<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
- ---
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from to
--------- ----------
Commission file number 1-5356
PENN ENGINEERING & MANUFACTURING CORP.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 23-0951065
- ------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 1000, Danboro, Pennsylvania 18916
- ---------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(215) 766-8853
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
documents and reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
-------- -------
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the last practicable
date: 1,707,082 shares of common stock, $1.00 par value,
outstanding on May 5, 1995.
<PAGE> 2
PART I. FINANCIAL INFORMATION
PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, 1995 December 31, 1994
CURRENT ASSETS -------------- ------------------
Cash and cash equivalents $4,291,260 $6,106,565
Short-term investments (Note 2) 10,756,485 5,303,092
Accounts receivable-trade 21,459,619 20,858,766
Allowance for doubtful accounts (1,000,000) (800,000)
Inventories (Note 3) 19,799,907 19,127,086
Prepaid expenses 1,184,714 1,106,642
Deferred income taxes 945,671 896,782
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Total current assets 57,437,656 52,598,933
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LONG-TERM INVESTMENTS 579,795 607,959
---------- ----------
PROPERTY
Property, plant & equipment 62,673,675 59,751,674
Less accumulated depreciation 31,835,670 30,831,734
----------- -----------
Property - net 30,838,005 28,919,940
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TOTAL $88,855,456 $82,126,832
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable-trade $3,937,861 $2,750,018
Dividends payable 469,448
Accrued expenses:
Pension & profit sharing 1,952,738 2,735,946
Income taxes 2,611,897 813,285
Payroll & commissions 3,602,431 2,654,053
Other 762,211 543,789
---------- ----------
Total current liabilities 13,336,586 9,497,091
---------- ----------
ACCRUED PENSION COST 5,496,531 5,369,984
---------- ----------
DEFERRED INCOME TAXES 1,296,057 1,349,923
---------- ----------
STOCKHOLDERS' EQUITY
Common stock 1,772,025 1,772,025
Additional paid-in capital 932,143 932,143
Retained earnings 67,074,457 64,520,461
Unrealized (loss) on
investments -net of tax (97,729) (139,895)
Cumulative foreign currency
translation adjustment (2,657) (222,943)
Treasury stock (951,957) (951,957)
---------- ----------
Total stockholders' equity 68,726,282 65,909,834
---------- ----------
TOTAL $88,855,456 $82,126,832
========== ==========
See Notes to Condensed Consolidated Financial Statements
<PAGE> 3
PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARY
STATEMENTS OF CONDENSED CONSOLIDATED INCOME AND RETAINED EARNINGS
THREE MONTHS ENDED
--------------------------------
March 31, 1995 March 31, 1994
-------------- --------------
REVENUES:
Net Sales $35,298,559 $28,407,646
Other income 348,727 55,765
----------- -----------
35,647,286 28,463,411
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COSTS AND EXPENSES
Cost of products sold 24,630,385 20,394,592
Selling, general & administrative 6,016,457 5,391,620
----------- -----------
30,646,842 25,786,212
----------- -----------
INOME BEFORE INCOME TAXES 5,000,444 2,677,199
PROVISION FOR INCOME TAXES 1,977,000 1,040,000
----------- -----------
NET INCOME 3,023,444 1,637,199
RETAINED EARNINGS - BEGINNING 64,520,460 56,682,704
CASH DIVIDEND (469,447) (426,770)
----------- -----------
RETAINED EARNINGS - ENDING $67,074,457 $57,893,133
=========== ===========
NET INCOME PER SHARE $1.77 $0.96
=========== ===========
AVERAGE SHARES OUTSTANDING 1,707,082 1,707,082
CASH DIVIDEND PER SHARE $.275 $.25
See Notes to Condensed Consolidated Financial Statements
<PAGE> 4
PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARY
STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
THREE MONTHS ENDED
-----------------------------
March 31, 1995 March 31, 1994
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,023,444 $1,637,199
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,030,029 868,820
Loss on disposal of property 2,206 3,112
Loss on disposal of investments 27,269
Changes in assets and liabilities:
(Increase) in receivables (400,853) (2,920,153)
(Increase) decrease in inventories (672,821) 450,565
