<PAGE>
THIS DOCUMENT IS A COPY OF THE 10Q FILED ON NOVEMBER 15, 1995 PURSUANT TO
RULE 201.
SECURITIES EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
Commission File No. 1-7215
PEERLESS TUBE COMPANY
New Jersey 22-1 191280 (I.R.S. Employer Identification
58-76 Locust Ave.
Bloomfield, New Jersey 07003
Telephone: 201-743-5100
Securities registered pursuant to Section 12(b) of the act:
None
Securities registered pursuant to section 12(9) of the act:
Title of Class Exchange
Common stock $1.33-1/3 par value Over the counter (Symbol PLSU)
Indicate by a check mark whether the registrant (1) has filed all
reports required to be filed under Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter periods that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes x No
On November 13, 1995, the aggregate market value of the voting
stock held by non affiliates of the registrant is approximately
$1,0776,000. This market value is based on the most recent trade
of a relatively small number of the Company's shares at $.4375 per
share. Previous other trades of similar small blocks of stock in
the last 52 weeks have ranged in transaction price from $.1250 -
$1.0312.
Common Stock, Par Value $1.33-1/3
Outstanding at September 30, 1995 2,462,973 Shares
Documents incorporated by reference: None.
<PAGE>
SECURITIES EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
PEERLESS TUBE COMPANY
For the quarterly period ended September 30,1995
Table of Contents
Description Page#
Part I - Financial Information. . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets 9/30/95 & 12/31/94. . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the
Nine Months Ended 9/30/95 & 9/30/94 . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the
Quarters Ended 9/30/95 & 9/30/94. . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the
Nine Months Ended 9/30/95 & 9/30/94 . .. . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the
Quarters Ended 9/30/95 & 9/30/94. . .. . . . . . . . . . . . . . . . . . . . . .
Notes to the Consolidated Financial Statements. .. . . . . . . . . . . . . . . .
Management's Discussion & Analysis of the
Financial Condition & Results of Operations .. . . . . . . . . . . . . . . . . .
Part II - Other Information
Item 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
<TABLE>
Peerless Tube Company September 30, December 31,
1995 1994
Consolidated Balance Sheet
______________________________________________________________________________________
Assets
____________
<S> <C> <C>
Current assets:
Cash and cash equivalents 263,000 550,000
Accounts receivable, less allowance for
doubtful accounts of $189,000 and $77,000
in 1995 and 1994, respectively 3,693,000 3,740,000
Inventories 3,223,000 3,500,000
Prepaid expenses 49,000 66,000
Other current assets 39,000 110,000
________ _________
Total current assets 7,267,000 7,978,000
Property, plant and
equipment, net 8,813,000 9,464,000
Other assets 58,000 58,000
________ _________
Deferred tax assets, net of
valuation allowance
of $4,400,000 and $3,756,000
in 1995 and 1994, respectively $16,138,000 $17,500,000
Liabilities & Stockholders' Equity
__________________________________
Current liabilities:
Accounts payable $3,299,000 $3,261,000
Accrued liabilities 1,915,000 1,395,000
Revolving credit line 1,605,000 1,816,000
Current portion of long term debt 639,000 618,000
________ _______
Total current liabilities 7,458,000 7,090,000
Long term debt 3,915,000 4,287,000
Deferred gain 1,251,000 1,340,000
Other liabilities 255,000 210,000
________ _______
Total liabilities 12,879,000 12,927,000
________ _______
Commitments and contingencies
Stockholders' equity:
Common stock, $1.33-1/3 par value;
authorized
5,000,000 shares; issued and outstanding
2,536,935 shares 3,382,000 3,382,000
Additional paid-in capital 14,439,000 14,439,000
Equity adjustment for minimum
pension liability (464,000) (464,000)
Accumulated defIcit (13,754,000)(12,440,000)
Less: 73,962 shares of stock in
treasury, at cost (344,000) (344,000)
__________ __________
Total stockholders' equity 3,259,000 4,573,000
_________ _________
$16,138,000 $17,500,000
_________ __________
The accompanying notes should be read in conjunction with the consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
Peerless Tube Company and Subsidiary
Consolidated Statement of
Operations and Accumulated Deficit
For the nine months ended September 30,
1995 1994
<S> <C> <C>
Net sales $22,916,000 $25,532,000
Cost of sales 21,780,000 23,344,000
Gross profit on sales 1,136,000 2,188,000
