-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HrHzQ4smhaqlSLinDytZU7qVVrR/kxOJ0MiAyaexrnyxH06vxE5fVKzDXbbX4OYv zL07Gl4fFnftl3eRX1cF7A== 0000077106-96-000002.txt : 19960517 0000077106-96-000002.hdr.sgml : 19960517 ACCESSION NUMBER: 0000077106-96-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENN ENGINEERING & MANUFACTURING CORP CENTRAL INDEX KEY: 0000077106 STANDARD INDUSTRIAL CLASSIFICATION: BOLTS, NUTS, SCREWS, RIVETS & WASHERS [3452] IRS NUMBER: 230951065 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05356 FILM NUMBER: 96566952 BUSINESS ADDRESS: STREET 1: PO BOX 1000 CITY: DANBORO STATE: PA ZIP: 18916 BUSINESS PHONE: 2157668853 MAIL ADDRESS: STREET 1: P O BOX 1000 CITY: DANBORO STATE: PA ZIP: 18916 10-Q 1 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, 1996 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 - --------------------------------------------------------------------------- (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 May 5, 1996. 2 PART I. FINANCIAL INFORMATION PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS (Unaudited) March 31, 1996 December 31, 1995 CURRENT ASSETS -------------- ------------------ Cash and cash equivalents $3,402,245 $1,459,370 Short-term investments 5,606,434 5,987,981 Accounts receivable-trade 23,054,087 21,744,900 Allowance for doubtful accounts (900,000) (900,000) Inventories (Note 2) 25,145,904 20,274,571 Prepaid expenses 3,261,661 2,556,893 Deferred income taxes 961,031 958,888 ---------- ---------- Total current assets 60,531,362 52,082,603 ---------- ---------- PROPERTY Property, plant & equipment 83,080,434 76,837,686 Less accumulated depreciation 35,852,266 34,896,199 ----------- ----------- Property - net 47,228,168 41,941,487 ----------- ----------- OTHER ASSETS 2,186,000 2,050,000 ----------- ----------- TOTAL $109,945,530 $96,074,090 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $11,000,000 $1,500,000 Accounts payable-trade 5,537,673 4,302,773 Dividends payable 469,447 Accrued expenses: Pension & profit sharing 1,586,554 3,983,621 Income taxes 1,772,866 468,268 Payroll & commissions 3,512,480 2,426,097 Other 700,474 521,559 ---------- ---------- Total current liabilities 24,579,494 13,202,318 ---------- ---------- ACCRUED PENSION COST 4,714,701 4,714,701 ---------- ---------- DEFERRED INCOME TAXES 2,284,058 2,066,179 ---------- ---------- STOCKHOLDERS' EQUITY (See Note 3) Common stock 1,772,025 1,772,025 Additional paid-in capital 932,143 932,143 Retained earnings 77,304,324 74,904,584 Unrealized (loss) on investments -net of tax (63,655) (60,303) Cumulative foreign currency translation adjustment (625,603) (505,600) Treasury stock (951,957) (951,957) ---------- ---------- Total stockholders' equity 78,367,277 76,090,892 ---------- ---------- TOTAL $109,945,530 $96,074,090 =========== ========== See Notes to Condensed Consolidated Financial Statements 3 PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES STATEMENTS OF CONDENSED CONSOLIDATED INCOME AND RETAINED EARNINGS THREE MONTHS ENDED ------------------------------- (Unaudited) March 31, 1996 March 31, 1995 -------------- -------------- REVENUES: Net Sales $39,028,866 $35,298,559 Other income 135,712 348,727 ----------- ----------- 39,164,578 35,647,286 ----------- ----------- COSTS AND EXPENSES Cost of products sold 27,477,361 24,630,385 Selling, general & administrative 7,113,030 6,016,457 ----------- ----------- 34,590,391 30,646,842 ----------- ----------- INOME BEFORE INCOME TAXES 4,574,187 5,000,444 PROVISION FOR INCOME TAXES 1,705,000 1,977,000 ----------- ----------- NET INCOME 2,869,187 3,023,444 RETAINED EARNINGS - BEGINNING 74,904,584 64,520,460 CASH DIVIDEND (469,447) (469,447) ----------- ----------- RETAINED EARNINGS - ENDING $77,304,324 $67,074,457 =========== =========== INCOME PER SHARE-Historical Weighted average number of shares of common stock outstanding 1,707,082 1,707,082 Net income $1.68 $1.77 ========= ========= INCOME PER SHARE-As adjusted for stock dividend Weighted average number of shares of common stock outstanding 6,828,328 6,828,328 Net income $0.42 $0.44 ========= ========= CASH DIVIDEND PER SHARE Historical $0.275 $0.275 ========= ========= As adjusted for stock dividend $0.069 $0.069 ========= ========= See Notes to Condensed Consolidated Financial Statements 4 PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS THREE MONTHS ENDED ----------------------------- (Unaudited) March 31, 1996 March 31, 1995 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $2,869,187 $3,023,444 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,181,301 1,030,029 Loss on disposal of property 27,296 2,206 Changes in assets and liabilities: (Increase) in receivables (1,309,187) (400,853) (Increase) in inventories (4,871,333) (672,821) (Increase) in prepaid expenses, etc. (704,768) (78,072) (Increase) in deferred income taxes-current (2,143) (48,889) (Increase) in other assets (136,000) (232,000) Increase in accounts payable 1,234,900 1,187,843 Increase in accrued expenses 172,829 2,182,204 Increase in accrued pension cost 0 126,547 Increase(decrease) in deferred income taxes - noncurrent 217,879 (53,866) ---------- ---------- Net cash provided (used) in operating activities (1,320,039) 6,297,772 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Property additions (6,517,784) (2,932,551) Additions to available-for-sale and held-to-maturity investments (828,948) (7,353,526) Proceeds from disposal of available-for- sale and held-to-maturity investments 1,205,000 1,998,574 Proceeds from disposal of property 7,125 55 ---------- ---------- Net cash used in investing activities (6,134,607) (8,287,448) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Net short-term borrowings 17,000,000 Net short-term repayments (7,500,000) ---------- Net cash provided by financing activities 9,500,000 ---------- Effect of exchange rate and investment reserve changes on cash (102,479) 174,371 ----------- --------- Net increase (decrease) in cash and cash equivalents 1,942,875 (1,815,305) Cash and cash equivalents at beginning of period 1,459,370 6,106,565 ----------- --------- Cash and cash equivalents at end of period $3,402,245 $4,291,260 =========== ========== SUPPLEMENTAL CASH FLOW DATA: Cash paid during the quarter for: Income taxes $180,850 $321,715 Interest 12,832 0 See Notes to Condensed Consolidated Financial Statements 5 PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 1996 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 Registrant's Annual Report. 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 Registrant's consolidated financial position at March 31, 1996 and 1995 and the consolidated statements of income and cash flow for the three-month periods then ended. The results of operations for the three months ended March 31, 1996 are not necessarily indicative of the results of operations to be expected for the year ending December 31, 1996. Note 2. 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: (Unaudited) March 31, 1996 December 31, 1995 -------------- ----------------- Raw material $4,806,178 $4,569,522 Tooling 3,850,530 3,610,307 Work-in-process 7,970,213 6,511,667 Finished goods 8,518,983 5,583,075 ---------- --------- TOTAL $25,145,904 $20,274,571 ========== ========== If the FIFO method of inventory valuation had been used for all inventories by Registrant, inventories would have been $8,334,201 and $8,027,875 higher than reported at March 31, 1996 and December 31, 1995, respectively, and net income would have been $192,000 and $55,000 higher than reported for the three months ended March 31, 1996 and 1995 respectively. Included in other assets is long-term tooling inventory totaling $2,186,000 and $2,050,000 at March 31, 1996 and December 31, 1995, respectively. Note 3. Reclassification - ------------------------ On April 17, 1996, the Board of Directors authorized a reclassification of the Company's existing common stock whereby each share of existing $1.00 par value voting common stock will be exchanged for one share of new $.01 par value Class A voting common stock (the "Stock Reclassification"). Immediately after the Stock Reclassification, the Board authorized a 4-for-1 stock split, effected in the form of a stock dividend, payable in shares of $.01 par value non-voting common stock