UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] Quarterly Report under Section 13 or 15 (d) of the Securities Exchange Act
of 1934
For the quarterly period ended SEPTEMBER 30, 1999
[ ] Transition Report under Section 13 or 15 (d) of the Exchange Act
For the transition period from ______________________ to ______________________
Commission File Number: 0-4036
KREISLER MANUFACTURING CORPORATION
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(Exact name of small business issuer as specified in its charter)
DELAWARE 22-1044792
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(State of other jurisdiction of (I.R.S. employer
incorporation or organization) Identification No.)
5960 CENTRAL AVENUE, SUITE H., ST. PETERSBURG, FLORIDA 33707
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(Address of principal executive offices)
(813) 347-1144
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(Issuer's telephone number)
NOT APPLICABLE
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(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
The number of shares outstanding of issuer's Common Stock, par value $.125 per
share, as of September 30,1999 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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FIRST QUARTER ENDED YEAR ENDED
9/30/99 6/30/99
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ASSETS
<S> <C> <C>
Cash and cash equivalents $4,491,524 $3,569,380
Certificates of deposit - current -- 600,723
Accounts receivable - trade 1,502,821 2,548,821
Inventories
Raw Materials 1,770,151 1,844,943
Work in Process 246,304 271,145
Finished Goods 36,075 65,079
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2,052,530 2,181,167
Deferred tax asset 73,000 73,000
Other current assets 25,618 47,039
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Total current assets 8,145,493 9,020,130
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Property, plant & equip., at cost, less accum.deprec 345,193 362,430
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$8,490,686 $9,382,560
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LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable - trade $ 447,564 $ 683,685
Accrued expenses 108,008 829,222
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Total current liabilities 555,572 1,512,907
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Stockholders' Equity
Common Stock, $.125 par value - 3,000,000 shares authorized
1,950,046 shares issued and outstanding for 1999 243,756 243,756
Additional paid-in capital 1,580,701 1,580,701
Retained earnings 6,110,657 6,045,196
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Total Stockholders' Equity 7,935,114 7,869,653
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$8,490,686 $9,382,560
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</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements
<PAGE>
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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Three Months Ended September 30 1999 1998
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Revenues $2,815,560 $3,438,408
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Cost of goods sold 2,538,098 2,699,013
Selling, general and administrative expenses 211,919 93,708
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2,750,017 2,792,721
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Earnings from operations 65,543 645,687
Other income :
Interest and other earnings 43,547 24,066
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Earnings before income taxes 109,090 669,753
Provision for income tax 43,636 267,613
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Net earnings $ 65,454 $ 402,140
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Earnings per share:
Net earnings basic shares $ .03 $ .21
Net earnings diluted shares $ .03 $ .20
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The accompanying notes are an integral part of these consolidated
financial statements
<PAGE>
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
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Three Months Ended September 30 1999 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 65,454 $ 402,140
Adjustments to reconcile net income to
cash provided (used) by operating activities:
Depreciation and amortization 22,232 18,974
(Increase) decrease in operating assets:
Accounts receivable - trade 1.046,004 366,654
Inventories 128,637 (18,848)
Other current assets 21,421 (1,092)
Deferred tax asset -- --
Increase (decrease) in operating liabilities:
Accounts payable - trade (211,023) (203,636)
Accrued expenses (746,310) (214,206)
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Net adjustments 260,961 (52,154)
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Cash provided (used) by operating activities 326,415 349,986
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from redemption of certificates of deposit -- 587,609
Purchase of property and equipment (4,995) (4,355)
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Cash provided (used) by investing activities (4,995) 583,254
Increase in cash and cash equivalents 321,420 933,240
Cash and cash equivalents at beginning of year 4,170,103 1,909,048
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Cash and cash equivalents at September 30 $ 4,491,524 $ 2,842,288
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</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 September 30, 1999 and the
related consolidated statements of operations and retained earnings and cash
flows for the three month period ended September 30,1999 and 1998 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,
1999.
