<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1999
Commission file Number 1-5356
PENN ENGINERRING & 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)
Registrant's telephone number, including area code:
(215) 766-8853
Indicate by check mark whether the registrant(1) has filed
all 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 latest practical
date: 1,675,082 shares of Class A common stock, $.01 par value, and
6,984,754 shares of common stock, $.01 par value, outstanding on
November 12, 1999.
<PAGE> 2
<TABLE>
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
PENN ENGINEERING & MANUFACTURING CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
(Dollars in thousands)
ASSETS
(Unaudited)
September 30, 1999 December 31, 1998
------------------ -----------------
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 4,150 $13,103
Short-term investments 10,775 10,584
Accounts receivable-net 39,391 28,963
Inventories 45,334 31,840
Prepaid expenses 2,856 2,474
------ ------
Total current assets 102,506 86,964
------- -------
PROPERTY
Property, plant & equipment 139,042 126,773
Less accumulated depreciation 58,646 52,769
------- -------
Property - net 80,396 74,004
------- -------
GOODWILL 21,570 0
------- -------
OTHER ASSETS 3,400 3,200
------- -------
TOTAL $207,872 $164,168
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts and notes payable $11,013 $5,460
Dividends payable 1,038 0
Accrued expenses:
Pension & profit sharing 3,406 1,155
Payroll & commissions 6,132 3,237
Other 3,763 3,455
------ ------
Total current liabilities 25,352 13,307
------ ------
ACCRUED PENSION COST 6,263 4,088
------ ------
LONG-TERM DEBT 20,000 0
------ ------
DEFERRED INCOME TAXES 4,544 4,721
------ ------
STOCKHOLDERS' EQUITY
Class A common stock 18 18
Common stock 72 72
Additional paid-in capital 36,774 36,530
Retained earnings 119,063 109,384
Accumulated other comprehensive
income (1,228) (966)
Treasury stock (2,986) (2,986)
------- -------
Total stockholders' equity 151,713 142,052
------- -------
TOTAL $207,872 $164,168
======= =======
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE> 3
<TABLE>
PENN ENGINEERING & MANUFACTURING CORP.
STATEMENTS OF CONDENSED CONSOLIDATED INCOME
(Unaudited)
<CAPTION>
(Dollars in thousands except per share amounts)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------------- -------------------------------------
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
NET SALES $48,378 $43,357 $141,415 $135,077
COST OF PRODUCTS SOLD 32,822 30,066 96,402 93,254
------ ------ ------- -------
GROSS PROFIT 15,556 13,291 45,013 41,823
------ ------ ------- -------
OTHER EXPENSES:
Selling expenses 5,005 4,280 14,786 13,919
General & administrative expenses 3,826 3,716 11,501 10,342
------ ------ ------- -------
8,831 7,996 26,287 24,261
------ ------ ------- -------
OPERATING PROFIT 6,725 5,295 18,726 17,562
OTHER INCOME - NET 0 581 523 1,092
------ ------ ------- -------
INCOME BEFORE INCOME TAXES 6,725 5,876 19,249 18,654
PROVISION FOR INCOME TAXES 2,256 1,995 6,458 6,625
------ ------ ------- -------
NET INCOME $4,469 $3,881 $12,791 $12,029
===== ===== ====== ======
PER SHARE DATA:
Basic earnings $0.52 $0.45 $1.48 $1.39
==== ==== ==== =====
Diluted earnings $0.51 $0.45 $1.48 $1.39
==== ==== ==== =====
Cash dividends declared $0.12 $0.11 $0.36 $0.33
==== ==== ==== =====
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE> 4
<TABLE>
PENN ENGINEERING & MANUFACTURING CORP.
STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
(Unaudited)
<CAPTION>
(Dollars in thousands)
NINE MONTHS ENDED
-------------------------------------
September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $12,791 $12,029
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 6,315 5,905
Gain on disposal of property (96) (47)
Loss on disposal of investments 55 4
Changes in assets and liabilities:
Increase in receivables (4,813) (1,168)
Increase in inventories (3,246) (4,412)
Increase in prepaid expenses (337) (313)
Increase in other assets (200) (68)
Increase (decrease) in accounts payable 568 (670)
Increase in accrued expenses 4,757 5,310
Increase in accrued pension cost 2,175 1,121
(Decrease) increase in deferred income taxes (178) 23
------ ------
Net cash provided by operating
activities 17,791 17,714
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (9,578) (5,712)
Acquisition of businesses (net of cash) (37,415) 0
Additions to held-to-maturity
investments (14,292) (18,391)
Proceeds from disposal of available-
for-sale investments 0 101
Proceeds from disposal of held-to-
maturity investments 14,008 13,063
Proceeds from disposal of property 341 221
------ ------
Net cash used in investing activities (46,936) (10,688)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings 2,000 0
Borrowings of long-term debt 20,000 0
Dividends paid (2,074) (1,900)
Issuance of common stock 245 195
Acquisition of treasury stock 0 (668)
------ ------
Net cash provided by (used in)
financing activities 20,171 (2,373)
------ ------
Effect of exchange rate changes on cash 21 171
------ ------
Net (decrease) increase in cash and
cash equivalents (8,953) 4,824
Cash and cash equivalents at
beginning of year 13,103 6,826
------ ------
Cash and cash equivalents at end of
period $4,150 $11,650
====== ======
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE> 5
PENN ENGINEERING & MANUFACTURING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
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 for the year ended December 31, 1998. The information
contained in this report is unaudited and subject to year-end audit and
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 the Company's consolidated financial position at September 30,
1999 and 1998 and the consolidated statements of income and cash flows for the
nine-month periods then ended. The results of operations for the nine months
ended September 30, 1999 are not necessarily indicative of the results of
operations to be expected for the year ending December 31, 1999.
Note 2. Inventories
- -------------------
Substantially all of the Company'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: (Dollars in thousands)
(Unaudited)
September 30, 1999 December 31, 1998
------------------ -----------------
Raw material $4,681 $4,572
Tooling 3,685 3,435
Work-in-process 12,107 10,533
Finished goods 24,861 13,300
------ ------
TOTAL $45,334 $31,840
====== ======
If the FIFO method of inventory valuation had been used by the Company for
all inventories, inventories would have been $9,346,000 and $9,046,000 higher
than reported at September 30, 1999 and December 31, 1998, respectively, and
net income would have been $199,000 and $194,000 higher than reported for the
nine months ended Septembre 30, 1999 and 1998, respectively. Included in other
assets is long-term tooling inventory totaling $3,400,000 and $3,200,000 at
September 30, 1999 and December 31, 1998, respectively.
Note 3. Lines of Credit
- -----------------------
As of September 30, 1999, the Company has three unsecured line-of-credit
facilities available. All lines-of-credit bear interest at interest rate
options provided in the facilities. The first line-of-credit facility permits
maximum borrowings of $15,000,000, due on demand. At September 30, 1999,
$2,000,000, bearing interest at 5.85%, was outstanding on this facility and is
included in accounts and notes payable in the accompanying condensed consoli-
dated balance sheet. The availability of funds under this facility is
periodically reviewed by the bank. The second line-of-credit facility permits
borrowings up to $10,000,000 and expires on September 27, 2000 unless extended
by the bank. There were no amounts outstanding under the $10,000,000 line-of-
credit facility at September 30, 1999. The third line-of-credit facility
permits borrowings of up to $30,000,000 to finance acquisitions. At September
30, 1999, $20,000,000, bearing interest at 5.90%, was outstanding on this
facility. The Company has a choice of a three year revolving term for the
acquisition line-of-credit or, on September 27, 2000, the acquisition line-of-
credit can be terminated and transferred to a term loan to be repaid over
periods ranging from three to seven years. The acquisition line-of-credit
requires the Company to comply with certain financial covenants.
<PAGE>6
PENN ENGINEERING & MANUFACTURING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
Note 4. Comprehensive Income
- ----------------------------
Total comprehensive income amounted to $12,529,000 and $12,800,000 for the
nine months ended September 30, 1999 and 1998, respectively.
