationary
period end after the fifteenth (15th) day of the month will be enrolled in the
Union the following month.
Section 2. (a) The Employer agrees to deduct from the wages earned
during the second (2nd) or third (3rd) week of each month or from the last wages
of an employee leaving the employ of the Company, monthly Union dues for each
employee who has given the Company proper written authorization to make a
deduction.
(b) The Employer agrees to deduct the Union initiation fee
from the wages of any employee who becomes a member of the Union provided
written authorization to do so is given by the employee to the Company.
-2-
<PAGE>
Section 3. All monies deducted by the Employer shall be paid to the
Union on or before the fifteenth (15th) day of the month following that for
which deductions are made.
Section 4. In the event there is a dispute between the Company and the
Union or any member thereof with respect to dues deduction, such dispute shall
be resolved in accordance with the "Grievance Procedure" herein set forth.
ARTICLE III
HOURS OF WORK
Section 1. Eight (8) hours per day, five (5) days per week, and forty
(40) hours per week shall normally constitute the work week. However, this may
be increased or decreased by the Company, as herein set forth after discussion
with the Union representatives, when in the Company's opinion, it is necessary
to do so in order to maintain an efficient operation.
Section 2. (a) The number of shifts and the starting time and the hours
of work per day or per week in each shift shall be fixed from time to time
solely by the Employer after discussion with the Union with respect thereto, and
hours per day or per week so fixed shall be considered as the normal hours of
work per day or per week. However, no reduction of the work week by more than
one (1) hour per day or, in the alternative, to less than four (4) days per
week, shall be made without the mutual consent of the Company and the Union.
Furthermore, there shall be no reduction of the work week until all part-time
employees have been laid off and while there are employees with less that
eighteen (18) months seniority working in the plant, unless agreed to by the
Company and the Union.
(b) However, not withstanding, the above provisions of
Section 2 (a), a temporary reduction of the work week may be made by the Company
when, in its opinion, it is necessary to do so because of special or unusual
circumstances, such as inventory periods or layoffs or less than one week.
Section 3. The Employer shall have the right to employ part-time
employees and the hours per day or per week at which that part-time employee is
employed shall be considered as the normal hours of work per day or per week of
the said employee.
Section 4. For the purpose of computing the pay of employees, the work
week shall begin at the starting time of the shift which starts immediately
prior to or following midnight Sunday, and shall end at the same time before or
after midnight of the following Sunday.
-3-
<PAGE>
Section 5. Employees shall receive three (3) minutes wash-up time
before lunch and three (3) minutes wash-up time before quitting time. Those
jobs where actual wash-up exceeds said amount, such employees shall receive
additional wash-up time as agreed upon between the Employer
and the Union.
Section 6. The Employer agrees that overtime work will be distributed
fairly and as equally as possible among the permanent employees within the
respective classifications and departments provided the individual employee has
the necessary qualifications and the ability to perform the required overtime
work, irrespective of the shift in which such individual employees work. With
respect to "grievances" under this paragraph, in the event of proven unfair
assignment, the redress shall be limited to the granting of opportunity for the
next available overtime assignment for which the employee is qualified.
Section 7. (a)In the event that an employee reports for work on their
regular shift without having been previously notified not to report to work,
they shall be given a minimum of four (4) hours work; or, if no work is
available, they shall be given four (4) hours pay, except where such
notification is not given by reasons of circumstance wholly beyond the control
of the Employer.
(b) In the event that the plant will be closed because of
reasons beyond the control of the Company, the Employer agrees, wherever
possible, to notify the employees of such closing approximately two (2) hours
before the beginning of the shift or shifts affected through the use of local
telephone answering service which the employee must call. Such notification
shall be deemed compliance with the requirement of notification set forth in
Section (7) (a) above and the Company shall have no liability to provide any
hours of work or pay as heretofore provided in this section.
(c) The Company shall have no liability to provide any
guaranteed work or pay as heretofore required in Section 7 (a) in the event the
lack of work is caused by fire, flood, power or boiler failure, labor dispute,
acts of God, or circumstances beyond the control of the Employer.
ARTICLE IV
RATE OF PAY
Section 1. The Employer agrees to grant an increase of $0.35 per hour
effective 5 December 1997, to all regular employees, members of the bargaining
unit in its employ and on the payroll as of 5 December 1997; and an additional
increase of $0.35 per hour effective 5 December 1998 to all Union employees in
its employ and on the payroll on 5 December 1998; and an additional increase of
$0.35 per hour effective on 5 December 1999 to all Union employees in its employ
and on the payroll on 5 December 1999.
-4-
<PAGE>
Section 2. (a) All occupations are classified into seven (7) labor
grades, the rates of these classifications will remain in effect as listed on
Schedule I, annexed hereto.
(b) New employees shall be hired at not less that the
minimum rates specified in Schedule I for their respective labor grade and will
receive an automatic increase every four (4) months until they reach the maximum
of the labor grade as shown in Schedule I.
(c) An employee to be eligible for an increase must have
worked at least seventy -five (75%) percent of the scheduled working days for
the six (6) month period immediately preceding the date of the automatic
increase. In the event the employee does not meet this requirement due to a
leave of absence or layoff, the due date of the automatic increase will be
advanced by the total number of scheduled work days absent.
(d) For the purpose of arriving at the date on which the
first automatic increase is due, and employee hired during the first three (3)
days of the work week shall be considered to have been hired on the first day of
the work week; and an employee hired during the last two (2) days of the work
week shall be considered to have been hired on the first day of the following
week. For the purpose of arriving at the date of subsequent automatic increases,
the last automatic or merit increase granted will be used to determine the date
of eligibility and according to the day of the week on which this falls, the
guide outlined in the previous sentence will be used.
(e) The Union will be furnished with the job title and labor
grade of all Union employees. Any question regarding an individual's job title
will be resolved between the individual and the foreman. If it is not resolved
on this level it will then follow the Grievance Procedure.
(f) An employee assigned to perform more than one job will
be in the higher classification provided they are required to spend at lease
forty (40%) percent of their time in such classification.
(g) An employee who is given a new job shall be given
instruction and training on any higher classification, and while receiving such
training in the higher classification shall be given the going rate for that
classification. Senior person to be given first choice in any promotion provided
they are qualified to do the job.
(h) When a new job is created, the Union will be immediately
informed regarding the job title and starting rate.
-5-
<PAGE>
(i) In the event the content of the job changes over a
period of time and the hiring rate is changed, the change shall become effective
on the date the Company and the Union agree the job content has been changed
sufficiently to warrant a change in rate.
(j) No changes shall be made in the minimum or maximum
hiring rate of the labor grades during the term of this Agreement. This does not
limit nor prohibit the Company from hiring individual employees at a higher rate
than the minimum, if, in the Company's opinion, it feels it is necessary in
order to secure qualified personnel.
(k) The Union agrees not to interfere with the work
assignment of any employees but will seek redress through proper channels.
Section 3. (a) An employee who works on the second shift shall receive
a ten (10%) percent night shift premium on the base rate for working this shift.
(b) An employee who works on the third shift shall receive a
fifteen (15%) percent night shift premium on the base rate for working this
shift.
Section 4. Any work performed in excess of eight (8) hours per day
shall constitute overtime and shall be paid for at time and one-half the regular
straight time rate. Work performed by the second shift shall be construed as
being worked in the day in which the immediately preceding first shift worked
even though the hours of the later shift run into the calendar Saturday,
Sundays, or holidays. Work performed on Saturday shall be paid for at time and
one-half the regular straight time rate. Work performed on Sunday and/or legal
holidays enumerated herein shall be paid for at double the regular straight time
rates.
