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 DECEMBER 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
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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)
(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 31,1999 was 1,955,379 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
12/31/99 6/30/99
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ASSETS
<S> <C> <C>
Cash and cash equivalents $3,823,066 $3,569,380
Certificates of deposit - current -- 600,723
Accounts receivable - trade 1,260,144 2,548,821
Inventories
Raw Materials 1,656,792 1,844,943
Work in Process 709,646 271,145
Finished Goods 146,719 65,079
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2,513,157 2,181,167
Deferred tax asset 73,000 73,000
Other current assets 38,968 47,039
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Total current assets 7,708,335 9,020,130
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Property, plant & equip., at cost, less accum.deprec 418,991 362,430
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$8,127,326 $9,382,560
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable - trade $ 405,000 $ 683,685
Accrued expenses 79,521 829,222
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Total current liabilities 484,521 1,512,907
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Stockholders' Equity
Common Stock, $.125 par value - 3,000,000 shares
authorized 1,955,379 shares issued and
outstanding for December 31, 1999 and 1,950,046 244,423 243,756
as of June 30, 1999
Additional paid-in capital 1,586,700 1,580,701
Retained earnings 5,811,682 6,045,196
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Total Stockholders' Equity 7,642,805 7,869,653
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$8,127,326 $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 December 31 1999 1998
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REVENUES $ 2,814,031 $ 3,676,701
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Cost of goods sold 2,945,221 2,925,478
Selling, general and administrative expenses 229,895 188,804
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3,175,116 3,114,282
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Earnings from operations (361,085) 562,419
Other income :
Interest and other earnings 62,112 44,369
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Earnings before income taxes (298,973) 606,788
Provision for income tax 0 242,883
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Net earnings $ (298,973) $ 363,905
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Earnings per share:
Net earnings basic shares $ (.15) $ .18
Net earnings diluted shares $ (.14) $ .17
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Six Months Ended December 31 1999 1998
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REVENUES $ 5,629,591 $ 7,115,109
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Cost of goods sold 5,483,318 5,624,491
Selling, general and administrative expenses 441,815 282,512
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5,925,133 5,907,003
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Earnings from operations (295,542) 1,208,106
Other income :
Interest and other earnings 105,659 68,436
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Earnings before income taxes (189,883) 1,276,542
Provision for income tax 43,636 510,497
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Net earnings $ (233,519) $ 766,045
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Earnings per share:
Net earnings basic shares $ (.12) $ .39
Net earnings diluted shares $ (.11) $ .37
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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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Six Months Ended December 31 1999 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings or (loss) $ (233,519) $ 766,045
Adjustments to reconcile net income to
cash provided (used) by operating activities:
Depreciation and amortization 46,381 41,398
(Increase) decrease in operating assets:
Accounts receivable - trade 1.288,681 428,067
Inventories (331,990) (295,113)
Other current assets 8,071 (35,982)
Deferred tax asset -- --
Increase (decrease) in operating liabilities:
Accounts payable - trade (278,684) (235,942)
Accrued expenses (749,702) 23,993
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Net adjustments (17,243) (73,579)
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Cash provided (used) by operating activities (250,762) 692,466
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from redemption of certificates of deposit -- 587,609
Purchase of property and equipment (102,942) (53,378)
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Cash provided (used) by investing activities (102,942) 534,231
Exercised Stock Options 6,667
Decrease in cash and cash equivalents (347,037) 1,226,697
Cash and cash equivalents at beginning of year 4,170,103 1,909,048
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Cash and cash equivalents at December 31 $ 3,823,066 $ 3,135,745
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</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 December 31, 1999 and the
related consolidated statements of operations and retained earnings and cash
flows for the three month and six month periods ended December 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,
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 December 31, 1999.
3. Income Tax Provision
At December 31, 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
FOR THREE MONTHS AND SIX MONTHS ENDED DECEMBER 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 manufactures
precision metal components and assemblies at Elmwood Park, New Jersey for use in
military and commercial aircraft engines and industrial gas turbine 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 to various parts of
the aircraft or aircraft engine. The Company also produces parts for industrial
gas turbine engines, which are land engines that produce electricity with
various applications.