Note 5. Use of Estimates
- ------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Note 6. Acquisition
- -------------------
On September 30, 1999, the Company acquired all of the issued and out-
standing capital stock of R.C. Dudek & Company, Inc. The acquisition will be
accounted for using the purchase method. The purchase price of approximately
$38.9 million consisted of cash, the assumption of certain liabilities, and
acquisition related expenses. Of the total amount paid, $3.4 million has been
placed in escrow pending the final determination of the purchase price. The
purchase was partly financed with the assumption of $2,000,000 in short-term
debt and $20,000,000 in long-term debt. The purchase price has been prelimin-
arily allocated to; accounts receivable - $5,434,000, inventory - $9,882,000,
property - $2,450,000 and goodwill and other intangible assets - $21,110,000.
Goodwill and other intangible assets will be amortized using the straight-line
method over a period of 20 years.
The pro forma unaudited results of operations for the nine months ended
September 30, 1999 and 1998, assuming consummation of the purchase and
issuance of the debt as of January 1, 1998 are as follows:
NINE MONTHS ENDED
-----------------
September 30, 1999 September 30, 1998
------------------ ------------------
(Dollars in thousands except per share amounts)
Net sales $150,956 $141,926
Net income $ 13,039 $ 12,539
Per share data:
Basic earnings $1.51 $1.45
Diluted earnings $1.51 $1.45
Note 7. Segment Information
- ---------------------------
(Dollars in thousands)
THREE MONTHS ENDED THREE MONTHS ENDED
September 30, 1999 September 30, 1998
------------------ ------------------
Fasteners Motors Fasteners Motors
--------- ------ --------- ------
Revenues from external customers $38,995 $9,383 $35,988 $7,369
Operating profit 5,946 779 4,834 461
NINE MONTHS ENDED NINE MONTHS ENDED
September 30, 1999 September 30, 1998
------------------ ------------------
Fasteners Motors Fasteners Motors
--------- ------ --------- ------
Revenues from external customers $115,535 $25,880 $110,447 $24,630
Operating profit 16,553 2,173 15,792 1,770
Segment assets 191,792 16,080 152,237 14,994
<PAGE 7>
PENN ENGINEERING & MANUFACTURING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
Note 8. Earnings Per Share Data
- -------------------------------
The following table sets forth the computation of basic and diluted earnings
per share for the periods indicated.
THREE MONTHS ENDED NINE MONTHS ENDED
September 30 September 30
------------- ------------
1999 1998 1999 1998
---- ---- ---- ----
(In thousands, except per share data)
Basic:
Net income $4,469 $3,881 $12,791 $12,029
Average shares outstanding 8,647 8,628 8,643 8,635
----- ----- ----- -----
Basic EPS $0.52 $0.45 $1.48 $1.39
===== ===== ===== =====
Diluted:
Net income $4,469 $3,881 $12,791 $12,029
===== ===== ====== ======
Average shares outstanding 8,647 8,628 8,643 8,635
Net effect of dilutive stock
options - based on treasury
stock method 33 18 16 29
----- ----- ----- -----
Totals 8,680 8,646 8,659 8,664
===== ===== ===== =====
Diluted EPS $0.51 $0.45 $1.48 $1.39
===== ===== ===== =====
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PENN ENGINEERING & MANUFACTURING CORP.
September 30, 1999
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Quarter Ended September 30, 1999 vs. Quarter Ended September 30, 1998
- ---------------------------------------------------------------------
Consolidated net sales for the quarter ended September 30, 1999 were $48.4
million, versus $43.4 million for the quarter ended September 30, 1998, an
11.5% increase. Net sales to customers outside the United States for the
quarter ended September 30, 1999 were $15.0 million, versus $14.7 million for
the quarter ended September 30, 1998, a 2.0% increase. Net sales for the
fastener operation for the quarter ended September 30, 1999 were $39.0
million, versus $36.0 million for the quarter ended September 30, 1998, an
8.3% increase. Motor net sales were $9.4 million for the quarter ended
September 30, 1999, versus $7.4 million recorded for the quarter ended
September 30, 1998, a 27.0% increase.
