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, 2000 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 $616,000. The market value is
based on $.25 as of June 29, 2000, which is the last recorded trade. During the
quarter, actual trades of relatively small amounts of the Company's shares of
stock have traded at a transaction price from $.22 to $.40.
Common Stock, Par Value $1.33-1/3
Outstanding at June 30, 2000. 2,462,973 shares
Documents incorporated by reference: None
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TABLE OF CONTENTS
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ITEM PAGE
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PART I FINANCIAL INFORMATION
Balance sheets as of June 30, 2000 - unaudited and December 31, 1999 3
Statement of operations for the quarters and six months ended June 30,
2000 and 1999 - unaudited 4-5
Statement of cash flows for the quarters and six months ended June 30,
2000 and 1999 - unaudited 6
Notes to the financial statements 7-8
Management's discussion & analysis of the financial conditions
and results of operations 9-10
PART II OTHER INFORMATION
Item 5 11
Item 6 11
Signatures 12
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2
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PEERLESS TUBE COMPANY JUNE 30, DECEMBER 31,
BALANCE SHEET 2000 1999
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(UNAUDITED)
(ROUNDED TO NEAREST THOUSAND)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 20,000 $ 50,000
Accounts receivable, less allowance for doubtful of $100,000 1,251,000 1,373,000
Inventories 733,000 919,000
Prepaid expenses and other current assets 58,000 63,000
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Total current assets 2,062,000 2,405,000
Property, plant and equipment, net 1,222,000 1,418,000
Deferred financing costs 150,000 165,000
Deferred tax assets, net of valuation allowance of $5,701,000
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Total assets $ 3,434,000 $ 3,988,000
=====================================================================================================================
LIABILITIES & STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable $ 1,228,000 $ 740,000
Accrued liabilities 413,000 595,000
Revolving credit line 1,134,000 1,184,000
Current portion of long-term debt 307,000 307,000
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Total current liabilities 3,082,000 2,826,000
Long term debt 1,561,000 1,715,000
Other liabilities 268,000 273,000
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Total liabilities 4,911,000 4,814,000
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Commitments and contingencies
Stockholders' deficiency:
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 18,954,000 18,303,000
Less 73,962 shares of stock in treasury, at cost (344,000) (344,000)
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Stockholders' deficiency 1,477,000 826,000
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Total liabilities and stockholders' deficiency $3,434,000 $3,988,000
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THE ACCOMPANYING NOTES SHOULD BE READ
IN CONJUNCTION WITH THE FINANCIAL STATEMENTS.
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PEERLESS TUBE COMPANY
STATEMENT OF OPERATIONS, JUNE 30 JUNE 30,
FOR THE QUARTER ENDED 2000 1999
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(ROUNDED TO NEAREST THOUSAND EXCEPT PER SHARE AMOUNTS)
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
NET SALES $ 3,291,000 $ 3,387,000
COST OF SALES 3,146,000 3,092,000
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GROSS PROFIT 145,000 295,000
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 437,000 443,000
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LOSS FROM OPERATIONS 292,000 148,000
INTEREST EXPENSE 115,000 58,000
OTHER INCOME 2,000 4,000
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NET LOSS $ 405,000 $ 202,000
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ACCUMULATED DEFICIENCY:
BEGINNING OF PERIOD $18,549,000 $18,023,000
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END OF PERIOD $18,954,000 $18,225,000
=====================================================================================================================
BASIC LOSS PER SHARE $0.16 $0.08
=====================================================================================================================
WEIGHTED AVERAGE SHARE OUTSTANDING 2,462,973 2,462,973
=====================================================================================================================
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THE ACCOMPANYING NOTES SHOULD BE READ
IN CONJUNCTION WITH THE FINANCIAL STATEMENTS.
4
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PEERLESS TUBE COMPANY
STATEMENT OF OPERATIONS, JUNE 30, JUNE 30,
FOR THE SIX MONTHS ENDED 2000 1999
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(ROUNDED TO NEAREST THOUSAND EXCEPT PER SHARE AMOUNTS)
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
NET SALES $ 6,779,000 $ 7,215,000
COST OF SALES 6,363,000 6,790,000
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GROSS PROFIT 416,000 425,000
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 860,000 840,000
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LOSS FROM OPERATIONS 444,000 415,000
INTEREST EXPENSE 232,000 116,000
OTHER INCOME 25,000 334,000
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NET LOSS $ 651,000 $ 197,000
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ACCUMULATED DEFICIENCY:
BEGINNING OF PERIOD $18,303,000 $18,028,000
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END OF PERIOD $18,954,000 $ 18,225,000
======================================================================================================================
BASIC LOSS PER SHARE $0.26 $0.08
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WEIGHTED AVERAGE SHARE OUTSTANDING 2,462,973 2,462,973
======================================================================================================================
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THE ACCOMPANYING NOTES SHOULD BE READ
IN CONJUNCTION WITH THE FINANCIAL STATEMENTS.
