-----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, LvTW8sSCGycnM3GgiCZ53V2j0AtwwL+iOUq88j+GXNf4tzaKdcTa6/L3VunT3fD8 D0eGpxWxM5qha9tpcaelvQ== 0000950134-97-007725.txt : 19971029 0000950134-97-007725.hdr.sgml : 19971029 ACCESSION NUMBER: 0000950134-97-007725 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19971028 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-K/A SEC ACT: SEC FILE NUMBER: 000-05214 FILM NUMBER: 97702188 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-K/A 1 AMENDMENT TO FORM 10-K YEAR ENDED JUNE 30, 1997 1 =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------------------ FORM 10-K/A AMENDMENT NO. 1 FOR ANNUAL REPORT AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 1997 |_| 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 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (214) 357-6181 Securities registered pursuant to Section 12(g) of the Act: Title of Each Class Name of Each Exchange on Which Registered: Common Stock, par value $1.00 The Nasdaq Stock Market's National Market - ----------------------------- ------------------------------------------- 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |_| At September 19, 1997, Peerless Mfg. Co. had 1,451,992 shares of common stock, $1.00 par value outstanding. The Company estimates that the aggregate market value of the common stock on September 19, 1997 (based upon the closing price of these shares on Nasdaq) held by non-affiliates was approximately $20,690,886. DOCUMENTS INCORPORATED BY REFERENCE None. 1 2 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Common Stock is quoted on the Nasdaq Stock Market's National Market under the symbol PMFG. The Company's Board of Directors reviews the financial position of the Company periodically to determine the advisability of paying dividends. The following table sets forth, for the periods indicated, the range of the daily high and low closing bid prices for the Company's Common Stock as reported by Nasdaq Stock Market's National Market and cash dividends paid per share.
Quarter Ended: Closing Bid Prices Cash Dividends High Low Per Share ------- ------ --------- Fiscal 1996 September 30, 1995 $12-3/4 $ 9-7/8 $ .125 December 31, 1995 11-5/8 9-1/4 .125 March 31, 1996 9-3/4 8-3/4 .125 June 30, 1996 11-5/8 9-5/8 .125 Fiscal 1997 September 30, 1996 $13-3/4 $ 9-1/4 $ .125 December 31, 1996 14-7/8 11-5/8 .125 March 31, 1997 13-1/4 9-1/2 .125 June 30, 1997 11 9-1/8 .125
The number of record holders of the Company's Common Stock on August 15, 1997 was 221. The Company estimates that approximately 700 additional shareholders own shares in broker names. 2 3 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Liquidity And Capital Resources As a general policy, the Company maintains corporate liquidity at a level it believes adequate to support existing operations and planned growth, as well as continue operations during reasonable periods of unanticipated adversity. Management also intends to direct additional resources to strategic new product development, market expansion and continuing improvement of existing products to enhance the Company's position as a market leader and to promote planned internal growth and profitability. The Company has historically financed and continues to finance working capital requirements and any expansion, equipment purchases or acquisitions primarily through the retention of earnings, which is reflected by the absence of long-term debt on the Company's consolidated balance sheet. In addition to retained earnings, the Company has infrequently used short term bank credit lines of $7,500,000 to supplement working capital. During Fiscal 1996 and Fiscal 1997, it was necessary for the Company to use its short-term bank credit lines in order to finance a temporary shortfall in working capital. At June 30, 1997, the Company had no amounts outstanding against its credit lines. The Company pays an annual commitment fee of 0.25% of the unused balance under the credit lines. The Company has no material commitments for capital expenditures other than replacing equipment and maintaining its existing plants and equipment. During Fiscal 1997 the Company purchased fixed assets totaling $596,395, consisting primarily of replacement manufacturing equipment, computer hardware and software, office equipment and building improvements. This is compared to purchases of $273,593 during Fiscal 1996. The Company believes that these sources will be sufficient to satisfy its needs in the foreseeable future. Working capital was $8,584,424 at June 30, 1997, down from $9,350,600 at June 30, 1996, a decline of 8.2%. This decline was due primarily to the adverse effects of a third-quarter cost overrun related to a major international project in the Company's environmental equipment division and to the early declaration of dividends in Fiscal 1997 rather than in Fiscal 1998, which resulted in a charge against working capital in Fiscal 1997. 3 4 The following table sets forth certain information related to working capital for the Company's last three fiscal years:
