<PAGE>
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 June 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: 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 $.28-$.3750.
Common Stock, Par Value $1.33-1/3
Outstanding at June 30, 1998. 2,462,973 shares
Documents incorporated by reference: None
PEERLESS TUBE COMPANY - June 30, 1998 Quarterly Report 10Q 1
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TABLE OF CONTENTS
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<CAPTION>
ITEM PAGE
<S> <C>
PART I FINANCIAL INFORMATION
Balance Sheets as of June 30, 1998 - Unaudited and December 31, 1997 3
Statement of Operations for the Quarters Ended June 30, 4-5
1998 and 1997 - Unaudited
Statement of Cash Flows for the Quarters ended June 30, 1998 6
and 1997 - Unaudited
Notes to the Financial Statements 7-9
Management's Discussion & Analysis of the Financial Conditions 10-11
and Results of Operations
PART II OTHER INFORMATION
Item 5 12
Item 6 12
Signatures 13
</TABLE>
PEERLESS TUBE COMPANY - June 30, 1998 Quarterly Report 10Q 2
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<TABLE>
<CAPTION>
PEERLESS TUBE COMPANY JUNE 30, DECEMBER 31,
BALANCE SHEET ---------------------------------
1998 1997
(UNAUDITED)
(ROUNDED TO NEAREST THOUSAND)
ASSETS
<S> <C> <C>
Current Assets:
Cash $ 34,000 $ 190,000
Accounts receivable, less allowances for doubtful
of $240,000 and $210,000 respectively 1,349,000 983,000
Inventories 1,831,000 2,214,000
Prepaid expenses 7,000 12,000
Other current assets 268,000 34,000
- ---------------------------------------------------------------------------------------------------------------
Total Current Assets $3,489,000 $3,433,000
Property, Plant and Equipment, Net 2,559,000 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 $6,058,000 $6,429,000
===============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES & STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable $ 2,312,000 $ 1,990,000
Accrued Liabilities 1,503,000 767,000
Revolving credit line 1,055,000 597,000
Current portion of long-term debt 124,000 232,000
- ---------------------------------------------------------------------------------------------------------------
Total current liabilities $ 4,994,000 $ 3,586,000
Long Term Debt 830,000 891,000
Other Liabilities 23,000 663,000
- ---------------------------------------------------------------------------------------------------------------
Total Liabilities $ 5,847,000 $ 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 (17,266,000) (16,188,000)
Less 73,962 shares of stock in treasury, at cost (344,000) (344,000)
- ---------------------------------------------------------------------------------------------------------------
Stockholders' equity 211,000 1,289,000
- ---------------------------------------------------------------------------------------------------------------
Total Liabilities and stockholders' equity $ 6,058,000 $ 6,429,000
===============================================================================================================
</TABLE>
THE ACCOMPANYING NOTES SHOULD BE READ IN CONJUNCTION
WITH THE FINANCIAL STATEMENTS.
PEERLESS TUBE COMPANY - June 30, 1998 Quarterly Report 10Q 3
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<TABLE>
<CAPTION>
PEERLESS TUBE COMPANY
STATEMENT OF OPERATIONS, JUNE 30, JUNE 30,
FOR THE QUARTER ENDED 1998 1997
- -----------------------------------------------------------------------------------------------------
(ROUNDED TO NEAREST THOUSAND EXCEPT PER SHARE AMOUNTS)
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
NET SALES $ 4,060,000 $ 3,875,000
COST OF SALES 3,791,000 4,283,000
- -----------------------------------------------------------------------------------------------------
GROSS PROFIT (LOSS) 269,000 ( 408,000)
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 554,000 525,000
- -----------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS $ (285,000) $ (933,000)
INTEREST EXPENSE (76,000) (79,000)
OTHER INCOME 0 2,000
- -----------------------------------------------------------------------------------------------------
NET LOSS $ (361,000) $($1,010,000)
=====================================================================================================
ACCUMULATED DEFICIT:
BEGINNING OF PERIOD $(16,905,000) $(13,528,000)
- -----------------------------------------------------------------------------------------------------
END OF PERIOD $(17,266,000) $ (14,538,000)
=====================================================================================================
BASIC LOSS PER SHARE ($0.15) ($0.41)
=====================================================================================================
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 - June 30, 1998 Quarterly Report 10Q 4
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<TABLE>
<CAPTION>
PEERLESS TUBE COMPANY
STATEMENT OF OPERATIONS, JUNE 30, JUNE 30,
FOR THE SIX MONTHS ENDED 1998 1997
- ------------------------------------------------------------------------------------------------------
(ROUNDED TO NEAREST THOUSAND EXCEPT PER SHARE AMOUNTS)
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
NET SALES $ 7,614,000 $ 8,551,000
COST OF SALES 7,446,000 8,276,000
- ------------------------------------------------------------------------------------------------------
GROSS PROFIT 168,000 275,000
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 1,107,000 1,209,000
- ------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS $ (939,000) $ (934,000)
INTEREST EXPENSE (141,000) (162,000)
OTHER INCOME 2.000 7,000
- ------------------------------------------------------------------------------------------------------
NET LOSS $ (1,078,000) $($1,089,000)
======================================================================================================
ACCUMULATED DEFICIT:
BEGINNING OF PERIOD $(16,188,000) $(13,449,000)