5
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PEERLESS TUBE COMPANY FOR THE SIX MONTHS ENDED JUNE 30,
STATEMENT OF CASH FLOWS ---------------------------------
2000 1999
(UNAUDITED) (UNAUDITED)
(ROUNDED TO THE NEAREST THOUSAND)
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS $651,000 $197,000
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ADJUSTMENT TO RECONCILE NET LOSS TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 211,000 360,000
DECREASE IN OPERATING ASSETS:
ACCOUNTS RECEIVABLE 122,000 27,000
INVENTORIES 186,000 192,000
PREPAID EXPENSES AND OTHER CURRENT ASSETS 5,000 62,000
INCREASE (DECREASE) IN OPERATING LIABILITIES:
ACCOUNTS PAYABLE 488,000 (111,000)
ACCRUED LIABILITIES (182,000) (12,000)
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TOTAL ADJUSTMENTS 830,000 518,000
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 179,000 321,000
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CASH FLOWS FROM FINANCING ACTIVITIES:
NET REPAYMENTS UNDER CREDIT LINE 50,000 70,000
REPAYMENT OF LONG TERM DEBT AND CURRENT MATURITIES 159,000 197,000
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NET CASH USED IN FINANCING ACTIVITIES 209,000 267,000
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NET (DECREASE) INCREASE IN CASH (30,000) 54,000
CASH - BEGINNING OF THE PERIOD 50,000 15,000
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CASH - END OF PERIOD $20,000 $69,000
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</TABLE>
THE ACCOMPANYING NOTES SHOULD BE READ
IN CONJUNCTION WITH THE FINANCIAL STATEMENTS.
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 there to included in the Company's Annual Report
Form 10-K for the year ended December 31, 1999 and the Quarterly Report Form
10-Q for the Quarter ended March 31, 2000.
In the opinion of management, these financial statements include all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position, results 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, 1999. The results of operations may not
be indicative of the results that may be expected for the year ending December
31, 2000.
NOTE 2: BUSINESS
The accompanying 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.
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 has
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.
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 34% from the prior year. Sales in the aluminum can product
line have decreased by 10% during the same period, largely due to increased
competition.
NOTE 3: DEBT RESTRUCTUING
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.
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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 four 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:
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INVENTORIES June 30, December 31,
2000 1999
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<S> <C> <C>
Raw materials $ 364,000 $ 510,000
Finished goods 369,000 409,000
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Total $ 733,000 $ 919,000
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NOTE 5: ACCRUED LIABILITIES
Accrued liabilities are comprised of the following:
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ACCRUED LIABILITIES June 30, December 31,
2000 1999
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<S> <C> <C>
Payroll, payroll taxes, and payroll related costs $155,000 $168,000
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Legal and professional 119,000 145,000
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All other 139,000 282,000
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Total $413,000 $595,000
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NOTE 6: LONG-TERM DEBT
Long-term debt is comprised of the following:
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LONG TERM DEBT June 30, December 31,
2000 1999
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<S> <C> <C>
Equipment term loan payable in monthly installments of $25,600 plus
interest through July, 2006 The loan bears interest at the prime rate
plus 3%. (see Note 3) $1,868,000 $2,022,000
Less current portion (307,000) (307,000)
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Long-term debt $1,561,000 $1,715,000
==================================================================================================================
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8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL
CONDITION & RESULTS OF OPERATIONS
SALES AND RESULTS OF OPERATIONS 2000 COMPARED TO 1999
SALES
Sales for the quarter ended June 30, 2000 and 1999 totaled $3,291,000 and
$3,387,000, respectively resulting in a decrease of $96,000 or 3%. The sales for
the six months ended June 30, 2000 and 1999 were $6,779,000 and $7,215,000,
respectively, resulting in a decrease of $436,000 or 6%.
The breakdown of the overall sales from all sources for the second quarter ended
June 2000 and 1999 respectively was as follows:
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2nd Quarter 2nd Quarter
Net Sales 2000 1999 Change %
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<S> <C> <C> <C> <C>
Cans $2,706,000 $2,806,000 ($100,000) (3.6%)
Metal tubes 426,000 394,000 32,000 8.1%
Miscellaneous 159,000 187,000 (28,000) (15.0%)
---------------------------------------------- ---------------- ----------------- ---------------- ---------------
Total $3,291,000 $3,387,000 ($96,000) (2.8%)
============================================== ================ ================= ================ ===============
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In the second quarter ending June 30, 2000, two customers accounted for 53% (39%
and 14%) of the Company's sales.
GROSS PROFIT TRENDS AND DISCUSSION
The gross profit on sales for the quarter ended June 30, 2000 was $145,000 or 4%
on sales of $3,291,000. For the quarter ended June 30, 1999 the gross profit was
$295,000, or 9% on sales of $3,387,000. For the six months ended June 30, 2000
the gross profit was $416,000 or 6% on sales of $6,779,000 as compared to
$425,000 or 6% on sales of $7,215,000 for the six months ended June 30, 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the quarter ended June 30, 2000
were $437,000 or 13% of sales. For the six months ended June 30, 2000, selling,
general and administrative expenses totaled $860,000 or 13% of sales. For the
quarter ended June 30, 1999, selling, general and administrative expenses were
$443,000 or 13% of sales and for the six months ended June 30, 1999, selling,
general and administrative expenses totaled $840,000 or 12.9% of sales.
INTEREST EXPENSE AND OTHER EXPENSES, NET
Interest expense for the quarter ended June 30, 2000 was $115,000 as compared to
$58,000 for the quarter ended June 30, 1999. The increase in interest expense
was due to the refinancing in July, 1999. (See Note 3).
9
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LIQUIDITY AND CAPITAL RESOURCES
The Company had negative working capital of $1,020,000 at June 30, 2000 which
was approximately a $599,000 decrease in working capital from December 31, 1999.
For the six months ended June 30, 2000 cash provided by operating activities was
$179,000 as compared with $321,000 provided by operations for the same period in
1999.
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.
10
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PART II OTHER INFORMATION
ITEM 5:
There were no dividends declared in the quarter.
ITEM 6:
None
11
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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
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