UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report under Section 13 or 15 (d) of the Securities Exchange Act
of 1934
For the quarterly period ended DECEMBER 31, 1998
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[ ] Transition Report under Section 13 or 15 (d) of the Exchange Act
For the transition period from ______________________ to ______________________
Commission File Number: 0-4036
KREISLER MANUFACTURING CORPORATION
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(Exact name of small business issuer as specified in its charter)
DELAWARE 22-1044792
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(State of other jurisdiction of (I.R.S. employer
incorporation or organization) Identification No.)
5960 CENTRAL AVENUE, SUITE H., ST. PETERSBURG, FLORIDA 33707
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(Address of principal executive offices)
(727) 347-1144
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(Issuer's telephone number)
NOT APPLICABLE
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
The number of shares outstanding of issuer's Common Stock, par value $.125 per
share, as of December 31,1998 was 1,950,046 shares.
Transitional small business disclosure format (check one): Yes [ ] No [X]
<PAGE>
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PART I Financial Information
Item 1 Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Notes To Financial Statements
Item 2 Management Discussion and Analysis of Financial Condition
and Results of Operations
PART II Other Information
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to Vote of Security Holders
Item 5 Other Information
Item 6 Exhibits and Reports of Form 8-K
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
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SECOND QUARTER ENDED YEAR ENDED
12/31/98 6/30/98
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<S> <C> <C>
ASSETS
Cash and cash equivalents $3,135,745 $ 1,909,048
Certificates of deposit - current - 587,609
Accounts receivable - trade 2,028,721 2,456,788
Inventories
Raw Materials 1,248,473 1,441,560
Work in Process 915,631 412,500
Finished Goods 76,809 91,740
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2,240,913 1,945,800
Deferred tax asset 125,700 125,700
Other current assets 64,038 28,056
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Total current assets 7,595,117 7,053,001
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Property, plant & equip., at cost, less accumulated
Depreciation of $2,850,949 for 1999 and $2,809,552 for 1998 334,837 322,857
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$7,929,954 $ 7,375,858
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LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable - trade $520,114 $ 756,057
Accrued expenses 623,245 599,252
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Total current liabilities 1,143,359 1,355,309
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Stockholders' Equity
Common Stock, $.125 par value - 3,000,000 shares authorized
1,950,046 and 1,942,048 shares issued and outstanding for
December 31, 1998 and June 30, 1998 respectively. 242,756 242,756
Additional paid-in capital 1,571,703 1,571,703
Retained earnings 4,972,136 4,206,090
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Total Stockholders' Equity 6,786,595 6,020,549
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$7,929,954 $ 7,375,858
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The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
<PAGE>
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
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Three Months Ended December 31 1998 1997
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<S> <C> <C>
REVENUES $3,676.701 $3,271,035
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Cost of goods sold 2,925,478 2,721,733
Selling, general and administrative expenses 188,804 155,168
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3,114,282 2,876,901
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Earnings from operations 562,419 394,134
Other income :
Interest and other earnings 44,369 21,889
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Earnings before income taxes 606,788 416,023
Provision for income tax 242,883 43,684
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Net earnings $ 363,905 $ 372,339
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Earnings per share:
Net earnings basic shares $ .18 $ .19
Net earnings diluted shares $ .17 $ .19
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Six Months Ended December 31 1998 1997
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REVENUES $7,115,109 $5,663,567
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Cost of goods sold 5,624,491 4,801,377
Selling, general and administrative expenses 282,512 238,743
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5,907,003 5,040,120
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Earnings from operations 1,208,106 623,447
Other income :
Interest and other earnings 68,436 42,392
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Earnings before income taxes 1,276,542 665,839
Provision (benefit)for income tax 510,497 (50,316)
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Net earnings $ 766,045 $ 716,155
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Earnings per share:
Net earnings basic shares $ .39 $ .36
Net earnings diluted shares $ .37 $ .36
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The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
<PAGE>
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
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Six Months Ended December 31 1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 766,045 $ 716,155
Adjustments to reconcile net income to
cash provided (used) by operating activities:
Depreciation and amortization 41,398 23,464
(Increase) decrease in operating assets:
Accounts receivable - trade 428,067 (3,340)
Inventories (295,113) (205,203)
Other current assets (35,982) (13,604)
Deferred tax asset - (59,040)
Increase (decrease) in operating liabilities:
Accounts payable - trade (235,942) (41,097)
Accrued expenses 23,993 (4,635)
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Net adjustments (73,579) (303,455)
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Cash provided (used) by operating activities 692,466 412,700
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments and certificates of deposit - (14,696)
Proceeds from redemption of certificates of deposit 587,609 -
Purchase of property and equipment (53,378) (125,610)
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Cash provided (used) by investing activities 534,231 (140,306)
Increase in cash and cash equivalents 1,226,697 272,394
Cash and cash equivalents at beginning of year 1,909,048 691,916
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Cash and cash equivalents at December 31 $ 3,135,745 $ 964,310
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The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
<PAGE>
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of the Company and its
wholly-owned subsidiaries after elimination of significant intercompany
transactions. The consolidated balance sheet as of December 31, 1998 and the
related consolidated statements of operations and retained earnings and cash
flows for the three month and the six month periods ended December 31,1998 and
1997 are unaudited. The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of management's
estimates. In the opinion of management all adjustments necessary for a fair
presentation of such financial statements have been included. Such adjustments
consisted only of normal recurring items. Interim results are not necessarily
indicative of results for a full year.