2. Inventories
On interim reports the inventory is determined on a cost of goods sold basis.
Material usage is based on historical cost. Any change in year end physical
inventory compared with that based on cost of goods sold could materially effect
increasing or decreasing profits. A physical inventory was completed for the
period ended June 30, 1999.
3. Income Tax Provision
At September 30, 1999, the Company had no net operating loss carryforward for
federal income tax purposes, and a net operating loss carryforward for Florida
state income tax purposes of approximately $60,000, expiring over a period of
years through 2011.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
THREE MONTHS ENDED SEPTEMBER 30, 1999
Description of Business
Kreisler Manufacturing Corporation is a Delaware business corporation which
was incorporated on December 13, 1968. Kreisler Manufacturing Corporation and
its wholly-owned subsidiary, Kreisler Industrial Corporation (collectively the
"Company") which was incorporated in New Jersey July 3, 1956 manufacture
precision metal components and assemblies at Elmwood Park, New Jersey for use in
military and commercial aircraft engines.
Forward Looking Statements
This Quarterly Report on Form 10QSB contains forward looking statements,
particularly with respect to the Liquidity and Capital Resources section of
Management's Discussion and Analysis of Financial Condition and Results of
Operations. Additional written or oral forward-looking statements may be made by
the Company from time to time, in filings with the SEC or otherwise. Such
forward-looking statements are within the meaning of that term in Section 27A of
the Securities Act of 1933 and Section 21 E of the Securities Exchange Act of
1934. Such statements may include, but not be limited to, projections of
revenue, income, losses, cash flows, capital expenditures, plans for future
operation, financing needs or plans, plans relating to products or services of
the Company, estimates concerning the effects of litigation or other disputes,
as well as assumptions to any of the foregoing.
Forward looking statements are inherently subject to risks and
uncertainties, some of which can not be predicted. Future events and actual
results could differ materially from those set forth in or underlying the
forward looking statements.
Products
The Company fabricates precision metal components and assemblies primarily
for aircraft engines with both military and commercial applications. The primary
function of the Company's products is to transport fluids (including air) to
various parts of the aircraft or aircraft engine. The redirection of air is a
major element in reducing high temperatures generated by aerospace propulsion.
High temperatures are a limiting factor in increasing thrust in jet engines.
Tube assemblies may be made of various materials and configurations.
Materials include titanium, inconel and stainless steel. Configurations include
quality controlled and highly engineered manifold assemblies to transfer fuel
for combustion, oil for lubrication, hydraulic fluid to activate thrust
reversers and impingement tubes or baffles to cool vanes in the combustion
section of the engine.
For the three months ended September 30, 1999, sales activity was
approximately thirty-five percent military aircraft engines and sixty-five
percent 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 are received through competitive proposals which are made in response to
requests for bids
<PAGE>
from contractors who are frequently supplying engines for commercial businesses
or various branches of the United States Government.
Results of Operations
Kreisler Manufacturing Corporation revenues and earnings declined compared
to the same period in the prior year. Revenues declined $623,000 or 18% and
earnings $337,000 or 84%. Revenues declined primarily with a change in product
mix for the quarter, production difficulties and the dilutive effect on
personnel focusing more on future development projects. Less definitive but
present, the announced Letter of Intent for a merger on July 1, 1999.
Earnings declined primarily with lower shipments but in addition the impact
of over $200,000 in environmental and merger expenses. It would appear that
these costs will continue or be accrued for both environmental and merger
expenses.
As we remained marginally profitable our cash and cash equivalents,
increased to $4,492,000 or 8% compared to June 30, 1999, and our backlog
improved 4% to slightly over 14 million dollars compared to June 30, 1999.
Year 2000 Compliance
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 1999. 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 Year 2000 related problems and expenses.