Section 5. Should the Employer move the factory outside the Elmwood
Park area, where transportation creates a hardship upon the employees, any
employee deciding to terminate his employment after the Employer had given
formal notice of its intention to move, would receive as severance whatever
vacation pay he had accumulated on a pro-rated basis.
ARTICLE V
HOLIDAY PAY
Section 1. The following shall be deemed legal holidays:
New Year's Eve Labor Day
New Year's Day Thanksgiving Day
Washington's Birthday Friday after Thanksgiving
Memorial Day Christmas Eve
Fourth of July Christmas Day
-6-
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Section 2. (a) Union members shall be paid for the above holidays on
which no work shall have been performed at their regular straight time hourly
rates, for their normal work day or fraction thereof, where indicated, provided,
however, that the employee is on the payroll and actually worked the full
working day preceding and the first full working day following such holiday.
Employees who are absent may qualify for such pay upon presentation of valid
reason for absence from work, such as a doctor's note for illness. Determination
of qualification shall be at the Employer's discretion.
(b) Union member to be notified in advance of a close-down
by the Company two (2) days before a said holiday.
Section 3. Union members who are on leave of absence or on layoff on
any of the aforementioned holidays are not entitled to receive pay for paid
holiday, except that an employee who is laid off due to lack of work or is
recalled from layoff shall be entitled to receive pay for any of the
aforementioned holidays which fall within the week during which the employee is
laid off or recalled.
Section 4. Employees will be entitled to two (2) floating holidays.
Employees with two (2) years or service as of their anniversary date of hire
will be entitled to one (1) additional floating holiday. Floating holidays may
be taken at the individual employee's option on three (3) days notice to the
Company except in case of an emergency. The Employer may deny an employee
request to take a specific day off if too many employees request the same day
off and production would be affected in which case requests for the day off will
be granted by seniority up to the maximum number of employees the Company may
excuse. Floating holidays may be used for sickness without prior notice. Any
unused floating holidays will be paid after June 30th each year.
ARTICLE VI
VACATION PAY
Section 1. (a) Vacation pay shall be computed at two (2%) percent of
the employee's earnings for the fiscal year ending at July 1st, provided,
however, that he shall have worked for at least three (3) months during the
aforesaid year. In the event that an employee shall have worked at least
forty-three (43) weeks in the year, the minimum vacation pay shall be forty (40)
hours at his base rate.
(b) In addition, an employee who was hired three (3) years
prior to June 30th, of the vacation year, will receive and additional amount
equal to the amount computed in paragraph (a) above, but not less than forty
(40) hours pay at his base rate in effect at July 1st.
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(c) An employee hired five (5) years or more prior to June
30th of the vacation year will receive a third week's vacation pay computed as
in paragraph (a) above.
(d) An employee hired fifteen (15) years or more prior to
June 30th of the vacation year will receive a fourth week's vacation pay
computed as in paragraph (a) above.
(e) An employee terminated for just cause within six (6)
months of a vacation year will not be paid any vacation ( see Article XI,
Section 4).
Section 2. Employees who have been continuously employed by the Company
for three (3) months or more and who are on layoff as of July 1st of any
calendar year, shall receive a pro-rata vacation pay based upon the time
actually worked in the fiscal year ending July 1st, which payment shall be made
to the employees at the normal vacation time.
Section 3. Vacation shall be scheduled at the convenience of the
Employer some time during June, July or August. Vacation pay shall be
distributed in advance. Employees entitled to three (3) or four (4) weeks
vacation pay may take their third and/ or fourth week of vacation at any time
during the calendar year provided, however, such scheduling shall be done at the
discretion of management in order not to interfere with the efficient operation
of the plant. If two (2) employees select the same vacation time and if
management is willing to permit only one (1) employee to take vacation at that
time, seniority shall prevail. Vacation shut-down dates will be posted on the
bulletin board by June 15th of each year.
ARTICLE VII
SENIORITY
Section 1. (a) An employee hired on or after the date of this Agreement
shall be a probationary employee until they have been employed for ninety (90)
calendar days. During their probationary period they shall be entitled to no
seniority and the discharge of a probationary employee during such period shall
not constitute a cause for grievance. Not more than five (5) working days
absence for any reason shall be credited for the purpose of computing the
probationary period while absent. At the end of their probationary period, or on
any rehiring, the date of their most recent hiring shall become their seniority
date. For purposes of seniority, this paragraph shall apply to an employee who
quits or is discharges or otherwise loses their seniority and is subsequently
rehired. Employees successfully completing their probationary period will be
required to pay Union dues for the last thirty (30) days of their probationary
period.
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(b) The Employer shall have the right to extend the
probationary period of any employee for thirty (30) calendar days with the
agreement of the Union Chairperson.
Section 2. (a) Employees working less than eight (8) hours per day,
forty (40) hours per week, regardless of their seniority, will be the first to
be laid off when reduction of force occurs.
(b) In case of layoff, seniority shall be on a plant wide
basis, irrespective of shift, with the exception of part-time workers, provided
only that the employees retained shall have the skill and ability to do work to
the satisfaction of the Company.
(c) No new employees shall be hired for any job until a
laid-off person having the ability to perform the work has been offered the
opportunity.
(d) No new employees shall be hired in any department unless
all employees entitled to seniority hereunder are working a full forty (40) hour
week.
Section 3. Seniority rights shall be broken when an employee:
(a) Quits Voluntarily,
(b) is discharged,
(c) after a layoff, fails to report to work within three (3)
days after mailing of the notice to return to work to last address furnished by
the employee,
(d) fails to return to work after a leave of absence is up,
(e) is laid off for a period of nine (9) months or more.
Section 4. (a) The number of Union representatives, in addition to the
Union Chairperson, shall not exceed three (3%) percent of the Union employees on
the payroll.
(b) The Shop Chairperson shall have top seniority in the
plant.
(c) The Union Steward shall have top seniority in the
section in which the Steward is employed.
(d) There shall be at lease one (1) Union Steward in the
plant at all times when eight (8) or more Union workers are working, excluding
the Maintenance Department.
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ARTICLE VIII
LAYOFFS
Section 1. The Employer agrees to notify the Shop Chairperson
twenty-four (24) hours in advance when a layoff for a period on more than one
(1) week is contemplated by the Employer; failing which the employee concerned
shall be given one (1) day's pay at his straight time hourly rate.
Section 2. It is expressly understood and agreed that the Employer has
the right in its discretion to lay off any employee or number of employees when
business conditions make such layoff necessary, subject to provisions in this
Agreement. In the operation seniority, it is agreed that the Employer will apply
seniority rights with respect to layoffs and rehiring within the plant as
provided in the immediately preceding article. The Employer shall have no
obligation to permit an employee to bump into a job where the employee does not
have the qualifications to perform said job, subject to an employee's right to
grieve on the issue of his qualifications. In the event of a layoff there can be
only one (1) "bump." The employee bumped will be the least senior employee in
the classification in which the bump occurs and said employee being bumped will
himself have no bumping rights.
Section 3. Seniority as to recall will operate in the same manner as
layoff.
Section 4. The Shop Chairperson shall be notified on all recalls.
Section 5. An employee who is recalled after a layoff and accepts a job
in a lower classification will automatically be transferred back with the same
rate of pay in his own classification whenever his job becomes available.
Section 6. The Employer will provide the Union with a seniority list on
a quarterly basis (wage rates will not be set forth on the list.)
ARTICLE IX
TRANSFERS
Section 1. The Employer shall at all times have the right to transfer
any employee from one department to another department and an employee so
transferred shall carry his accumulated seniority with him into the department
to which he has been transferred and so employee's seniority rights shall be
reduced because of any such transfer and no discharge shall result solely
because of such transfer.