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 December 31, 1999, sales activity was
approximately thirty-five percent military aircraft engines and sixty-five
percent commercial aircraft engines and gas turbine 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
Sales in the second quarter of fiscal year 1999-2000 were $2,814,000;
$863,000 or 24% less than the comparable period in the prior year. Sales for the
six month period from July 1, 1999 to December 31, 1999 were $5,630,000;
$1,486,000 or 21% less than the same period in the prior year.
For the quarter ended December 31, 1999 the loss was $299,000 or 11%
compared to a profit of $364,000 or 10% for the same period in the prior year.
For the six months ended December 31,1999 the loss was $233,000 or 3.3% compared
to the prior year profit of $766,000 or 10.8%. Environmental and merger expenses
in the second quarter were $239,000 and for the six months $442,000 compared to
total merger expenses of $60,000 for both the first and second quarters of the
prior year.
Although sales for the second quarter were almost the same as in the first
quarter, earnings in the first quarter reflects normal accounting practice
reversals of approximately $387,000 for charges expensed in the fourth quarter
of fiscal year 1998-1999. The second quarter did not benefit from these
reversals.
Our backlog as of December 31, 1999 has increased approximately 3% to over
$14,400,000 compared to that of June 30, 1999. During the past six months our
focus has been on design and development. Resources for our core manufacturing
responsibility were diverted. We have solved this problem by strengthening our
development resources both with additional engineers and new cad/cam software
and we have redirected our resources toward manufacturing. We recognize our
future is in development and early involvement with our customers on new
products but the primary support for this endeavor is with increased throughput
and cost reduction. Neither is mutually exclusive of the other. With these
changes we know the next two quarterly results will be considerably improved
over the past two quarters.
Our balance sheet as of December 31, 1999 has no long term debt. Cash and
cash equivalents are $3,823,000. Total current liabilities declined $1,021,000
or 67% compared to the fiscal year ended June 30, 1999. Current ratio is 15.9:1.
Working capital is $7,112,000.
We are a strong, aggressive company. We view the disappointing results of the
first and second quarters as short term.
Year 2000 Compliance
As of this writing in early January 2000 the company has had no Y2K problems.
The Company reviewed its critical information systems for Year 2000 compliance
and completed a successful transition to year 2000. The Company is year 2000
compliant. Despite our efforts, the Company can provide no assurances that
supplier and customer Year 2000 compliance plans have been successfully
completed.
<PAGE>
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 $2.0 million, to be
incurred over the next three to five years.
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. It is unknown at the present time, but it is anticipated
that some of these remediation costs and other liabilities will be covered by
its liability insurance policies.
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
<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, 2000
EXHIBIT 11.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
BASIC EARNINGS PER SHARE SHARES
------------------------ ------
Basic shares outstanding at December 31, 1999 1,955,379
NET EARNINGS OR (LOSS) $(233,519) $(.12) per share
------------------------ ----------
Basic shares outstanding 1,955,379
DILUTED EARNINGS PER SHARE SHARES
-------------------------- ------
Basic shares outstanding at December 31, 1999 1,955,379
Stock Options-common stock equivalents 114,413
---------
Diluted shares outstanding at December 31, 1999 2,069,792
NET EARNINGS $(233,519) $(.11) per share
-------------------------- ----------
Diluted shares outstanding 2,069,792
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,823,066
<SECURITIES> 0
<RECEIVABLES> 1,260,144
<ALLOWANCES> 0
<INVENTORY> 2,513,157
<CURRENT-ASSETS> 8,127,326
<PP&E> 3,365,993
<DEPRECIATION> 2,947,003
<TOTAL-ASSETS> 8,127,326
<CURRENT-LIABILITIES> 491,187
<BONDS> 0
0
0
<COMMON> 243,756
<OTHER-SE> 7,392,139
<TOTAL-LIABILITY-AND-EQUITY> 8,127,326
<SALES> 5,629,591
<TOTAL-REVENUES> 5,629,591
<CGS> 5,483,318
<TOTAL-COSTS> 5,483,318
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (189,883)
<INCOME-TAX> 43,636
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (233,519)
<EPS-BASIC> (.12)
<EPS-DILUTED> (.11)
</TABLE>