The number of fastener units sold to independent customers increased
approximately 11.8% in the third quarter of 1999 compared to the third
quarter of 1998. The number of fastener units sold within North America
increased approximately 15.3% in the third quarter of 1999 compared to the
third quarter of 1998, and represented approximately 68.2% of total fasteners
sold in the third quarter of 1999. This increase is attributable to record
point-of-sale shipments for the quarter due to several new programs involving
high-volume, high-price products. The number of fastener units sold
into Europe increased approximately 8.5% in the third quarter of 1999
compared to the third quarter of 1998 and represented approximately 24.6% of
total fasteners sold in the third quarter of 1999. The number of fastener
units sold into the Asia-Pacific region decreased approximately 5.5% in the
third quarter of 1999 compared to the third quarter of 1998, mainly as a
result of the shifting of assembly operations by major computer manufacturers
from this region and a general slowdown due to excess inventory levels caused
by Y2K concerns. The average selling price for fasteners shipped in the third
quarter of 1999 was $63.49 per thousand fasteners sold compared to $60.76 per
thousand fasteners sold in the third quarter of 1998, an increase of 4.5%. The
number of motors sold increased 27.3% in the third quarter of 1999 compared to
the third quarter of 1998 while the average selling price remained the same.
This increase can be attributable to a large sale to one customer as well as
lower than normal sales in the third quarter of 1998.
Consolidated gross profit for the third quarter of 1999 was $15.6 million,
versus $13.3 million for the third quarter of 1998, a 17.3% increase. Fastener
gross profit increased 12.8% in the third quarter of 1999 compared to the
third quarter of 1998 while motor gross profit increased 43.8% mainly due to
the increased sales and a reduction of fixed expenses.
Consolidated selling, general, and administrative expenses ("SG&A") for the
third quarter of 1999 were $8.8 million, versus $8.0 million for the third
quarter of 1998, an 10.0% increase. This increase was mainly caused by
increased technology related expenses, including Year 2000 related expenses,
start-up costs related to acquisition efforts, and increased outside
professional service expenses.
Consolidated net income for the third quarter of 1999 was $4.5 million,
versus $3.9 million for the third quarter of 1998. Other income was negatively
impacted in the third quarter of 1999 by foreign currency translation losses
in the United Kingdom.
<PAGE> 9
PENN ENGINEERING & MANUFACTURING CORP.
September 30, 1999
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Nine Months Ended September 30, 1999 vs. Nine Months Ended September 30, 1998
- -----------------------------------------------------------------------------
Consolidated net sales for the nine months ended September 30, 1999 were
$141.4 million, versus $135.1 million for the nine months ended September 30,
1998, a 4.7% increase. Net sales to customers outside the United States for
the nine months ended September 30, 1999 were $45.8 million, versus $40.5
million for the nine months ended September 30, 1998, a 13.1% increase. Net
sales for the fastener operation for the nine months ended September 30, 1999
were $115.5 million, versus $110.4 million for the nine months ended September
30, 1998, a 4.6% increase. Motor sales were $25.9 million for the nine months
ended September 30, 1999, versus $24.6 million for the nine months ended
September 30, 1998, a 5.3% increase.
The number of fastener units sold to independent customers increased
approximately 7.5% in the first nine months of 1999 compared to the first
nine months of 1998. The number of fastener units sold within North America
increased approximately 3.0% in the first nine months of 1999 compared to the
first nine months of 1998, and represented approximately 66.1% of total
fasteners shipped in the first nine months of 1999. The number of fastener
units sold into Europe increased approximately 6.2% in the first nine months
of 1999 compared to the first nine months of 1998 and represented
approximately 25.1% of total fasteners sold in the first nine months of 1999.
The European economy remains strong despite currency pressures while domestic
point-of-sale increases in the third quarter have contributed to the growth
in North America. The number of fastener units sold into the Asia-Pacific
region increased approximately 67.0% from the first nine months of 1998 to the
first nine months of 1999 due mainly to low assembly costs in this region
during the first half of 1999. The average selling price of fasteners shipped
in the first nine months of 1999 increased approximately 1.3% from $62.07 per
thousand fasteners sold in the first nine months of 1998 to $62.85 per
thousand fasteners sold in the first nine months of 1999. The number of motors
sold increased 8.3% in the first nine months of 1999 compared to the first
nine months of 1998; however, the average selling price decreased 9.5% from
$44.65 per motor in the first nine months of 1998 to $40.43 per motor in the
first nine months of 1999.
