SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter year ended June 30, 1996 Commission File No. 1-7215
PEERLESS TUBE COMPANY
New Jersey 22-1191280 (I.R.S. Employer Identification)
58-76 Locust Avenue
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(g) of the act:
Title of Class Exchange
-------------- ---------
Common stock of $1.33-1/3 par value Over the counter (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 has been subject to such filing requirements for
the past 90 days.
Yes x No
As of the filing date, the aggregate market value of the voting
stock held by non affiliates of the Registrant was approximately
$1,231,000. The market value is based on a price of $.50 as of
August 16, 1996, which is the last recorded trade.
Common Stock, Par Value $1.33-1/3
Outstanding at June 30, 1996 2,462,973 Shares
Documents incorporated by references: None.
<PAGE>
Table of Contents
Item Page
Financial Information
Consolidated Balance Sheets June 30, 1996 and 4
December 31, 1995
Consolidated Statement of Operations for the Quarters 5-6
Ended June 30, 1996 and 1995
Consolidated Statement of Cash Flows - June 30, 1996 7
June 30, 1996 and 1995
Notes to the Consolidated Financial Statements 8-10
Management's Discussion & Analysis of the Financial Notes 1-6
Conditions & Results of Operations
<PAGE>
Peerless Tube Company & Subsidiary June 30 December 31,
Consolidated Balance Sheet 1996 1995
- ------------------------------------------------------------------
Assets
- ----------------------------------
Current assets:
Cash and cash equivalents $255,000 $660,000
Accounts receivable, less allowance
for doubtful accounts of $166,000
and $140,000 in 1996 and 1995,
respectively 2,768,000 3,697,000
Inventories 1,921,000 2,425,000
Prepaid expenses 588,000 465,000
Other current assets 43,000 54,000
--------- ---------
Total current assets 5,575,000 7,301,000
Property, plant and equipment, net 7,529,000 8,083,000
Other assets 59,000 59,000
Deferred tax assets, net of valuation
allowance of $4,800,000 and $4,607,000
in 1996 and 1995, respectively --------- ---------
$13,163,000 $15,443,000
Liabilities & Stockholders' Equity
- -----------------------------------
Current liabilities:
Accounts payable $2,161,000 $3,016,000
Accrued liabilities 1,820,000 1,415,000
Revolving credit line 771,000 1,717,000
Current portion of long term debt 658,000 683,000
---------- ---------
Total current liabilities 5,410,000 6,831,000
Long term debt 3,709,000 4,009,009
Deferred gain 1,161,000 1,221,000
Other liabilities 120,000 120,000
__________ _________
Total liabilities 10,400,000 12,181,000
__________ __________
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
Accumulated deficit (14,714,000) (14,215,000)
Less: 73,962 shares of stock in
treasury, at cost (344,000) (344,000)
---------- ----------
Total stockholders' equity 2,763,000 3,262,000
---------------------------
$13,163,000 $15,443,000
---------------------------
The accompanying notes should be
read in conjunction with the
consolidated financial statements.
<PAGE>
Peerless Tube Company and Subsidiary
Consolidated Statement of For the quarter ended June 30,
Operations and Accumulated ---------------------------------
Deficit 1996 1995
Net sales $6,547,000 $8,284,000
Cost of sales 5,822,000 7,890,000
---------- ----------
Gross profit on sales 725,000 394,000
Selling and general and
administrative expenses (706,000) (716,000)
Interest expense (199,000) (221,000)
Other income, net 28,000 391,000
---------- ----------
Net (loss) income (152,000) (152,000)
Accumulated Deficit:
Beginning of quarter (14,562,000) (13,173,000)
----------- -----------
End of Quarter ($14,714,000) ($13,325,000)
Net (loss) income per share ($0.06) ($0.06)
----------- -----------
Average shares outstanding 2,462,973 2,462,973
The accompanying notes should be read in
conjunction with the consolidated financial statements.
