<PAGE>
SECURITIES EXCHANGE COMMISSION
EXCHANGE COMMISSION
10-Q
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1998 Commission File No. 1-7215
PEERLESS TUBE COMPANY
New Jersey 22-1191280 (IRS Identification)
58-76 LOCUST AVENUE
BLOOMFIELD, NEW JERSEY 07003
TELEPHONE: 201-743-5100
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 $690,000. The market value is
based on $.28 as of July 16, 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 $.3750-$.43.
Common Stock, Par Value $1.33-1/3
Outstanding at March 31, 1998. 2,462,973 shares
Documents incorporated by reference: None
PEERLESS TUBE COMPANY - March 31, 1998 Quarterly Report 10Q
1
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
PART I FINANCIAL INFORMATION
<S> <C> <C>
Balance Sheets as of March 31, 1998 - Unaudited and December 31, 1997 3
Statement of Operations for the Quarters Ended March 31, 4
1998 and 1997 - Unaudited
Statement of Cash Flows for the Quarters ended March 31, 1998 5
and 1997 - Unaudited
Notes to the Financial Statements 6-7
Management's Discussion & Analysis of the Financial Conditions 8-9
and Results of Operations
PART II OTHER INFORMATION
Item 5 10
Item 6 10
Signatures 11
</TABLE>
PEERLESS TUBE COMPANY - March 31, 1998 Quarterly Report 10Q
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<TABLE>
<CAPTION>
PEERLESS TUBE COMPANY MARCH 31 DECEMBER 31,
-------------------------------------
BALANCE SHEET 1998 1997
(UNAUDITED)
(ROUNDED TO NEAREST THOUSAND)
ASSETS
<S> <C> <C>
Current Assets:
Cash $ 16 ,000 $ 190,000
Accounts receivable, less allowances for doubtful
of $222,000 and $210,000 respectively 1,068,000 983,000
Inventories 1,686,000 2,214,000
Prepaid expenses 37,000 12,000
Other assets 94,000 34,000
- ------------------------------------------------------------------------------------------------------------------
Total Current Assets $ 2,901,000 $ 3,433,000
Property, Plant and Equipment 2,772,000 2,986,000
Other assets 10,000 10,000
Deferred tax assets, net of valuation allowances of
$4,143,000 and $4,800,000, respectively
- ------------------------------------------------------------------------------------------------------------------
Total Assets $ 5,683,000 $ 6,429,000
==================================================================================================================
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,893,000 $ 1,990,000
Accrued Liabilities 1,314,000 767,000
Revolving credit line 819,000 597,000
Current portion of long-term debt 185,000 232,000
- ------------------------------------------------------------------------------------------------------------------
Total current liabilities $ 4,211,000 $ 3,586,000
Long Term Debt 877,000 891,000
Other Liabilities 23,000 663,000
- ------------------------------------------------------------------------------------------------------------------
Total Liabilities $ 5,111,000 $ 5,140,000
- ------------------------------------------------------------------------------------------------------------------
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 (16,905,000) (16,188,000)
Less 73,962 shares of stock in treasury, at cost (344,000) (344,000)
- ------------------------------------------------------------------------------------------------------------------
Stockholders' equity 572,000 1,289,000
- -----------------------------------------------------------------------------------------------------------------
Total Liabilities and stockholders' equity $ 5,683,000 $ 6,429,000
=================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES SHOULD BE READ IN CONJUNCTION
WITH THE FINANCIAL STATEMENTS.
PEERLESS TUBE COMPANY - MARCH 31, 1998 QUARTERLY REPORT 10Q
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<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS,
FOR THE QUARTER ENDED MARCH 31, 1998 1997
- ----------------------------------------------------------------------------------------------------------------
(ROUNDED TO NEAREST THOUSAND EXCEPT PER SHARE AMOUNTS)
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
NET SALES $ 3,554,000 $ 4,676,000
COST OF SALES 3,655,000 3,993,000
- ----------------------------------------------------------------------------------------------------------------
GROSS PROFIT (LOSS) (101,000) 683,000
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 553,000 684,000
- ----------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS $ (654,000) $ (1,000)
INTEREST EXPENSE (65,000) (83,000)
OTHER INCOME 2,000 5,000
- ----------------------------------------------------------------------------------------------------------------
NET LOSS $ (717,000) $ (79,000)
================================================================================================================
ACCUMULATED DEFICIT:
BEGINNING OF PERIOD $(16,188,000) $(13,449,000)
- ----------------------------------------------------------------------------------------------------------------
END OF PERIOD $(16,905,000) $ (13,528,000)
================================================================================================================
BASIC LOSS PER SHARE ($0.29) ($0.03)
================================================================================================================
WEIGHTED AVERAGE SHARE OUTSTANDING 2,462,973 2,462,973
================================================================================================================
THE ACCOMPANYING NOTES SHOULD BE READ IN CONJUNCTION
WITH THE FINANCIAL STATEMENTS.
