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 SEPTEMBER 30, 2000
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[x] Transition Report under Section 13 or 15 (d) of the Exchange Act
For the transition period from _____________________ to _______________________
Commission File Number: 0-4036
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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 30,2000 was 1,955,379 shares.
Transitional small business disclosure format (check one): Yes [ ] No [X]
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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
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PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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<CAPTION>
(UNAUDITED)
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FIRST QUARTER ENDED YEAR ENDED
9/30/00 6/30/00
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<S> <C> <C>
ASSETS
Cash and cash equivalents $ 4,139,388 $ 4,045,523
Accounts receivable - trade 2,453,975 2,574,499
Inventories:
Raw Materials 1,564,912 1,738,934
Work in Process 450,729 500,265
Finished Goods 90,566 102,000
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2,106,207 2,341,199
Deferred tax asset 90,200 26,600
Insurance recoveries anticipated 580,000 --
Other current assets 49,752 44,967
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Total current assets 9,419,522 9,032,788
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Property, plant & equip., at cost, less accum.deprec 506,898 469,692
Other assets:
Insurance recoveries anticipated 830,000 --
Deferred tax asset 172,000 --
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Total other assets 1,002,000 --
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$10,928,420 $ 9,502,480
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LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable - trade $ 496,497 $ 575,128
Accrued expenses 233,253 746,516
Accrued environmental costs 880,000 --
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Total current liabilities 1,609,750 1,321,644
Long term liabilities:
Accrued environmental costs 1,260,000 --
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Total Liabilities 2,869,750 1,321,644
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Stockholders' Equity
Common Stock, $.125 par value - 3,000,000 shares authorized
1,955,379 shares issued and outstanding for 2000 244,423 244,423
Additional paid-in capital 1,586,700 1,586,700
Retained earnings 6,227,547 6,349,713
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Total Stockholders' Equity 8,058,670 8,180,836
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$10,928,420 $ 9,502,480
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The accompanying notes are an integral part of these
consolidated financial statements
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KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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THREE MONTHS ENDED SEPTEMBER 30 2000 1999
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Revenues $ 3,769,713 $ 2,815,560
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Cost of goods sold 3,186,941 2,538,098
Selling, general and administrative expenses 113,027 211,919
Provision for environmental remediation
net of insurance recoveries anticipated 730,000 --
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4,029,968 2,750,017
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(Loss) earnings from operations (260,255) 65,543
Other income:
Interest and other earnings 55,539 43,547
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(Loss) earnings before income taxes (204,716) 109,090
(Benefit) provision for income tax (82,550) 43,636
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Net (loss) earnings $ (122,166) $ 65,454
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Earnings per share:
Net (loss) earnings basic shares $ (.06) $ .03
Net (loss) earnings diluted shares $ (.06) $ .03
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The accompanying notes are an integral part of these
consolidated financial statements
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KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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<CAPTION>
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THREE MONTHS ENDED SEPTEMBER 30 2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) earnings $ (122,166) $ 65,454
Adjustments to reconcile net (loss) earnings to
cash provided (used) by operating activities:
Depreciation and amortization 30,927 22,232
(Increase) decrease in operating assets:
Accounts receivable - trade 120,524 1,046,004
Expected insurance recoveries (1,410,000) --
Deferred tax asset (235,600) --
Inventories 234,991 128,637
Other current assets (4,785) 21,421
Increase (decrease) in operating liabilities:
Accounts payable - trade (78,629) (211,023)
Accrued expenses (513,263) (746,310)
Accrued environmental costs 2,140,000 --
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Net adjustments 284,165 260,961
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Cash provided by operating activities 161,999 326,415
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (68,134) (4,995)
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Cash (used) by investing activities (68,134) (4,995)
Increase in cash and cash equivalents 93,865 321,420
Cash and cash equivalents at beginning of year 4,045,523 4,170,103
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Cash and cash equivalents at September 30 $ 4,139,388 $ 4,491,524
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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 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. 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,
2000.
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, 2000.
3. Income Tax Provision
At September 30, 2000, 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.
4. 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 on 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 are or were produced or handled which contain
constituents classified hazardous. The Company generally provides for the
disposal or processing of such substances through licensed, independent
contractors.
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The Company became aware of historical releases of hazardous substances at its
leased facility located at 180 Van Riper Avenue, Elmwood Park, New Jersey
(Facility). The Company promptly 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 environmental remediation consultants 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. The site characterization has been
completed. The preliminary cost estimate for remediation of the site is
approximately $ 2.140 million, to be incurred over the next six years.
The Company has notified its liability insurance carriers which issued liability
policies to the Company during the period from 1959 to 1985 and, at this time,
management believes it is probable that its liability insurance policies will
cover an estimated $1.41 million of the remediation expenses.
It is reasonably possible that the Company's recorded estimate of this
remediation and probable insurance recoveries may change in the near term.
With respect to the environmental issue discussed above, the Company has
recorded the present value of the estimated cost and probable insurance using a
discount rate of 6.16%. The recorded discounted amounts are as follows:
Accrued Environmental cost $ 2,140,000
Expected insurance recoveries (1,410,000)
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$ 730,000
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
KREISLER MANUFACTURING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
THREE MONTHS ENDED SEPTEMBER 30, 2000
Description of Business
Kreisler Manufacturing Corporation is a Delaware business corporation which was
incorporated on December 13, 1968, which succeeded a New Jersey business
corporation which was incorporated in New Jersey in 1940, which succeeded a New
York corporation which was incorporated in 1930. Kreisler Manufacturing
Corporation and its only 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.
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 tubular products is to transport fluids, including
air, oil and gas to various parts of the aircraft or aircraft engine.
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, 2000, the sales activity was
approximately thirty percent for military aircraft engines and seventy 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
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customer. Orders for these are received through competitive proposals, which are
made in response to requests for bids from contractors who are frequently
supplying engines to various branches of the Untied States Government or to
commercial businesses.
Results of Operations
Kreisler Manufacturing Corporation revenues increased $954,000 or 34% compared
to the same period in the prior year. Revenues increased primarily with the
introduction of new programs.
Net earnings compared to the same period in the prior year declined $187,620
with the recording of estimated remediation net costs of $730,000 on both our
income statement and balance sheet,as required by accounting principles.
Restated without estimated environmental remediation costs earnings increased
$166,000 or 253% compared to the same period in the prior year.
Cash for the quarter increased $93,865 even with a net loss of $122,166 which
included a tax benefit of $82,550.
Although the total estimated remediation costs are recorded this quarter, actual
payments will occur over an estimated six year period with heaviest payments in
the first three years. As more definitive costs are determined accruals will be
revised.
Kreisler continues to be a strong viable company with positive cash flow, an 8%
improved backlog compared with June 30, 2000, entrance into the industrial gas
turbine market and cash and cash equivalents of $4,139,000.
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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) Reports on 8K
No reports on form 8K were filed during the last period
covered by this report.
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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
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Edward L. Stern
President, Treasurer
November 14, 2000