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Section 2. The moving of employees within a classification in a
department shall not be considered a transfer and will be made whenever
necessary for the efficient operation of the department. Any employee who
refuses to accept an assignment to another job in the same classification in a
department offered to them shall be deemed to have quit.
Section 3. It is agreed that due to special conditions prevailing in
the shop in the closing down of/ or disbanding of any department, the Employer
may transfer an employee from a higher skilled department to which they are
transferred. Such transfer, however, shall take place by agreement with the
Union representative, and also by agreement with the employee or employees in
question.
Section 4. It is agreed that such employee whose wages have been
reduced because of a transfer shall have first preference to return to his
original department from which he was transferred when there is sufficient work
in such department.
Section 5. Union job openings will be posted on the bulletin board.
Union employees who have the necessary qualifications will be interviewed and if
found acceptable, will be given the job on a thirty (30) day trial basis.
ARTICLE X
LEAVE OF ABSENCE
Section 1. There shall be no loss of seniority as a result of an
approved leave of absence. The following will govern the granting of leaves of
absence:
(a) Leave of absence will be granted without pay.
(b) Maximum leave of absence will be six (6) weeks.
(c) In order to qualify for a leave of absence, an employee
must have had one (1) year of service with the Company.
(d) At least one (1) year must elapse between successive
leaves of absence, except if the leave is due to medical reasons.
(e) An employee who fails to return to work after the
stipulated time of his leave of absence shall be subject to discharge.
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(f) An employee who is ill or injured and presents
satisfactory proof of such illness or injury to the Employer will be granted a
leave of absence as provided in the terms set forth in the preceding paragraphs
for a period not to exceed sixty (60) days. Such leave of absence may be
extended by the Employer for additional periods of time not to exceed sixty (60)
days in any instance, if at the expiration of such leave or extension thereof,
the employee continues to be unable to return to work but under normal
circumstances should be able to do so within a reasonable period, and provided
further that he notifies the Employer in writing by registered mail to that
effect at least five (5) calendar days prior to expiration of such leave of
absence.
(g) An employee who sustains a compensable injury or who
acquired an occupational disease which originates in the Employer's plant will
be granted a leave of absence automatically for the full period of legal
temporary disability.
(h) An employee who engages in gainful employment during a
leave of absence, except when such leave is expressly granted for such purpose,
shall be deemed to have quit.
(i) An employee shall be subject to immediate dismissal for
falsifying any reason given to the Company for leave of absence.
(j) Anything herein to the contrary not with-standing,
employees will be entitled to the benefits of the State of New Jersey family
Leave Act of the Federal Family and Medical Leave Act, whichever Act provides
the greater benefit.
Section 2. The Employer agrees that in the event an employee is elected
to full time office in the Union, such employee shall be granted a leave of
absence for the duration of their term of office and shall be reinstated without
loss of seniority upon the expiration of their term of office.
Section 3. In the event that any regular employee shall enter into or
be drafted into the armed forces of the United States, it is agreed that they
shall be granted a leave of absence for the duration of their service, and it is
further agreed that such employee shall, at the conclusion of the period of
service provided that are physically equipped to perform their duties, and
provided that they apply within sixty (60) days after their discharge, be
re-employed without loss of seniority or other rights and be reinstated to their
former position or one equivalent to it as a regular employee at the then
prevailing rate of wages for such position. It is further understood and agreed
that any new employee who is engaged to take the place of an employee who
entered the armed forces of the United States may be discharged upon the
rehiring of the former employee.
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Section 4. (a) In the event of the death of an employee's husband,
wife, parent, brother, sister, or child, they will be granted a maximum of three
(3) day leave of absence starting from time of death, with pay at their normal
straight time earnings, for any regularly scheduled work days lost, to take care
of the funeral arrangements and attend the funeral of the deceased, upon
delivery of proof satisfactory to the Company of such death, provided they shall
have had at least one (1) year's service with the Company.
(b) In the event of the death of an employee's grandparent,
mother-in-law, father-in-law, brother-in-law, sister-in-law, stepmother,
stepfather, stepchild, stepbrother, stepsister, they will be granted a one (1)
day leave of absence with pay at their normal straight time earning for actual
time lost for a scheduled work day, to attend the funeral upon delivery of proof
satisfactory to the Company of such death, provided they shall have had at least
one (1) year's service with the Company.
(c) Employees on vacation, leave of absence, or on layoff,
will not be paid for the above sections 4(a) or 4(b).
Section 5. (a) In the event an employee is summoned for jury duty, they
will be granted a two (2) week leave of absence and will be paid, up to a
maximum of two (2) weeks, the difference between jury pay and their regular
straight time pay for their normal work week, provided they have had at least
one (1) year's service with the Company.
(b) Employees on vacation, leave of absence, or on layoff,
will not be paid for the above section 5(a).
ARTICLE XI
DISCHARGE
Section 1. Any employee absent from work for three (3) consecutive
working days without notification of such absence to the Personnel Department
will automatically be removed from the payroll of the Employer and lose all
seniority rights. An employee must have a satisfactory reason for any day of
absence.
Section 2. Any employee requesting relief from a work assignment, due
to physical conditions, must upon the Employer's request, submit to a physical
examination by a physician. If, on the basis of the doctor's report, the Company
determines that the employee is physically able to perform the work assignment,
the employee will be so informed. Refusal to perform the work assigned will
result in the automatic termination of the employee.
Section 3. Excessive absenteeism or lateness will result in dismissal,
after at least one (1) warning slip has been issued to the employee, and notice
been given to the Union Chairperson.
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Section 4. The Employer reserves the right to discharge an employee for
any just cause or reason. Included in the right to discharge, but not limited to
the foregoing authority, the parties agree that inefficiency, loitering after
warning, drinking, gambling or bookmaking on the Company premises, or crimes
committed off the Company premises shall be cause for discharge under this
provision. It is understood that in the event a person is accused of a crime
committed off Company premises, the party will be suspended without pay or
benefits until the disposition of the criminal proceedings when the final
disciplinary action will be determined, provided, however, that if the Union
claims that the discharge was unjust or not for reasonable cause, the matter
shall be submitted for arbitration in the manner provided for in this Agreement.
ARTICLE XII
DEPARTMENTAL SUPERVISORS
Section 1. The Employer reserves the right to have Assistant Foreman
perform whatever type work it deems necessary for efficient operation of the
department.
Section 2. An employee upgraded to a position, Assistant Foreman,
outside the bargaining unit, and for any reason returned to a position within
the bargaining unit within a period of one (1) year from the date they were
upgraded, shall be reinstated in the Union with full seniority rights from their
original date of hire.
ARTICLE XIII
HOSPITALIZATION AND INSURANCE
Section 1. (a) The Employer agrees to provide, at its expense, (as
specified in Section 1 (b), a benefit plan (Local 377 Group Health Plan) for
each employee, provided said employee meets the eligibility requirements as
specified in the subject plan.
(b) The Employer agrees to pay $255.00 per month beginning 5
December 1997 for each employee for the entire term of this Agreement, i.e.,
three (3) years, December 5, 1997 to December 4, 2000.
Section 2. The Employer agrees to provide, at its expense, a group life
insurance plan providing a Three Thousand Dollar ($3,000.00) coverage for each
employee, provided said employee shall have six (6) months service with the
Company.
