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SECURITIES EXCHANGE COMMISSION
WASHINGTON, DC 20549
10-Q
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1998 Commission File No. 1-7215
PEERLESS TUBE COMPANY
New Jersey 22-1191280 (IRS Identification)
58-76 LOCUST AVENUE
BLOOMFIELD, NEW JERSEY 07003
TELEPHONE: 973-743-5100
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 report), and (2) 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 $320,000. The market value
is based on $.1300 as of September 4, 1998, which is the last recorded trade.
During the quarter, actual trades of relatively small amounts of the Company's
shares of stock have ranged in transaction price from $.1300-$.2800.
Common Stock, Par Value $1.33-1/3
Outstanding at September 30, 1998. 2,462,973 shares
Documents incorporated by reference: None
1
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PEERLESS TUBE COMPANY
TABLE OF CONTENTS
PAGE
PART I FINANCIAL INFORMATION
ITEM I FINANCIAL STATEMENTS
Balance Sheets as of September 30, 1998 (Unaudited) and 3
December 31, 1997
Statement of Operations for the Quarters Ended September 30, 4-5
1998 and 1997 (Unaudited) and for the nine-month period ended
September 30, 1998 and 1997 (Unaudited).
Statement of Cash Flows - for the nine-month periods ended 6
September 30, 1998 and 1997. (Unaudited)
Notes to the Consolidated Financial Statements 7-9
ITEM II MANAGEMENT'S DISCUSSIONS & ANALYSIS OF THE FINANCIAL 10-11
CONDITIONS AND RESULTS OF OPERATIONS
PART II OTHER INFORMATION
Item 5 11
Item 6 11
Signatures 12
2
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<CAPTION>
PEERLESS TUBE COMPANY
BALANCE SHEET September 30, 1998 December 31, 1997
------------------- -----------------
(Unaudited)
(rounded to nearest thousand)
ASSETS
Current Assets:
<S> <C> <C>
Cash $ 22,000 $ 190,000
Accounts receivable, less allowance for doubtful accounts of
$185,000 and $210,000 for 1998 and 1997, respectively 1,207,000 983,000
Inventories 1,349,000 2,214,000
Prepaid expenses 42,000 12,000
Other current assets 100,000 34,000
- -------------------------------------------------------------------------------------------------------
Total Current Assets $ 2,720,000 $ 3,433,000
Property, Plant and Equipment, Net 2,345,000 2,986,000
Other assets 10,000 10,000
Deferred tax assets, net of valuation allowance of $4,956,000
- -------------------------------------------------------------------------------------------------------
Total Assets $ 5,075,000 $ 6,429,000
=======================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 2,338,000 $ 1,990,000
Accrued Liabilities 600,000 767,000
Revolving credit line 842,000 597,000
Current portion of long-term debt 235,000 232,000
- -------------------------------------------------------------------------------------------------------
Total Current Liabilities 4,015,000 3,586,000
Long Term Debt 715,000 891,000
Other Liabilities 603,000 663,000
- -------------------------------------------------------------------------------------------------------
Total Liabilities 5,333,000 5,140,000
- -------------------------------------------------------------------------------------------------------
Commitments and contingencies
Stockholders' Equity (deficit):
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 17,735,000 16,188,000
Less 73,962 shares of stock in treasury, at cost (344,000) (344,000)
- -------------------------------------------------------------------------------------------------------
Stockholders' equity (deficit) (258,000) 1,289,000
- -------------------------------------------------------------------------------------------------------
Total Liabilities and stockholders' equity (deficit) $ 5,075,000 $ 6,429,000
=======================================================================================================
THE ACCOMPANYING NOTES SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS.
</TABLE>
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<TABLE>
<CAPTION>
PEERLESS TUBE COMPANY
STATEMENT OF OPERATIONS FOR THE QUARTER ENDED September 30, 1998 September 30, 1997
--------------------------- ---------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
(rounded to nearest thousand except per share amounts)
Net sales $ 4,074,000 $ 3,974,000
Cost of sales 4,005,000 3,797,000
- --------------------------------------------------------------------------------------------------------
Gross profit 69,000 177,000
Selling, general, and administrative expenses 475,000 391,000
- --------------------------------------------------------------------------------------------------------
Loss from operations 406,000 214,000
Interest expense 62,000 79,000
Other income (expense) - net (1,000) 7,000
- --------------------------------------------------------------------------------------------------------
Net loss 469,000 286,000
========================================================================================================
Accumulated deficit:
Beginning of period 17,266,000 14,539,000
- --------------------------------------------------------------------------------------------------------
End of period 17,735,000 14,825,000
========================================================================================================
Net loss per share $0.19 $0.12
========================================================================================================
Weighted average shares outstanding 2,462,973 2,462,973
========================================================================================================
THE ACCOMPANYING NOTES SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS.
