<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 March 31, 1999 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 $615,000. The market value
is based on $.25 as of May 8, 1999, 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 $.2500-$.5200.
Common Stock, Par Value $1.33-1/3
Outstanding at September 30, 1998. 2,462,973 shares
Documents incorporated by reference: None
Peerless Tude Company - March 31, 1999 Quarterly Report 10Q 1
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PEERLESS TUBE COMPANY
TABLE OF CONTENTS
<TABLE>
Page
<S> <C>
Part I Financial Information
Item I Financial Statements
Balance sheets as of March 31, 1999 (unaudited) and December 31, 3
1998
Statements of operations for the quarters ended March 31, 1999 4
(unaudited) and 1998 (unaudited).
Statements of cash flows - for the quarters ended March 31, 1999 5
(unaudited) and 1998 (unaudited).
Notes to the financial statements 6-7
Item II Management's Discussions & Analysis of the Financial Conditions and 8-9
Results of Operations
Part II Other Information
Item 5 9
Item 6 9
Signatures 10
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Peerless Tude Company - March 31, 1999 Quarterly Report 10Q 2
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<TABLE>
<CAPTION>
Peerless Tube Company
Balance Sheets March 31, 1999 December 31, 1998
----------------------- -----------------------
(Unaudited)
(rounded to nearest thousand)
=====================================================================================================================
<S> <C> <C>
Assets
Current assets:
Cash $ 41,000 $ 15,000
Accounts receivable, less allowance for doubtful accounts of 1,945,000 1,184,000
$100,000
Inventories 990,000 1,233,000
Prepaid expenses 75,000 86,000
- --------------------------------------------------------------------------------------------------------------------
Total current assets 3,051,000 2,518,000
Property, plant and equipment, net 1,958,000 2,138,000
Deferred tax assets, net of valuation allowances of 5,862,000.
- --------------------------------------------------------------------------------------------------------------------
Total assets $ 5,009,000 $ 4,656,000
====================================================================================================================
Liabilities and stockholders' deficiency
Current liabilities:
Accounts payable $ 2,312,000 $ 2,004,000
Accrued liabilities 1,119,000 1,145,000
Revolving credit line 1,029,000 868,000
Current portion of long-term debt 225,000 236,000
- --------------------------------------------------------------------------------------------------------------------
Total current liabilities 4,685,000 4,253,000
Long term debt 604,000 651,000
Other liabilities 266,000 303,000
- --------------------------------------------------------------------------------------------------------------------
Total liabilities 5,555,000 5,207,000
- --------------------------------------------------------------------------------------------------------------------
Commitments and contingencies
Stockholders' deficiency:
Common stock, $1.33-1/3 par value; authorized 5,000,000 shares; 3,382,000 3,382,000
issued and outstanding 2,536,935 shares
Additional paid-in capital 14,439,000 14,439,000
Accumulated deficiency 18,023,000 18,028,000
Less 73,962 shares of stock in treasury, at cost (344,000) (344,000)
Stockholders' deficiency 546,000 551,000
- --------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' deficiency $ 5,009,000 $ 4,656,000
====================================================================================================================
</TABLE>
The accompanying notes should be read in conjunction with the financial
statements.
Peerless Tude Company - March 31, 1999 Quarterly Report 10Q 3
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<TABLE>
<CAPTION>
Peerless Tube Company
Statements of Operations For the Quarters Ended March 31, 1999 March 31, 1998
---------------------- -----------------------
(Unaudited)
(rounded to nearest thousand except per share
amount)
====================================================================================================================
<S> <C> <C>
Net sales $ 3,828,000 $ 3,554,000
Cost of sales 3,698,000 3,655,000
- -------------------------------------------------------------------------------------------------------------------
Gross profit (loss) 130,000 (101,000)
Selling, general, and administrative expenses 397,000 553,000
- -------------------------------------------------------------------------------------------------------------------
Loss from operations 267,000 654,000
Interest expense 58,000 65,000
Other income 330,000 2,000
- -------------------------------------------------------------------------------------------------------------------
Net income (loss) 5,000 (717,000)
- -------------------------------------------------------------------------------------------------------------------
Accumulated deficiency:
Beginning of period 18,028,000 16,188,000
- -------------------------------------------------------------------------------------------------------------------
End of period $ 18,023,000 $ 16,905,000
===================================================================================================================
Net income (loss) per share $ 0.00 $ (0.29)
===================================================================================================================
Weighted average shares outstanding 2,462,973 2,462,973
===================================================================================================================
The accompanying notes should be read in conjunction with the financial
statements.