The financial statements and notes are presented as permitted by Form 10-QSB,
and do not contain certain information included in the Company's annual
financial statements and notes. Accordingly, these statements should be read in
conjunction with the consolidated financial statements and notes thereto
appearing in the Annual Report of the Company for the fiscal year ended June 30,
1998.
2. INVENTORIES
On interim reports the inventory is determined on a cost of goods sold basis.
Material usage is based on historical cost. Any change in year end physical
inventory compared with that based on cost of goods sold could materially effect
increasing or decreasing profits. A physical inventory was completed for the
period ended December 31, 1998.
3. INCOME TAX PROVISION
At December 31, 1998 the company had fully utilized net operating loss
carryforward for federal income tax purposes, a net operating loss carryforward
of approximately $642,000 for New Jersey state income tax purposes, expiring
over a period of years through 2003; and a net operating loss carryforward for
Florida state income tax purposes of approximately $142,000 expiring over a
period of years through 2011. The provision for income taxes for the three month
period ended December 31, 1998 was $242,883 and for the six month period ended
December 31, 1998 was $510,497.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 1998
DESCRIPTION OF BUSINESS
Kreisler Manufacturing Corporation is a Delaware business corporation which was
incorporated on December 13, 1968. Kreisler Manufacturing Corporation and its
wholly-owned subsidiary, Kreisler Industrial Corporation (collectively the
"Company") which was incorporated in New Jersey July 3, 1956 manufacture
precision metal components and assemblies at Elmwood Park, New Jersey for use in
military and commercial aircraft engines.
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10QSB contains forward looking statements,
particularly with respect to the Liquidity and Capital Resources section of
Management's Discussion and Analysis of Financial Condition and Results of
Operations. Additional written or oral forward-looking statements may be made by
the Company from time to time, in filings with the SEC or otherwise. Such
forward-looking statements are within the meaning of that term in Section 27A of
the Securities Act of 1933 and Section 21 E of the Securities Exchange Act of
1934. Such statements may include, but not be limited to, projections of
revenue, income, losses, cash flows, capital expenditures, plans for future
operation, financing needs or plans, plans relating to products or services of
the Company, estimates concerning the effects of litigation or other disputes,
as well as assumptions to any of the foregoing.
Forward looking statements are inherently subject to risks and uncertainties,
some of which can not be predicted. Future events and actual results could
differ materially from those set forth in or underlying the forward looking
statements.
PRODUCTS
Kriesler fabricates precision metal compenents for use in aircraft, spacecraft
and industrial gas turbine engines. Our primary product line includes manifold
assemblies, consisting of fuel manifolds, scavenge tubes, breather tubes and
various air, oil and de-icing lines. These assemblies may be made of various
materials and configurations. Materials include titanium, inconel and stainless
steel. Capabilities to fabricate these components include tube bending, heat
treating, furnace brazing, manual and automatic welding, machining and nickel
plating. Kreisler also performs x-ray and penetrant inspection.
For the three months ended December 31, 1998, sales activity was approximately
twenty percent military aircraft engines and eighty percent commercial aircraft
engines.
<PAGE>
Substantially all sales of products are made through an in-house sales staff
supported by a government sales representative. All products are manufactured to
the blueprints and specifications of the particular customer. Orders are
received through competitive proposals which are made in response to requests
for bids from contractors who are frequently supplying engines for commercial
businesses or various branches of the United States Government.
RESULTS OF OPERATIONS
The Company's goals are to seek profitable sales growth to increase shareholder
value. To build an organization to support and manage this growth. To expand and
diversify our core competency by investing in state of the art proprietary
processes and manufacturing technology.
Kreisler Manufacturing Corporation revenues and earnings continue to improve
although less robustly with provision for taxes compared to the same periods in
the prior year. Revenues increased for the second quarter $406,000 or 12% and
for the six months $1,452,000 or 26% compared to the same periods in the prior
year. Earnings before income taxes increased $191,000 or 46% for the quarter and
$611,000 or 92% for the six months compared to the same periods in the prior
year.
Federal and State Income tax increased $199,000 or 456% for the quarter and
$560,000 or 1,115% for the six months ended December 31, 1998, compared to the
same periods in the prior year.
Net income for the quarter decreased $8,000 for the quarter or 2% and increased
$50,000 or 7% for the six months compared to the same periods in the prior year.
Diluted earnings per share for the second quarter were .17 compared to .19 in
the same period in the prior year. For the six months diluted earnings per share
were .37 compared to .36 for the same period in the prior year.