(Increase) in prepaid expenses, etc. ( 78,072) (181,872)
(Increase) decrease in deferred
income taxes-current ( 48,889) 10,457
Increase in accounts payable 1,187,843 397,010
Increase in accrued expenses 2,182,204 28,642
Increase in accrued pension cost 126,547 254,368
(Decrease) in deferred income taxes
- noncurrent (53,866) (27,767)
---------- ----------
Net cash provided in
operating activities 6,297,772 547,650
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (2,932,551) (890,881)
Additions to available-for-sale and
held-to-maturity investments (7,353,526) (2,209,402)
Proceeds from disposal of available-for-
sale and held-to-maturity investments 1,998,574 579,710
Proceeds from disposal of property 55 98
---------- ----------
Net cash used in investing activities (8,287,448) (2,520,475)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings 407,000
----------- ---------
Net cash provided by financing activities 407,000
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Effect of exchange rate and investment
reserve changes on cash 174,371 (1,011)
----------- ---------
Net (decrease) in cash and cash
equivalents (1,815,305) (1,566,836)
Cash and cash equivalents at
beginning of year 6,106,565 2,199,918
----------- ---------
Cash and cash equivalents at end of year $4,291,260 $ 633,082
=========== ==========
SUPPLEMENTAL CASH FLOW DATA:
Cash paid during the year for:
Income taxes $321,715 $196,956
Interest 7,418
See Notes to Condensed Consolidated Financial Statements
<PAGE> 5
PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1995
Note 1. Condensed Consolidated Financial Statements (Unaudited)
- -------------------------------------------------------------
The accompanying interim financial statements should be read in conjunction
with the annual financial statements and notes thereto included in the
Company's Annual Report. The information contained in this report is
unaudited and subject to year-end adjustment. In the opinion of management,
all adjustments (which include only normal recurring adjustments) have been
made which are necessary for a fair presentation of Registrant's consolidated
financial position at March 31, 1995 and 1994 and the consolidated results of
operations and changes in the financial position for the three-month periods
then ended.
Note 2. Investments
- -------------------
The Company adopted as of January 1, 1994, the accounting and disclosure
requirements of the Statement of Financial Accounting Standards No. 115
(SFAS No. 115) "Accounting for Certain Investments in Debt and Equity
Securities." The cumulative and 1994 effect of the accounting change is not
considered to be significant. SFAS No. 115 requires the Company to account
for debt and equity securities as follows:
Trading - The Company holds no investments that were designated as trading
securities.
Held-to-Maturity - Securities that management has the positive intent and
ability to hold until maturity. These investments are carried at their
remaining unpaid principal balance net of any unamortized premiums or
discounts.
Available-for-Sale - Securities that will be held for indefinite periods of
time. These investments are carried at market value which is determined
using published quotes as of close of business at the period end. Unrealized
gains and losses are excluded from earnings and are reported net of tax as a
seperate component of equity until realized.
Note 3. Inventories
- -------------------
Substantially all of the Registrant's domestic fastener inventories are
priced on the lower of last-in, first-out (LIFO) cost or market method. The
remainder of the inventories are priced on the first-in, first-out (FIFO)
method, at the lower of cost or market.
Inventories are as follows:
March 31, 1995 December 31, 1994
-------------- -----------------
Raw material $3,709,936 $3,584,625
Tooling 4,889,133 4,230,680
Work-in-process 5,823,966 5,099,340
Finished goods 5,376,872 6,212,441
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TOTAL $19,799,907 $19,127,086
========== ==========
If the FIFO method of inventory valuation had been used for all inventories
by Registrant, inventories would have been $7,733,751 and $7,642,430 higher
than reported at March 31, 1995 and December 31, 1994, respectively, and net
income would have been $55,000 and $556,000 higher than reported for the
three months ended March 31, 1995 and 1994 respectively.