- ------------------------------------------------------------------------------------------------------
END OF PERIOD $(17,266,000) $ (14,538,000)
======================================================================================================
BASIC LOSS PER SHARE ($0.44) ($0.44)
======================================================================================================
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 - June 30, 1998 Quarterly Report 10Q 5
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<TABLE>
<CAPTION>
PEERLESS TUBE COMPANY FOR THE SIX MONTHS ENDED JUNE 30,
STATEMENT OF CASH FLOWS ---------------------------------
1998 1997
(UNAUDITED) (UNAUDITED)
(ROUNDED TO NEAREST THOUSAND)
===================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
NET LOSS ($1,078,000) ($1,089,000)
ADJUSTMENT TO RECONCILE NET LOSS TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 427,000 352,000
PROVISION FOR BAD DEBT 24,000 20,000
(INCREASE) DECREASE IN OPERATING ASSETS:
ACCOUNTS RECEIVABLE ( 390,000) 714,000
INVENTORIES 383,000 200,000
PREPAID EXPENSES 5,000 32,000
OTHER CURRENT ASSETS (234,000) 0
INCREASE (DECREASE) - IN OPERATING LIABILITIES:
ACCOUNTS PAYABLE 169,000 ( 309,000)
ACCRUED LIABILITIES 249,000 128,000
- ------------------------------------------------------------------------------------
TOTAL ADJUSTMENTS $ 633,000 $ 1,137,000
- ------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ (445,000) $ 48,000
CASH FLOWS FROM FINANCING ACTIVITIES:
NET (REPAYMENTS) BORROWING UNDER CREDIT LINE 355,000 (165,000)
PROCEED FROM LONG TERM DEBT 308,000
REDUCTION OF LONG TERM DEBT AND CURRENT MATURITIES (66,000) (164,000)
- ------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 289,000 ($ 21,000)
- ------------------------------------------------------------------------------------
Net Increase (Decrease) in cash (156,000) 27,000
Cash - beginning of the period 190,000 227,000
- ------------------------------------------------------------------------------------
CASH - END OF PERIOD $ 34,000 $ 254,000
====================================================================================
THE ACCOMPANYING NOTES SHOULD BE READ IN CONJUNCTION
WITH THE FINANCIAL STATEMENTS.
</TABLE>
PEERLESS TUBE COMPANY - June 30, 1998 Quarterly Report 10Q 6
<PAGE>
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 and the Quarterly Report Form 10-
Q for the Quarter ended 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 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, 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 restaffed 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 increase competition
continues to come from the laminate and plastic packaging. However, the company
continues to monitor its costs and improve its product mix. The has Company
also introduced into the market a new specially shaped can with an elegant new
Slim-Top.TM(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.
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.
PEERLESS TUBE COMPANY - June 30, 1998 Quarterly Report 10Q 7
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The Company is currently in the process working towards being in compliance with
the year 2000. The Company is using the services of a consulting company to
complete this
project. The schedule completion date is September 1999.
The Company's management does not believe this will have a material effect on
the Company's financial position.
PEERLESS TUBE COMPANY - June 30, 1998 Quarterly Report 10Q 8
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NOTE 3: INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
INVENTORIES June 30, December 31,
1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
Raw materials $ 693,000 $1,156,000
Work-in-process 34,000 52,000
Finished Goods 1,104,000 1,006,000
- -------------------------------------------------------------------------------------------------------------------------------
Total $ 1,831,000 $2,214,000
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 4 - ACCRUED LIABILITIES
Accrued liabilities are comprised of the following:
<TABLE>
<CAPTION>
ACCRUED LIABILITIES June 30, December 31,
1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Payroll, payroll taxes, and payroll related costs $ 462,000 $ 202,000
- -------------------------------------------------------------------------------------------------------------------------------
Health benefits 42,000 60,000
- -------------------------------------------------------------------------------------------------------------------------------
All other 999,000 505,000
- -------------------------------------------------------------------------------------------------------------------------------
Total $1.503,000 $ 767,000
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 5 - LONG-TERM DEBT/REVOLVING CREDIT LINE
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
LONG-TERM DEBT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
June 30, December 31,
1998 1997
Equipment term loan (the Company received additional $ 916,000 $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 June 30, 1998) plus 4%.
Various purchase money capital leases for manufacturing
and office equipment, final payment due in 2000, with
interest rates at an average 18%. 38,000 114,000
--------------------------------
954,000 1,123,000
Less current portion (124,000) (232,000)
---------------------------------
Long-term debt $ 830,000 $ 891,000
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
PEERLESS TUBE COMPANY - June 30, 1998 Quarterly Report 10Q 9
<PAGE>
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 June 30, 1998 and 1997 totaled $4,060,000 and
$3,875,000 respectively. The sales for the six months ended June 30, 1998 and
1997 were $7,614,000 and $8,551,000 respectively, resulting in a decrease of
$937,000 or 11 % A significant part of the decline is a results of the foreign
intervention in the aerosol market, particularly the Asian markets.
