-----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, C5N0giR9nBcFtlGahS4wIQ767tO+cnUpoX6HPDtrzOasitWNLnlHMIwWokv3uF4I R6SMGaP8AYSu3Xo0A6nwdg== 0000076954-98-000011.txt : 19980518 0000076954-98-000011.hdr.sgml : 19980518 ACCESSION NUMBER: 0000076954-98-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEERLESS MANUFACTURING CO CENTRAL INDEX KEY: 0000076954 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT, NEC [3569] IRS NUMBER: 750724417 STATE OF INCORPORATION: TX FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-05214 FILM NUMBER: 98624613 BUSINESS ADDRESS: STREET 1: 2819 WALNUT HILL LN CITY: DALLAS STATE: TX ZIP: 75229 BUSINESS PHONE: 2143576181 MAIL ADDRESS: STREET 1: P.O. BOX 540667 CITY: DALLAS STATE: TX ZIP: 75354 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 10-Q (Mark One) x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE ------ SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 1998 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF ------ THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ - ------------------------------------------------------------------------------- Commission File Number 0-5214 PEERLESS MFG. CO. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Texas 75-0724417 - ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) identification No.) 2819 Walnut Hill Lane Dallas, Texas 75229 P. O. Box 540667 Dallas, Texas 75354 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (214) 357-6181 None - ------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last repor Indicate by a 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 shorter periods 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 practicable date. Class Outstanding at May 15, 1998 - ----------------------------- ----------------------------------- Common stock, $1.00 par value 1,457,492 Shares PEERLESS MFG. CO. INDEX Page Number ----------- Part I: Financial Information Item 1: Consolidated Financial Statements Condensed Consolidated Balance Sheets for the periods ended March 31, 1998 and June 30, 1997. 3-4 Condensed Consolidated Statements of Earnings for the three and nine months ended March 31, 1998 and 1997. 5 Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 1998 and 1997. 6 Notes to the Condensed Consolidated Financial Statement 7 - 8 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations. 9 - 12 Part II: Other Information 13 Exhibits 14 - 15 Signatures 16 2 of 15 PART I FINANCIAL INFORMATION Item 1. Financial Statements - ---------------------------- PEERLESS MFG. CO. CONDENSED CONSOLIDATED BALANCE SHEETS March 31, June 30, ----------------------------- 1998 1997 -------------- -------------- (UNAUDITED) (AUDITED) Assets Current assets Cash and cash equivalents $539,506 $772,553 Short term investments 267,844 259,007 Accounts receivable-principally trade-net of allowance for doubtful accounts of $374,591 at March 31, 1998 and $312,450 at June 30, 1997 9,803,758 9,671,067 Inventories Raw materials 1,066,460 1,084,890 Work in process 2,570,726 1,586,213 Finished goods 265,546 322,752 Costs and earnings in excess of billings on uncompleted contracts 313,349 1,871,817 Deferred income taxes 270,096 269,721 Other 197,149 298,605 -------------- -------------- Total current assets 15,294,434 16,136,625 Property, plant and equipment-at Cost, less accumulated depreciation 1,535,888 1,527,856 Property held for investment-at Cost, less accumulated depreciation 841,185 888,383 Other assets 701,176 528,729 -------------- -------------- $18,372,683 $19,081,593 ============== ============== The accompanying notes are an integral part of these statements. 3 of 16
PEERLESS MFG. CO. CONDENSED CONSOLIDATED BALANCE SHEETS March 31, June 30, ----------------------------- 1998 1997 -------------- -------------- (UNAUDITED) (AUDITED) Liabilities and Stockholders' Equity Current liabilities Notes payable $0 $0 Accounts payable-trade 3,163,387 5,054,532 Billings in excess of costs and earnings on uncompleted contracts 18,858 363,257 Commissions payable 982,265 779,474 Accrued liabilities Compensation 619,173 656,082 Warranty 390,133 406,903 Other 966,698 291,953 -------------- -------------- Total current liabilities 6,140,514 7,552,201 Deferred income taxes 99,962 99,962 Stockholders' equity Common stock-authorized 10,000,000 shares of $1 par value; issued and outstanding, 1,457,492 shares at March 31, 1998 and authorized 4,000,000 shares; issued and outstanding 1,451,992 at June 30, 1997 1,457,492 1,451,992 Additional paid-in capital 2,584,721 2,535,221 Unamortized value of restricted stock grants (61,074) (44,625) Cumulative foreign currency translation adjustment (86,750) (93,944) Retained earnings 8,237,818 7,580,786 -------------- -------------- 12,132,207 11,429,430 -------------- -------------- $18,372,683 $19,081,593 ============== ============== The accompanying notes are an integral part of these statements. 4 of 16