<PAGE> 6
PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARY
March 31, 1995
MANAGEMENT'S ANALYSIS OF THE
QUARTERLY INCOME STATEMENT
AND FINANCIAL CONDITION
Quarter Ended: March 31, 1995 vs. December 31, 1994
- ---------------------------------------------------
Consolidated net sales of $35,299,000 for the quarter ended March 31,
1995 were $4,094,000, or approximately 13%, greater than consolidated net
sales of $31,204,000 for the quarter ended December 31, 1994. Sales of the
fastener operation for the first quarter of 1995 increased 13% from
$25,070,000 for the quarter ended December 31, 1994 to $28,302,000 for the
quarter ended March 31, 1995. Motor sales of $6,997,000 for the quarter ended
March 31, 1995 increased approximately 14% from the $6,134,000 recorded in
the previous quarter. PEM International, Ltd., located in Doncaster, England,
saw sales increase from $4,506,000 in the fourth quarter of 1994 to
$6,383,000 in the first quarter of 1995.
Consolidated income before taxes in the quarter ended March 31, 1995 was
$5,000,000 or approximately 12% less than the $5,677,000 reported in the
fourth quarter of 1994. Income before taxes from the fastener operation was
$4,154,000 for the first quarter of 1995 compared to $4,481,000 for the
fourth quarter of 1994. Income before taxes from the motor operation
decreased from $867,000 in the fourth quarter of 1994 to $498,000 in the
first quarter of 1995.
Cash and short-term investments increased from $11,410,000 for the period
ended December 31, 1994 to $15,048,000 for the period ended March 31, 1995.
The additional funds will be used to finance capital expenditures during the
remainder of the year.
Quarter Ended: March 31, 1995 vs. March 31, 1994
- ------------------------------------------------
Consolidated net sales for the quarter ended March 31, 1995 were
approximately 24% or $6,891,000 higher than the consolidated net sales of
$28,408,000 for the quarter ended March 31, 1994. The sales of the fastener
operation increased from $22,196,000 for the quarter ended March 31, 1994 to
$28,302,000 for the quarter ended March 31, 1995. For the same period sales of
the motor operation increased approximately 13% from $6,211,000 in 1994 to
$6,997,000 in 1995.
Consolidated net income before taxes increased approximately 87% from
$2,677,000 for the quarter ended March 31, 1994 to $5,000,000 for the quarter
ended March 31, 1995. For the same periods, income before taxes of the
fastener operation was $4,154,000 in 1995 compared to $2,342,000 in 1994
while income before taxes from the motor operation increased from $282,000
in 1994 to $498,000 in 1995.
PEM International Ltd's income before taxes for the period ended March 31,
1995 was $95,000 higher than the $97,000 attained for the comparable period
in 1994.
<PAGE> 7
PART II OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
Reference is made to Part 1, Item 3 of the Registrant's Form 10-K Annual
Report for the year ended December 31, 1994.
Item 2. Changes in Securities
- -----------------------------
Not Applicable
Item 3. Defaults Upon Senior Securities
- ---------------------------------------
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
Not Applicable
Item 5. Other Information
- -------------------------
None
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits:
None
(b) Reports on Form 8-K
None
<PAGE> 8
SIGNATURE
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.
PENN ENGINEERING & MANUFACTURING CORP.
Dated: May 9, 1995 By: /s/ Kenneth A. Swanstrom
----------------------------
Kenneth A. Swanstrom
Chairman/ CEO/ President
Dated: May 9, 1995 By: /s/ Mark W. Simon
----------------------------
Mark W. Simon
Vice-President - Finance
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 4,291,260
<SECURITIES> 10,756,485
<RECEIVABLES> 21,459,619
<ALLOWANCES> 1,000,000
<INVENTORY> 19,799,907
<CURRENT-ASSETS> 57,437,656
<PP&E> 62,673,675
<DEPRECIATION> 31,835,670
<TOTAL-ASSETS> 88,855,456
<CURRENT-LIABILITIES> 13,336,586
<BONDS> 0
<COMMON> 1,772,025
0
0
<OTHER-SE> 66,954,257
<TOTAL-LIABILITY-AND-EQUITY> 88,855,456
<SALES> 35,298,559
<TOTAL-REVENUES> 35,647,286
<CGS> 24,630,385
<TOTAL-COSTS> 30,446,842
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 200,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,000,444
<INCOME-TAX> 1,977,000
<INCOME-CONTINUING> 3,023,444
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,023,444
<EPS-PRIMARY> 1.77
<EPS-DILUTED> 1.77
</TABLE>