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ARTICLE XIV
GRIEVANCE PROCEDURE
Any dispute, difference, or grievance which may arise concerning any of
the provisions, terms or interpretations of this Agreement shall be submitted
within two (2) working days of its occurrence by the Union or employee affected
to the Company for settlement between the Union Steward and the Foreman, or be
forever barred. If no agreement is reached within two (2) additional working
days, it shall be referred to the Union representatives and the representative
of Management. If the Union is not satisfied with the answer given by the
Company, it must serve written notice to appeal within ten (10) working days. If
timely notice of appeal to arbitration is not given, the matter is closed and
the Company's answer is final. If timely notice of appeal to arbitration is
served, the parties shall endeavor to select an arbitrator mutually satisfactory
to them. In the event the parties cannot agree on a mutually satisfactory
arbitrator within five (5) working days, either party may request the New Jersey
State Board of mediation to submit a panel of arbitrators in accordance with its
rules and practices. The arbitrator shall then be selected in accordance with
the rules and regulations of the New Jersey State Board of Mediation and the
issue in dispute shall be submitted to him for final determination.
The arbitrator may provide for reinstatement of any discharged
employee, either with or without pay as the arbitrator may determine, or may
sustain a discharge, or may otherwise determine any other question referred to
him. In the event of any back pay award, there shall be deducted from the same
any employee earnings elsewhere, as determined in accordance with National Labor
Relations Board standards.
The arbitrator shall not have the authority to alter, modify, add to or
subtract from, any of the terms or provisions of the Agreement.
The fee of the arbitrator shall be shared equally by the Company and
the Union. All other expenses of the arbitration shall be paid by the party
incurring the same.
No individual employee or employees shall have the right to request
arbitration under this Agreement.
In the event there were two (2) Stewards or one (1) Steward and one (1)
Chairperson in the same department, only one (1) will be released at any one
time to process grievances.
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ARTICLE XV
INTERFERENCE, DISCRIMINATION, COERCION
This contract is the full agreement and the Employer shall not enter
into any private agreement with any of its employees whereby any of the
provisions of this Agreement may or shall be violated, waived or modified. Any
and all such agreements shall be null and void and of no effect.
ARTICLE XVI
NO STRIKES, LOCKOUTS
During the term of this Agreement, the Employer shall not lock out and
the Union agrees that neither it nor any of its representatives, stewards,
covered employees or members will sanction, authorize or engage in any strike,
slowdown, stoppage or interference with work; but should such unauthorized
suspension or stoppage or interference with work take place, the Union and its
agents shall make every effort to restore and resume normal operations
forthwith. The Employer agrees that it will not sue or claim money damages from
the Union by reason of any unsanctioned or unauthorized strike or suspension of
work, provided the Union has reasonably endeavored to have work resumed.
ARTICLE XVII
MISCELLANEOUS
Section 1. Any provisions of this Agreement which are in conflict with
any law, executive or governmental, city or state regulations, order or
directive, now or hereafter in existence, shall be suspended as long as such
conflict exists.
Section 2. No payroll deduction shall be made for any purpose
whatsoever except as specifically required by federal, state and/or municipal
law, or as hereinabove specified, or unless authorized in writing by the
employee in question and agreed to by the Employer. Nothing herein contained,
however, shall be construed to prevent reasonable regulations for deductions in
case an employee is late in reporting for work.
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Section 3. Unless an employee is hospitalized, employees absent from
work must call in by 8:30 A.M. on a daily basis or they will be subject to the
progressive discipline set forth in Article XI, Section 3.
Section 4. The Employer will provide two (2) First Aid Kits for the
production area of the plant, one to be placed at each end of the production
area.
ARTICLE XVIII
SECURITY
Section 1. In the event that a government agency concerned with
security regulations applicable to the Employer advises the Employer to restrict
any member of the Union from work on or access to classified information or
material, the Union will not hold the Employer responsible for such action as
the Employer may reasonably take to comply with its contractual obligations to
the customer working on contracts for the government.
Section 2. The Union recognizes that the Employer has certain
obligations under the law pertaining to security and in its contracts with
vendors doing government work as required by the security regulations of the
armed forces, and agrees that nothing contained in this Agreement is intended to
place the Employer in violation of such law pertaining to security or its
security agreements with the government.
ARTICLE XIX
TERM OF AGREEMENT
THIS AGREEMENT shall remain in full force and effect and shall be
binding upon the parties and successors until midnight 4 December 2000, and
shall be considered automatically renewed from year to year thereafter unless at
least sixty (60) days prior to the end of any effective period either party
shall serve written notice upon the other by registered mail that it desires to
modify or terminate this Agreement.
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IN WITNESS WHEREOF, the parties hereto set their hands and seals the
day and year first above written.
KREISLER INDUSTRIAL CORPORATION LOCAL 377, RWDSU, AFL-CIO
/s/ EDWARD A. STERN /s/ DANIEL GOUGH
- ------------------- ----------------
Secretary Treasurer
COMMITTEE:
/s/ ROBERT D. OWENS
-------------------
/s/ RICHARD HARRAKA
-------------------
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EFFECTIVE 5 DECEMBER 1997
SCHEDULE I
LABOR GRADE "B"
Minimum $5.15 per hour with an increase of $.05 per hour after thirty
(30) days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $11.80 per hour.
The following jobs are in "B" Classification:
General Machine Operator - (including chamfering, swedging,
drill press, tube cutter)
Solder Remover
Pressure & Flow Tester
Induction Brazer
Identification
Moveman
Shipping/Receiving Clerk
Porter
Furnace Assembler
Cap and Wrap
LABOR GRADE "C"
Minimum $5.25 per hour with an increase of $.05 per hour after thirty
(30) days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $11.90 per hour.
The following jobs are in "C" Classification:
Chemical Cleaner
DeBurrer
Tube Bender
Final Assembly Inspector
LABOR GRADE "D"
Minimum $5.40 per hour with an increase of $.05 per hour after thirty
(30) days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $12.05 per hour.
The following jobs are in "D" Classification:
Adjustor
Torch Brazer
Fluorescent Penetrant Operate & Set-Up
Plater
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LABOR GRADE "E"
Minimum $5.65 per hour with an increase of $.05 per hour after thirty
(30) days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $12.30 per hour.
The following jobs are in "E" Classification:
Machinist - 2nd Class
Vendor's Inspector
Leadman
Truck Driver
X-Ray Technician
Process Inspector
Ultrasonic Technician
LABOR GRADE "F"
Minimum $5.90 per hour with an increase of $.05 per hour after thirty
(30) days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $12.80 per hour.
The following jobs are in "F" Classification:
Furnace Operator
General Maintenance Man
X-Ray Reader
Set-Up Man
LABOR GRADE "G"
Minimum $6.15 per hour with an increase of $.05 per hour after thirty
(30) days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $13.05 per hour.
The following jobs are in "G" Classification:
CNC Machine Set-Up
Machinist 1st Class
Experimental Machinist
Turret Lathe Set-Up and Operator
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LABOR GRADE "H"
Minimum $6.40 per hour with an increase of $.05 per hour after thirty
(30) days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $13.55 per hour.
The following jobs are in "H" Classification:
Tool and Die Maker
Toolmaker
Layout Inspector
Welder
LEADMAN: In the event the Company establishes a Leadman in any
classification in any labor grade, it is agreed the rate of the Leadman should
be ten (10%) percent above their then current hourly rate, said payment to
commence upon the completion of a thirty (30) day trial period in the Leadman
Classification.
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EFFECTIVE 5 DECEMBER 1998
SCHEDULE I
LABOR GRADE "B"
Minimum $5.15 per hour with an increase of $.05 per hour after thirty
(30) days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $12.15 per hour.
The following jobs are in "B" Classification:
General Machine Operator - (including chamfering, swedging,
drill press, tube cutter)
Solder Remover
Pressure & Flow Tester
Induction Brazer
Identification
Moveman
Shipping/Receiving Clerk
Porter
Furnace Assembler
Cap and Wrap
LABOR GRADE "C"
Minimum $5.25 per hour with an increase of $.05 per hour after thirty
(30) days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $12.25 per hour.