Selling and general
and administrative expenses (2,289,000) (2,249,000)
Interest expense (638,000) (677,000)
Other income, net 477,000 242,000
Net loss (1,314,000) (496,000)
Accumulated Deficit:
Beginning of period (12,440,000) (11,836,000)
End of period ($13,754,000) ($12,332,000)
Net loss per share ($0.53) ($0.20)
Average shares outstanding 2,462,973 2,462,973
The accompanying notes should be read in conjunction with the consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
Peerless Tube Company and Subsidiary
Consolidated Statement of
Operations and Accumulated Deficit
For the quarter ended September 30,
1995 1994
<S> <C> <C>
Net sales $7,072,000 $9,083,000
Cost of sales 6,745,000 8,287,000
__________ ___________
Gross profit on sales 327,000 796,000
Selling and general
and administrative expenses (677,000) (694,000)
Interest expense (199,000) (246,000)
Other income, net 120,000 232,000
____________ _________
Net (loss) income (429,000) (88,000)
Accumulated Deficit:
Beginning of quarter (13,325,000) (12,420,000)
___________ __________
End of quarter ($13,754,000) ($12,332,000)
___________ ____________
Net (loss) income per share ($0.17) ($0.04)
___________ ____________
Average shares outstanding 2,462,973 2,462,973
The accompanying notes should be read in conjunction with the consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
Peerless Tube Company and Subsidiary
Consolidated Statement of
Operations and Accumulated Deficit
For the nine months ended September 30,
1995 1994
<S> <C> <C>
Cash flows from operating
activities:
Net loss ($1,314,000) ($496,000)
Adjustments to reconcile net
loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 797,000 793,000
Provision for bad debts 112,000 61,000
Deferred gain (72,000)
Other, net (236,000) (249,000)
Decrease (increase) in assets:
Accounts receivable (65,000) (1,298,000)
Inventories 277,000 542,000
Prepaid expenses 19,000 13,000
Other current assets 71,000 134,000
Increase (decrease) in liabilities:
Accounts payable 38,000 310,000
Accrued liabilities 270,000 63,000
Total adjustments 1,211,000 369,000
Net cash used in
operating activities (103,000) (127,000)
Cash flows from investing
activities:
Proceeds from sale of assets, net 531,000
Purchases of property, plant,
and equipment (163,000) (52,000)
Net cash provided by (used in)
investing activities 368,000 (52,000)
Cash flows from financing
activities:
Net (repayments) borrowings under
credit line (211,000) 820,000
Proceeds from equipment leases
and loans 130,000 750,000
Reduction of long term debt and
current maturities (481,000) (1,429,000)
Net cash (used in) provided by
financing activities (562,000) 141,000
Net decrease in cash
and cash equivalents (297,000) (38,000)
Cash and cash equivalents
beginning of period 560,000 761,000
Cash and cash equivalents
end of period $263,000 $723,000
The accompanying notes should be read in conjunction with the consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
Peerless Tube Company and Subsidiary
Consolidated Statement of Cash Flows
For the quarter ended September 30,
1995 1994
<S> <C> <C>
Cash flows from operating
activities:
Net (loss) income ($429,000) $88,000
Adjustments to reconcile net
loss to net cash provided
(used in) operating activities:
Depreciation and amortization 267,000 265,000
Provision for bad debts 36,000 21,000
Deferred gain (2,000) 0
Other, net (230,000) (249,000)
Decrease (increase) in assets:
Accounts receivable 842,000 64,000
Inventories (136,000) 1,352,000
Prepaid expenses 74,000 7,000
Other current assets 47,000 12,000
Increase (decrease) in
liabilities: 0
Accounts payable (204,000) (555,000)
Accrued liabilities (53,000) 84,000
Total adjustments 641,000 1,001,000
Net cash provided by
operating activities 212,000 1,089,000
Cash flows from investing
activities:
Proceeds from sale of assets, net 95,000 0
Purchases of property, plant,
and equipment (87,000) 219,000
Net cash provided by (used in)
investing activities 8,000 219,000
Cash flows from financing
activities:
Net borrowings under credit line (495,000) (537,000)
Proceeds from equipment leases 50,000 524,000
Reduction of long term debt and 0 0
current maturities (177,000) (1,137,000)
Net cash (used in) provided by
financing activities (622,000) (1,150,000)
Net decrease in cash
and cash equivalents (402,000) 158,000
Cash and cash equivalents beginning
of period 665,000 565,000
Cash and cash equivalents end
of period $263,000 $723,000
The accompanying notes should be read in conjunction with the consolidated
financial statements.