PEERLESS MFG. CO. CONDENSED STATEMENTS OF EARNINGS (UNAUDITED) Three Months Ended Nine Months Ended March 31, March 31, ----------------------------- ----------------------------- 1998 1997 1998 1997 -------------- -------------- -------------- -------------- Revenue $10,419,822 $14,826,299 $28,667,383 $32,102,952 Cost of goods sold 6,765,114 11,446,432 18,658,985 23,674,424 -------------- -------------- -------------- -------------- Gross profit 3,654,708 3,379,867 10,008,398 8,428,528 Operating expenses Marketing and engineering 2,208,071 2,705,972 6,411,681 6,958,340 General and administrative 544,386 486,248 1,660,663 1,386,795 -------------- -------------- -------------- -------------- Operating income 902,251 187,647 1,936,054 83,393 Other income(expense) Interest income 6,158 3,670 21,562 21,264 Interest expense (9,503) (14,936) (24,089) (21,527) Foreign exchange gains(losses) (6,357) (60,537) (57,341) 117,135 Other, net (9,178) (2,585) (58,131) 9,052 -------------- -------------- -------------- -------------- (18,880) (74,388) (117,999) 125,924 -------------- -------------- -------------- -------------- Earnings from operations before Federal income tax 883,371 113,259 1,818,055 209,317 Federal income tax Current 349,747 35,370 699,228 43,195 Deferred (31,582) (82,708) 0 -------------- -------------- -------------- -------------- 318,165 35,370 616,520 43,195 -------------- -------------- -------------- -------------- Net earnings 565,206 77,889 1,201,535 166,122 ============== ============== ============== ============== Basic and diluted earnings per share $0.39 $0.05 $0.83 $0.11 ============== ============== ============== ============== Weighted average number of common shares outstanding 1,455,698 1,455,298 1,453,209 1,454,494 ============== ============== ============== ============== Cash dividend per common share $0.125 $0.125 $0.125 $0.125 ============== ============== ============== ============== The accompanying notes are an integral part of these statements. 5 of 16
PEERLESS MFG. CO. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the nine months ended March 31, ----------------------------- 1998 1997 -------------- -------------- Cash flows from operating activities Net earnings $1,201,535 $166,122 Adjustments to reconcile earnings to net cash provided by (used in) operating activities Depreciation and amortization 271,151 244,305 Other 15,426 39,988 Changes in operating assets and liabilities Accounts receivable (132,691) (2,846,228) Inventories (908,877) (1,327,394) Cost and earnings in excess of billings on uncompleted contracts 1,558,468 1,039,066 Other current assets 101,081 (33,992) Other assets (182,746) 49,126 Accounts payable (1,891,119) 1,380,651 Billings in excess of costs and earnings on uncompleted contracts (344,399) 64,350 Commissions payable 202,791 377,525 Accrued liabilities 620,503 (554,571) -------------- -------------- (690,412) (1,567,174) -------------- -------------- Net cash provided by (used in) operating activities 511,123 (1,401,052) Cash flows from investing activities: Net sales (purchases) of short-term investments (8,837) (52,852) Net sales (purchases) of property and equipment (222,115) (480,741) -------------- -------------- Net cash provided by (used in) investing activities (230,952) (533,593) Cash flows from financing activities: Net change in short-term borrowings 0 1,145,550 Proceeds from issuance of common stock 24,524 0 Dividends paid (544,935) (545,529) -------------- -------------- Net cash provided by (used in) financing activities (520,412) 600,021 Effect of exchange rate on cash and cash equivalents 7,194 (89,285) -------------- -------------- Net increase (decrease) in cash and cash equivalents (233,047) (1,423,909) Cash and cash equivalents at beginning of period 772,553 2,082,329 -------------- -------------- Cash and cash equivalents at end period $539,506 $658,420 ============== ============== The accompanying notes are an integral part of these statements. 6 of 16
