<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 September 30, 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
- ---------------------------------------------------------------------------
(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 November 9, 1995.
<PAGE> 2
PART I. FINANCIAL INFORMATION
PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, 1995 December 31, 1994
CURRENT ASSETS ------------------ ------------------
Cash and cash equivalents $4,206,691 $6,106,565
Short-term investments (Note 2) 9,140,710 5,303,092
Accounts receivable-trade 21,292,312 20,858,766
Allowance for doubtful accounts (900,000) (800,000)
Inventories (Note 3) 20,816,832 19,127,086
Prepaid expenses 2,369,906 1,106,642
Deferred income taxes 876,726 896,782
---------- ----------
Total current assets 57,803,177 52,598,933
---------- ----------
LONG-TERM INVESTMENTS 615,081 607,959
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PROPERTY
Property, plant & equipment 69,729,532 59,751,674
Less accumulated depreciation 33,762,200 30,831,734
----------- -----------
Property - net 35,967,332 28,919,940
----------- -----------
TOTAL $94,385,590 $82,126,832
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable-trade $4,917,622 $2,750,018
Dividends payable 469,446
Accrued expenses:
Pension & profit sharing 2,458,045 2,735,946
Income taxes 417,825 813,285
Payroll & commissions 4,075,200 2,654,053
Other 503,533 543,789
---------- ----------
Total current liabilities 12,841,671 9,497,091
---------- ----------
ACCRUED PENSION COST 5,749,625 5,369,984
---------- ----------
DEFERRED INCOME TAXES 1,461,733 1,349,923
---------- ----------
STOCKHOLDERS' EQUITY
Common stock 1,772,025 1,772,025
Additional paid-in capital 932,143 932,143
Retained earnings 72,976,350 64,520,461
Unrealized (loss) on
investments -net of tax (63,312) (139,895)
Cumulative foreign currency
translation adjustment (332,688) (222,943)
Treasury stock (951,957) (951,957)
---------- ----------
Total stockholders' equity 74,332,561 65,909,834
---------- ----------
TOTAL $94,385,590 $82,126,832
========== ==========
See Notes to Condensed Consolidated Financial Statements
<PAGE> 3
PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES
STATEMENTS OF CONDENSED CONSOLIDATED INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------------- -------------------------------------
September 30, 1995 September 30, 1994 September 30, 1995 September 30, 1994
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
REVENUES:
Net Sales $34,080,372 $30,836,123 $106,277,130 $90,265,429
Other income 224,530 124,027 843,163 298,150
----------- ----------- ------------ -----------
34,304,902 30,960,150 107,120,293 90,563,579
----------- ----------- ------------ -----------
COSTS AND EXPENSES:
Cost of products sold 23,677,065 20,775,799 73,452,576 62,636,930
Selling, general & administrative 5,442,893 5,512,809 17,792,485 16,477,018
----------- ----------- ------------ -----------
29,119,958 26,288,608 91,245,061 79,113,948
----------- ----------- ------------ -----------
INOME BEFORE INCOME TAXES 5,184,944 4,671,542 15,875,232 11,449,631
PROVISION FOR INCOME TAXES 1,801,000 1,844,000 6,011,000 4,476,000
----------- ----------- ------------ -----------
NET INCOME 3,383,944 2,827,542 9,864,232 6,973,631
RETAINED EARNINGS - BEGINNING 70,061,853 59,975,253 64,520,460 56,682,704
CASH DIVIDEND (469,448) (426,772) (1,408,343) (1,280,312)
----------- ----------- ------------ -----------
RETAINED EARNINGS - ENDING $72,976,349 $62,376,023 $72,976,349 $62,376,023
=========== =========== ============ ===========
NET INCOME PER SHARE $1.98 $1.66 $5.78 $4.09
=========== =========== ============ ===========
AVERAGE SHARES OUTSTANDING 1,707,082 1,707,082 1,707,082 1,707,082
CASH DIVIDEND PER SHARE $.275 $.25 $.825 $.75
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<PAGE> 4
PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES
STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
NINE MONTHS ENDED
-------------------------------------