</TABLE>
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<TABLE>
<CAPTION>
PEERLESS TUBE COMPANY
STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED September 30, 1998 September 30, 1997
--------------------------- ---------------------------
(Unaudited) (Unaudited)
(rounded to nearest thousand except per share amounts)
<S> <C> <C>
Net sales $11,688,000 $12,526,000
Cost of sales 11,451,000 12,073,000
- ------------------------------------------------------------------------------------------------------------
Gross profit 237,000 453,000
Selling, general, and administrative expenses 1,582,000 1,601,000
- ------------------------------------------------------------------------------------------------------------
Loss from operations 1,345,000 1,148,000
Interest expense 203,000 241,000
Other income - net 1,000 13,000
- ------------------------------------------------------------------------------------------------------------
Net loss 1,547,000 1,376,000
============================================================================================================
Accumulated deficit:
Beginning of period 16,188,000 13,449,000
- ------------------------------------------------------------------------------------------------------------
End of period 17,735,000 14,825,000
============================================================================================================
Net loss per share $0.63 $0.56
============================================================================================================
Weighted average shares outstanding 2,462,973 2,462,973
============================================================================================================
THE ACCOMPANYING NOTES SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS.
</TABLE>
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<TABLE>
<CAPTION>
PEERLESS TUBE COMPANY
STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED September 30, 1998 September 30, 1997
------------------- -------------------
(Unaudited) (Unaudited)
<S> <C> <C>
(rounded to nearest thousand)
Cash flows from operating activities:
Net loss $1,547,000 $1,376,000
Adjustment to reconcile net loss to net cash provided (used in)
by operating activities:
Depreciation and amortization 641,000 541,000
Provision for bad debts (25,000) (74,000)
(Increase) decrease in operating assets:
Accounts receivable (199,000) 972,000
Inventories 865,000 644,000
Prepaid expenses (30,000) 26,000
Other current assets (66,000) 10,000
Other assets 1,000
Increase (decrease) - in operating liabilities:
Accounts payable 348,000 (527,000)
Accrued liabilities (167,000) (81,000)
Other liabilities (60,000)
- -------------------------------------------------------------------------------------------------------------
Total Adjustments 1,307,000 1,512,000
- -------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (240,000) 136,000
Cash flows from financing activities:
Net borrowing (repayments) under credit line 245,000 (499,000)
Proceeds from (reduction of) long term debt and current maturities (173,000) 328,000
- -------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 72,000 (171,000)
- -------------------------------------------------------------------------------------------------------------
Net decrease in cash 168,000 35,000
Cash - beginning of the period 190,000 227,000
- -------------------------------------------------------------------------------------------------------------
Cash - end of period $ 22,000 $ 192,000
=============================================================================================================
THE ACCOMPANYING NOTES SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS.
</TABLE>
6
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PEERLESS TUBE COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 1: PREPARATION OF FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared by the
Company without audit in accordance with generally accepted accounting
principles. These statements should be read in conjunction with the audited
financial statements and notes included in the Company's Annual Report Form 10-K
for the year ended December 31, 1997 and the Quarterly Report Form 10-Q for the
Quarters ended June 30, 1998 and March 31, 1998.
In the opinion of management, these financial statements include all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position, result of operations, and cash flows for
the Company. Certain information and footnote disclosure normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. The Company believes, however, that
the disclosures in this report are adequate to make the information presented
not misleading in any material respect. There have been no significant changes
in accounting policy since December 31, 1997. The results of operations may not
be indicative of the results that may be expected for the year ending December
31, 1998.
NOTE 2: BUSINESS AND DEBT RESTRUCTURING
The Company's management continues to evaluate and reshape its business plans to
improve operating results and respond to changes in its very competitive market.