PEERLESS MFG. CO. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying consolidated financial statements of Peerless Mfg. Co. and its subsidiaries (the "Company") have been prepared by the Company without audit. In the opinion of the Company's management, the financial statements reflect all adjustments necessary to present fairly the results of operations for the three and nine months ended March 31, 1998 and 1997, the Company's financial position at March 31, 1998 and June 30, 1997, and cash flows for the nine months ended March 31, 1998 and 1997. These adjustments are of a normal, recurring nature which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the interim periods. Certain notes and other information have been condensed or omitted from the interim financial statements presented in the Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Company's Annual Report Form 10-K for the Fiscal year ended June 30, 1997 and the consolidated financial statements and notes thereto included in the Company's June 30, 1997, audited financial statements. 2. The results for the interim periods are not necessarily indicative of the results to be expected for the full year. Peerless Mfg. Co. designs and manufactures custom contracted pressure vessels and other products to customer specifications, sales of which are obtained by competitive bids and may result in material sales and profitability increases or decreases when comparing interim periods between years. The Company generally recognizes sales of custom-contracted products at the completion of the manufacturing process, which is normally less than one year. The percentage-of-completion method is used for significant long-term contracts. 3. The backlog of uncompleted orders and letters of intent at March 31, 1998 was approximately $29,000,000 as compared to a March 31, 1997 backlog of $22,200,000. Of the $29,000,000 backlog at March 31, 1998, approximately 55% is scheduled to be completed in the current fiscal year. 4. The Company has a formal agreement with two banks for an aggregate of $7,500,000 continuing lines of credit, renewable annually. Under the terms of these agreements, loans bear interest at the prevailing prime rate and the Company is required to pay 1/4 of 1% per annum on the unused portion of the facility. The Company had no loans outstanding under these lines at March 31, 1998, and $1,145,550 outstanding at March 31, 1997. 7 of 16 5. The Company consolidates the accounts of its wholly-owned foreign subsidiaries, Peerless Europe Limited, Peerless International N.V. and Peerless Europe B.V. All significant intercompany accounts and transactions have been eliminated in the consolidation. 8 of 16 Item 2. Management's discussion and analysis of financial - ------- ------------------------------------------------- condition and results of operations. ------------------------------------ PEERLESS MFG. CO. This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements are subject to inherent risks and uncertainties, some of which cannot be predicted or quantified. Actual results could differ materially from those projected in the forward-looking statements as a result of changes in market conditions, increased competition, or other factors. The following discussion and analysis should be read in conjunction with the attached consolidated financial statements and notes thereto, and with the Company's audited financial statements and notes thereto for the fiscal year ended June 30, 1997. Capital Resources and Liquidity - ------------------------------- As a general policy, the Company maintains corporate liquidity at a level adequate to support existing operations and planned internal growth, and to allow continued operations through periods of unanticipated adversity. Cash and equivalents decreased by $233,047 from June 30, 1997. Company operations provided $511,123 and proceeds from issuance of common stock provided $24,524 for the nine month period ending March 31, 1998. Uses of cash for the nine months ended March 31, 1998 included expenditures of $230,952 for purchase of fixed assets and short-term investments and $544,935 for dividend payments. As indicated in the preceding paragraph, cash flows from operating activities provided $511,123 of cash in the nine months ended March 31, 1998 when compared to uses of $1,401,052 for the nine months ended March 31, 1997. The Company has historically and continues to finance plant expansion, equipment purchases, acquisitions and working capital requirements primarily through the retention of earnings, which is reflected by the absence of long-term debt in the Company's statement of financial position. In addition to retained earnings, the Company has from time to time used two short-term bank credit lines totaling $7,500,000 to supplement working capital. The Company has no material commitments for capital expenditures other than its established program of maintaining existing plant and equipment. 