<TABLE>
<CAPTION>
The breakdown of the overall sales from all sources for the second quarter ended
June 1998 and 1997 respectively was as follows:
<S> <C> <C> <C> <C>
2nd Quarter 2nd Quarter
Net Sales 1998 1997 Change %
Cans $3,794,000 $3,573,000 $221,000 6.2%
Metal Tubes $ 190,000 $207,000 ($17,000) (8.2%)
Miscellaneous $ 76,000 $ 95.000 ($19,000) (20.0%)
-------------------------------------------
Total $4,060,000 $3,875,000 $185,000 4.8%
===========================================
</TABLE>
In the second quarter ending June 30, 1998, two customers accounted for 54% (43%
and 11%) of the Company's sales. The 1998 market outlook for aluminum tubes is
expecterd to remain soft. Aerosol sales for the second quarter, June 30, 1998 as
compared with quarter ended June 30, 1997 were trending upward as a result of
the newly introduced Slim-Top can. With the continued development of new types
of aluminum packaging the Company hopes to achieve continues success in the
market place.
GROSS PROFIT TRENDS AND DISCUSSION
The gross profit (loss) on sales for the quarter ended June 30, 1998 was
269,000, or 7% on sales of $4,060,000. as compared with the quarter ended June
30, 1997 the gross profit (loss) was ($408,000) or (11%) on sales of $3,875,000.
For the six months ended June 30, 1998 the gross profit was $168,000 or 2% on
sales of $7,614,000 as compared to $276,000 or 3% on sales of $8,551,000 for
the six months ended June 30, 1997. The increase in gross profit for the
quarter and six months ended June 30, 1998 as compared to the quarter and six
months ended June 30, 1997 is a result of a favorable change in product mix.
The overall average sell price was up 4% when comparing the six months ended
June 30, 1998 vs the six months ended June 30, 1997. Volume for the same time
periods, six months ended June 30, 1998 was 32,807,000 as compared to
38,672,000 for the six months end June 30, 1997. The company, because of its
high fixed cost, remaines sensitive to volume changes and as a result, the gains
realized in pricing during the first six months were offset to some extent by
the decrease in volume during the same time period..
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the quarter ended June 30, 1998
were $554,000 or 14% of sales. For the six months ended June 30, 1998 Selling,
general and administrative expenses totaled $1,107,000 or 15% of sales. For the
PEERLESS TUBE COMPANY - June 30, 1998 Quarterly Report 10Q 10
<PAGE>
quarter ended June 30, 1997 Selling, general and administrative expenses were
$525,000 or 14% of sales and for the six months ended June 30, 1997 Selling,
general and administrative expenses totaled $1,209,000 or 14% of sales. This
reflects a decrease in Selling, general and administration expenses of $102,000
or 8% for the six months ended June 30, 1998 as compared with the six months
ended June 30, 1997.
INTEREST EXPENSE AND OTHER EXPENSES, NET
Interest expense for the quarter ended June 30, 1998 was $76,000 as compared to
$79,000 for the quarter ended June 30, 1997. The decrease of approximately
$3,000 is attributed to the termination of short term capital leases on several
pieces of equipment.
LIQUIDITY AND CAPITAL RESOURCES
The Company had negative working capital of $1,505,000 at June 30, 1998 which
was approximately a $1,352,000 decrease in working capital from December 31,
1997.
For the six months ended June 30, 1998 cash used in operating activities was
($445,000) as compared with $48,000 provided from operations for the same period
in 1997
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 - June 30, 1998 Quarterly Report 10Q 11
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PART II OTHER INFORMATION
ITEM 5:
There were no dividends declared in the quarter.
ITEM 6:
None
PEERLESS TUBE COMPANY - June 30, 1998 Quarterly Report 10Q 12
<PAGE>
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 - June 30, 1998 Quarterly Report 10Q 13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 41,000
<SECURITIES> 10,000
<RECEIVABLES> 1,931,000
<ALLOWANCES> (314,000)
<INVENTORY> 1,831,000
<CURRENT-ASSETS> 3,499,000
<PP&E> 22,927,000
<DEPRECIATION> (20,368,000)
<TOTAL-ASSETS> 6,058,000
<CURRENT-LIABILITIES> 4,994,000
<BONDS> 853,000
0
(344,000)
<COMMON> 3,382,000
<OTHER-SE> (2,827,000)
<TOTAL-LIABILITY-AND-EQUITY> 6,058,000
<SALES> 4,060,000
<TOTAL-REVENUES> 4,060,000
<CGS> 3,791,000
<TOTAL-COSTS> 3,791,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (361,000)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> 0
</TABLE>
