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 MARCH 31,1999
[ ] 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
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 22-1044792
- - ------------------------------- -------------------
(State of other jurisdiction of (I.R.S. employer
incorporation or organization) Identification No.)
5960 Central Avenue, Suite H., St. Petersburg, Florida 33707
------------------------------------------------------------
(Address of principal executive offices)
(727) 347-1144
-------------------------
(Issuer's telephone number)
Not Applicable
---------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
The number of shares outstanding of issuer's Common Stock, par value $.125 per
share, as of March 31,1999 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)
------------------
THIRD QUARTER ENDED YEAR ENDED
3/31/99 6/30/98
------------------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $3,152,228 $1,909,048
Certificates of deposit - current -- 587,609
Accounts receivable - trade 2,706,088 2,456,788
Inventories
Raw Materials 1,765,928 1,441,560
Work in Process 501,143 412,500
Finished Goods 119,319 91,740
---------- ----------
2,386,390 1,945,800
Deferred tax asset 125,700 125,700
Other current assets 51,473 28,056
---------- ----------
Total current assets 8,421,879 7,053,001
---------- ----------
Property, plant & equip., at cost, less accumulated
Depreciation of $2,873,373 for 1999 and $2,809,552 for 1998 364,655 322,857
---------- ----------
$8,786,534 $7,375,858
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LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable - trade $ 595,077 $ 756,057
Accrued expenses 991,028 599,252
---------- ----------
Total current liabilities 1,586,105 1,355,309
---------- ----------
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 5,385,970 4,206,090
---------- ----------
Total Stockholders' Equity 7,200,429 6,020,549
---------- ----------
$8,786,534 $7,375,858
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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)
THREE MONTHS ENDED MARCH 31 1999 1998
- - --------------------------- ----------- -----------
REVENUES $ 3,640,128 $ 3,527,159
----------- -----------
Cost of goods sold 2,799,069 2,981,858
Selling, general and administrative expenses 181,292 84,561
----------- -----------
2,980,361 3,066,419
----------- -----------
Earnings from operations 659,767 460,740
Other income :
Interest and other earnings 32,272 27,923
----------- -----------
Earnings before income taxes 692,039 488,663
Provision for income tax 278,205 89,189
----------- -----------
Net earnings $ 413,884 $ 399,474
----------- -----------
Earnings per share:
Net earnings basic shares $ .21 $ .20
Net earnings diluted shares $ .20 $ .20
----------- -----------
NINE MONTHS ENDED MARCH 31 1999 1998
- - -------------------------- ---------- ----------
REVENUES $10,755,237 $ 9,190,726
----------- -----------
Cost of goods sold 8,423,560 7,783,235
Selling, general and administrative expenses 463,803 323,304
----------- -----------
8,887,363 8,106,539
----------- -----------
Earnings from operations 1,867,874 1,084,187
Other income :
Interest and other earnings 100,708 70,315
----------- -----------
Earnings before income taxes 1,968,582 1,154,502
Provision for income tax 788,702 38,873
----------- -----------
Net earnings $ 1,179,879 $ 1,115,629
----------- -----------
Earnings per share:
Net earnings basic shares $ .60 $ .57
Net earnings diluted shares $ .57 $ .56
----------- -----------
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>
NINE MONTHS ENDED MARCH 31 1999 1998
- - -------------------------- ----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 1,179,879 $ 1,115,629
Adjustments to reconcile net income to
cash provided (used) by operating activities:
Depreciation and amortization 63,821 51,135
(Increase) decrease in operating assets:
Accounts receivable - trade (249,300) (371,897)
Inventories (440,589) 107,014
Other current assets (23,417) (6,351)
Deferred tax asset -- 38,873
Increase (decrease) in operating liabilities:
Accounts payable - trade (160,980) 99,351
Accrued expenses 391,776 114,714
----------- -----------
Net adjustments (418,688) 32,839
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Cash provided (used) by operating activities 761,191 1,148,468
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments and certificates of deposit -- (22,362)
Proceeds from redemption of certificates of deposit 587,609 --
Purchase of property and equipment (105,620) (184,536)
----------- -----------
Cash provided (used) by investing activities 481,989 (206,898)
Increase in cash and cash equivalents 1,243,180 941,570
Cash and cash equivalents at beginning of year 1,909,048 691,916
----------- -----------
Cash and cash equivalents at March 31 $ 3,152,228 $ 1,633,486
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of the Company and its
wholly-owned subsidiaries after elimination of significant intercompany
transactions. The consolidated balance sheet as of March 31, 1999 and the
related consolidated statements of operations and retained earnings and cash
flows for the three month and the nine month periods ended March 31,1999 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,
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 March 31,1999 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 March 31, 1999 was $ 278,205 and for the nine month period ended March 31,
1999 was $ 788,702.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 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
Kreisler fabricates precision metal components 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 March 31, 1999, sales activity was approximately
twenty percent military aircraft engines and eighty 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 from contractors who are frequently supplying engines for commercial
businesses or various branches of the United States Government.