9 of 16 REVENUE: Revenue decreased 30% to $10,420,000 for the three months ended March 31, 1998 when compared to $14,826,000 for the three months ended March 31, 1997. For the nine month period, revenues decreased 11% to $28,667,000 for the nine months ended March 31, 1998 when compared to $32,103,000 for the nine months ended March 31, 1997. For both periods, the decreases resulted primarily from a significant $5,000,000 shipment of environmental equipment to an international customer in the third quarter ending March 31, 1997. This decrease was slightly offset by increased sales volumes to customers for the Company's filtration and separation products. GROSS PROFIT: Gross profit increased 8% to $3,655,000 for the three months ended March 31, 1998 when compared to $3,380,000 for the three months ended March 31, 1997. The increase in gross profits is primarily attributable to increased sales recorded for engineering service projects which carry a greater gross profit margin than the standard or regular custom engineered and fabricated products sold by the Company. For the nine month period, gross profit increased 19% to $10,008,000 for the nine months ended March 31, 1998 from $8,429,000 for the nine months ended March 31, 1997. For the three and nine month period, a change in the mix of products sold in Fiscal 1998 compared to Fiscal 1997 also contributed to the increase in gross profits. Sales revenue on engineering services, nuclear steam dryers and commercial mist extractors have a lower percentage cost of goods than the Company's traditional line of pressure vessels, allowing for increased gross profits as a percentage of revenues. For the nine months ended March 31, 1998, percentage of revenue generated from engineering services and sales of nuclear steam dryers and commercial mist extractors increased as compared to the nine months ended March 31, 1997. OPERATING EXPENSES: Operating expenses decreased 14% from $3,192,000 for the three months ended March 31, 1997 to $2,752,000 for the three months ended March 31, 1998. Operating expenses also decreased 3% from $8,345,000 for the nine months ended March 31, 1997 to $8,072,000 for the nine months ended March 31, 1998. The declines in both periods reflect the decrease in commissions and engineering expenses associated with the $5,000,000 shipment of environmental equipment shipped to an international customer recorded in the third quarter ended March 31, 1997. General and administrative expenses increased primarily due to various cost increases associated with increased profits, and various accruals for profit sharing and compensation plans. 10 of 16 OTHER INCOME/(EXPENSE): The Company recognized net other expense of $19,000 and $118,000 for the three and nine months ending March 31, 1998 for interest, foreign exchange losses and the settlement of an employee issue in the nine month period. These expenses compare favorably to the $74,000 other expense for the three months ended March 31, 1997 and unfavorably to the $126,000 other income for the nine months ended March 31, 1997. Foreign exchange loss of $6,000 for the three month period ending March 31, 1998 compare favorably to the foreign exchange loss of $61,000 for the three month period ending March 31, 1997. For the nine month period, foreign exchange losses of $57,000 compare unfavorably to the foreign exchange gain of $117,000 for the nine month period ending March 31, 1997. YEAR 2000 ISSUE: The Company embarked on a program of upgrading its current computer system in 1996 and the Year 2000 Issue was addressed. The Company has reviewed and continues to monitor its exposure to the SEC's Staff Legal Bulletin No. 5 regarding the Year 2000 Issue. The Company believes that the cost of addressing the Year 2000 Issue will not be material or create uncertainty that would cause reported financial information not to be necessarily indicative of future operating results or financial condition. Further, the Company believes that any cost or any consequences of incomplete or untimely resolution of any Year 2000 Issues will not represent a known material event or uncertainty that is reasonably expected to affect the Company's future financial results, or cause the Company's reported financial information not to be necessarily indicative of future operating results or future financial condition. SOUTHEAST ASIA: The Company does not anticipate any material affect on the demand for its products in Southeast Asia as a result of the current financial crisis there. Oil and gas products in the area contribute hard currency and currently continue to be scheduled. Secondary projects financed in local currencies are expected to experience some delays. The Company is hopeful that demand for its products in Mexico and South America may offset the potential for reduced opportunities in Southeast Asia. However, there can be no assurances that the Company's results of operations will not be materially and adversely affected by the Asian financial situation. 