The following jobs are in "C" Classification:
Chemical Cleaner
DeBurrer
Tube Bender
Final Assembly Inspector
LABOR GRADE "D"
Minimum $5.40 per hour with an increase of $.05 per hour after thirty
(30) days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $12.40 per hour.
The following jobs are in "D" Classification:
Adjustor
Torch Brazer
Fluorescent Penetrant Operate & Set-Up
Plater
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LABOR GRADE "E"
Minimum $5.65 per hour with an increase of $.05 per hour after thirty (30) days
anautomatic increases of $.10 per hour every four (4) months until reaching
maximum rate of $12.65per hour.
The following jobs are in "E" Classification:
Machinist - 2nd Class
Vendor's Inspector
Leadman
Truck Driver
X-Ray Technician
Process Inspector
Ultrasonic Technician
LABOR GRADE "F"
Minimum $5.90 per hour with an increase of $.05 per hour after thirty
(30) days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $13.15 per hour.
The following jobs are in "F" Classification:
Furnace Operator
General Maintenance Man
X-Ray Reader
Set-Up Man
LABOR GRADE "G"
Minimum $6.15 per hour with an increase of $.05 per hour after thirty
(30) days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $13.40 per hour.
The following jobs are in "G" Classification:
CNC Machine Set-Up
Machinist 1st Class
Experimental Machinist
Turret Lathe Set-Up and Operator
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LABOR GRADE "H"
Minimum $6.40 per hour with an increase of $.05 per hour after thirty
(30) days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $13.90 per hour.
The following jobs are in "H" Classification:
Tool and Die Maker
Toolmaker
Layout Inspector
Welder
LEADMAN: In the event the Company establishes a Leadman in any
classification in any labor grade, it is agreed the rate of the Leadman should
be ten (10%) percent above their then current hourly rate, said payment to
commence upon the completion of a thirty (30) day trial period in the Leadman
Classification.
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EFFECTIVE 5 DECEMBER 1999
SCHEDULE I
LABOR GRADE "B"
Minimum $5.15 per hour with an increase of $.05 per hour after thirty
(30) days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $12.50 per hour.
The following jobs are in "B" Classification:
General Machine Operator - (including chamfering, swedging,
drill press, tube cutter)
Solder Remover
Pressure & Flow Tester
Induction Brazer
Identification
Moveman
Shipping/Receiving Clerk
Porter
Furnace Assembler
Cap and Wrap
LABOR GRADE "C"
Minimum $5.25 per hour with an increase of $.05 per hour after thirty
(30) days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $12.60 per hour.
The following jobs are in "C" Classification:
Chemical Cleaner
DeBurrer
Tube Bender
Final Assembly Inspector
LABOR GRADE "D"
Minimum $5.40 per hour with an increase of $.05 per hour after thirty
(30) days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $12.75 per hour.
The following jobs are in "D" Classification:
Adjustor
Torch Brazer
Fluorescent Penetrant Operate & Set-Up
Plater
-25-
<PAGE>
LABOR GRADE "E"
Minimum $5.65 per hour with an increase of $.05 per hour after thirty
(30) days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $13.00 per hour.
The following jobs are in "E" Classification:
Machinist - 2nd Class
Vendor's Inspector
Leadman
Truck Driver
X-Ray Technician
Process Inspector
Ultrasonic Technician
LABOR GRADE "F"
Minimum $5.90 per hour with an increase of $.05 per hour after thirty
(30) days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $13.50 per hour.
The following jobs are in "F" Classification:
Furnace Operator
General Maintenance Man
X-Ray Reader
Set-Up Man
LABOR GRADE "G"
Minimum $6.15 per hour with an increase of $.05 per hour after thirty
(30) days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $13.75 per hour.
The following jobs are in "G" Classification:
CNC Machine Set-Up
Machinist 1st Class
Experimental Machinist
Turret Lathe Set-Up and Operator
-26-
<PAGE>
LABOR GRADE "H"
Minimum $6.40 per hour with an increase of $.05 per hour after thirty
(30) days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $14.25 per hour.
The following jobs are in "H" Classification:
Tool and Die Maker
Toolmaker
Layout Inspector
Welder
LEADMAN: In the event the Company establishes a Leadman in any
classification in any labor grade, it is agreed the rate of the Leadman should
be ten (10%) percent above their then current hourly rate, said payment to
commence upon the completion of a thirty (30) day trial period in the Leadman
Classification.
-27-
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
SHARES
------
Basic Shares outstanding at June 30, 1998 1,942,048
---------
NET PROFIT AFTER TAX $ 1,548,158 = $ .80 per share
-------------------- -----------
Basic Shares outstanding 1,942,048
Diluted Shares outstanding at June 30, 1998 2,040,737
---------
NET PROFIT AFTER TAX $ 1,548,158 = $ .76 per share
-------------------- -----------
Diluted Shares outstanding 2,040,737
EXHIBIT 13
1998 ANNUAL REPORT
KREISLER MANUFACTURING CORPORATION
<PAGE>
To Our Stockholders
Fiscal year ended June 30,1998 Kreisler Manufacturing Corporation
reached a record level for the second consecutive year. The excellent
performance by its principal and only operating unit, Kreisler Industrial
Corporation, established records for both earnings and revenues. The dramatic
fifty-nine percent increase in earnings and thirty eight percent increase in
revenue compared to the record prior year is enhanced by the backlog increase to
fourteen million dollars.
Over the past two years the company has benefited from net operating
loss carryforwards; this coming year these benefits no longer exist. Operating
income will continue to improve but net income will be affected by the combined
forty percent federal and state tax rate.
The aerospace markets are dominated by a small number of large
manufacturers. General Electric, Pratt & Whitney and Rolls Royce accounted for a
substantial portion of the worldwide supply of large aircraft engines. Over the
past two years Kreisler's average growth rate has exceeded fifty percent per
year. This past year we have made progress in broadening our customer base. This
coming year we must continue to focus on marketing, sales and diversifying our
product development capabilities. The strategic plan is to achieve more balance
in our customer base.
Kreisler's goal is to build shareholder value via expanded marketing
and sales growth and increased productivity and competitiveness.
Over the past two years Kreisler has recovered from five years of
losses by changing its operating management, improving manufacturing systems,
enhancing product quality, meeting shipping schedules and re-establishing
credibility with our customers. It now seeks a similar approach to expand its
marketing efforts as it did with its manufacturing systems. It will continue to
increase its market presence in its core competencies and look for opportunities
in other markets.
Our trading volume has increased significantly in fiscal year 1997-1998
and our stock value has escalated substantially since the fall of last year.
Stockholder equity has increased 35% (thirty-five percent) this past year.
Earnings per share has increased 60% (sixty percent) compared to the same period
in the prior year.
A special word of appreciation is due this year to the officers and
employees of Kreisler Industrial Corporation who often, at considerable personal
sacrifice, completed a demanding year of record performance. I express sincere
thanks for their contribution in 1998 and best wishes for the months ahead in
1999.