</TABLE>
PEERLESS TUBE COMPANY - March 31, 1998 Quarterly Report 10Q
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PEERLESS TUBE COMPANY
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED MARCH 31,
-------------------------------
1998 1997
(UNAUDITED) (UNAUDITED)
(ROUNDED TO NEAREST THOUSAND)
=================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
NET LOSS ($717,000) ($ 78,000)
ADJUSTMENT TO RECONCILE NET LOSS TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 213,000 176,000
PROVISION FOR BAD DEBT 6,000 88,000
(INCREASE) DECREASE IN OPERATING ASSETS:
ACCOUNTS RECEIVABLE (91,000) 631,000
INVENTORIES 528,000 (731,000)
PREPAID EXPENSES ( 24,000) 26,000
OTHER CURRENT ASSETS ( 60,000) 0
INCREASE (DECREASE) - IN OPERATING LIABILITIES:
ACCOUNTS PAYABLE (250,000) ( 38,000)
ACCRUED LIABILITIES 60,000 7 ,000
- ------------------------------------------------------------------------------
TOTAL ADJUSTMENTS $ 382,000 $ 159,000
- ------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ (335,000) $ 81,000
CASH FLOWS FROM FINANCING ACTIVITIES:
NET (REPAYMENTS) BORROWING UNDER CREDIT LINE 221,000 (116,000)
REDUCTION OF LONG TERM DEBT AND CURRENT MATURITIES (60,000) 219,000
- ------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 161,000 $ 103,000
- ------------------------------------------------------------------------------
Net Increase (Decrease) in cash (174,000) 184,000
Cash - beginning of the period 190,000 227,000
- ------------------------------------------------------------------------------
CASH - END OF PERIOD $ 16,000 $ 411,000
- ------------------------------------------------------------------------------
THE ACCOMPANYING NOTES SHOULD BE READ IN CONJUNCTION
WITH THE FINANCIAL STATEMENTS.
</TABLE>
PEERLESS TUBE COMPANY - March 31, 1998 Quarterly Report 10Q
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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 there to included in the Company's Annual Report
Form 10-K for the year ended December 31, 1997.
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 foot notes 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, 1997.
NOTE 2: BUSINESS AND DEBT RESTRUCTURING
The accompanying financial statements contemplate continuation of the Company as
a going concern. Since 1988, however, the Company has suffered recurring losses
from operations and negative cash flows. These conditions raise substantial
doubt about its ability to continue as a going concern.
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.
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's management is continually evaluating and reshaping its business to
improve the operational results of the Company. Also the Company has along with
its asset-based amended its agreement to continue to provide certain loans for
operations.
With the anticipated co-operation of its secured lender and managements actions
presently being taken to improve the Company's operating performance including
the stabilized cost of raw material, increased productivity, and reductions in
staffing levels will provide adequate working capital, help minimize the
financial losses, and create the opportunity for the Company to continue as a
going concern
PEERLESS TUBE COMPANY - March 31, 1998 Quarterly Report 10Q
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NOTE 3: INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
INVENTORIES March 31, December 31,
1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 1,033,000 $1,156,000
- ------------------------------------------------------------------------------------------------------------
Work-in-process 52,000 52,000
- ------------------------------------------------------------------------------------------------------------
Finished Goods 601,000 1,006,000
- ------------------------------------------------------------------------------------------------------------
Total $ 1,686,000 $2,214,000
- ------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 4 - ACCRUED LIABILITIES
Accrued liabilities are comprised of the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
ACCRUED LIABILITIES March 31, December 31,
1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Payroll, payroll taxes, and payroll related costs $ 260,000 $ 202,000
- ------------------------------------------------------------------------------------------------------------
Health benefits 60,000 60,000
- ------------------------------------------------------------------------------------------------------------
All other 994,,000 505,000
- ------------------------------------------------------------------------------------------------------------
Total $ 1.314,000 $ 767,000
- ------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 5 - LONG-TERM DEBT/REVOLVING CREDIT LINE
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT
- -------------------------------------------------------------------------------------------------------------
March 31, December 31,
1998 1997
<S> <C> <C>
Equipment term loan (the Company received additional $ 962,000 $ 1,009,000
advances during 1997 amounting to $552,000) payable
in monthly installments of $15,625 plus interest through
January 1, 2000 with a balloon payment of $809,650 on
February 1, 2000. The loan bears interest at the prime
rate (8.5% at December 31, 1997) plus 4%.
Various purchase money capital leases for manufacturing
and office equipment, final payment due in 2000, with
interest rates at an average 18%. 100,000 114,000
-------------------------------
1,062,000 1,123,000
Less current portion (185,000) (232,000)
-------------------------------
Long-term debt $ 877,000 $ 891,000
==============================
</TABLE>
PEERLESS TUBE COMPANY - March 31, 1998 Quarterly Report 10Q
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL
& RESULTS OF OPERATIONS
SALES AND RESULTS OF OPERATIONS 1998 COMPARED TO 1997
SALES
Sales for the quarters ended March 31, 1998 and 1997 totaled $3,554,000 and
$4,676,000 respectively. The decrease in sales of $1,122,000 or 24.0% is a
result of an overall decrease of sales in the aerosol market.