<PAGE>
RESULTS OF OPERATIONS
Kreisler Manufacturing Corporation revenues and earnings continue to improve
compared to the same periods in the prior year. Revenues increased for the third
quarter $104,000 or 3% and for the nine months $1,565,000 or 17% compared to the
same periods in the prior year. Earnings before income taxes increased $203,376
or 42% for the quarter and $814,000 or 52% for the nine months compared to the
same periods in the prior year.
Federal and State Income tax increased $189,000 or 212% for the quarter and
$750,000 or 1,923% for the nine months ended March 31, 1999, compared to the
same periods in the prior year.
Net income for the quarter increased $2,000 for the quarter or 1% and increased
$387,000 or 49% for the nine months compared to the same periods in the prior
year. Diluted earnings per share for the third quarter were .20 compared to .20
in the same period for the prior year. For the nine months diluted earnings per
share were .57 compared to .56 for the same period in the prior year.
Selling, general and administrative expenses increased 124% or $100,000 for the
quarter compared to the comparable period in the prior year. Primary impact was
$59,000 paid to a member of The Board of Directors, Robert Krupp, as a strategic
planning consultant. For the nine months SG&A increased $140,000 or 9% which
included $117,000 paid to Robert Krupp and Board of Directors fees of $20,000
compared to the same period in the prior year.
Total expenses for the quarter decreased 3% with a sales increase of 3% and for
the nine months a 8.5% total expense increase on a 17% sales increase compared
to the same periods in the prior year.
Cash and cash equivalents increased 26% or $656,000 since June 30, 1998.
Inventory 23% or $441,000 since June 30, 1998 and accounts receivables increased
10% or $249,000. The balance sheet has no long term debt, current ratio of 5.3:1
and $6,839,000 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 $12 million as of March 31, 1999 a 14% decline
since June 30, 1998.
Stockholder equity per share increased since June 30, 1998 to March 31, 1999
from $3.10 per share to $3.69 or 19%.
<PAGE>
YEAR 2000
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 and began implementation of a plan to
evaluate and address the potential impact on the Company of the Year 2000
problem on internal systems, key customers and suppliers. The Company has
divided the plan into three areas of evaluation: 1) administrative and
manufacturing computer hardware and software and imbedded systems 2) customers
and 3) suppliers.
As of 31 March 1999, the Company's networked computer hardware systems have been
internally tested and are Year 2000 ready. Year 2000 readiness for computer
software and imbedded systems is expected by 30 June 1999. The Company also
continues to assess its Year 2000 risks attributable to its relationships with
significant customers and suppliers. As of 31 March 1999, the Company had
received written responses to a Company sponsored request for information from
the majority of our significant customers and suppliers. The responses to this
request for information indicate a high level of stated anticipated Year 2000
readiness by our significant customers and suppliers by 31 December 1999. The
Company continues to identify, evaluate and develop solutions or contingency
plans to address any Year 2000 readiness problems it may encounter.
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
April 13, 1999
<PAGE>
EXHIBIT INDEX
EXHIBIT 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 March 31, 1999 1,950,046
NET EARNINGS $1,179,879 $.60 per share
- - -------------- ----------
Basic shares outstanding 1,950,046
DILUTED EARNINGS PER SHARE SHARES
- - -------------------------- ------
Basic shares outstanding at March 31, 1999 1,950,046
Stock Options-common stock equivalents 98,690
Diluted shares outstanding at March 31, 1999 2,048,736
NET EARNINGS $1,179,879 $.57 per share
- - -------------- ----------
Diluted shares outstanding 2,048,736
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 3,152,228
<SECURITIES> 0
<RECEIVABLES> 2,706,088
<ALLOWANCES> 0
<INVENTORY> 2,386,389
<CURRENT-ASSETS> 8,421,879
<PP&E> 3,238,028
<DEPRECIATION> 2,873,373
<TOTAL-ASSETS> 8,786,534
<CURRENT-LIABILITIES> 1,586,105
<BONDS> 0
<COMMON> 242,756
0
0
<OTHER-SE> 6,957,672
<TOTAL-LIABILITY-AND-EQUITY> 8,786,534
<SALES> 10,755,237
<TOTAL-REVENUES> 10,755,237
<CGS> 8,423,560
<TOTAL-COSTS> 8,423,560
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,968,582
<INCOME-TAX> 788,702
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,179,879
<EPS-PRIMARY> 0.60
<EPS-DILUTED> 0.57
</TABLE>