Consolidated gross profit for the first nine months of 1999 was $45.0
million, versus $41.8 million for the first nine months of 1998, a 7.7%
increase. Fastener gross profit increased 6.3% in the first nine months of
1999 compared to the first nine months of 1998 while motor gross profit
increased 15.2% during the same period. Gross profit increases were the direct
result of increased sales, cost containment, and productivity improvements.
Consolidated SG&A expenses for the first nine months of 1999 were $26.3
million, versus $24.3 million for the first nine months of 1998, an 8.2%
increase. This increase was expected due to continued Year 2000 compliance and
testing costs as well as costs related to acquisition activity.
Consolidated net income for the first nine months of 1999 was $12.8 million,
versus $12.0 million for the first nine months of 1998. The Company benefited
from a lower effective tax rate as a result of increased foreign sales
activity.
<PAGE> 10
PENN ENGINEERING & MANUFACTURING CORP.
September 30, 1999
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Liquidity and Capital Resources
- -------------------------------
Net cash provided by operations totaled $17.8 million for the nine months
ended September 30, 1999. Funds from operations were sufficient to pay normal
dividends and for capital expenditures other than the acquisition of R.C.
Dudek & Company, Inc. which was partially funded through $22.0 million of
borrowings. Capital expenditures totalled $9.6 million during the first nine
months of 1999 and included approximately $3.5 million for an additional
50,000 square feet of manufacturing space near the Company's Danboro, PA.
Headquarters. The Company anticipates that its existing capital resources and
cash flow generated from future operations as well as existing short-term
lines of credit will enable it to maintain its current level of operations and
its planned growth for the foreseeable future.
Year 2000 Issues
- ----------------
As is more fully described in the Company's annual report on Form 10-K for
the fiscal year ended December 31, 1998, the Company is modifying or replacing
significant portions of its software as well as certain hardware to enable
continued operations beyond December 31, 1999. As of September 30, 1999 the
Company has completed its Year 2000 review, documentation, remediation, and
testing for the following: Winston-Salem operation, Suffolk operation, Motor
operation, IT systems, all facilities, PEM Singapore, and PEM Doncaster. The
Company estimates its progress toward completion of its remaining Year 2000
compliance plan as indicated in the following table:
<TABLE>
<CAPTION>
Danboro R.C. Dudek
Operation Operation
--------- ---------
<S> <C> <C>
Review & Assessment 100% 100%
Document Unknown Status Items 100% 100%
Remediation - Known Non-Compliance Testing 99% 70%
Testing 99% 90%
Expected Completion Date 11/30/99 11/30/99
</TABLE>
Testing for Winston-Salem, Suffolk, Singapore, and Doncaster are conducted
at Danboro.
We are also in the process of continually surveying our business partners
concerning their Y2K readiness. We expect this to be an on-going process
through the end of the year. Y2K is not applicable to our self-clinching
fastener products, our PEMSERTER insertion machines, or our Pittman division
motors.
Total Y2K expenditures are expected to approximate $1.0 million, of which
approximately 98% has been spent to date. The balance is expected to be spent
during the remainder of 1999. These costs represent estimates based on
internal and external efforts to identify Y2K issues critical to the produc-
tion and delivery of the Company's products. Actual results could differ from
those anticipated.
The Company's plans to complete Y2K modifications are based on management's
estimates, which are based on numerous assumptions about future events,
including the continued availability of certain resources and other factors.
Estimates on the status of completion and expected completion dates are based
on the level of effort expended to date to total expected internal staff
effort. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those plans. Specific
factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes, and similiar
uncertainties.
The information above contains forward-looking statements, including, with-
out limitation, statements relating to the Company's plans, strategies, ob-
jectives, expectations, intentions, and adequate resources that are made
pursuant to the "safe harbor" provisions of the "Private Securities Litigation
Reform Act of 1995". Readers are cautioned that forward-looking statements
about Y2K should be read in conjunction with the Company's disclosure under
the heading "Forward Looking Statements".
<PAGE> 11
PENN ENGINEERING & MANUFACTURING CORP.