</TABLE>
Peerless Tude Company - March 31, 1999 Quarterly Report 10Q 4
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<TABLE>
<CAPTION>
Peerless Tube Company
Statements of Cash Flows For the Quarters Ended March 31, 1999 March 31, 1998
---------------- ----------------
(Unaudited)
(rounded to nearest thousand)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 5,000 $ (717,000)
Adjustment to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization 180,000 213,000
Provision for bad debts 6,000
(Increase) decrease in operating assets:
Accounts receivable (761,000) (91,000)
Inventories 243,000 528,000
Prepaid expenses 11,000 (24,000)
Other current assets (60,000)
Increase (decrease) in operating liabilities:
Accounts payable 308,000 (250,000)
Accrued liabilities (26,000) 60,000
- ----------------------------------------------------------------------------------------------------------------
Total adjustments (45,000) 382,000
- ----------------------------------------------------------------------------------------------------------------
Net cash used in operating activities 40,000 335,000
Cash flows from financing activities:
Net borrowing under credit line 161,000 221,000
Reduction of long term debt and current maturities 95,000 60,000
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 66,000 161,000
- ----------------------------------------------------------------------------------------------------------------
Net Increase (decrease) in cash 26,000 (174,000)
Cash - beginning of the period 15,000 190,000
- ----------------------------------------------------------------------------------------------------------------
Cash - end of period $ 41,000 $ 16,000
================================================================================================================
</TABLE>
The accompanying notes should be read in conjunction with the financial
statements.
Peerless Tube Company - March 31, 1999 Quarterly Report 10Q 5
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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, 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, 1998. The results of operations may not
be indicative of the results that may be expected for the year ending December
31, 1999.
NOTE 2: BUSINESS AND DEBT RESTRUCTURING
The accompanying consolidated 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 suffered recurring losses from operations and negative cash flows
and currently has a stockholders' deficiency. These conditions raise
substantial doubt about its ability to continue as a going concern.
Additionally, 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 of which $60,000 has been paid upon
execution of the agreement. The remaining balance has been reflected as a
liability in the accompanying consolidated financial statements to be paid as
follows:
$60,000 currently payable;
$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 (see Note 8).
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. Major cost and
head count reduction programs previously implemented focused on reduction of
pension and employee benefits, particularly changes to healthcare benefits.
Except for periodic additions to meet peaks in sales demand, the Company has
reduced its workforce, both salaried and hourly. Management introduced and
implemented new programs to improve its production, inventory management and
management cost accounting systems.
With the anticipated cooperation of its secured lender and the additional
consolidation of plant assets, management believes that actions presently being
taken to improve the Company's operating performance including reductions of
staffing levels and stabilization of raw material prices 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, 1999 Quarterly Report 10Q 6
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NOTE 3: INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Inventories March 31, 1999 December 31, 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $362,000 $ 648,000
Work-in-process 27,000 27,000
Finished Goods 601,000 558,000
- ----------------------------------------------------------------------------------------------------------
Total $990,000 $1,233,000
- ----------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 4: ACCRUED LIABILITIES
Accrued liabilities is comprised of the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Accrued Liabilities March 31, 1999 December 31, 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Payroll, payroll taxes, and payroll related costs $ 246,000 $ 208,000
All Other 873,000 937,000
- ----------------------------------------------------------------------------------------------------------
Total $1,119,000 $1,145,000
- ----------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 5 - LONG-TERM DEBT/REVOLVING CREDIT LINE
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Long-Term Debt March 31, 1999 December 31, 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Equipment term loan payable in monthly installments $ 775,000 $ 822,000
of $15,625 plus interest through January 1, 2000
with a balloon payment of $624,750 on February 1,
2000. The loan bears interest at the prime rate
plus 4%.