Management continues to work towards improving the operating performance of the
Company, including the stabilizing of its raw material costs. The Company along
with its secured lender have entered into an agreement that will result in the
Company maximizing its purchasing power with certain key vendors. Also, as the
company moves forward it has re-staffed key personnel in the operations area as
the Company continues its quest to increase operational productivity.
The highly competitive markets have resulted in a decrease in volume in both the
aluminum aerosol and aluminum tube product lines. The increased competition
continues to come from laminate and plastic packaging. However, the Company
continues to monitor its costs and improve its product mix. The Company has
also introduced into the market a new specially shaped can with an elegant new
Slim-Top (Patent Pending).
In January 1998, a jury verdict was rendered against the Company in a lawsuit
filed by a former employee alleging age discrimination and breach of contract.
The amount of damages and attorney's fees awarded to the employee approximated
$638,000. On June 5, 1998, a settlement agreement with the former employee was
reached whereby the Company will pay, over a two-year period, a total of
$700,000 including interest (which has been reflected as a liability in the
consolidated financial statements) as follows:
$60,000 payable upon execution of the agreement;
$60,000 payable on or before June 1, 1999
$300,000 payable on or before December 1, 1999; and
$280,000 payable on or before May 31, 2000.
7
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Under the terms of the agreement, the former employee was granted a lien
subordinated in priority to the Company's asset-based lender on substantially
all of the Company's assets.
The Company is currently working towards being in compliance with the year 2000.
The Company is using the services of a consulting company to complete this
project. The scheduled completion date is September 1999. The Company's
management does not believe this will have a material effect on the Company's
financial position.
8
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<CAPTION>
NOTE 3: INVENTORIES
Inventories are comprised of the following:
- ------------------------------------------------------------------------------------------
INVENTORIES SEPTEMBER 30, 1998 DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 709,000 $1,156,000
Work-in-process 52,000 52,000
Finished Goods 588,000 1,006,000
Total $1,349,000 $2,214,000
- ------------------------------------------------------------------------------------------
NOTE 4: ACCRUED LIABILITIES
Accrued liabilities is comprised of the following:
- ------------------------------------------------------------------------------------------
ACCRUED LIABILITIES SEPTEMBER 30, 1998 DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------
Payroll, payroll taxes, and payroll related costs $ 214,000 $202,000
Health benefits 60,000 60,000
All Other 326,000 505,000
- ------------------------------------------------------------------------------------------
Total $600,000 $767,000
- ------------------------------------------------------------------------------------------
NOTE 5 - LONG-TERM DEBT/REVOLVING CREDIT LINE
Long-term debt is comprised of the following:
- --------------------------------------------------------------------------------------------
LONG-TERM DEBT SEPTEMBER 30, 1998 DECEMBER 31, 1997
- --------------------------------------------------------------------------------------------
Equipment loan secured by substantially all the
Company's machinery and equipment payable to a
lender, renegotiated during March and July 1997,
termination date January 31, 2000. The loan bears
interest at the prime +3.5% $ 869,000 $1,009,000
Various purchase money capital leases for
manufacturing and office equipment, final payments
due in 2000, with interest rates at an average 18% 81,000 114,000
----------------------------------------
950,000 1,123,000
Less current portion (235,000) (232,000)
- ---------------------------------------------------------------------------------------------
Long-term debt $ 715,000 $ 891,000
- ---------------------------------------------------------------------------------------------
</TABLE>
9
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL
CONDITION & RESULTS OF OPERATIONS
SALES AND RESULTS OF OPERATIONS 1998 COMPARED TO 1997
SALES
Sales for the quarter ended September 30, 1998 and 1997 totaled $4,074,000 and
$3,974,000 respectively.
The sales for the nine months ended September 30, 1998 and 1997 were $11,688,000
and $12,526,000 respectively, resulting in a decrease of $838,000 or 6.7%.
The breakdown of overall sales from all sources for the third quarter ended
September 1998 and 1997 respectively was as follows:
NET SALES 3/RD/ 3/RD/ $ %
QUARTER QUARTER CHANGE CHANGE
1998 1997
Cans $3,713,000 $3,679,000 $ 34,000 0.9%
Metal Tubes 199,000 233,000 ($34,000) -14.6%
Miscellaneous 162,000 62,000 $ 100,000 161.3%
-----------------------------------------
Total $4,074,000 $3,974,000 $ 100,000 2.5%
In the third quarter ending September 30, 1998, one customer accounted for 59%
of the Company's sales. Year-end margins for 1998 will be affected by the
product sales mix for the last quarter of 1998.