<PAGE>
Peerless Tube Company and Subsidiary
Consolidated Statement of For the six months ended June 30,
Operations and Accumulated ---------------------------------
Deficit 1996 1995
Net sales $12,908,000 $15,844,000
Cost of sales 11,530,000 15,056,000
---------- ----------
Gross profit on sales 1,378,000 788,000
Selling and general and
administrative expenses (1,462,000) (1,614,000)
Interest expense (411,000) (439,000)
Other expense, net (4,000) 356,000
---------- ----------
Net loss (499,000) (909,000)
Accumulated Deficit:
Beginning of period 12/31/95 (14,215,000) (12,906,000)
----------- -----------
End of period ($14,714,000) ($13,815,000)
Net loss per share ($0.20) ($0.37)
----------- -----------
Average shares outstanding 2,462,973 2,462,973
The accompanying notes should be read in
conjunction with the consolidated financial statements.
<PAGE>
Peerless Tube Company and
Subsidiary Consolidated
Statement of Cash Flows For the six months ended June 30
--------------------------------------
1996 1995
- -------------------------------------------------------------------
Cash flows from operating
activities:
Net loss (499,000) (885,000)
Adjustments to reconcile net
loss to net cash (used in)
provided by operating
activities:
Depreciation and amortization 554,000 530,000
Provision for bad debts 26,000 76,000
Deferred gain (60,000) (70,000)
Other net 0 (6,000)
Decrease (increase) in
operating assets:
Accounts receivable 903,000 (907,000)
Inventories 504,000 413,000
Prepaid expenses (123,000) (55,000)
Other current assets 11,000 24,000
Increase (decrease) in
operating liabilities:
Accounts payable (855,000) 242,000
Accrued liabilities 405,000 323,000
____________________________
Total adjustments 1,365,000 570,000
Net cash provided by (used
in) operating activities: 866,000 (315,000)
_____________________________
Cash flows from investing
activities:
Proceeds from sale of assets,
net 0 436,000
_____________________________
Purchases of property,
plant and equipment (76,000)
Net cash provided by
investment activities 0 360,000
_____________________________
Cash flows from financing
activities:
Net (repayments) borrowings
under credit line (946,000) 284,000
Reduction of long-term debt
and current maturities (325,000) (224,000)
Net cash provided by (used
in) financing activities (1,271,000) 60,000
_____________________________
Net (decrease) increase in
cash and cash equivalents (405,000) 105,000
Cash and cash equivalents
beginning of period 660,000 560,000
____________________________
Cash and cash equivalents
end of period $255,000 $665,000
________________________________
<PAGE>
SALES AND RESULTS OF OPERATIONS 1996 COMPARED TO 1995
SALES
Sales for the quarter ended June 30, 1996 and 1995 totaled
$6,546,927 and $8,283,679 respectively. Sales for the six months
ended June 30, 1996 and 1995 were $12,908,168 and $15,843,658
respectively, resulting in a decrease of $2,935,490 or 18.5%. Sales
of aluminum tubes and cans were lower by $1,596,000 and $130,000
respectively when comparing the sales volume for the second quarter
June 30, 1996 and 1995 respectively. This was a result of the loss
of a major customer during the first quarter of 1996. The loss of
this major customer represented a 10.2% and a 22.6% of the
Company's sales volume for the six months ended June 30, 1996 and
1995 respectively. Overall, industry sales which were soft in 1995
continued into 1996. Also, over capacity in the market, resulting
in competitive pricing has had an impact on the decline in sales
dollars.
The loss of this major customer resulted in a $2,247,962 decrease
in sales for the six months ended June 30, 1996. This number is
comprised of $1,257,368 in metal tube sales and $990,594 in aerosol
can sales. The breakdown of the overall sales decrease from all
sources for the second quarters ended June 30, 1996 and 1995
respectively was as follows:
2nd Quarter 2nd Quarter
Net Sales 1996 1995 Change %
Cans 5,088,000 5,218,000 -130,000 -2.49%
Metal Tubes 1,323,000 2,919,000 -1,596,000 -54.68%
Miscellaneous 136,000 147,000 -11,000 -7.48%
--------- --------- ---------- -------
Total $6,547,000 ($8,284,000) ($1,737,000) -20.97%
---------- ---------- ---------- -------
In the second quarter of 1996, three customers accounted for 58%
(23%, 22%, and 13%) of the Company's sales. During the quarter
ended June 30, 1996 the Company signed a two year contract with its
largest aerosol customer. While no significant change has occurred
in the sales backlog it is still unclear as to what price
concessions will be necessary to retain and attract new customers.