1997 1996 1995 -------- -------- ------ Average working capital as a percentage of net sales 20.8% 25.6% 27.5% Annual accounts receivable turnover(1) 4.3 3.8 6.0 Annual inventory turnover(2) 6.6 5.7 6.7
(1) Annual accounts receivable turnover is computed by dividing annual net sales by the average monthly accounts receivable. (2) Annual inventory turnover is computed by dividing the cost of goods sold by the average monthly inventory and contract costs. The average working capital decrease as a percentage of net sales is related to increased sales volume of approximately $7,842,000 reported in Fiscal 1997 over Fiscal 1996. The increase in annual accounts receivable turnover reflects improved collection methods by the Company in Fiscal 1997. The increase in average inventory turnover is due primarily to increased efforts to manage inventory in Fiscal 1997. Peerless continues to monitor and streamline the Company's receivable collection and inventory purchasing procedures to enhance and maximize cash flow. Results of Operations The following table sets forth various measures of performance expressed as percentages of net sales for the Company's last three fiscal years, as well as the Company's effective income tax rate for the same periods:
1997 1996 1995 -------- -------- ------ Gross profit margin 27.8% 30.4% 33.0% Operating expenses 26.8% 26.8% 27.3% Earnings before income taxes 1.3% 3.5% 6.0% Effective income tax rate 0.1% 33.2% 35.8%
Inflation did not have a material impact on the Company's operating results during the last three fiscal years. 4 5 Comparison of Fiscal 1997 to Fiscal 1996 Net Sales The Company's net sales increased approximately $7,842,000, or 23.3%, to $41,486,000 in Fiscal 1997 from $33,644,000 in Fiscal 1996. Compared to Fiscal 1996, Fiscal 1997 domestic sales increased by 11.5% from $14,244,000 to $15,886,000. Foreign sales increased from $19,400,000 in Fiscal 1996 to $25,600,000 in Fiscal 1997, an increase of 32.0%. The increase resulted primarily from additional sales realized in Asia. The Company's backlog of unfilled orders increased from $15,300,000 at June 30, 1996 to $20,200,000 at June 30, 1997. Sales increased from $2,562,000 in Fiscal 1996 to $3,326,000 in Fiscal 1997 at the Company's Singapore sales office. The backlog of unfilled orders at June 30, 1997 includes approximately $2,000,000 of orders generated through the Singapore office. The Company continues to believe that its sales in Asia are enhanced by its maintenance of a Singapore office. During Fiscal 1997, Peerless Europe Ltd., the Company's UK subsidiary, contributed Fiscal 1997 sales revenue of $4,605,000, representing a decrease of $789,000, or 14.6% below Fiscal 1996 revenue of $5,394,000. This subsidiary continued to operate solidly during Fiscal 1997, with a year-end backlog of approximately $2,515,000 as compared with $1,000,000 in Fiscal 1996. Approximately $800,000 of this increase is attributable to Peerless Europe Ltd. assuming certain sales of Peerless Europe B.V. in Fiscal 1997. Peerless Europe B.V., the Company's Dutch subsidiary, continued its efforts during Fiscal 1997 to implement the Company's direct marketing strategy in Europe. Sales revenue decreased from $2,105,000 in Fiscal 1996 to $1,332,000 in Fiscal 1997. Peerless Europe B.V. is winding down its operations, which will be continued by Peerless Europe Ltd., the Company's U.K. subsidiary. Sales by the Company's SCR (Selective Catalytic Reduction) division improved from $6,013,000 in Fiscal 1996 to $9,632,000 in Fiscal 1997. During Fiscal 1997, the SCR division, which designs and manufactures equipment used to remove nitrogen oxide (NOx) emissions caused by boilers, gas burners, turbines and internal combustion engines, ended the year with a backlog of unfilled orders of approximately $2,123,000, a decrease from the Fiscal 1996 backlog of $4,838,000. Gross Profit Margin The Company's gross profit margin decreased from 30.4% of net sales in Fiscal 1996 to 27.8% of net sales in Fiscal 1997. The decrease resulted from a change in product mix of orders completed in Fiscal 1997 and adverse effects of a cost overrun related to a major international project in the Company's environmental equipment division in the third quarter. 