<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 September 30, 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 $345,000. The market value
is based on $.1400 as of September 10, 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 $.1400-$.2200.
Common Stock, Par Value $1.33-1/3
Outstanding at September 30, 1999. 2,462,973 shares
Documents incorporated by reference: None
<PAGE>
PEERLESS TUBE COMPANY
TABLE OF CONTENTS
<TABLE>
<CAPTION> Page
<S> <C>
Part I Financial Information
Item I Financial Statements (Unaudited)
Balance Sheets as of September 30, 1999 (Unaudited) and December 3
31, 1998
Statement of Operations for the Quarters Ended September 30, 1999 4-5
and 1998 (Unaudited) and for the nine-month periods ended September
30, 1999 and 1998 (Unaudited).
Statement of Cash Flows - for the nine-month periods ended 6
September 30, 1999 and 1998. (Unaudited)
Notes to the Consolidated Financial Statements 7-9
Item II Management's Discussions & Analysis of the Financial Conditions and 10-11
Results of Operations
Part II Other Information
Item 5 11
Item 6 11
Signatures 12
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
(Unaudited)
Peerless Tube Company
Balance Sheet September 30, 1999 December 31, 1998
------------------ -----------------
(rounded to nearest thousand)
<S> <C> <C>
Assets
Current assets:
Cash $ 21,000 $ 15,000
Accounts receivable, less allowance for doubtful accounts of 1,674,000 1,184,000
$100,000.
Inventories 841,000 1,233,000
Prepaid expenses and other current assets 109,000 86,000
---------------------------------------
Total current assets $ 2,645,000 $ 2,518,000
Property, plant and equipment, net 1,598,000 2,138,000
Deferred tax assets, net of valuation allowance of $5,862,000
---------------------------------------
Total assets $ 4,243,000 $ 4,656,000
===========================================================================================================
Liabilities and Stockholders' Deficiency
Current liabilities:
Accounts payable $ 1,003,000 $ 2,004,000
Accrued liabilities 488,000 1,145,000
Revolving credit line 1,324,000 868,000
Current portion of long-term debt 311,000 236,000
---------------------------------------
Total current liabilities 3,126,000 4,253,000
Long term debt 1,792,000 651,000
Other liabilities 223,000 303,000
---------------------------------------
Total liabilities 5,141,000 5,207,000
Commitments and contingencies
Stockholders' Deficiency:
Common stock, $1.33-1/3 par value; authorized 5,000,000 shares; 3,383,000 3,383,000
issued and outstanding 2,536,935 shares
Additional paid-in capital 14,439,000 14,439,000
Accumulated deficit 18,375,000 18,028,000
Less 73,962 shares of stock in treasury, at cost (345,000) (345,000)
---------------------------------------
Stockholders' deficiency 898,000 551,000
---------------------------------------
Total liabilities and stockholders' deficiency $ 4,243,000 $ 4,656,000
===========================================================================================================
</TABLE>
The accompanying notes should be read in conjunction with the financial
statements.
3
<PAGE>
<TABLE>
<CAPTION>
(Unaudited)
Peerless Tube Company
Statement of Operations For the Quarter Ended September 30, 1999 September 30, 1998
------------------ ------------------
(rounded to nearest thousand except per share amount)
<S> <C> <C>
Net sales $ 3,536,000 $ 4,074,000
Cost of sales 3,107,000 4,005,000
---------------------------------------------------
Gross profit 429,000 69,000
Selling, general, and administrative expenses 473,000 475,000
---------------------------------------------------
Loss from operations 44,000 406,000
Interest expense 107,000 62,000
Other income (expense) - net 1,000 (1,000)
---------------------------------------------------
Net loss 150,000 469,000
===================================================================================================================
Accumulated deficit:
Beginning of period 18,225,000 17,266,000
---------------------------------------------------
End of period 18,375,000 17,735,000
===================================================================================================================
Net loss per share $ .06 $ .19
===================================================================================================================
Weighted average shares outstanding 2,462,973 2,462,973
===================================================================================================================
</TABLE>
The accompanying notes should be read in conjunction with the financial
statements.
4
<PAGE>
<TABLE>
<CAPTION>
(Unaudited)
Peerless Tube Company
Statement of Operations For the Nine Months Ended September 30, 1999 September 30, 1998
------------------ ------------------
(rounded to nearest thousand except per share amount)
<S> <C> <C>
Net sales $10,751,000 $11,688,000
Cost of sales 9,897,000 11,451,000
-----------------------------------------------------
Gross profit 854,000 237,000
Selling, general, and administrative expenses 1,313,000 1,582,000
-----------------------------------------------------
Loss from operations 459,000 1,345,000
Interest expense 223,000 203,000
Other income - net 335,000 1,000
-----------------------------------------------------
Net loss 347,000 1,547,000
===================================================================================================================
Accumulated deficit:
Beginning of period 18,028,000 16,188,000
End of period 18,375,000 17,735,000
===================================================================================================================
Net loss per share $ .14 $ .63
===================================================================================================================
Weighted average shares outstanding 2,462,973 2,462,973
===================================================================================================================
</TABLE>
The accompanying notes should be read in conjunction with the financial
statements.