</TABLE>
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements for the nine
months and quarters ended September 30, 1995 and 1994 have been
prepared by the Company without audit. These consolidated
financial statements herein prepared by the Company have been
prepared in accordance with the instructions to Form 10-Q and do
not include all of the information and note disclosures required by
generally accepted accounting principles. These statements should
be read in conjunction with the consolidated financial statements
and notes thereto included in the Company's Annual Report Form 10-K
for the year ended December 31, 1994 and the Company's Quarterly
Reports Form 10-Q for the quarters ended June 30, 1995 and March
31, 1995.
In the opinion of management, these consolidated financial
statements include all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial
position, results of operations, and cash flows for the Company.
The results of operations may not be indicative of the results that
may be expected for the year ending December 31, 1995.
Reclassification
Certain items in the 1994 consolidated financial statements have
been reclassified to conform with their presentation in 1995.
NOTE 2 - BUSINESS AND DEBT RESTRUCTURING
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which
contemplate continuation of the Company as a going concern. Since
1988; however, the Company has sustained operating losses which
resulted in the Company restructuring its business and certain of
its debt. In addItion, the Company's management continues to
evaluate and reshape its business plans to improve the operational
results of the Company and respond to the changes in the economic
and competitive market in which the Company operates. For the last
four fiscal years, the Company has improved its net income and
exceeded its internal projections.
In 1995, the Company's progress has been adversely impacted by
lower sales and aluminum price increases. The overall industry has
experienced an overall slowdown in sales activity. In addition,
excess capacity in the market has created very competitive pricing
which has decreased the opportunity for increases in selling prices
to customers. Further, new and existing business is being quoted
at sales prices that will likely erode the industry's historical
profit margins for the immediate future. Accordingly, the Company
and its competitors have been unable to offset higher operating
costs created by the combination of higher aluminum prices and the
impact of fixed costs at lower volumes. In response to these
industry trends, the Company has taken some measures to reduce
costs; however, should these economic factors extend, additional
action and contingency steps will be implemented. Although less
significant than the impact of decreased sales and higher aluminum
costs, process improvement and major cost reduction programs which
have driven previous margin improvements are continuing. Except
for periodic additions to meet peaks in sales demands, the Company
has maintained its current head count near historic lows. Through
its Continuous Improvement Program and Total Quality Leadership
activities, the Company has increased its customer satisfaction and
performance.
In the first nine months of 1995, the Company also sold certain
production equipment, which was obsolete in the Company's
operations, for approximately $531,000. In addition, the Company
amended its working capital line agreement with its secured lender
in November 1995 to extend the agreement term to January 1999 and
provide additional working capital.
Management believes that similar actions presently being taken to
improve the Company's operating performance, as well as additional
benefits to be obtained in future periods from the impact of the
items discussed above will provide the opportunity for the Company
to continue as a going concern.
NOTE 3 - INVENTORY
Inventory is comprised of the following:
Inventory
September 30 December 31.
1995 1994
Raw materials $1,730,000 $1,999,000
Work-in-process 131,000 138,000
Finished goods 1,362,000 1,363,000
$3,223,000 $3,500,000
In the first nine months of 1995, an estimated loss of $400,000 was
recorded based on the application of the lower of cost or market
standards for inventories and purchase commitments for aluminum.
Of this loss, $150,000 is included in cost of goods sold while
$250,000 is included in other expense.