to shareholders of record on May 3, 1996 (the "Stock Dividend"). On the contemplated effective date of May 23, 1996, the change in par value of the Class A common stock as a result of the Stock Reclassification will result in the transfer of $1,754,305 from Class A common stock to additional paid-in capital, and the Stock Dividend will result in the issuance of 5,316,075 new common shares and in the transfer of $53,161 from retained earnings to common stock. Accordingly, all references in the quarterly financial statements to average numbers of shares outstanding and per share amounts have been stated at their historical amounts as well as adjusted to give effect to the Stock Reclassification and the Stock Dividend. 6 PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES March 31, 1996 MANAGEMENT'S ANALYSIS OF THE QUARTERLY INCOME STATEMENT AND FINANCIAL CONDITION Quarter Ended: March 31, 1996 vs. March 31, 1995 - --------------------------------------------------- Consolidated net sales for the quarter ended March 31, 1996 were $39.0 million, versus $35.3 million for the quarter ended March 31, 1995, a 10.5% increase. Sales to customers outside the United States for the quarter ended March 31, 1996 were $9.8 million, versus $9.6 million for the quarter ended March 31, 1995, a 2.1% increase. Net sales for the fastener operation for the quarter ended March 31, 1996 were $31.5 million, versus $28.3 million for the quarter ended March 31, 1995, an 11.3% increase. The number of fastener units shipped within North America (including Canada) increased approximately 19.6% from the first quarter of 1995 to the first quarter of 1996, and represented approximately 70.9% of total fasteners shipped in the first quarter of 1996. The number of fastener shipments to Europe increased approximately 22.3% from the first quarter of 1995 to the first quarter of 1996, while the number of units shipped to the Asia-Pacific region decreased 18.9% from the first quarter of 1995 to the first quarter of 1996. The continued strong demand for personal computers as well as other electronic equipment, which accounted for approximately 84% of fastener sales in the first quarters of 1995 and 1996, were the main cause of the increased shipment volume in North America and Europe. However, this was offset by the decline in the Asia-Pacific region, which was caused by high retail personal computer inventory levels resulting from a 1995 sales surge after the release of "Windows 95". Unsold computer and peripherals inventory at the end of 1995 caused a temporary slowdown in fastener requirements in the first quarter of 1996. Average selling price for fasteners shipped in the first quarter of 1996 decreased approximately 5.3% compared to the first quarter of 1995 because of a short-term change in product mix towards lower margin fasteners. Net sales of the motor operation for the first quarter of 1996 were $7.6 million, versus $7.0 million for the first quarter of 1995, an 8.0% increase. The number of motors sold increased approximately 12.7% from the first quarter of 1995 to the first quarter of 1996 while the average selling price declined 3.6% as a result of a temporary change in product mix toward lower margin motors. Consolidated gross margin for the first quarter of 1996 was $11.6 million, versus $10.7 million for the first quarter of 1995, an 8.3% increase. Fastener gross margin increased 8.3 % from the first quarter of 1995 to the first quarter of 1996 as a result of the increased number of units sold without a proportionate increase in cost. As a percent of sales, however, fastener gross margin decreased from 31.1% in the first quarter of 1995 to 30.3% in the first quarter of 1996 because cost increases incurred for raw material, outside screw machine services, and tooling were not fully offset by price increases, production efficiencies, and cost containment. It is anticipated a price increase, effective April 1, 1996, will partially offset these cost increases for the remainder of 1996. Motor gross margin increased approximately 8.0% from the first quarter of 1995 to the first quarter of 1996 and remained constant at 26.5% of