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 31,2000
-------------
[ ] 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 March 31,2000 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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THIRD QUARTER ENDED YEAR ENDED
3/31/00 6/30/99
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<S> <C> <C>
ASSETS
Cash and cash equivalents $3,239,705 $3,569,380
Certificates of deposit - current -- 600,723
Accounts receivable - trade 2,498,132 2,548,821
Inventories
Raw Materials 2,193,500 1,844,943
Work in Process 309,671 271,145
Finished Goods 77,417 65,079
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2,580,588 2,181,167
Deferred tax asset 73,000 73,000
Other current assets 47,368 47,039
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Total current assets 8,438,793 9,020,130
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Property, plant & equip., at cost, less accumulated
Depreciation of $2,873,373 for 2000 and $2,809,552 for 1999 430,870 362,430
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$8,869,663 $9,382,560
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LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable - trade $ 553,499 $ 683,685
Accrued expenses 282,880 899,222
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Total current liabilities 836,379 1,512,907
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Stockholders' Equity
Common Stock, $.125 par value - 3,000,000 shares authorized
1,955,379 and 1,950,046 shares issued and outstanding for
March 31,2000 and
June 30, 1999 respectively 244,423 243,756
Additional paid-in capital 1,586,700 1,580,701
Retained earnings 6,202,161 6,045,196
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Total Stockholders' Equity 8,033,284 7,869,653
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$8,869,663 $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)
<TABLE>
<CAPTION>
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Three Months Ended March 31 2000 1999
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<S> <C> <C>
REVENUES $ 4,436,756 $ 3,640,128
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Cost of goods sold 3,816,107 2,799,069
Selling, general and administrative expenses 321,868 181,292
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4,137,975 2,980,361
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Earnings from operations 298,781 659,767
Other income:
Interest and other earnings 47,879 32,272
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Earnings before income taxes 346,660 692,039
Provision for income tax (43,818) 278,205
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Net earnings $ 390,478 $ 413,884
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Earnings per share:
Net earnings basic shares $ .20 $ .21
Net earnings diluted shares $ .19 $ .20
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Nine Months Ended March 31 2000 1999
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REVENUES $ 10,066,347 $ 10,755,237
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Cost of goods sold 9,299,425 8,423,560
Selling, general and administrative expenses 763,683 463,803
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10,063,108 8,887,363
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Earnings from operations 3,239 1,867,874
Other income:
Interest and other earnings 153,538 100,708
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Earnings before income taxes 156,777 1,968,582
Provision for income tax (182) 788,702
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Net earnings $ 156,959 $ 1,179,879
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Earnings per share:
Net earnings basic shares $ .08 $ .60
Net earnings diluted shares $ .08 $ .57
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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 CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
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Nine Months Ended March 31 2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 156,959 $ 1,179,879
Adjustments to reconcile net income to
cash provided (used) by operating activities:
Depreciation and amortization 68,805 63,821
(Increase) decrease in operating assets:
Accounts receivable - trade 50,693 (249,300)
Inventories (399,421) (440,589)
Other current assets (329) (23,417)
Deferred tax asset -- --
Increase (decrease) in operating liabilities:
Accounts payable - trade (130,185) (160,980)
Accrued expenses (546,342) 391,776
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Net adjustments (956,780) (418,688)
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Cash provided (used) by operating activities (799,820) 761,191
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from redemption of certificates of deposit -- 587,609
Purchase of property and equipment (137,245) (105,620)
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Cash provided (used) by investing activities (137,245) 481,989
Exercised Stock Options 6,667
Increase in cash and cash equivalents (930,398) 1,243,180
Cash and cash equivalents at beginning of year 4,170,103 1,909,048
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Cash and cash equivalents at March 31 $ 3,239,705 $ 3,152,228
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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 March 31, 2000 and the
related consolidated statements of operations and retained earnings and cash
flows for the three month and the nine month periods ended March 31,2000 and
1999 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 March 31,2000 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.