NOTE 4 - ACCRUED LIABILITIES
Accrued liabilIties is comprised of the following:
Accrued Liabilities
September 30, December 31,
1995 1994
Payroll, payroll taxes, and
payroll related costs $749,000 $525,000
Health benefits 180,000 180,000
Reserve for loss on
purchase commitments 250,000
All other 736,000 690,000
_______ ________
$1,915,000 $1,395,000
NOTES - LONG-TERM DEBT/REVOLVING LINE OF CREDIT
Long-term debt is comprised of the following:
<TABLE>
Long-Term Debt
September 30, December 31,
1995 1994
<S> <C> <C>
11% Capital lease obligation in connection $3,651,000 $3,852,000
with 1991 sale and leaseback of Puerto
Rico assets, final payment due in 2006,
total minimum lease payments of
$5,672.000 less $2,021,000 representing
interest
Prime Equipment loan secured by substantially 562,000 703,000
+4% all the Company's Bloomfield,NJ
machinery and equipment payable to a
lender, final payment due in 1998
Average Various purchase money capital 341,000 350,000
of 18% leases for manufacturing and
office equipment, final payment
due in 1998, total minimum lease
payments of $435,000 less $95,000
representing interest
4,554,000 4,905,000
Less: Current portion (639,000) (618,000)
Long-term debt $3,915,000 $4,287,000
</TABLE>
NOTE 6 - OTHER INCOME
Other income is comprised of:
Other Income, net
September 30, September 30,
1995 1994
Gain on obsolete equipment $531,000 $197,000
sales
Provision for loss on adverse (250,000)
purchase orders (NOTE 3)
All other 196,000 45,000
$477,000 $242,000
NOTE 7 - MAJOR CUSTOMERS
In the first nine months of 1995, four customers accounted for 66%
(25%, 15%, 14% and 12%) of the Company's sales. In 1994, these
same customers accounted for 64% (27%, 14%, 10% and 13%) of the
Company's sales.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
At September 30, 1995, the Company had outstanding purchase
commitments of approximately $1,494,000 for raw aluminum through
December 1995. In October 1995, approximately $494,000 of these
purchase commitments were canceled. The remaining commitments are
substantially offset by firm purchase orders or contracts from
customers. As described in NOTE 3, an estimated loss of $250,000
was recorded in the Consolidated Statement of Operations and
Accumulated DeficIt for the nine months ended September 30, 1995,
based on the application of the lower of cost or market standards
for these commitments.
MANAGEMENT'S DISCUSSION & ANALYSIS OF THE
FINANCIAL CONDITION & RESULTS OF OPERATIONS
BUSINESS AND FINANCIAL RESTRUCTURE
Since 1990, the Company has been restructuring and improving both
its debt structure and business operations. The Company had made
substantial progress in containing losses and minimizing its cash
outflow. For four consecutive years, the Company also had bettered
its internal projections and the previous year's results.
For the nine months ended September 30, 1995, the Company's
business recovery; however, has been hurt by economic factors
facing its industry, including higher aluminum costs, lower sales
volume and over capacity in the marketplace.
The Company's aluminum costs through September 30, 1995 have been
40% higher than its 1994 average acquisition cost. Due to the
excess capacity and a very competitive market, only a portion of
these increased costs have been reflected in higher selling prices.
Further, new and existing business is being quoted at sales prices
that will likely erode the industry's historical profit margins for
the immediate future. Accordingly, the Company and its competitors
have been unable to offset higher operating costs created by the
combination of higher aluminum prices and the impact of fixed costs
at lower volume. In response to these industry trends, the Company
has taken some measures to reduce costs; however, should these
economic factors extend, additional action and contingency steps
will be implemented. More specifically, as noted in the Company's
Annual Report 10-K, the Company's ability to implement its longer
term strategies will depend on the following:
1. Minimization of current year (1995) losses and preservation of
cash and liquidity. As reflected in the net loss of
$1,314,000 reported for the nine months ended September 30,
1995, the minimization of additional losses will be difficult.
A 10% reduction in sales year-to-date, and rising costs,
particularly increases in the cost of aluminum, the Company's
principal raw material cost, costs have exceeded the Company's
operating improvements. Aluminum prices have moderated from
earlier 1995 high price levels, and the Company has managed a
very critical period by aggressively managing its cash.