September 30, 1995 September 30, 1994
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $9,864,232 $6,973,631
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 2,986,400 2,577,522
Loss on disposal of property 17,799 5,252
Loss (gain) on disposal of investments (18,332) 36,065
Changes in assets and liabilities:
(Increase) in receivables (333,546) (5,506,729)
(Increase) decrease in inventories (1,689,746) 2,579,483
(Increase) in prepaid expenses, etc. (1,263,264) (579,996)
(Increase) decrease in deferred
income taxes-current 20,056 (81,318)
Increase in accounts payable 2,167,604 291,603
Increase in accrued expenses 707,530 1,608,960
Increase in accrued pension cost 379,641 763,104
Increase (decrease) in deferred
income taxes - noncurrent 111,810 (62,558)
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Net cash provided by
operating activities 12,950,184 8,605,019
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CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (10,047,993) (2,466,477)
Additions to available-for-sale and
held-to-maturity investments (25,614,933) (5,939,455)
Proceeds from disposal of available-for-
sale and held-to-maturity investments 21,916,164 923,137
Proceeds from disposal of property 1,705 1,198
---------- ----------
Net cash used in investing activities (13,745,057) (7,481,597)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term repayments (401,000)
Dividends paid (938,897) (853,541)
---------- ---------
Net cash used in financing activities (938,897) (1,254,541)
---------- ---------
Effect of exchange rate and investment
reserve changes on cash (166,104) 495,192
----------- ---------
Net increase (decrease) in cash and
cash equivalents (1,899,874) 364,073
Cash and cash equivalents at
beginning of year 6,106,565 2,199,918
----------- ---------
Cash and cash equivalents at end of year $4,206,691 $2,563,991
=========== ==========
SUPPLEMENTAL CASH FLOW DATA:
Cash paid during the year for:
Income taxes $6,329,247 $4,023,160
Interest 9,433 58,457
See Notes to Condensed Consolidated Financial Statements
<PAGE> 5
PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 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 September 30, 1995 and 1994 and the consolidated
results of operations and changes in the financial position for the
nine-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:
September 30, 1995 December 31, 1994
------------------ -----------------
Raw material $4,561,589 $3,584,625
Tooling 5,291,677 4,230,680
Work-in-process 6,073,158 5,099,340
Finished goods 4,890,408 6,212,441
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TOTAL $20,816,832 $19,127,086
========== ==========
If the FIFO method of inventory valuation had been used for all inventories
by Registrant, inventories would have been $8,537,957 and $7,642,430 higher
than reported at September 30, 1995 and December 31, 1994, respectively, and
net income would have been $556,000 and $284,000 higher than reported for the
nine months ended September 30, 1995 and 1994 respectively.
<PAGE> 6
PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES
September 30, 1995
MANAGEMENT'S ANALYSIS OF THE
QUARTERLY INCOME STATEMENT
AND FINANCIAL CONDITION
Quarter Ended: September 30, 1995 vs. June 30, 1995
- ---------------------------------------------------
Consolidated net sales of $34,080,000 for the quarter ended September 30,
1995 were $2,818,000, or approximately 8%, less than consolidated net
sales of $36,898,000 for the quarter ended June 30, 1995. Sales of the
fastener operation for the third quarter of 1995 were $27,051,000
compared to $29,342,000 for the second quarter of 1995, a decrease of
approximately 8%. Motor sales were $7,029,000 for the third quarter of 1995,
approximately 7% less than $7,556,000 recorded in the previous quarter.
PEM International, Ltd., located in Doncaster, England, saw sales decrease
from $6,123,000 in the second quarter of 1995 to $5,332,000 in the third
quarter of 1995, a decrease of approximately 13%.