<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, 2000
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 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 March 31, 2000, sales activity was approximately
thirty percent military aircraft engines and seventy percent commercial aircraft
engines and gas turbine 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
<PAGE>
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 third quarter of fiscal year 1999 - 2000 were $4,437,000 compared
to $3,640,000 for the same period in the prior year an increase of $797,000 or
22%. Sales for the nine month period from July 1, 1999 to March 31, 2000 was
$10,066,000 compared with $10,755,000 in the same period of the prior year a
decrease of $689,000 or 6%.
Net earnings for the quarter ended March 31, 2000 were $390,000 or 9% compared
with $409,000 or 11% for the same period in the prior year. Net earnings for the
nine months ended March 31, 2000 was $157,000 or 2% compared with $1,180,000 or
11% compared to the same period in the prior year.
The earnings decrease for the third quarter compared to the prior year, even
with a 22% increase in sales compared to the prior year, reflects a policy
decision to expand our development programs which required an increased
engineering and development staff. We believe, although initially costly, that
new development programs will help to offset the currently declining aerospace
market.
The earnings decrease for the nine months reflects lower sales of $689,000 or 6%
compared to the same period in the prior year, increased payroll costs and
merger and environmental expenses of $736,000 compared with $123,000 for the
same period in the prior year or an increase of $613,000.
Kreisler's backlog as of March 31, 2000 was approximately $14,000,000 the same
as June 30, 1999.
Shipments for the nine months remain slightly lower (6%) than the same period in
the prior year yet we have successfully offset a decrease of almost 50% with a
major customer with increased shipments to new or current accounts.
Kreisler's balance sheet as of March 31, 2000 continues to have no long term
debt. Cash and cash equivalents have decreased $930,000 since June 30, 1999 to
$3,240,000 primarily with lower net profit, increased inventory and purchase of
equipment.
We are pleased to announce that Wallace N. Kelly has joined Kreisler Industrial
Corporation as Chief Operating Officer to strengthen our management team. Mr.
Kelly has almost forty years of experience in the gas turbine industry. He has
held various engineering positions with Pratt & Whitney, General Electric and
Chromalloy Gas Turbine Corporation. We are pleased that he has joined Kreisler
and that Kreisler will benefit from the experience and talent he will bring to
us in making Kreisler a more successful company.
Kreisler is in a transition period facing increased environmental costs,
managing change to new development programs while continuing to meet customer
requirements. Kreisler's challenges are many and the company will be tested many
times over as it has been in the past.
Stockholder equity per share increased since June 30, 1999 to March 31, 2000
from $4.03 per share to $4.11 or 2%.
<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.
<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 25, 2000
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
BASIC EARNINGS PER SHARE SHARES
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Basic shares outstanding at March 31, 2000 1,955,379
NET EARNINGS $159,959 $.08 per share
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Basic shares outstanding 1,955,379
DILUTED EARNINGS PER SHARE SHARES
-------------------------- ------
Basic shares outstanding at March 31, 2000 1,955,379
Stock Options-common stock equivalents 114,413
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Diluted shares outstanding at March 31,2000 2,069,792
NET EARNINGS $156,959 $.08 per share
-------------------------- --------
Diluted shares outstanding 2,069,792
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 3,239,705
<SECURITIES> 0
<RECEIVABLES> 2,498,132
<ALLOWANCES> 0
<INVENTORY> 2,580,588
<CURRENT-ASSETS> 8,438,793
<PP&E> 3,400,297
<DEPRECIATION> 2,969,427
<TOTAL-ASSETS> 8,869,663
<CURRENT-LIABILITIES> 836,379
<BONDS> 0
<COMMON> 244,423
0
0
<OTHER-SE> 7,788,861
<TOTAL-LIABILITY-AND-EQUITY> 8,869,663
<SALES> 10,066,347
<TOTAL-REVENUES> 10,066,347
<CGS> 9,299,425
<TOTAL-COSTS> 9,299,425
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 156,777
<INCOME-TAX> (182)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 156,959
<EPS-BASIC> 0.08
<EPS-DILUTED> 0.08
</TABLE>