Management also has provided for $400,000 for anticipated
accounting losses relative to inventory write-downs and
purchase commitments. If the current downward trend in
industry sales continues, the Company's ability to meet this
objective will be further challenged. The Company's cash and
liquidity position was helped by the sale of certain obsolete
equipment in the first nine months of 1995 which resulted in
$531,000 in cash and a gain of a like amount. In November
1995, the Company also obtained an extension of its revolving
credit line which provided additional working capital.
2. Sale of idle or excess property. As discussed above, the
Company already has secured the proceeds of approximately
$531,000, and has already exceeded the total proceeds that
were received in 1994 from similar activity. In addition, the
Company has had discussions with several interested parties as
to a sale and leaseback transaction that would provide
additional cash and lower operating costs.
3. Continued support from the Company's secured lender. The
Company is in compliance with all its covenants, and in
November 1995 agreed to new terms and conditions with its
lender which are favorable to the Company. The Company also
anticipates continued support from its vendors.
4. Sustaining the 1994 profitable performance in its wholly-owned
subsidiary. Peerless Tube Company of Puerto Rico, Inc.
Through the first nine months of 1995 this operation is
profitable.
5. Retention and continued development of the Company's customer
base. There have been no major customer changes to date in
1995. Several customers are: however, reassessing their
contracts with the Company. With the competitive pressures
facing the industry, management is uncertain of the outcome of
these decisions, but believes it will retain a core base of
business. Depending on the outcome of these decisions,
management has various alternatives and contingency plans
which it is prepared to execute.
6. Obtaining financing for new equipment. Based on current
market demands and industry capacity, such financing now
appears to be a longer-term issue. The Company continues its
capital repair and maintenance programs, and remains
competitive with industry technology and capability.
Despite the difficulty of the above requirements, the Company's
management believes it can be successful in these efforts, and
points to its accomplishments over the last several years.
Although not a guarantee of future success, this past performance
and willingness to take necessary actions in its restructuring is
an indication of management's commitment and potential for future
success. As previously discussed, the Company's longer-term
restructure will be enhanced by the acquisition of new equipment or
development of new product offerings. For the near future, the
Company must depend solely on the continued improvement in its
operations to gradually reverse its trend of operating losses.
This necessity, in the opinion of management, has a high degree of
risk and is dependent on many factors cited above. The time frame
to be successful remains critical and Company's management is
acutely aware of the need to minimize future losses and generate
positive cash flow.
SALES AND RESULTS OF OPERATIONS 1995 COMPARED TO 1994
Overall Summaries
There are three primary factors in the comparison for the nine
months and quarters ended September 30, 1995 and September 30,
1994, respectively, were:
1. significant sales decreases;
2. the acquisition cost of aluminum, which increased
approximately 40% over the previous periods in 1994; and
3. an increase of other income, net in the nine months ended
September 30, 1995 of $235,000 which was primarily from
the sale of obsolete equipment.
These items and other items of significance are further discussed
in the paragraphs that follow.
Sales
Sales revenues decreased for the nine months and quarter ended
September 30, 1995 by approximately $2,616,000, or 10%, and
$2,011,000, or 22%, respectively, compared to the prior year.
Sales of aerosols were lower than 1994 by approximately $2,436,000,
or 14% through the first nine months of 1995. Sales of aluminum
tubes after a strong start in 1995 have also decreased during the
first nine months by $497,000 or 7%. These decreases in sales were
also net of a 1995 price increases of approximately 4-7%. The 1995
overall unit volume is approximately 13% lower than in 1994. As a
percentage of total sales, customer sales in dollars to the
Company's larger accounts in total were generally similar to last
year; however, the aerosol dollar sales volume from these customers
was down by $1,062,000 or 7%. This decrease appears to reflect
industry trends in 1995. There appears to be an underlying
softness in the market, and continuing downward inventory
adjustments being made by these large marketers. The remainder of
the Company's lower aerosol business can be also be attributed to
this "soft" market, as well as lost sales to competitors, including
a relatively new competitor, who appears to have priced product to
attract new business to initially fill capacity. More recently,
the overall industry has been hurt by economic factors, including
higher aluminum costs, lower sales and over capacity in the market-
place. These conditions have made for a very competitive market as
the individual companies in the industry are aggressively seeking
new business to cover fixed costs and fill respective capacity.