The breakdown of the overall sales decrease from all sources for the
first quarter ended March 31, 1998 and 1997 respectively, was as follows:
<TABLE>
<CAPTION>
Net Sales 1998 1997 Change %
<S> <C> <C> <C> <C>
Cans $ 3,297,000 $ 4,272,000 ($975,000) (22.8%)
Metal Tubes $ 179,000 $ 257,000 ($78,000) (30.4%)
Miscellaneous $ 78,000 $ 147.000 ($69,000) (46.9%)
------------------------------------------------------------------
Total $3,554,,000 $ 4,676,000 ($1,122,000) (23.9%)
==================================================================
</TABLE>
In the first quarter of 1998, two customers accounted for 58% (31% and 27%) of
the Company's sales. The 1998 market outlook for aluminum aerosols and tubes
is expected to remain soft. The decrease in aluminum tubes sales is attributed
to the increased demand from the competing plastic tube market.
GROSS PROFIT TRENDS AND DISCUSSION
The gross profit (loss) on sales for the quarter ended March 31, 1998 was (
$101,000), or (3%) on sales of $3,554,000. as compared with the quarter ended
March 31, 1997 the gross profit (loss) was $683,000 or 15% on sales of
$4,676,000. The decrease in gross profit for the quarter ended March 31, 1998 as
compared to the quarter ended March 31, 1997 is a result of lower than
anticipated aerosol sales. The total decrease in aerosol sales for the quarter
ended March 31, 1998 as compared to the quarter ended March 31, 1997 was
$975,000.
The gross profit and operating results was also adversely affected by a
decrease in the Company's value added output. The Company's high fixed costs
are sensitive to volume changes and while the Company has been successful in
reducing its operating costs it is important the Company improve its value-added
output.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the quarter ended, March 31,
1998 were $553,000 or 16% of sales. For the quarter ended March 31, 1997
Selling, general and administrative expenses were $684,000 or 15% of net sales.
The majority of these cost are fixed in resulting in the quarter ended March
1998 percentage to net sales to be slightly higher than March 1997.
PEERLESS TUBE COMPANY - March 31, 1998 Quarterly Report 10Q
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INTEREST EXPENSE AND OTHER EXPENSES, NET
Interest expense for the quarter ended March 31, 1998 was $65,000 as compared to
$83,000 for the quarter ended March 31 1997. The decrease of approximately
$18,000 is attributed to the termination of capital leases on several pieces of
equipment.
LIQUIDITY AND CAPITAL RESOURCES
The Company had negative working capital of $1,310,000 at March 31, 1998 which
was approximately a $1,167,000 decrease in working capital from December 31,
1997. .
The debt-to-equity ratio at March 31, 1998 was 8.9:1 compared to 4.0:1 at
December 31, 1997. The change in this financial ratio was adversely impacted by
the Company's first quarter 1997 loss.
For the quarter ended March 31, 1998, cash used in operating activities was
$335,000 compared to $81,000 provided by operating activities for the same
period in 1997. The Company continues to work closely with its
secured lenders. The Companys Revolving Credit Line for the Quarter ended March
31, 1997 was $819,000 as compared with $597,000 as of December 31, 1997, an
increase of $222,000.
The Company's management has continually evaluated and reshaped 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. Except for
periodic additions to meet peaks in sales demands, the Company has reduced its
workforce, both salary and hourly. Also, management has introduced and
implemented new programs to improve its production and inventory management.
PEERLESS TUBE COMPANY - March 31, 1998 Quarterly Report 10Q
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PART II OTHER INFORMATION
ITEM 5:
There were no dividends declared in the quarter.
ITEM 6:
None
PEERLESS TUBE COMPANY - March 31, 1998 Quarterly Report 10Q
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 19345 the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PEERLESS TUBE COMPANY
Registrant
By:
Frederic Remington, Jr.
Chairman
By:
Richard W. Potts
President
By:
George J. Blumenschein
Vice President of Finance
PEERLESS TUBE COMPANY March 31, 1998 Quarterly Report 10Q
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 53,000
<SECURITIES> 10,000
<RECEIVABLES> 1,458,000
<ALLOWANCES> (296,000)
<INVENTORY> 1,686,000
<CURRENT-ASSETS> 2,911,000
<PP&E> 22,927,000
<DEPRECIATION> (20,155,000)
<TOTAL-ASSETS> 5,683,000
<CURRENT-LIABILITIES> 4,211,000
<BONDS> 900,000
0
(344,000)
<COMMON> 3,382,000
<OTHER-SE> (2,466,000)
<TOTAL-LIABILITY-AND-EQUITY> 5,683,000
<SALES> 3,554,000
<TOTAL-REVENUES> 3,554,000
<CGS> 3,655,000
<TOTAL-COSTS> 3,655,000
<OTHER-EXPENSES> 553,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (2,000)
<CHANGES> 0
<NET-INCOME> (717,000)
<EPS-PRIMARY> (0.29)
<EPS-DILUTED> 0
</TABLE>