Also, given the shorter lead times created by the excess capacity
in the market and changes in order patterns, management must be up
to the task to meet these new demands in the market. As a result
the Company continues its capital repair and maintenance programs
and remains competitive with the industry technology and
capability.
GROSS MARGIN TRENDS AND DISCUSSIONS
The gross profit on sales for the quarter ended June 30, 1996 was
$725,000 or 11.0% on sales of $6,547,000. For the six months ended
June 30, 1996 gross profit on sales was $1,378,000 or 10.6% on
sales of $12,908,000 compared to $809,000 or 5.1% on sales of
$15,844,000 for the six months end June 30, 1995. The improvement
in gross margin for the quarter and six months ended June 30, 1996
as compared to the quarter and six month period ending June 30,
1995 relates to a change in product mix. With increased sales in
aerosol cans, which has higher margins than tubes, along continuing
cost reductions programs that have been implemented, lower
spending, reduction in manpower while improving efficiencies, and
lower aluminum prices as compared to 1995 have help offset the
18.5% loss in sales volume.
The Company's gross margins continue to be sensitive to volume.
Most of the Company's costs, excluding material, are fixed as
opposed to variable. While the Company has been successful in
reducing these costs, it is extremely important that the Company
continues to improve its man to machine ratio and value-added
output.
In order for the Company to continue to increase its profit margins
it must increase sales and at the same time continue to leverage
its machine hours. This is important if the Company is going to
have the ability to cover its fixed costs, both manufacturing and
selling and general administrative. The current sales backlog is
currently not adequate enough to meet these costs, but management
is hopeful that gross margins will be sufficient to meet cash
requirements until shipments increase.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the quarter ended,
June 30, 1996 were $706,000 or 10.7% of sales. For the six months
ended June 30, 1996 selling, general and administrative expenses
totaled $1,462,000 or 11.3% of sales. When comparing the second
quarter and the six months ended June 30, 1995 the expenses are
$716,000 and $1,613,000 or 8.6% and 10.2% respectively of sales.
The current cost incurred in 1996 for both the quarter and six
months end June 30, 1996 are reasonable.
INTEREST EXPENSE AND OTHER EXPENSE, NET
Interest expense for the quarter ended June 30, 1996 was
approximately $199,000 as compared to $221,000 for the quarter
ended June 30, 1995. For the six months ended June 30, 1996
interest expense was $411,000 as compared to $439,000 for six
months ended June 30, 1995. The overall decrease in interest of
approximately $28,000, compared to 1995 is a result of lower
average borrowing.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $165,000 at June 30, 1996 which
was approximately a $305,000 decrease in working capital from
December 31, 1995. This continued decrease in working capital
indicates management's biggest challenge in the immediate future is
the minimization of cash losses.
For the period ended June 30, 1996 cash provided by operating
activities was $866,000. The primary source of this cash was the
liquidation of accounts receivable, which decreased $903,000 along
with a $504,000 decrease in inventories. Cash used for 1996
financing activities was $1,271,000, as the Company's credit line
was reduced by $946,000 and its long term debt was reduced by
$325,000 during the six months ended June 30, 1996. Overall the
Company had a net decrease in cash of $405,000 for the six months
ended June 30, 1996, as compared with a net increase of $105,000
for the six months ended June 30, 1995.
The debt-to-equity ratio at June 30, 1996 was 3.76:1 as compared to
3.87:1 for the quarter ended March 31, 1996. The favorable change
in ratio is a result of the Company's stronger second quarter. As
of June 30, 1996, the Company is in compliance with its debt
agreement and covenants.
Management continues to manage its cash resources even during
periods of losses. In addition continued cost reduction such as
reduced manpower, the carrying of lower inventories, and a
reduction in overall manufacturing spending have contributed to
minimizing the drain on cash. Also, the reduced aluminum costs in
1996 continue to be a benefit to the Company.
The Company has offers for two aluminum lines currently not in the
future plans of the Company. The sale of these lines, supported by
anticipated increases in the sales backlog is sufficient to meet
current obligations. In the opinion of management, the current cash
management actions appear sufficient to meet current obligations
including working capital sufficient to cover any additional
losses. The Company's past performance and willingness to take
necessary actions is an indication of management's commitment,
intent and ability to succeed.