The Company's current backlog of production orders and finished
goods inventory is $6,500,000 compared to $10,000,00 last year and
is reflective of this overall sales trend discussed above. Given
the shorter lead times created by the excess capacity in the
market, and the order pattern, as to "release" dates by larger
customers, this decrease is not necessarily an accurate forecast of
future sales. Management believes that sales for the remainder of
the year will continue to be below those levels obtained in 1994.
The Company's sales for aluminum aerosols for the first nine months
of 1995 accounted for approximately 65.9% of the sales compared to
68.7% in 1994. The reasons for this shift in sales mix is
discussed above. The mix of individual product sizes and diameter
within each category for the quarter has remained similar to 1994.
Gross Margin
The gross profit for the nine months ended September 30, 1995 and
September 30, 1994, was $1,136,000, or 5.0% of sales, and
$2,188,000 or 8.6% of sales, respectively. For the quarters ended
September 30, 1995 and September 30, 1994, the gross profit was
$327,000 or 4.6%, and $796,000 or 8.8%, respectively. The decline
in gross margin was due to the impact of the decreased sales volume
and increases in the cost of aluminum which was not entirely offset
by price increases to customers. For the nine months ended
September 30, 1995, cost of goods sold also includes a $150,000
inventory write-down to its aluminum inventory to reflect the
impact of the increased aluminum prices. Management estimates that
the Company recovered 40-50% of these increases from customer price
increases. As discussed above, aluminum prices increased
approximately 40% from 1994 and reached their 1995 high in the
first quarter of 1995. The Company, had it not been for its higher
aluminum costs, would have increased its gross margin through
continued operating improvements. Peerless Tube Company of Puerto
Rico also continued to be profitable which is a continuation of the
progress made in 1994. These continued improvements and cost
reductions also cushioned the financial impact of the decreases in
sales volume and related adverse effect of fixed costs. On the
current sales volume, the Company in previous periods would have
experienced yet lower margins.
These improvements, although obscured, are significant especially
should the sales volume increase or aluminum prices decline
further. This assumption may; however, be tested due to the
competitive state of the industry discussed above. In addition,
the Company does anticipate that future gross margins will be less
compared to 1994 (9%) based on the current and forecasted prices of
aluminum, and the impact of scheduled holiday shutdown and
maintenance schedules. In addition, the current level of aerosol
sales and related adverse effect of fixed costs will also keep
margins below the previous year. The Company will attempt to
maintain the price increases obtained in 1995, and continue its
process improvement activities, and reduce variable labor, wherever
possible, to reduce the gross margin erosion. In summary, the
Company's future improvement in gross profit and operating results
is expected to be gradual especially with the current sales volume
and cost of aluminum.
Selling, general and administrative expenses
Selling, general and administrative expenses for the nine months
ended, September 30, 1995 were approximately $2,289,000 compared to
$2,249,000 in 1994 representing a $40,000, or 1.7% increase. For
the quarters ended September 30, 1995 and September 30, 1994 these
expenses were $677,000 and $694,000, respectively. Both the year-
to-date increase of $40,000 (1.7%), and the quarter decrease of
$17,000 (2.4%) in the most recent quarter comparison are not
considered an indication of any trends. As a percentage of sales,
selling, general, and administrative costs were approximately 10.0%
and 8.8% of sales for the nine month periods in 1995 and 1994,
respectively, and approximately 9.6% and 7.6% for the respective
quarters ended September 30, 1995 and 1994.
Interest expense
Interest expense for the nine months ended, September 30, 1995 was
approximately $638,000 compared to $677,000 in 1994. For the
quarter ended September 30, 1995 and September 30, 1994 interest
expense was $199,00 and $246,000, respectively. In 1995, the level
of borrowing has been relatively low due to the cash received from
obsolete equipment sales. Any interest rate impact has been minimal
through September 30, 1995.
Other income, net
In 1995, other income, net of $477,000 includes a provision to
record an estimated loss on aluminum purchase contracts of
$250,000, a net gain on the sale of fully depreciated equipment of
$531,000, and other net income items of $196,000. In 1994, other
income, net of $242,000 includes a net gain on the sale of fully
depreciated equipment of $197,000, and other net income items of
$45,000.
