SECURITIES 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 September 30, 1996 Commission File No. 1-7215
PEERLESS TUBE COMPANY
New Jersey 22-1191280 (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(g) of the act:
Title of Class Exchange
Common stock $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
nonaffiliates 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 September 30, 1996 2,462,973 Shares
Documents incorporated by references: None.
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TABLE OF CONTENTS
ITEM PAGE
Part 1 Financial Information
Consolidated Balance Sheets September 30, 1996 and 4
December 31, 1995
Consolidated Statement of Operations for the quarters 5-6
and nine months ended September 1996 and 1995.
Consolidated Statement of Cash Flows for the nine months 7
ended September 30, 1996 and 1995.
Notes to the Consolidated Financial Statements 8-10
Management's Discussion & Analysis of the Financial 11-13
Conditions & Results of Operations
Part 2 Other Information
Item 5 14
Item 6 14
Signature 15
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Peerless Tube Company & Subsidiary September 30, December 31,
Consolidated Balance Sheet 1996 1995
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Assets
Current assets:
Cash and cash equivalents $479,000 $660,000
Accounts receivable, less allowance for doubtful
accounts of $253,000 and $140,000 in 1996
and 1995, respectively 1,850,000 3,697,000
Inventories 2,581,000 2,425,000
Prepaid expenses 570,000 465,000
Other current assets 56,000 54,000
Total current assets 5,536,000 7,301,000
Property, plant and equipment, net 7,296,000 8,083,000
Other assets 59,000 59,000
Deferred tax assets, net of valuation allowance
of $4,800,00 and $4,607,000 in 1996
and 1995, respectively
$12,891,000 $15,443,000
Liabilities & Stockholders' Equity
Current liabilities:
Accounts payable $2,305,000 $3,016,000
Accrued liabilities 1,971,000 1,415,000
Revolving credit line 502,000 1,717,000
Current portion of long term debt 382,000 683,000
Total current liabilities 5,160,000 6,831,000
Long term debt 3,820,000 4,009,000
Deferred gain 1,131,000 1,221,000
Other liabilities 120,000 120,000
Total liabilities 10,231,000 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 (14,817,000) (14,215,000)
Less: 73,962 shares of stock in treasury, at cost (344,000) (344,000)
Total stockholders' equity 2,660,000 3,262,000
$12,891,000 $15,443,000
The accompanying notes should be read in
conjunction with the consolidated financial statements.
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Peerless Tube Company and Subsidiary
Consolidated Statement of For the quarter ended September 30,
Operations and Accumulated Deficit 1996 1995
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Net sales $5,261,000 $7,072,000
Cost of sales 4,653,000 6,745,000
Gross profit on sales 608,000 327,000
Selling and general
and administrative expenses (608,000) (677,000)
Interest expense (208,000) (199,000)
Other income 105,000 120,000
Net Loss (103,000) (429,000)
Accumulated Deficit:
Beginning of quarter ($14,714,000) ($13,325,000)
Other Misc Adjustments
End of quarter ($14,817,000) ($13,754,000)
Net (loss) per share .04 0.17
Average shares outstanding 2,462,973 2,462,973
The accompanying notes should be read in
conjunction with the consolidated financial statements.
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Peerless Tube Company and Subsidiary
Consolidated Statement of For the quarter ended September 30,
Operations and Accumulated Deficit 1996 1995
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Net sales $18,169,000 $22,916,000
Cost of sales 16,184,000 21,780,000
Gross profit on sales 1,985,000 1,136,000
Selling and general
and administrative expenses (2,070,000) (2,289,000)
Interest expense (619,000) (638,000)
Other income 102,000 477,000
Net loss (602,000) (1,314,000)
Accumulated Deficit:
Beginning of quarter ($14,215,000) ($12,440,000)
Other Misc Adjustments
End of quarter ($14,817,000) ($13,754,000)
Net (loss) per share $0.24 $0.53
Average shares outstanding 2,462,973 2,462,973
The accompanying notes should be read in
conjunction with the consolidated financial statements.