5
<PAGE>
<TABLE>
<CAPTION>
(Unaudited)
Peerless Tube Company
Statement of Cash Flows For the Nine Months Ended September 30, 1999 September 30, 1998
------------------ ------------------
(rounded to nearest thousand)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ 347,000 $1,547,000
Adjustment to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 540,000 641,000
Provision for bad debts (85,000)
(Increase) decrease in operating assets:
Accounts receivable (490,000) (139,000)
Inventories 392,000 865,000
Prepaid expenses and other current assets (23,000) (96,000)
Increase (decrease) in operating liabilities:
Accounts payable (1,001,000) 348,000
Accrued liabilities (657,000) (167,000)
Other liabilities (80,000) (60,000)
-------------------------------------------
Net cash used in operating activities 1,666,000 240,000
-------------------------------------------
Cash flows from financing activities:
Net borrowing under credit line 456,000 245,000
Increase (reduction) of long term debt and current maturities 1,216,000 (173,000)
-------------------------------------------
Net cash provided by financing activities 1,672,000 72,000
-------------------------------------------
Net increase (decrease) in cash 6,000 (168,000)
Cash - beginning of the period 15,000 190,000
-------------------------------------------
Cash - end of period $ 21,000 $ 22,000
====================================================================================================================
</TABLE>
The accompanying notes should be read in conjunction with the financial
statements.
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 included in the Company's Annual Report Form 10-K
for the year ended December 31, 1998 and the Quarterly Report Form 10-Q for the
Quarters ended June 30, 1999 and March 31, 1999.
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
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.
Although the competition remains strong in all areas of the business, the
Company has been able to increase its market share in the aluminum tube product
line with sales up 57% from the prior year. Sales in the aluminum can product
line have decreased by 16% during the same period, largely due to increased
competition.
7
<PAGE>
NOTE 3: DEBT RESTRUCTURING
On July 29, 1999, the Company entered into a refinancing agreement with a major,
national asset based lender, covering both a new revolving credit facility and a
new term loan.
Borrowings against the revolving credit facility are based on specific levels of
accounts receivable and inventories of the Company and bear interest at the
prime rate plus three percent on the outstanding balance. The initial draw
against the revolving credit line was approximately $410,000.
The term loan, which also carries interest at the prime rate plus three percent,
will be amortized equally over 84 months. The initial amount of this loan was
$2,150,000.
There are minimum borrowing requirements of $1,500,000 and the maximum amount
available under the combined borrowings is $5,000,000. The Company has pledged
substantially all of its assets as collateral for these loans. In addition, the
agreement requires the Company to comply with various financial covenants
including restrictions on the amounts of capital expenditures and a prohibition
on the payment of dividends on the Company's common stock.
Proceeds from these borrowings were used to 1) repay the existing asset based
lender in full; 2) pay the $640,000 remaining due from the lawsuit verdict in
favor of a former employee; and 3) to pay all real estate and other taxes as
well as other past due accounts payable.
NOTE 4: INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
Inventories September 30, 1999 December 31, 1998
<S> <C> <C>
Raw materials $283,000 $ 648,000
Work-in-process 27,000 27,000
Finished goods 531,000 558,000
--------------------------------------
Total $841,000 $1,233,000
=======================================
</TABLE>
NOTE 5: ACCRUED LIABILITIES
Accrued liabilities are comprised of the following:
<TABLE>
<CAPTION>
Accrued Liabilities September 30, 1999 December 31, 1998
<S> <C> <C>
Payroll, payroll taxes, and payroll related costs $226,000 $ 208,000
Legal and professional 130,000 470,000
All other 132,000 467,000
--------------------------------------
Total $488,000 $1,145,000
=======================================
</TABLE>
8
<PAGE>
NOTE 6 - LONG-TERM DEBT
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
Long-Term Debt September 30, 1999 December 31, 1998
<S> <C> <C>
Equipment loan secured by substantially all the $2,099,000 $ 822,000
Company's property, plant and equipment payable to a
lender, restructured during July 1999, payable in
equal monthly installments through July 31, 2006. The
loan bears interest at prime +3.0%
Various purchase money capital leases for manufacturing 4,000 65,000
and office equipment, final payments due in 1999, with
interest rates at an average 18%
--------------------------------------------
2,103,000 887,000
Less current portion (311,000) (236,000)
---------------------------------------------
Long-term debt $1,792,000 $ 651,000
=============================================
</TABLE>
9
<PAGE>
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 September 30, 1999 and 1998 totaled $3,536,000 and
$4,074,000 respectively. The sales for the nine months ended September 30, 1999
and 1998 were $10,751,000 and $11,688,000 respectively, resulting in a decrease
of $937,000 or 8.0%.