Selling, general and administrative expenses increased 30% or $30,000 for the
quarter compared to the comparable period in the prior year. Primary impact was
$58,000 paid to a member of The Board of Directors, Robert Krupp, as a strategic
planning consultant. For the six months SG&A increased $40,000 or 17% compared
to the same period in the prior year.
Total expenses excluding SG&A for the quarter increased 7.5% with a sales
increase of 13% and for the six months a 17% expense increase on a 26% sales
increase compared to the same periods in the prior year.
Cash and cash equivalents increased 64% or $1,227,000 since June 30, 1998.
Inventory increased 15% or $295,000 since June 30, 1998 and accounts receivables
declined 17% or $428,000. The balance sheet has no long term debt, current ratio
of 6.6:1 and $6,451,000 working capital. Management believes there are
sufficient funds available for current operations with internally generated
funds or reserves for capital equipment and short and long term requirements.
Acquisitions or additional expansion would require outside funding.
Current backlog is approximately $13 million as of December 31, 1998 a 7%
decline since June 30, 1998.
Stockholder equity per share increased since June 30, 1998 to December 31, 1998
from $3.10 per share to $3.48 or 12.6%.
<PAGE>
YEAR 2000
The first quarter 10Q of fiscal year 1998-99 was amended on January 12, 1999 to
include the following Year 2000 discussion. The only change since that date is
that the Company has received additional completed questionaires from both its
customers and vendors indicating their compliance or expected completion date
for compliance.
Many computer systems in use today were designed and developed using two digits,
rather than four, to specify years. As a result, such systems will recognize the
year 2000 as 00 or 1900. This could cause many computer applications to fail
completely or to create erroneous results unless corrective measures are taken.
During FY 1999, the Company developed a plan to evaluate and address the impact
of the Year 2000 problem on its internal systems. In addition, the Company is
now seeking to evaluate the potential impact of the Year 2000 problem at key
customers and suppliers of the Company. The Company has divided the plan into
three areas of evaluation: 1) administrative/manufacturing hardware and
software, 2) customers and 3) suppliers. The Company is approximately 40%
complete in the evaluation of hardware and software and expects to be
substantially complete with this portion of the evaluation by 28 February 1999.
Final compliance for administrative/manufacturing hardware and software is
expected by 30 June 1999. The Company is assessing its Year 2000 risks related
to relationships with significant customers and suppliers. The primary focus of
this portion of the evaluation is through written responses to a
Company-sponsored request for information to significant customers and
suppliers. The responses to this request for information are currently being
gathered for review.
Despite these efforts, the Company can provide no assurances that supplier and
customer Year 2000 compliance plans will be successfully completed in a timely
manner and there can be no assurances that the Company will not experience
material Year 2000 related problems or expenses.
FOR MORE INFORMATION CONCERNING KREISLER MANUFACTURING CORPORATION, PLEASE
ACCESS OUR WEBSITE NOW UNDER CONSTRUCTION AT WWW.KREISLER-IND.COM.
<PAGE>
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
None
ITEM 2 CHANGES IN SECURITIES
None
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 OTHER INFORMATION
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8K
(a) Part I Exhibits
11. Statement re: computation of per share earnings
27. Financial data schedule
<PAGE>
SIGNATURE
Pursuant to the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
KREISLER MANUFACTURING CORPORATION
(Registrant)
BY /s/ EDWARD L. STERN
--------------------
Edward L. Stern
President, Treasurer
January 28, 1999
<PAGE>
EXHIBIT INDEX
EXHIBIT
- -------
11. Statement re: computation of per share earings
27. Financial data schedule
EXHIBIT 11.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
BASIC EARNINGS PER SHARE SHARES
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Basic shares outstanding at December 31, 1998 1,950,046
NET EARNINGS $ 766,045 $.39 per share
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Basic shares outstanding 1,950,046
DILUTED EARNINGS PER SHARE SHARES
-------------------------- ------
Basic shares outstanding at December 31, 1998 1,950,046
Stock Options-common stock equivalents 98,690
Diluted shares outstanding at December 31, 1998 2,048,736
NET EARNINGS $ 402,140 $.37 per share
------------------------ ---------
Diluted shares outstanding 2,048,736
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,135,745
<SECURITIES> 0
<RECEIVABLES> 2,028,721
<ALLOWANCES> 0
<INVENTORY> 2,240,913
<CURRENT-ASSETS> 7,595,117
<PP&E> 3,185,786
<DEPRECIATION> 2,850,950
<TOTAL-ASSETS> 7,929,954
<CURRENT-LIABILITIES> 1,143,359
<BONDS> 0
<COMMON> 242,756
0
0
<OTHER-SE> 6,543,839
<TOTAL-LIABILITY-AND-EQUITY> 7,929,954
<SALES> 7,115,109
<TOTAL-REVENUES> 7,115,109
<CGS> 5,907,002
<TOTAL-COSTS> 5,907,002
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,276,542
<INCOME-TAX> 510,497
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 766,045
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.37
</TABLE>