Yours Sincerely,
Edward L. Stern
CHAIRMAN OF THE BOARD AND PRESIDENT
September 24, 1998
<PAGE>
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $1,909,048 $ 691,916
Certificates of deposits - current 587,609 --
Accounts receivable - trade 2,456,788 1,609,913
Inventories 1,945,800 1,822,570
Deferred tax asset 125,700 300,000
Other current assets 28,056 22,987
---------- ----------
Total Current Assets
7,053,001 4,447,386
---------- ----------
Certificates of deposit -- 554,934
Property, plant and equipment, at cost less accumulated
depreciation of $2,809,552 for 1998 and $2,724,581 for 1997 322,857 197,246
---------- ----------
7,375,858 $5,199,566
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable - trade $ 756,057 $ 552,959
Accrued expenses 599,252 174,216
---------- ----------
Total Current Liabilities $1,355,309 727,175
---------- ----------
Stockholders' Equity
Common Stock, $.125 par value for 1998 and .50 par value for 1997 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 1,571,703 1,571,703
Retained earnings 4,206,090 2,657,932
---------- ----------
Total Stockholders' Equity 6,020,549 4,472,391
---------- ----------
$7,375,858 $5,199,566
---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS
1
<PAGE>
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE YEARS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES $ 13,025,631 $ 9,402,005 $ 5,703,865
------------ ------------ ------------
Cost of goods sold 10,824,630 8,513,738 6,441,227
Selling, general and administrative expenses 437,514 282,221 282,962
------------ ------------ ------------
11,262,144 8,795,959 6,724,189
------------ ------------ ------------
Income (loss) from operations 1,763,487 606,046 (1,020,324)
Other income:
Interest and other earnings 101,971 69,864 103,837
(Loss) on investments -- -- (6,432)
------------ ------------ ------------
Income (loss) before income taxes 1,865,458 675,910 (922,919)
Income tax (expense) benefit (317,300) 295,000 --
------------ ------------ ------------
Net Income (loss) $ 1,548,158 $ 970,910 $ (922,919)
------------ ------------ ------------
Earnings per share:
Net Income (loss) basic shares $ .80 $ .50 $ (.48)
Net Income (loss) diluted shares .76 .50 (.48)
------------ ------------ ------------
</TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
ADDITIONAL HOLDING GAINS TOTAL
COMMON PAID-IN RETAINED TREASURY ON AVAILABLE-FOR STOCKHOLDERS'
STOCK CAPITAL EARNINGS STOCK SALE SECURITIES EQUITY
----------- ------------- ----------- ----------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE JUNE 30, 1995 $ 411,726 $ 2,667,377 $ 5,021,979 $(3,676,682) $ 3,088 $ 4,427,488
Net loss -- -- (922,919) -- -- (922,919)
Retirement of treasury stock (168,970) (1,095,674) (2,412,038) 3,676,682 -- --
Recognition of gain upon sale -- -- -- -- -- --
of available-for-sale securities -- -- -- -- (3,088) (3,088)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE JUNE 30, 1996 242,756 1,571,703 1,687,022 -- -- 3,501,481
Net profit -- -- 970,910 -- -- 970,910
----------- ----------- ----------- ----------- ----------- -----------
BALANCE JUNE 30, 1997 242,756 1,571,703 2,657,932 -- -- 4,472,391
Net Profit -- -- 1,548,158 -- -- 1,548,158
----------- ----------- ----------- ----------- ----------- -----------
BALANCE JUNE 30, 1998 $ 242,756 $ 1,571,703 $ 4,206,090 -- -- $ 6,020,549
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS
2
<PAGE>
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,548,158 $ 970,910 $ (922,919)
Adjustments to reconcile net income to
cash provided (used) by operating activities:
Depreciation and amortization 84,970 59,509 59,576
Gain on sale of assets -- (1,000) (8,269)
Increase) decrease in operating assets:
Accounts receivable - trade (846,875) (718,553) 123,002
Inventories (123,230) (248,956) (404,776)
Other current assets (5,068) (1,154) 16,201
Deferred tax asset 174,300 (300,000) --
Increase(decrease) in operating liabilities:
Accounts payable - trade 203,097 151,063 258,078
Accrued expenses 425,037 (25,715) 34,084
----------- ----------- -----------
Net adjustments (87,769) (1,084,806) 77,896
----------- ----------- -----------
Cash provided (used) by operating activities 1,460,389 (113,896) (845,023)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments and certificates of deposit (32,676) (29,590) (556,124)
Proceeds from sale of investments and redemption of
certificates of deposit -- 300,000 1,418,532
Purchase of property, plant and equipment (210,581) (52,661) (38,276)
Proceeds from sale of equipment -- 1,000 --
----------- ----------- -----------
Cash provided (used) by investing activities (243,257) 218,749 824,132
Increase (decrease) in cash and cash equivalents 1,217,312 104,853 (20,891)
Cash and cash equivalents at beginning of year 691,916 587,063 607,954
----------- ----------- -----------
Cash and cash equivalents at end of year $ 1,909,048 $ 691,916 $ 587,063
----------- ----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS
3
<PAGE>
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
OPERATIONS
Kreisler Manufacturing Corporation (the "Company") fabricates precision metal
components and assemblies primarily for aircraft engines with both military and
commercial applications. These products include tube assemblies of multiple
sizes and configuration, vane inserts, and blade locks.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Kreisler
Manufacturing Corporation and its subsidiaries, all of which are wholly owned.
Intercompany transactions and accounts have been eliminated.
STOCK SPLIT
On December 2, 1997, the Company declared a 4 for 1 stock split on its common
stock. All share-related data in these consolidated financial statements have
been adjusted retroactively to give effect to these events as if they occurred
at the beginning of the earliest period presented.
ACCOUNTS RECEIVABLE
The accounts receivable is net of an allowance for uncollectible accounts of
$8,600 for 1998 and 1997.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost less accumulated
depreciation. Maintenance and repairs, which do not improve efficiency or extend
the useful life, are charged to operations as incurred. Asset and related
accumulated depreciation amounts are relieved from the accounts for retirements
or dispositions. Resulting gains or losses are reflected in earnings.
Depreciation is computed using accelerated methods over the estimated useful
lives three to ten years for machinery and equipment while the straight line
method is used over the term of leases for building improvements.
STOCK BASED COMPENSATION
In October 1995, the FASB issued SFAS No.123 "Accounting for Stock-Based
Compensation" (FASNo.123) which provides companies an alternative to accounting
for stock-based compensation as prescribed under APB Opinion No. 25 (APB25) FAS
No. 123 encourages but does not require companies to recognize expense for stock
based awards based on their fair market value at date of grant. Statement 123
allows companies to continue to follow existing accounting rules (intrinsic
value method under APB 25) provided that pro-forma disclosures are made of what
net income and earnings per share would have been had the new fair value method
been used. The Company has elected to adopt the disclosure requirements of FAS
No. 123 but will continue to account for stock-based compensation under APB 25.
INVENTORIES
Inventories are stated at the lower of cost or market, cost being determined on
a first-in, first-out basis.
INCOME TAXES
The Company accounts for its income taxes in accordance with FASB Statement No.
109, "Accounting for Income Taxes" (FAS No. 109), which requires the
establishment of a deferred tax asset or liability for the recognition of the
tax effect of future deductible or taxable amounts, operating loss, or tax
credit carryforwards. Deferred tax expense or benefit is recognized as a result
of the changes in the deferred assets and liabilities during the year. Future
tax benefits, such as net operating loss carryforwards, are recognized to the
extent that realization of such benefits are more likely than not.
EARNINGS PER SHARE
The Company adopted Statement of Financial Accounting Standards No. 128
"Earnings per Share" ("SFAS128") during 1998, which requires disclosure of basic
and diluted earnings per share. Under the new standard, basic earnings per share
is computed as earnings divided by weighted average shares outstanding. Diluted
earnings per share includes the dilutive effects of stock options and other
potentially dilutive securities. All prior period disclosures have been restated
to conform with current year presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
4
<PAGE>
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
2. CASH AND CASH EQUIVALENTS
The Company classifies all highly liquid investments with an initial maturity of
three months or less as cash equivalents.
3. CONCENTRATION OF CREDIT RISK
The Company maintains cash balances and certificates of deposit at several
financial institutions. Accounts at each institution are insured by the Federal
Deposit Insurance Corporation up to $100,000. Uninsured balances at one
institution totaled $1,628,305, and $422,000 at June 30, 1998, and 1997,
respectively. The Company has not experienced any losses in such accounts and
believes it is not exposed to any significant credit risk on cash and cash
equivalents.