Compliance with Environmental Laws
The Company has recently become aware of historical releases of hazardous
substances at the facility located at 180 Van Riper Avenue, Elmwood Park, New
Jersey (hereinafter the "Facility"). Based on the results of tests conducted at
the Facility, the Company has discovered that both the soil and groundwater at
the Facility, and possibly offsite, are contaminated with tetrachloroethylene
("PCE"). While the Company cannot be absolutely certain about the source of this
condition, the Company used PCE for degreasing and other similar purposes from
about 1959, when it commenced operation at the Facility, until approximately
1985, when it replaced PCE with another solvent.
Promptly after learning of this condition, the Company notified the New
Jersey Department of Environmental Protection ("Department") as required by the
New Jersey Spill Compensation and Control Act ("Spill Act"), N.J.S.A.
58:10-23.11, and retained the services of Pleasant Hill Consultants and The
Whitman Companies to perform a full site characterization in accordance with the
Department's Technical Requirements for Site Remediation, N.J.A.C. 7:26E-1.1.
While the site characterization is still underway, the preliminary cost estimate
for remediation of the contamination is approximately $1.5 million, to be
incurred over the next two to three years. The site characterization is expected
to be completed within the next thirty to sixty days.
<PAGE>
The Company has notified its liability insurance carriers which issued
liability policies to the Company during the period from 1959 to 1985 and is
waiting for a determination from the various insurance carriers regarding the
available insurance for coverage of the expected remediation costs and other
potential liabilities arising out of the contamination.
At this time, the Company believes, based upon the facts as currently
known, that its liability policies will cover at least some of the remediation
expenses and other liabilities.
TERMINATION OF MERGER TRANSACTION
On July 1, 1999, the Company signed a non-binding letter of intent for the
merger of the Company with and into Wood Group Gas Turbine Holdings, Inc., a
wholly owned subsidiary of the John Wood Group PLC, for approximately $25.5
million. As previously disclosed, environmental tests at Kreisler's Elmwood
Park, New Jersey facility, performed in connection with the proposed
transaction, revealed that both the soil and groundwater at the facility, and
possibly offsite, are contaminated with tetrachlorethylene ("PCE").
Both Kreisler and the Wood Group obtained additional information and
advices regarding the nature, scope and expense of the necessary remediation and
attempted to reach agreement on appropriate adjustments to the terms of the
proposed transaction. Unfortunately, fundamental disagreements between the two
parties remain and Kreisler believed that additional negotiations would not
result in an acceptable agreement. On November 4, 1999 the Company terminated
the letter of intent with the Wood Group.
<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
(b) Form 8-K
None
<PAGE>
SIGNATURE
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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
November 5, 1999
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
11. Statement re: computation of per share earnings
27. Financial data schedule
EXHIBIT 11.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
BASIC EARNINGS PER SHARE SHARES
------------------------ ------
Basic shares outstanding at September 30, 1999 1,950,046
NET EARNINGS $ 65,454 $.03 per share
------------------------ ----------
Basic shares outstanding 1,950,046
DILUTED EARNINGS PER SHARE SHARES
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Basic shares outstanding at September 30, 1999 1,950,046
Stock Options-common stock equivalents 109,314
Diluted shares outstanding at September 30, 1999 2,059,360
NET EARNINGS $ 65,454 $.03 per share
-------------------------- ----------
Diluted shares outstanding 2,059,360
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,491,523
<SECURITIES> 0
<RECEIVABLES> 1,502,821
<ALLOWANCES> 0
<INVENTORY> 2,052,530
<CURRENT-ASSETS> 8,145,494
<PP&E> 3,268,047
<DEPRECIATION> 2,922,854
<TOTAL-ASSETS> 8,490,686
<CURRENT-LIABILITIES> 555,575
<BONDS> 0
<COMMON> 243,756
0
0
<OTHER-SE> 7,691,355
<TOTAL-LIABILITY-AND-EQUITY> 8,490,686
<SALES> 2,815,560
<TOTAL-REVENUES> 2,815,560
<CGS> 2,538,098
<TOTAL-COSTS> 2,538,098
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 109,090
<INCOME-TAX> 43,636
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,454
<EPS-BASIC> 0.03
<EPS-DILUTED> 0.03
</TABLE>