Inflation
At present, the Company results have not been significantly
impacted by inflation other than through rising operating costs
which have not been offset by increases to the Company's sales
prices. Recent market prices of aluminum have moderated from
earlier highs; however, the market remains 35-40% above the
Company's 1994 average cost for aluminum purchased. Should these
market prices remain the same or increase, the Company will incur
similar or lower profit margins than in the first nine months of
1995. (See Note 8 to consolidated financial statements on page
11.)
LIQUIDITY AND CAPITAL RESOURCES
Working capital at September 30, 1995 has decreased approximately
$1,079,000 from December 31, 1994, primarily due to losses in the
first nine months of 1995. In the third quarter of 1995, working
capital decreased by $370,000. For the quarter ended September 30,
1995, approximately $212,000 of cash was provided primarily by
collections of receivables. For the nine months ended September
30, 1995, cash of $103,000 was used in operating activities.
Overall total cash and cash equivalents decreased $297,000 during
this same period. Additional cash of $562,000 has been used to
repay debt and borrowings under the credit line. During the nine
months ended September 30, 1995, the Company also received $531,000
for the sale of obsolete equipment and made certain minor
($163,000) capital additions for production and office equipment
which should benefit operations in future periods. These items
were substantially financed through three year capital leases.
The debt-to-equity ratio at September 30, 1995 was 3.95:1 compared
to 2.83:1 at December 31, 1994.
As of September 30,1995, the Company is in compliance with its debt
agreements and covenants.
As of September 30, 1995, the Company had cash and cash equivalents
of approximately $263,000 and availability under its line of credit
of another $900,000. After considering the changes in the
Company's working capital revolving credit line, the net cash and
availability, as of the November 15, 1995 filing date, is
approximately $800,000.
The Company aggressively managed its cash through the first nine
months of 1995, recognizing the impact of higher aluminum prices
and sales trends for aerosols, which are behind 1994 levels. This
management included acceleration of receivable collections,
maintenance of lower inventories, monitoring manning and staffing
levels, and controlling both costs and the timing of disbursements.
The Company has not, nor anticipates, any significant operating
difficulties as a result of these actions. In addition, the
Company and its working capital lender agreed to new loan
provisions which has increased the availability of working capital.
This access to additional working capital, expected receivable
collections, and continued cash management should provide the
necessary funds to meet the Company's short term cash requirements.
Going forward, management clearly recognizes the need to reverse
the overall trend of financial losses to insure sufficient
liquidity and will take appropriate steps. The continued
moderation and or further decrease in aluminum prices going forward
will be a positive factor. In the opinion of management, the
current cash and availability under the Company's loan agreements,
as supplemented by continuing cash management actions, appears
sufficient to meet current obligations including working capital
sufficient to cover any additional financial losses in 1995.
As in any business, success will depend on a number of factors. It
is, of course, also possible that the Company's current business
plan will not be achieved, and/or management's actions will fall
short of their desired intent causing cash shortfalls. Although
certainly not a guarantee of future success, the Company's past
performance and willingness to take necessary actions is an
indication of management's commitment, intent and ability to
succeed.
PART II OTHER INFORMATION
ITEM 5:
There were no dividends declared in the quarter.
ITEM 6:
On March 30, 1995 the Company filed its Annual Report Form 10-K for
the year ended December 31, 1994. On May 12, 1995, the Company
filed a Form 12-B requesting a filing extension of the Quarterly
Report Form 10-Q for the quarter ended March 31, 1995. On May 19,
1995, the Company filed its Quarterly Report Form 10-Q for the
quarter ended March 31, 1995. On August 15, the Company filed its
Quarterly Report Form 10-Q for the quarter ended June 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
November 15, 1995
PEERLESS TUBE COMPANY
Registrant
By:
/s/ Frederic Remington, Jr.
___________________________
Frederic Remington, Jr.
Chairman
By:
/s/ Paul Peterik
_________________________
Paul Peterik
Vice President, Finance and
Treasurer
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<PERIOD-END> SEP-30-1995
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