4. INVENTORIES
Inventories consist of the following at June 30:
1998 1997
---------- ----------
Raw materials $1,441,560 $1,232,044
Work in process 412,500 528,880
Finished goods 91,740 61,646
---------- ----------
$1,945,800 $1,822,570
---------- ----------
5. PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment consists of the following at June 30:
1998 1997
----------- -----------
Building improvements $ 172,581 $ 145,740
Machinery and equipment 2,959,828 2,776,087
----------- -----------
$ 3,132,409 $ 2,921,827
Less Accumulated Depreciation (2,809,552) (2,724,581)
----------- -----------
$ 322,857 $ 197,246
----------- -----------
Depreciation expense was $84,970, $59,509, and $59,576 for 1998, 1997, and 1996,
respectively.
6. INCOME TAXES
The Company and its subsidiaries file a consolidated federal income tax return.
The provision for income tax expense (benefit) from continuing operations was as
follows for the year ended June 30:
FEDERAL INCOME TAXES (BENEFIT) 1998 1997 1996
- ----------------------------- --------- --------- ---------
Current $ 143,000 $ 5,000 $ --
Deferred 497,500 236,000 (308,100)
State Income Taxes (Benefit)
Deferred 97,800 26,000 (41,400)
--------- --------- ---------
738,300 267,000 (349,500)
Tax Credit -- (5,000) --
Change in valuation allowance (421,000) (557,000) 349,500
--------- --------- ---------
(421,000) (562,000) 349,500
Income tax expense (benefit) $ 317,300 $(295,000) $ --
--------- --------- ---------
The actual income tax expense (benefit) attributable to earnings (loss) for the
years ended June 30 differed from the amounts computed by applying the U.S.
federal income tax rate of 34% to pretax income (loss) as a result of the
following:
1998 1997 1996
--------- --------- ---------
Computed expected tax expense
(benefit) $ 634,500 $ 230,000 $(313,800)
Alternative minimum tax -- 5,000 --
State income tax expense (benefit),
net of federal income reduction 97,800 26,000 (41,400)
Non-deductible expenses 6,000 6,000 5,700
Valuation allowance increase (decrease) (421,000) (557,000) 349,500
Alternative minimum tax credit -- (5,000) --
--------- --------- ---------
(Benefit) provision for income taxes $ 317,300 $(295,000) $ --
--------- --------- ---------
Non deductible expenses relate primarily to life insurance payments, and meals
and entertainment that are not deductible for income tax purposes. The use of
net operating loss carry forwards to offset the 1997 taxable income resulted in
a benefit of $262,000. Also changes in economic circumstances in 1997 and 1998
made the utilization of the remaining net operating loss carryforwards likely,
generating a benefit of $295,000 for 1997 and $421,000 for 1998.
At June 30, 1998 the company had no 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.
Deferred tax assets consist of the following at June 30:
1998 1997
--------- ---------
Net operating loss carryforward $ 65,600 $ 709,000
Other 60,100 7,000
Alternative minimum tax credit -- 5,000
--------- ---------
125,700 721,000
Less valuation allowance -- (421,000)
$ 125,700 $ 300,000
--------- ---------
7. INTEREST AND OTHER EARNINGS
The components of interest and other earnings are as follows:
1998 1997 1996
-------- -------- --------
Interest income $ 94,573 $ 64,929 $103,837
-------- -------- --------
Miscellaneous Income 7,398 4,935 --
-------- -------- --------
Total $101,971 $ 69,864 $103,837
-------- -------- --------
5
<PAGE>
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. STOCK OPTION PLAN
The Company's Stock Option Plan (Plan) was approved by the shareholders of the
Company in November 1997, effective August 5, 1997. A maximum of 280,000 shares
of the Company's common stock may be issued under the Plan. The maximum term of
the stock options granted is ten years and optionees vest in the options over a
three-year period.
The purpose of the Plan is to provide additional incentives to officers, other
key employees, and directors of and important consultants to the Company by
encouraging them to invest in shares of the Company's common stock and, thereby,
acquire a proprietary interest in the Company and an increased personal interest
in the Company's continued success and progress.
Options under the Plan may be options which qualify under Section 422 of the
Internal Revenue Code (Incentive Stock Options), or options which do not qualify
under Section 422 (Nonqualified Options).
On August 5, 1997, Incentive Stock Options and Nonqualified Options to purchase
20,000 and 112,000 shares, respectively, at a price of $1.25 per share were
granted. The quoted market price of the Company's stock at that time was $1.46
per share. The term of the granted options is ten years. As of June 30, 1998, no
options are exercisable.
The fair value of these options was estimated at $.67 each using the
Black-Scholes option pricing model. The following assumptions were used: (1)
risk free interest rate of 6.13%, (2) dividend yield of 0%, (3) expected lives
of 5 years, and (4) volatility of 32.18%. Since none of the options had vested
as of June 30, 1998, no compensation cost was recognized under APB 25 or
required to be recognized under FAS No.123. Accordingly, the Company's reported
income and earnings per share as of June 30, 1998 are the same under both
accounting methods.
9. EARNINGS PER SHARE
1998 1997 1996
----------- ----------- -----------
BASIC EPS:
Net Income $ 1,548,158 $ 970,910 $ (922,919)
Basic Shares 1,942,048 1,942,048 1,942,048
Per Share $ .80 $ .50 $ (.48)
=========== =========== ===========
DILUTED EPS:
Net Income $ 1,548,158 $ 970,910 $ (922,919)
Effect of options 98,689
Diluted shares 2,040,737 1,942,048 1,942,048
Per Share $ .76 $ .50 $ (.48)
=========== =========== ===========
10. SIGNIFICANT CUSTOMERS
A substantial portion of the Company's sales were to three industrial customers
and the U.S. Government in 1998 and 1997 and two industrial customers and the
U.S. Government in 1996. Sales to and accounts receivable from these customers
for the past three years were as follows:
U.S. GOVERNMENT INDUSTRIAL CUSTOMERS
SALES A/R SALES A/R
---------- ---------- ---------- ----------
1998 $1,219,000 $ 354,800 $8,913,300 $1,525,500
1997 1,236,000 269,000 5,951,000 811,000
1996 592,000 104,000 3,179,000 450,000
========== ========== ========== ==========
11. COMMITMENTS AND CONTINGENCIES
LEASES
The Company conducts its operations from leased facilities, which include a
manufacturing plant and office. Total rental expense for 1998, 1997 and 1996
amounted to $91,855, $91,682 and $89,511 respectively. A schedule of the
Company's minimum non-cancelable rental commitments as of June 30, 1998,
follows:
YEAR ENDING JUNE 30,
- --------------------
1998 $ 79, 992
6
<PAGE>
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. COMMITMENTS AND CONTINGENCIES (CONT'D)
CONTINGENCIES
Certain federal and state laws authorize the United States Environmental
Protection Agency (EPA) to issue orders and bring enforcement actions to compel
responsible parties to take investigative and remedial actions at any site that
is determined to present an imminent and substantial danger to the public or the
environment because of an actual or threatened release of one or more hazardous
substances. These statutory provisions impose joint and several responsibility
without regard to fault on all responsible parties, including the generators of
the hazardous substances, for certain investigative and remedial costs at sites
where these substances were disposed of or processed. Because of the nature of
the Company's business, various products and substances are or were produced or
handled which contain constituents classified as hazardous. The Company
generally provides for the disposal or processing of such substances through
licensed independent contractors.