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Peerless Tube Company & Subsidiary For the Nine months ended September 30,
Consolidated Balance Sheet 1996 1995
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Cash flows from operating activities:
Net loss ($602,000) ($1,314,000)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Depreciation and amortization 787,000 797,000
Provision for bad debts 113,000 112,000
Deferred gain (90,000) (72,000)
Other net 0 (236,000)
Decrease (increase) in operating assets:
Accounts receivable 1,734,000 (65,000)
Inventories (156,000) 277,000
Prepaid expenses (105,000) 19,000
Other current assets (2,000) 71,000
Increase (decrease) in operating liabilities:
Accounts payable (711,000) 38,000
Accrued liabilities 556,000 270,000
Total adjustments 2,126,000 1,211,000
Net cash provided by
operating activities 1,524,000 (103,000)
Cash flows from investing activities:
Proceeds from sale of assets, net 531,000
Purchases of property, plant, and equipment (163,000)
Net cash provided by (used in)
investing activities 0 368,000
Cash flows from financing activities:
Net repayments (1,215,000) (211,000)
Proceeds from equipment leases 130,000
Reduction of long term debt and
current maturities (490,000) (481,000)
Net cash used in
financing activities (1,705,000) (562,000)
Net decrease in cash
and cash equivalents (181,000) (297,000)
Cash and cash equivalents beginning of period 660,000 560,000
Cash and cash equivalents end of period $479,000 $263,000
The accompanying notes should be read in
conjunction with the consolidated financial statements.
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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, 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
quarters ended June 30, 1996 and 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.
In response to this recent loss of sales volume, the Company has initiated a
plant consolidation along with other operating cost reductions.
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NOTE 3 - INVENTORY
Inventory is comprised of the following:
Inventories
September 30, December 31,
1996 1995
Raw Material 1,270,000 1,432,000
Work-In-Process 108,000 119,000
Finished Goods 1,203,000 874,000
$2,581,000 $2,425,000
NOTE 4 - ACCRUED LIABILITIES
Accrued liabilities is comprised of the following:
Accrued Liabilities
September 30, December 31,
1996 1995
Payroll, payroll taxes, and payroll
related costs 815,000 510,000
Health Benefits 180,000 180,000
All Other 976,000 725,000
$1,971,000 $1,415,000
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NOTE 5 - Long Term Debt/Revolving Credit Line
Long Term debt is comprised of the following:
Long-term debt
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September 30, December 31,
1996 1995
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11% Capital lease obligations in connection 3,356,000 3,580,000
with he 1991 sale and leaseback of Puerto
Rico assets, final payment due in 2006,
total minimum lease payments of $4,989,000
less $1,633,000 representing interest.
(See Note 6.)
Prime Equipment loan secured by substantially all 731,000 835,000
4% the Company's Bloomfield, NJ machinery and
equipment payable to a lender, final
payment due in 1999.
Average of Various purchase money capital leases for 116,000 277,000
18% manufacturing and office equipment, final
payment due in 1998 total minimum lease
payment of $154,000 less $38,000
representing interest
$4,203,000 $4,692,000
Less: Current portion 382,000 683,000
Long-term debt $3,821,000 $4,009,000
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NOTE 6 - DISCLOSURE: Termination of Sale Lease Back of Puerto Rico Facility
Effective November 1, 1996 the Peerless Tube Company of Puerto Rico will be
closing as a result of Block Drugs decision to terminate its business and lease
with the Company. The Block Drug Company has changed its packaging requirements
from an aluminum tube 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 of the Bloomfield, New Jersey facility. No interruption in
meeting production or future shipment dates is anticipated.
In connection with the Block Drug termination of the sale lease back agreement
The Company will recognize a net gain of approximately $1,600,000 in the fourth
quarter.
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MANAGEMENT'S DISCUSSION & ANALYSIS OF THE FINANCIAL CONDITIONS & RESULTS OF
OPERATIONS
SALES AND RESULTS OF OPERATIONS 1996 COMPARED TO 1995
Sales
Sales for the quarter ended September 30, 1996 and 1995 totaled $5,261,000 and
$7,072,000 respectively as compared with Sales for the nine months ended
September 30, 1996 and 1995 were $16,169,000 and $22,916,000 respectively.
When comparing 1996 vs. 1995 the quarter ended September 1996 had a decrease in
sales of $1.811,000 or 25.6% and nine months ended September 1996 had a
decrease in sales of $4,747,000 or 20.7%.
Sales of aluminum tubes for the nine months ended September 1996 are lower than
the first nine months of 1995 by $2,976,000 or 40.6%. This is a result of a
loss of major customer during the first quarter of 1996. The loss of this
customer represents $2,023,000 or 68.0% of the overall reduction in tube sales
for the first nine months ending September 1996. This customer during the first
nine months of 1995 represented $2,624,000 or 35.8% of the total aluminum tube
business.
Aluminum tubes will continue to have an erosion of sales int he fourth quarter,
October through December 1996 with the closing of the Puerto Rico Facility. This
is a result of the Block Drug Company changing its packaging requirements from
aluminum tubes to a laminate based tube. Block Drug represents approximately 70%
of the volume at the Puerto Rico facility. The remaining production
requirements will be met by utilizing the excess capacity at the Bloomfield,
New Jersey facility.