11 of 16 RESTRUCTURING: At the Annual Shareholders Meeting conducted November 20, 1997, Mr. Stone, Chairman and Chief Executive Officer of the Company, announced its organizational restructuring and reorganization of its two separation and filtration units into one combined group. The restructuring and reorganization was designed to lower costs of goods and improve on time delivery of product. The restructuring is complete and the Company continues to audit the results of this process. 12 of 16 PEERLESS MFG. CO. PART II OTHER INFORMATION Item 1 -- Legal proceedings - --------------------------- Reference is made to Form 10-K Annual Report, as amended, Item 3, Page 6, "Legal Proceedings" for the Fiscal year ended June 30, 1997. For the three months ended March 31, 1998 there were no new proceedings filed against the Company. Item 6 -- Exhibits and Reports -- Form 8-K - ------------------------------------------ There were no reports on Form 8-K for the three months ended March 31, 1998. 13 of 16 EXHIBITS: References to the Company's SEC File Number 0-05214. 3(a) The Company's Articles of Incorporation, as amended to date (filed as Exhibit 3(a) to the Company's Quarterly Report on Form 10-Q, dated December 31, 1997, and incorporated herein by reference). 3(b) The Company's Bylaws, as amended to date (filed as Exhibit 3(b) to the Company's Annual Report on Form 10- K, dated June 30, 1997, and incorporated herein by reference). 10(a) Incentive Compensation Plan effective January 1, 1981, as amended January 23, 1991 (filed as Exhibit 10(b) to the Company's Annual Report on Form 10-K, dated June 30, 1991, and incorporated herein by reference). 10(b) 1985 Restricted Stock Plan for Peerless Mfg. Co., effective December 13, 1985 (filed as Exhibit 10(b) to the Company's Annual Report on Form 10-K, dated June 30, 1993, and incorporated herein by reference). 10(c) 1991 Restricted Stock Plan for Non-Employee Directors of Peerless Mfg. Co., adopted subject to shareholder approval May 24, 1991, and approved by shareholders November 20, 1991 (filed as Exhibit 10(e) to the Company's Annual Report on Form 10-K dated June 30, 1991, and incorporated herein by reference). 10(d) Employment Agreement, dated as of April 29, 1994, by and between the Company and Sherrill Stone (filed as Exhibit 10(d) to the Company's Annual Report on Form 10-K for the Fiscal year ended June 30, 1994, and incorporated herein by reference). 10(e) Agreement, dated as of April 29, 1994 by and between Company and Sherrill Stone (filed as Exhibit 10(e) to the Company's Annual Report on Form 10-K dated June 30, 1994 and incorporated herein by reference). 14 of 16 10(f) Sixth Amended and Restated Loan Agreement, dated as of January 12, 1998, between NationsBank of Texas, N.A. and the Company (filed as Exhibit 10(f) to the Company's Quarterly Report on Form 10-Q, dated December 31, 1997, and incorporated herein by reference). 10(g) Amended and Restated Loan Agreement, dated as of January 12, 1998, by and between Texas Commerce Bank National Association and the Company (filed as Exhibit 10(g) to the Company's Quarterly Report on Form 10-Q, dated December 31, 1997, and incorporated herein by reference). 10(h) Peerless Mfg. Co. 1995 Stock Option and Restricted Stock Plan, adopted by the Board of Directors December 31, 1995 and approved by the Shareholders of the Company November 21, 1996 (filed as Exhibit 10(h) to the Company's Annual Report on Form 10-K dated June 30, 1997 and incorporated herein by reference). 10(i) Rights Agreement between Peerless Mfg. Co. and ChaseMellon Shareholder Services, L.L.C., adopted by the Board of Directors May 21, 1997 (filed as Exhibit 1 to the Company's Registration Statement on Form 8-A (File No. 0-05214) and incorporated herein by reference). 21 Subsidiaries of the Company (filed as Exhibit 21 to the Company's Annual Report on Form 10-K dated June 30, 1993, and incorporated herein by reference). 27 Financial Data Schedule.* *Filed herewith 15 of 16 SIGNATURES 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 thereto duly authorized. PEERLESS MFG. CO. Dated: May 15, 1998 /s/ Sherrill Stone /s/ Kent J. Van Houten ----------------------- ------------------------- By: Sherrill Stone By: Kent J. Van Houten Chairman, President and Secretary - Treasurer and Chief Executive Officer Chief Financial Officer 16 of 16 EX-27 2
5 9-MOS JUN-30-1998 MAR-31-1998 539,506 267,844 10,178,349 374,591 3,902,732 15,294,434 8,207,716 5,830,643 18,372,683 6,140,514 0 0 0 1,457,492 10,674,715 18,372,683 28,667,383 28,667,383 18,658,985 18,658,985 6,411,681 41,718 24,089 1,818,055 616,520 1,201,535 0 0 0 1,201,535 0.83 0
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