5 6 Operating Expenses Operating expenses increased from $9,009,000 in Fiscal 1996 to $11,118,000 in Fiscal 1997. However, operating expenses as a percent of sales held steady at 26.8% in Fiscal 1996 and 26.8% in Fiscal 1997. This increase in operating expenses was primarily due to increased sales and additional personnel hired to support the increased level of sales anticipated by the Company. Income Tax The Company's effective income tax rate decreased from 33.2% in Fiscal 1996 to 0.1% in Fiscal 1997. This decrease resulted from foreign deferred tax benefits offsetting domestic tax expenses. The Company anticipates that it will not be able to continue utilizing these deferred tax benefits to the same extent and expects that the Company's effective income tax rates will return to historical levels in Fiscal 1998. For a further discussion of the Company's federal income taxes, see Note H to the Company's Consolidated Financial Statements. Comparison of Fiscal 1996 to Fiscal 1995 Net Sales The Company's net sales increased approximately $1,555,000, or 4.8%, to $33,644,000 in Fiscal 1996 as compared to $32,089,000 in Fiscal 1995. Compared to Fiscal 1995, Fiscal 1996 domestic sales decreased by 1.0% from $14,389,000 to $14,244,000. Foreign sales increased from $17,700,000 in Fiscal 1995 to $19,400,000 in Fiscal 1996, an increase of 9.6%. The increase was primarily the result of additional sales realized in Europe. The Company's backlog of unfilled orders decreased slightly from $15,875,000 at June 30, 1995 to $15,300,000 at June 30, 1996. Sales decreased from $3,346,000 in Fiscal 1995 to $2,562,000 in Fiscal 1996 at the Company's Singapore sales office. The backlog of unfilled orders at June 30, 1996 includes approximately $510,000 of orders generated through the Singapore office. The Company continues to believe that its sales in Asia are enhanced by its maintenance of a Singapore office. During Fiscal 1996, Peerless Europe Ltd., the Company's UK subsidiary, contributed Fiscal 1996 sales revenue of $5,394,000, representing an increase of $1,760,000, or 48.4% over Fiscal 1995 revenue of $3,634,000. This subsidiary continued to operate solidly during Fiscal 1996, with a year-end backlog of approximately $1,000,000. Peerless Europe B.V., the Company's Dutch subsidiary which became operational as a trading company late in Fiscal 1993, continued its efforts during Fiscal 1996 to implement the Company's direct marketing strategy in Europe. Sales revenue increased from $1,155,000 in Fiscal 1995 to $2,105,000 in Fiscal 1996. 6 7 Sales by the Company's SCR (Selective Catalytic Reduction) division improved from $3,696,000 in Fiscal 1995 to $6,013,000 in Fiscal 1996. During Fiscal 1996, the SCR division, which designs and manufactures equipment used to remove nitrogen oxide (NOx) emissions caused by boilers, gas burners, turbines and internal combustion engines, experienced an improvement in its order intake activity and ended the year with a backlog of unfilled orders of approximately $4,838,000. Gross Profit Margin The Company's gross profit margin decreased from 33.0% of net sales in Fiscal 1995 to 30.4% of net sales in Fiscal 1996. The decrease resulted from a change in product mix of orders completed in Fiscal 1996. Operating Expenses Operating expenses increased from $8,770,000 in Fiscal 1995 to $9,009,000 in Fiscal 1996. However, operating expenses as a percent of sales decreased slightly from 27.3% in Fiscal 1995 to 26.8% in Fiscal 1996, due primarily to the increase in net sales. Income Tax The Company's effective income tax rate decreased from 35.8% in Fiscal 1995 to 33.2% in Fiscal 1996. For a further discussion of the Company's federal income taxes, see Note H to the Company's Consolidated Financial Statements. Outlooks and Uncertainties This Annual Report on Form 10-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements refer to events that could occur in the future or may be identified by the use of words such as "expect," "intend," "plan," "believe," correlative words, and other expressions indicating that future events are contemplated. Such statements are subject to inherent risks and uncertainties, and actual results could differ materially from those projected in the forward-looking statements as a result of certain of the risk factors set forth below and elsewhere in this Annual Report on Form 10-K. In addition to the other information contained in this Annual Report on Form 10-K, investors should carefully consider the following risk factors. Competition. The Company operates in highly competitive markets worldwide. The Company competes with manufacturers and sellers of separators, filters and pulsation dampeners, some of which are larger than the Company and have greater financial resources. In addition, several smaller manufacturers also produce custom-designed equipment that is competitive with the Company's specialized products and services. Competition may also increase as larger and better financed foreign companies become attracted to the market potential for products 7 8 manufactured by the Company. There can be no assurance that the Company will be able to compete successfully with current or future competitors. Foreign Operations. The Company derives a significant portion of its revenues