Aerosol sales for the quarter ended September 1996 and 1995 total $4,089,000 and
$4,978,000 respectively. Sales for the nine months ended September 1996 and
1995 were $14,045,000 and $15,366,000 respectively. This is a result of the
volume for quarter ended September 1996 being down a total of $889,000 and for
the none months ended September 1996 volume is down a total of $1,321,000. The
lower than anticipated aerosol sales for the nine months ended September 1996
indicates a short fall in volume of $922,000 and a reduction in margin of
$393,000 due primarily to product mix. The shortfall in aerosol volume is the
result of a loss of a major customer during the quarter ended March 1996.
The customer base for the nine months ended September 30,1 996 was comprised
largely of four customers. These customers accounted for 62% 921%, 20%, 14% and
7%). A change in customer sales mix will occur during the fourth quarter ending
December 1996 as a result of the closing of the Puerto Rico facility. The
Company's current sales backlog is $4,900,000 as compared with $6,500,000
for the same time last year. This is a result of the shorter lead times
demanded in the market and the changes in order patterns.
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Gross Margin Trends And Discussions
The gross profit on sales for the quarter ended September 30, 1996 was $608,000
or 11.5% on sales of $5,261,000. For the nine months ended September 30, 1996
gross profit on sales was $1,985,000 or 10.9% on sales of $18,169,000
compared to $1,136,000 or 5.0% on sales of $22,916,000 for the nine months
ended September 30, 1995. The improvement in gross margin for the quarter and
nine months ended September 30, 1996 as compared to the quarter and nine month
periods ended September 30, 1995 relate to changes in product mix. A greater
percentage of sales now results from sales in aerosol cans which have higher
margins than tubes. The change in product mix along with the continuing cost
reductions programs and lower manufacturing spending as compared to the same
time period for 1995 have helped offset the 20.7% loss in volume. Also,
aluminum prices have decreased over the nine month period ended September 30,
1996 favorably impacting the Gross Margin level. Continued gross profit
improvement and operating results are expected to be slow, especially with
the closing of the Puerto Rico facility.
With the closing of the Puerto Rico facility management is in the process of
maximizing capacity at its Bloomfield, New Jersey facility while attempting to
maintain its current variable labor level. This along with continued process
improvements is important with the added fixed cost now assumed by Bloomfield,
New Jersey.
Selling, general and administrative expenses
Selling, general and administrative expenses for the quarter ended, September
30, 1996 were $608,000 or 11.6% of sales. For the nine months ended September
30, 1996 Selling, general and administrative expenses totaled $2,070,000
or 11.4% of sales. When comparing the third quarter and the nine months
ended September 30, 1995 the expenses are $677,000 and $2,289,000 or 9.6%
and 10.0% respectively of sales. The current cost incurred in 1996 for both
the quarter and nine months and September 30, 1996 are reasonable.
Interest expense and other expense, net
Interest expense for the quarter ended September 30, 1996 was approximately
$208,000 as compared to $199,00 for the quarter ended September 30, 1996.
For the nine months ended September 30, 1996 interest expense was $619,000 as
compared to $638,000 for nine months ended September 30, 1995. The overall
decrease in interest of approximately $20,000 compared to 1995 is a result of
lower average borrowing.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $376,000 at September 30, 1996 which is
approximately a $94,000 decrease in working capital from December 31, 1995.
This continued decrease in working capital indicates management must continue
its fight in the minimization of cash losses.
For the nine months ended September 30,1 996 cash provided by operating
activities was $1,534,000. The primary source of this cash was the
liquidation of accounts receivable, which decreed $1,734,000. Cash used for
the 1996 financing activities was $1,705,000 as the Company's credit line
was reduced by $1,215,000 and its long term debt was reduced by $490,000
during the nine months ended September 30, 1996. Overall the Company had
a net decrease in cash of $181,000 for the nine months ended September 30,
1996 as compared with a net decrease in cash of $207,000 for
the nine months ended September 30, 1995.
The debt-to-equity ratio at September 30, 1996 was 3.85:1 as compared 3.76:1 for
the quarter ended September 30,1 996.
As of September 30, 1996, the Company is in compliance with its debt agreements
and covenants.
Management continues to manage its cash resources very closely. The reduced
aluminum cost during 1996 continue to be a benefit to the Company. Management
clearly recognizes the importance of controlling its aluminum costs and has
taken steps to protect the Gross Margins of its current sales backlog.
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PART II OTHER INFORMATION
ITEM 5:
There were not dividends declared in the quarter.
ITEM 6:
On May 15, 1996 the Company filed a form 12-B requesting a filing extension
of the Quarterly 10-Q for the Quarter ended March 31, 1996. On August 14,
1996 the Company filed a form 12-B requesting a filing extension of the
Quarterly 10-Q for the Quarter ended June 30, 1996.
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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 19, 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
Vice President and
Treasurer