September 30, 1999
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Forward-Looking Statements
- --------------------------
Forward-looking statements are made throughout this Mnagement's Discussion
and Analysis. The Company's results may differ from those in the forward-
looking statements. Forward-looking statements are based on management's
current views and assumptions, and involve risks and uncertainties that
significantly affect expected results. For example, operating results may be
affected by external factors such as: changes in laws and regulations, changes
in accounting standards, fluctuations in the cost and availability of the
supply chain resources, and foreign economic conditions, including currency
rate fluctuations.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
- -----------------------------------------------------------------
There have been no material changes to Part 2, Item 7A of the Company's Form
10-K Annual Report for the year ended December 31, 1998.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
Reference is made to Part 1, Item 3 of the Company's Form 10-K Annual Report
for the year ended December 31, 1998.
Item 2. Changes in Securities
- -----------------------------
Not Applicable.
Item 3. Default upon Senior Securities
- --------------------------------------
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
Not Applicable
Item 5. Other Information
- -------------------------
Not Applicable
<PAGE> 12
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
a). Exhibits
Exhibit No. Description
----------- -----------
2.1 Stock Purchase Agreement among Penn Engineering &
Manufacturing Corp. and Harriet Dudek, now known as Harriet
Serven, Trustee of Trust B under Will of Richard C. Dudek,
Deceased, Victor E. Carlson, Sara E. Carlson, John S.
Perell, Elizabeth C. Perell and Martha Gail Anderson dated
September 16, 1999 (Incorporated by reference to like-
numbered exhibit of the Company's Form 8-K report dated
September 30, 1999.)
2.2 Agreement of Sale for 800 Del Norte Boulevard, Oxnard,
California, dated as of September 30, 1999 between Victor
E. Carlson, Sara E. Carlson, John S. Perell, Elizabeth C.
Perell, Harriet Dudek, now known as Harriet Serven, Trustee
Under Will of Richard C. Dudek, Deceased, as Seller, and
Penn Engineering & Manufacturing Corp., as Buyer (Incorpo-
rated by reference to like-numbered exhibit of the Company's
Form 8-K report dated September 30, 1999.)
3.1 Restated Certificate of Incorporation (Incorporated by
reference to Exhibit 3.1 of the Company's Form 10-Q
Quarterly Report for the period ended June 30, 1996.)
3.2 By-laws, as amended (Incorporated by reference to Exhibit
3(ii) of the Company's Form 10-K Annual Report for the
fiscal year ended December 31, 1994.)
10.4 Loan Agreement dated as of September 28, 1999 between Penn
Engineering & Manufacturing Corp. and First Union National
Bank (Incorporated by reference to like-numbered exhibit
of the Company's Form 8-K report dated September 30, 1999.)
27 Financial Statement Data Schedule
b). Reports on Form 8-K
The Company filed a Form 8-K dated September 30, 1999 to report under
Item 2 that it had acquired all of the issued and outstanding capital
stock of R.C. Dudek & Company, Inc. in consideration for the payment of
cash of $33,052,000 (net of cash acquired) and the assumption of
$3,541,000 of liabilities. The Company also acquired certain real
property owned by the shareholders of R.C. Dudek used in the operation
of the business, for cash of $2,200,000.
<PAGE> 13
SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
PENN ENGINEERING & MANUFACTURING CORP.
Dated: November 12, 1999 By: /s/ Kenneth A. Swanstrom
-----------------------------
Kenneth A. Swanstrom
Chairman/CEO
Dated: November 12, 1999 By: /s/ Mark W. Simon
-----------------------------
Mark W. Simon
Vice-President - Finance
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Sep-30-1999
<CASH> 4,150
<SECURITIES> 10,775
<RECEIVABLES> 40,001
<ALLOWANCES> 610
<INVENTORY> 45,334
<CURRENT-ASSETS> 102,506
<PP&E> 139,042
<DEPRECIATION> 58,646
<TOTAL-ASSETS> 207,872
<CURRENT-LIABILITIES> 25,352
<BONDS> 20,000
<COMMON> 90
0
0
<OTHER-SE> 151,623
<TOTAL-LIABILITY-AND-EQUITY> 207,872
<SALES> 141,415
<TOTAL-REVENUES> 141,938
<CGS> 96,402
<TOTAL-COSTS> 122,689
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 19,249
<INCOME-TAX> 6,458
<INCOME-CONTINUING> 12,791
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,791
<EPS-BASIC> 1.48
<EPS-DILUTED> 1.48
</TABLE>