sales in both quarters. Selling, general, and administrative expenses ("SG&A") for the first quarter of 1996 were $7.1 million, versus $6.0 million recorded for the first quarter of 1995, an 18.2% increase. SG&A, as a percent of sales, increased from 17.0% in the first quarter of 1995 to 18.2% in the first quarter of 1996. Additional SG&A staff, wage increases for the current staff, and the establishment of a Singapore distribution center all contributed to the increased SG&A expense. Consolidated net income for the first quarter of 1996 was $2.9 million, versus $3.0 million for the first quarter of 1995. Other income decreased 61.1% as a result of decreased investment income. This decrease as well as the increased cost of SG&A expenses were partially offset by a Pennsylvania income tax rate reduction that lowered the effective tax rate from 39.5% in 1995 to 37.3% in 1996. 7 PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES March 31, 1996 MANAGEMENT'S ANALYSIS OF THE QUARTERLY INCOME STATEMENT AND FINANCIAL CONDITION Liquidity and Capital Resources - ------------------------------- Liquidity needs for the quarter ended March 31, 1996 were primarily for the acquisition of approximately $3.0 million of finished goods inventory and other assets purchased from the Company's distributor in Singapore and for $6.5 million of capital expenditures including the construction of a 43,000 square foot addition to the Company's Danboro facility which is nearing completion. Short-term borrowings increased $9.5 million to finance the above expenditures. As a result of this, working capital decreased from $38.9 million at December 31, 1995 to $36.0 million at March 31, 1996. Cash and short-term investments increased approximately 21.0% from $7.4 million at December 31, 1995 to $9.0 million at March 31, 1996 as internally generated funds continued to finance current working capital needs. On a historical basis, stockholders' equity per share increased from $44.58 at December 31, 1995 to $45.91 at March 31, 1996. 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, 1995. 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 - ------------------------- On May 22, 1996, the Company intends to file an admendment to its Certificate of Incorporation (the "Amendment") with the Delaware Secretary of State, which will (i) increase the number of authorized shares of Capital Stock of the Company from 3,000,000 shares to 23,000,000 shares, consisting of 20,000,000 shares of Common Stock and 3,000,000 shares of Class A Common Stock, (ii) reclassify the Prior Common Stock as Class A Common Stock, (iii) authorize a new class of non-voting capital stock designated as Common Stock, and (iv) establish the rights, powers, and limitations of the Common Stock and the Class A Common Stock. In addition, the Board of Directors declared a dividend of three shares of the new non-voting Common Stock for each share of the Company's issued Common Stock held of record on May 3, 1996. The Stock Dividend will have the same effect on the total number of shares of Capital Stock outstanding as a four-for-one stock split. Each of these actions is subject to approval by stockholders at the Company's annual meeting of stockholders on May 22, 1996. It is anticipated that the distribution of the shares of the new non-voting Common Stock will be made on May 23, 1996. Item 6. Exhibits and Reports on Form 8-K - ---------------------------------------- (a) Exhibits: Exhibit 27, Financial Data Schedule (b) Reports on Form 8-K None 9 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 14, 1996 By: /s/ Kenneth A. Swanstrom ---------------------------- Kenneth A. Swanstrom Chairman/ CEO/ President Dated: May 14, 1996 By: /s/ Mark W. Simon ---------------------------- Mark W. Simon Vice-President - Finance EX-27 2
5 3-MOS DEC-31-1996 MAR-31-1996 3,402,245 5,606,434 23,054,087 900,000 25,145,904 60,531,362 83,080,434 35,852,266 109,945,530 24,579,494 0 1,772,025 0 0 76,595,252 109,945,530 39,028,866 39,164,578 27,477,361 34,577,559 0 0 12,832 4,574,187 1,705,000 2,869,187 0 0 0 2,869,187 1.68 1.68
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