Consolidated income before taxes in the quarter ended September 30, 1995
was $5,185,000 or approximately 9% less than $5,690,000 reported in the
second quarter of 1995. The fastener operation's income before taxes for the
third quarter of 1995 was $4,328,000 or approximately 7% less than the
$4,652,000 recorded in the second quarter of 1995. The motor operation's
income before taxes decreased from $768,000 in the second quarter of 1995 to
$632,000 in the third quarter of 1995.
Cash and short-term investments decreased slightly from $13,518,000 for
the period ended June 30, 1995 to $13,347,000 for the period ended September
30, 1995 as the Company continued to finance the higher capital expenditures
necessary to support the increased level of business.
Quarter Ended: September 30, 1995 vs. September 30, 1994
- --------------------------------------------------------
Consolidated net sales for the quarter ended September 30, 1995 were
approximately 11% or $3,244,000 higher than the consolidated net sales of
$30,836,000 for the quarter ended September 30, 1994. The sales of the
fastener operation increased from $24,463,000 for the quarter ended September
30, 1994 to $27,051,000 for the quarter ended September 30, 1995. For the
same period sales of the motor operation increased approximately 10% from
$6,373,000 in 1994 to $7,029,000 in 1995.
Consolidated net income before taxes increased approximately 11% from
$4,672,000 for the quarter ended September 30, 1994 to $5,185,000 for the
quarter ended September 30, 1995. For the same periods, income before taxes
of the fastener operation was $4,328,000 in 1995 compared to $3,962,000 in
1994 while income before taxes from the motor operation increased from
$585,000 in 1994 to $632,000 in 1995.
<PAGE> 7
PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES
September 30, 1995
MANAGEMENT'S ANALYSIS OF THE
QUARTERLY INCOME STATEMENT
AND FINANCIAL CONDITION
Nine Months Ended: September 30, 1995 vs. September 30, 1994
- ------------------------------------------------------------
Consolidated net sales of $106,277,000 for the nine months ended
September 30, 1995 were approximately 18% higher than consolidated net sales
of $90,265,000 for the nine months ended September 30, 1994.
Consolidated net income before taxes of $15,875,000 for the nine months
ended September 30, 1995 was $4,426,000 or approximately 39% higher than the
consolidated net income before taxes of $11,450,000 as of September 30, 1994.
For the same periods, income before taxes for the fastener operation increased
from $9,653,000 in 1994 to $13,134,000 in 1995. The motor operation's income
before taxes for nine months ended September 30 increased from $1,498,000 in
1994 to $1,898,000 in 1995.
PEM International Ltd. produced income before taxes of $465,000 for the
nine months ended September 30, 1995 compared to $31,000 for the similar
period in 1994.
<PAGE> 8
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: November 13, 1995 By: /s/ Kenneth A. Swanstrom
----------------------------
Kenneth A. Swanstrom
Chairman/ CEO/ President
Dated: November 13, 1995 By: /s/ Mark W. Simon
----------------------------
Mark W. Simon
Vice-President - Finance
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 4,206,691
<SECURITIES> 9,140,710
<RECEIVABLES> 21,292,312
<ALLOWANCES> 900,000
<INVENTORY> 20,816,832
<CURRENT-ASSETS> 57,803,177
<PP&E> 69,729,532
<DEPRECIATION> 33,762,200
<TOTAL-ASSETS> 94,385,590
<CURRENT-LIABILITIES> 12,841,671
<BONDS> 0
<COMMON> 1,772,025
0
0
<OTHER-SE> 72,560,536
<TOTAL-LIABILITY-AND-EQUITY> 94,385,590
<SALES> 106,277,130
<TOTAL-REVENUES> 107,120,293
<CGS> 73,452,576
<TOTAL-COSTS> 91,145,061
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 100,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 15,875,232
<INCOME-TAX> 6,011,000
<INCOME-CONTINUING> 9,864,232
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,864,232
<EPS-PRIMARY> 5.78
<EPS-DILUTED> 5.78
</TABLE>