Various purchase money capital leases for 54,000 65,000
manufacturing and office equipment, final payment
due in 2000, with interest rates ranging from 11% to
18%
----------------------------------------
829,000 887,000
Less current portion (225,000) (236,000)
- ----------------------------------------------------------------------------------------------------------
Long-term debt $ 604,000 $ 651,000
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Peerless Tube Company - March 31, 1999 Quarterly Report 10Q 7
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL
CONDITION & RESULTS OF OPERATIONS
SALES AND RESULTS OF OPERATIONS 1999 COMPARED TO 1998
Sales
Sales for the quarter ended March 31, 1999 and 1998 totaled $3,828,000 and
$3,554,000 respectively.
The breakdown of overall sales from all sources for the first quarter ended
March 1999 and 1998 respectively, was as follows:
<TABLE>
<CAPTION>
Net Sales 1/st/ Quarter 1/st/ Quarter $ %
1999 1998 Change Change
<S> <C> <C> <C> <C>
Cans $3,354,000 $3,297,000 $ 57,000 1.7
Metal Tubes 242,000 179,000 63,000 35.2
Miscellaneous 232,000 78,000 154,000 197.4
--------------- ------------- ------------- -------------
Total $3,828,000 $3,554,000 $ 274,000 7.7
</TABLE>
In the first quarter of 1999, one customer accounted for 45% of the Company's
sales.
Gross Profit Trends and Discussion
The gross profit on sales for the quarter ended March 31, 1999 was $130,000, or
3% on sales of $3,828,000, as compared with the quarter ended March 31, 1998
where the gross loss on sales was $101,000, or (3%) on sales of $3,554,000.
This improvement is due to lower raw material costs and reduced payroll.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the quarter ended, March 31,
1999 were $397,000 or 10% of sales. For the quarter ended March 31, 1998
selling, general and administrative expenses were $553,000 or 16% of net sales.
This reduction is largely due to high legal costs recorded in the first quarter
of 1998 due to the lawsuit described in the notes.
Peerless Tube Company - March 31, 1999 Quarterly Report 10Q 8
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Interest Expense and Other Expenses, net
Interest expense for the quarter ended March 31, 1999 was $58,000 as compared to
$65,000 for the quarter ended March 31, 1998. In the first quarter of 1999 the
Company had a one time credit of $308,000 resulting from the termination of the
Company's overfunded defined benefit pension plan.
Liquidity and Capital Resources
The Company has negative working capital of $1,634,000 at March 31, 1999 which
is approximately a $324,000 decrease in working capital from December 31, 1998.
For the three months ended March 31, 1999 cash used in operating activities was
$40,000 compared to $335,000 for the same period in 1998. The Company continues
to work closely with its secured lenders. The Company's revolving credit line
for the quarter ended March 31, 1998 was $1,029,000 as compared with $868,000 as
of December 31, 1998, and increase of $161,000.
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.
PART II - OTHER INFORMATION
ITEM 5:
There were no dividends declared in the quarter.
ITEM 6:
None.
Peerless Tube Company - March 31, 1999 Quarterly Report 10Q 9
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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:
___________________________
Frederic Remington, Jr.
Chairman
By:
___________________________
Richard W. Potts
President
Peerless Tube Company - March 31, 1999 Quarterly Report 10Q 10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 41,000
<SECURITIES> 0
<RECEIVABLES> 2,045,000
<ALLOWANCES> (100,000)
<INVENTORY> 990,000
<CURRENT-ASSETS> 3,051,000
<PP&E> 19,700,000
<DEPRECIATION> (17,742,000)
<TOTAL-ASSETS> 5,009,000
<CURRENT-LIABILITIES> 4,685,000
<BONDS> 0
0
(344,000)
<COMMON> 3,382,000
<OTHER-SE> (3,584,000)
<TOTAL-LIABILITY-AND-EQUITY> 5,009,000
<SALES> 3,828,000
<TOTAL-REVENUES> 3,828,000
<CGS> 3,698,000
<TOTAL-COSTS> 4,095,000
<OTHER-EXPENSES> (330,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,000
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