The breakdown of overall sales from all sources for the third quarter ended
September 1999 and 1998 respectively was as follows:
<TABLE>
<CAPTION>
Net Sales 3/rd/ Quarter 3/rd/ Quarter $ %
1999 1999 Change Change
<S> <C> <C> <C> <C>
Cans $ 3,033,000 $ 3,713,000 ($680,000) (19.3%)
Metal Tubes 258,000 199,000 $ 59,000 29.6%
Miscellaneous 245,000 162,000 $ 83,000 51.2%
----------- ----------- -----------
Total $ 3,536,000 $ 4,074,000 ($538,000) (13.2%)
=========== =========== ===========
</TABLE>
In the third quarter ending September 30, 1999, one customer accounted for 25%
of the Company's sales. Year-end margins for 1999 will be effected by the
product sales mix for the last quarter of 1999.
Gross Profit Trends and Discussion
The total decrease in sales for the quarter and nine months ended September 30,
1999 as compared with the quarter and nine months September 30, 1998 is $538,000
and $937,000 respectively. The decrease in sales for the nine months ended
September 1999 vs. September 1998 is a combination of two things; a decrease in
sales to a major customer which has been offset by significant new customers and
increases to other existing customers. The increase in business to new and
expanded customers has accelerated in the 4th quarter.
The gross profit on sales for the quarter ended September 30, 1999 was $429,000
or 12.0% on sales of $3,536,000 as compared with the quarter ended September 30,
1998, when the gross profit was $69,000 or 1.7% on sales of $4,074,000. For the
nine months ended September 30, 1999 the gross profit was $854,000 or 7.9% on
sales of $10,751,000 compared to $237,000 or 2.0% on sales of $11,588,000 for
the nine months ended September 30, 1998. The increase in gross profit for the
quarter and nine months ended September 30, 1999 as compared to the quarter and
nine months ended September 30, 1998 is mainly a result of lower raw material
costs and better labor utilization.
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.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the quarter ended September 30,
1999 were $473,000 or 13.4% of sales. For the nine months ended September 30,
1999, selling, general and administrative expenses totaled $1,313,000 or 12.2%
of sales. For the quarter ended September 30, 1998, selling, general and
administrative expenses were $475,000 or 11.7% of sales and for the nine months
ended September 30, 1998 they were $1,582,000 or 13.5% of sales.
10
<PAGE>
Interest Expense and Other Expenses, net
Interest expense for the quarter ended September 30, 1999 was $107,000 as
compared to $62,000 in 1998.
Liquidity and Capital Resources
The Company has negative working capital of $480,000 at September 30, 1999 which
is approximately a $1,255,000 increase in working capital from December 31,
1998.
For the nine months ended September 30, 1999 cash used in operating activities
was $1,666,000 as compared with $240,000 for the same period in 1998.
As of September 30, 1999 the Company had cash and cash equivalents of
approximately $21,000. Net cash used in operations as of September 30, 1999 was
$1,666,000. Through September 30, 1999, cash provided by financing activities
was $1,672,000 principally obtained with the new financing agreement. As of
September 30, 1999, the net decrease in cash from December 31, 1998 was $1,000.
PART II - OTHER INFORMATION
ITEM 5:
There were no dividends declared in the quarter.
ITEM 6:
None.
11
<PAGE>
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
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 21,000
<SECURITIES> 0
<RECEIVABLES> 1,774,000
<ALLOWANCES> (100,000)
<INVENTORY> 841,000
<CURRENT-ASSETS> 2,645,000
<PP&E> 22,927,000
<DEPRECIATION> (21,329,000)
<TOTAL-ASSETS> 4,243,000
<CURRENT-LIABILITIES> 3,126,000
<BONDS> 0
0
0
<COMMON> 3,383,000
<OTHER-SE> (4,281,000)
<TOTAL-LIABILITY-AND-EQUITY> 4,243,000
<SALES> 3,536,000
<TOTAL-REVENUES> 3,537,000
<CGS> 3,107,000
<TOTAL-COSTS> 473,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 107,000
<INTEREST-EXPENSE> (150,000)
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (150,000)
<EPS-BASIC> (0.06)
<EPS-DILUTED> 0
</TABLE>