As of June 22, 1993, Kreisler Industrial Corporation (KIC), a wholly-owned
subsidiary of Kreisler Manufacturing Corporation, was notified by the EPA that
the EPA considers KIC to be a Potentially Responsible Party (PRP) pursuant to
Section 107(a) of the Comprehensive Environmental Response Compensation and
Liability Act relating to the cleanup of a superfund site in Fairfield, New
Jersey (Site)..
Currently, management is unable to ascertain the amount of liability or the time
frame over which payments will be made. As of June 11, 1993, the United States
had incurred at least $6,441,998 for response actions taken in regard to the
Site, of which, $4.5 million was not reimbursed. Generally, actions directed at
funding such site investigations and remediation include all suspected or known
responsible parties.
The EPA and a PRP Group have filed suit against KIC for its costs with regard to
the Site. Both cases are currently under a stay. KIC does not know the amount
which will be sought in these cases. Pursuant to the terms of several insurance
policies, the legal defense burden is being shared by these insurance companies.
12. RELATED PARTY TRANSACTIONS;
Consulting fees paid to a board member totaled $0, $42,988 and $67,450, in 1998,
1997, and 1996, respectively.
13. CURRENT LIABILITIES IN EXCESS OF 5%
Liabilities, other than trade payables, at June 30,1998, which exceed 5% of
current liabilities include an accrual for payroll of $66,690 and a bonus
payable of $236,000. At June 30, 1997,there was accrued payroll of $46,550.
7
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Kreisler Manufacturing Corporation
We have audited the accompanying consolidated balance sheets of Kreisler
Manufacturing Corporation and its subsidiaries as of June 30, 1998 and 1997, and
the related consolidated statements of operations, changes in stockholders'
equity, and cash flows for each of the three years in the period ended June 30,
1998. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Kreisler
Manufacturing Corporation and its subsidiaries as of June 30, 1998 and 1997, and
the results of their operations and their cash flows for each of the three years
in the period ended June 30, 1998 in conformity with generally accepted
accounting principles.
GREGORY, SHARER & STUART
/s/ GREGORY, SHARER & STUART
- ----------------------------
St. Petersburg, Florida
August 14, 1998
8
<PAGE>
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
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.
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.
FORWARD LOOKING STATEMENTS
This Annual Report on Form 10KSB 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.
1998 COMPARED TO 1997
Revenues increased from $9,402,000 in 1997 to $13,026,000 in 1998. The
revenue increase of $3,624,000 or 39% reflects an increase of $3,621,000 with
five major customers. Our backlog as of June 30,1998, has increased by 17%
compared to the prior year. Gross profit has increased from 9% to 17% as of June
30, 1998, with a productivity increase of 15%. Income before taxes for 1998 were
$1,865,000 or 14% of revenues, as compared to $676,000 or 7% of revenues in the
prior year.
Capital expenditures were $211,000 compared to $53,000 in the prior year.
No budget has been established for 1998-1999 and any such, expenditures will be
determined as needed.
Selling, general and administrative expenses increased by $155,000 or 55%.
The primary increases were bonuses, legal and stock administration expenses.
Short-term liquidity, management believes, will be adequately provided by
internally generated funds or cash reserves to meet the needs of the business.
Our cash reserves are $2,500,000, an increase of $1,250,000 or 100%. At June 30,
1998 working capital was $5,698,000 and a current ratio of 5.2:1. Accounts
receivable increased to $2,457,000 from $1,610,000, an increase of $847,000 or
53%. We have no long- term debt. Stockholder equity is $3.10 per share compared
to $2.30 per share in the prior year, an increase of $ .80 per share or 35%.
Growth in the number of commercial flights increases the frequency of
accidents. Management has concern bout aviation safety and by December 1998,
Kreisler expects to have its ISO 9000 quality certification. As our Company has
grown so has our dependency on a few customers. We recognize the problem and we
are in the process of expanding our sales and marketing effort. The Asian
problem has not affected us yet but as aircraft manufacturers catch up on their
delivery schedule there could be an impact as the delivery of planes are
deferred or cancelled. The Company has reviewed its critical information systems
for Year 2000 compliance and has initiated plans to remedy any deficiencies in a
timely manner. As a result of the review and actions plan, the Company believes
the cost of such remedial corrective actions are not material to the Company's
financial position, results of operations or cash flows. The Company plans to be
Year 2000 compliant by December 1998.
9
<PAGE>
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
QUARTERLY COMMON STOCK DATA
The Company's stock is traded over-the-counter. There are approximately 1000
shareholders. The Company does not anticipate the payment of cash dividends this
year. The table below presents a summary of the sales prices for years ended
June 30.
1998 1997
---------------- ------------------
Quarter High Low High Low
First - September 30 7.00 1.69 .88 .66
Second - December 31 17.75 5.25 1.16 .91
Third - March 31 13.00 6.25 1.81 1.16
Fourth - June 30 10.63 6.75 1.78 1.25
DIRECTORS AND OFFICERS
DIRECTORS
EDWARD L. STERN, CHAIRMAN OF THE BOARD, PRESIDENT,CEO,
KREISLER MANUFACTURING CORPORATION,KREISLER INDUSTRIAL
CORPORATION
ROBERT S. KRUPP, FINANCIAL CONSULTANT
HARRY BRILL-EDWARDS, PRESIDENT, GAS TURBINE CONSULTING
EDWARD A. STERN, VICE PRESIDENT, KREISLER INDUSTRIAL
CORPORATION
MICHAEL D. STERN, VICE PRESIDENT, KREISLER INDUSTRIAL
CORPORATION
OFFICERS
EDWARD L. STERN, CHAIRMAN OF THE BOARD,
PRESIDENT
EDWARD A. STERN, VICE PRESIDENT
MICHAEL D. STERN, VICE PRESIDENT
AUDITORS
GREGORY, SHARER & STUART
CERTIFIED PUBLIC ACCOUNTANTS
100 Second Avenue South, Suite 600
St. Petersburg, FL 33701
TRANSFER AGENT
COMMON STOCK
American Stock Transfer and Trust Company
40 Wall Street
New York, NY 10005
REGISTRAR
American Stock Transfer and Trust Company
40 Wall Street
New York, NY 10005
COUNSEL
BLANK, ROME, COMISKY & McCAULEY
One Logan Square
Philadelphia, PA 19103-6998
ADDITIONAL INFORMATION
Stockholders may obtain, free of charge, a copy of Kreisler's annual report on
Form 10-KSB filed with the Securities and Exchange Commission for the year ended
June 30, 1998, by written or telephone request to the Secretary of Kreisler
Manufacturing Corporation, 5960 Central Ave, Suite H, St. Petersburg, Florida,
33707 Telephone - 727-347-1144
CORPORATE OFFICES: 5960 CENTRAL AVENUE, SUITE H, ST. PETERSBURG, FL 33707
This entire report printed on Recycled Paper
10
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The only significant subsidiary of the Registrant is Kreisler Industrial
Corporation, a New Jersey corporation, all of whose outstanding stock is owned
by the Registrant.
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<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 1,909,048
<SECURITIES> 0
<RECEIVABLES> 2,456,788
<ALLOWANCES> 0
<INVENTORY> 1,945,800
<CURRENT-ASSETS> 7,053,001
<PP&E> 3,132,409
<DEPRECIATION> 2,809,552
<TOTAL-ASSETS> 7,375,858
<CURRENT-LIABILITIES> 1,355,309
<BONDS> 0
0
0
<COMMON> 242,756
<OTHER-SE> 5,777,793
<TOTAL-LIABILITY-AND-EQUITY> 7,375,858
<SALES> 13,025,631
<TOTAL-REVENUES> 13,025,631
<CGS> 11,262,144
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<INCOME-PRETAX> 1,865,458
<INCOME-TAX> 317,300
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<EXTRAORDINARY> 0
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<NET-INCOME> 1,548,158
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<EPS-DILUTED> 0.76
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