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements for the six
months and quarters ended June 30, 1996 and 1995 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, 1995 and the Company's Quarterly Report
Form 10-Q for the quarter ended March 31, 1996.
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, 1996.
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.
As in the past, the Company's management continues to evaluate and
reshape its business to improve the operational results of the
Company and respond to the changes in the economic and competitive
market in which the Company operates. In response to this recent
loss of sales volume, the Company has initiated a plant
consolidation along with other operating cost reductions.
<PAGE>
NOTE 4 - INVENTORY
Inventory is comprised of the following:
Inventories
June 30, 1996 December 31, 1995
Raw Material 892,000 1,432,000
Work-In-Process 119,000 119,000
Finished Goods 910,000 874,000
--------- ---------
$1,921,000 $2,425,000
--------- ---------
NOTE 3 - ACCRUED LIABILITIES
Accrued liabilities is comprised of the following:
Accrued Liabilities
June 30, 1996 December 31, 1995
Payroll, payroll taxes,
and payroll related costs 785,000 510,000
Health Benefits 180,000 180,000
All Other 855,000 725,000
--------- ---------
$1,820,000 $1,415,000
--------- ---------
<PAGE>
NOTE 5 - LONG TERM DEBT/REVOLVING CREDIT LINE
Long Term debt is comprised of the following:
Long-term debt June 30, December 31
1996 1995
11% Capital lease obligations in connec- 3,431,000 3,580,000
tion with the 1991 sale and lease-
back of Puerto Rico assets, final
payment due in 2006, total minimum
lease payments of $5,160,000 less
$1,727,000 representing interest
Prime Equipment loan secured by substan- 757,000 835,000
4% tially all the Company's Bloomfield,
NJ machinery and equipment payable
to a lender, final payment due in 1999
Average Various purchase money capital leases 179,000 277,000
of 18% for manufacturing and office equip-
ment, final payment due in 1998 total
minimum lease payment of $229,000 less
$50,000 representing interest
$4,367,000 $4,692,000
---------- ---------
Less: Current portion 658,000 683,000
---------- ---------
Long-term debt $3,709,000 $4,009,000
NOTE 6 - DISCLOSURE, Sale Lease Back of Puerto Rico
Effective October 18, 1996 Peerless Tube of Puerto Rico facility
will be closing. This is a result of The Block Drug Company
changing its packaging requirements from aluminum tubes to a
laminate based tube. Block Drug represented approximately 70% of
the volume at the Puerto Rico plant. The remaining production
requirements will be met by utilizing the excess capacity at the
Bloomfield, New Jersey facility. No interruption in meeting
production or future shipment dates is anticipated.
As a result of Block Drugs decision to terminate business with the
Company, the financial impact relating to the Sale Lease Back
Agreement is as follows:
Calculation of Income Recognition on the closure of Puerto Rico
Write-off of property and equipment (2,975,528)
Write-off of capital lease obligation 3,262,258
Severance pay - Company's portion (55,901)
Termination payment from Block Drug 272,640
Recognition of deferred gain 1,131,449
---------
Total Gain to be recognized $1,634,918
---------
<PAGE>
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.
August 20, 1996
PEERLESS TUBE COMPANY
Registrant
By: /s/ Frederic Remington, Jr.
____________________________
Frederic Remington, Jr.
Chairman
By:/s/ Richard W. Potts
____________________________
Richard W. Potts
President
By:/s/ George J. Blumenschein
___________________________
George J. Blumenschein
Director of Finance, and
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 255,000
<SECURITIES> 0
<RECEIVABLES> 2,786,000
<ALLOWANCES> 0
<INVENTORY> 1,921,000
<CURRENT-ASSETS> 5,576,000
<PP&E> 7,529,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,163,000
<CURRENT-LIABILITIES> 5,410,000
<BONDS> 0
0
0
<COMMON> 3,382,000
<OTHER-SE> (467,000)
<TOTAL-LIABILITY-AND-EQUITY> 13,163,000
<SALES> 6,547,000
<TOTAL-REVENUES> 6,547,000
<CGS> 5,822,000
<TOTAL-COSTS> 706,000
<OTHER-EXPENSES> (344,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 199,000
<INCOME-PRETAX> (152,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (152,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> (347,000)
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