GROSS PROFIT TRENDS AND DISCUSSION
The total increase (decrease) in sales for the quarter and nine months ended
September 30, 1998 as compared with the quarter and nine months September 30,
1997 is $100,000 and $(838,000) respectively. The decrease in sales for the nine
months ended September 1998 vs. September 1997 is related to a drop off in our
customers' sales to markets in Asia. The gross profit on sales for the quarter
ended September 30, 1998 was $69,000 or 1.7% on sales of $4,074,000; for the
quarter ended September 30, 1997, the gross profit was $177,000 or 4.5% on sales
of $3,974,000. For the nine months ended September 30, 1998 the gross profit
was $237,000 or 2.9% on sales of $11,588,000 compared to $453,000 or 3.6% on
sales of $12,526,000 for the nine months ended September 30, 1997. The decrease
in gross profit for the quarter and nine months ended September 30, 1998 as
compared to the quarter and nine months ended September 30, 1997 is mainly a
result of higher raw material costs.
The Company's gross margins are sensitive to product mix and sales volume. The
Company continues to review its plant utilization and its utilization of
personnel.
Current conditions in its market have changed the ability of the Company to
measure its backlog. This is a result of a switch to "EDI" Electronic Data
Interchange and Just in Time Delivery. The need to respond to these different
purchase plans result in quick changes to the Company's production schedule and
some detraction from gross margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the quarter ended September 30,
1998 were $475,000 or 11.7% of sales. For the nine months ended September 30,
1998, selling, general and administrative expenses totaled $1,582,000 or 13.5%
of sales on sales of $4,074,000 and $11,588,000 respectively. For the quarter
ended September 30, 1997, selling, general and administrative expenses were
$391,000 or 9.8% and for the nine months ended September 30, 1997 $1,601,000 or
12.8% on sales of $3,974,000 and $12,526,000 respectively.
10
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INTEREST EXPENSE AND OTHER EXPENSES, NET
Interest expense for the quarter ended September 30, 1998 was $62,000 as
compared to $79,000 in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company has negative working capital of $1,295,000 at September 30, 1998
which is a $1,142,000 decrease in working capital from December 31, 1997.
For the nine months ended September 30, 1998 cash used in operating activities
was $240,000 as compared with $136,000 provided from operations for the same
period in 1997.
As of September 30, 1998 the Company had cash and cash equivalents of
approximately $22,000. Net cash used in operations as of September 30, 1998 was
$240,000. Through September 30, 1998 cash provided by financing activities was
$72,000. At September 30, 1998 the net decrease in cash from December 31, 1997
was $168,000.
PART II - OTHER INFORMATION
ITEM 5:
There were no dividends declared in the quarter.
ITEM 6:
On May 15, 1998 the Company filed the Quarterly Report Form 10-Q for the quarter
ended March 31, 1998.
On August 14, 1998 the Company filed the Quarterly Report Form 10-Q for the
quarter ended June 30, 1998.
11
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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.
PEERLESS TUBE COMPANY
Registrant
By:/s/ Frederic Remington, Jr.
--------------------------
Frederic Remington, Jr.
Chairman
By: /s/ Richard W. Potts
--------------------------
Richard W. Potts
President
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 22000
<SECURITIES> 0
<RECEIVABLES> 1392000
<ALLOWANCES> (185000)
<INVENTORY> 1349000
<CURRENT-ASSETS> 2720000
<PP&E> 22890000
<DEPRECIATION> 20545000
<TOTAL-ASSETS> 5075000
<CURRENT-LIABILITIES> 4015000
<BONDS> 0
0
0
<COMMON> 3382000
<OTHER-SE> (3640000)
<TOTAL-LIABILITY-AND-EQUITY> 5075000
<SALES> 11688000
<TOTAL-REVENUES> 11688000
<CGS> 11451000
<TOTAL-COSTS> 13033000
<OTHER-EXPENSES> (1000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 203000
<INCOME-PRETAX> (1547000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1547000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1547000)
<EPS-PRIMARY> (0.63)
<EPS-DILUTED> 0
</TABLE>