from foreign sales, particularly in Asia. The Company is subject to risks of doing business abroad, including the possibility that foreign purchasers may default in the payment of amounts due, and that collection of such amounts may be more difficult than for U.S. customers, adverse fluctuations in currency exchange rates, that the U.S. and foreign governments may impose regulatory burdens upon exports and imports of the Company's products, and that the Company may be required to perform its obligations under product warranties, which might result in added expense due to the requirement that it perform such services in a foreign country. The occurrence of any one or more of the foregoing could adversely affect the Company's operations. Concentrations of Credit Risk. The Company continues to closely monitor the creditworthiness of its customers and has never experienced significant credit losses; however, a significant portion of the Company's sales are to customers whose activities are related to the oil and gas industry, including some who are located in foreign countries. The Company generally extends credit to these customers. Its exposure to credit risk is affected by conditions within the oil and gas industry, and with respect to foreign sales, collection may be more difficult in the event of a default. However, substantially all foreign sales are made to large, well-established companies and the Company generally requires collateral or guarantees on foreign sales to smaller companies. Backlog. The Company's backlog represents incomplete customer orders. Although the Company has historically completed and shipped virtually all of its backlog and expects to complete and ship all outstanding orders in Fiscal 1998, customers may cancel outstanding orders prior to their completion. In such cases, the Company would not recognize revenues for canceled orders. However, the Company has contractual protection to recover from its customers at least the Company's costs related to canceled orders. 8 9 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Index to Financial Statements
Page ---- REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ............................................ 16 CONSOLIDATED BALANCE SHEETS AT JUNE 30, 1997 AND 1996............ 17 CONSOLIDATED STATEMENTS OF EARNINGS FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995...................... 19 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995........................................... 20 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995...................... 22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995................ 24 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE............................................. 36 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNT................... 37
9 10 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Peerless Mfg. Co. We have audited the accompanying consolidated balance sheets of Peerless Mfg. Co. and Subsidiaries as of June 30, 1997 and 1996, and the related consolidated statements of earnings, changes in stockholders' equity, and cash flows for each of the three years in the period ended June 30, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above, present fairly, in all material respects, the consolidated financial position of Peerless Mfg. Co. and Subsidiaries as of June 30, 1997 and 1996, and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended June 30, 1997, in conformity with generally accepted accounting principles. GRANT THORNTON LLP Dallas, Texas September 2, 1997 10 11 PEERLESS MFG. CO. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30,
ASSETS 1997 1996 ---------- ----------- CURRENT ASSETS Cash and cash equivalents $ 772,553 $ 2,082,329 Short-term investments 259,007 246,659 Accounts receivable - principally trade - net of allowance for doubtful accounts of $312,450 and $100,000 in 1997 and 1996, respectively 9,671,067 8,404,331 Inventories 2,993,855 2,972,456 Costs and earnings in excess of billings on uncompleted contracts 1,871,817 1,403,199 Deferred income taxes 269,721 226,214 Other 298,605 240,214 ----------- ----------- TOTAL CURRENT ASSETS 16,136,625 15,575,402 PROPERTY, PLANT AND EQUIPMENT - AT COST, less accumulated depreciation 1,527,856 1,213,859 PROPERTY HELD FOR INVESTMENT - AT COST, less accumulated depreciation 888,383 948,775 OTHER ASSETS 528,729 453,390 ----------- ----------- $19,081,593 $18,191,426 =========== ===========
11 12 PEERLESS MFG. CO. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - CONTINUED June 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996 ------------ ------------- CURRENT LIABILITIES Accounts payable - trade $ 5,054,532 $ 4,325,595 Billings in excess of costs and earnings on uncompleted contracts 363,257 -- Commissions payable 779,474 566,766 Accrued expenses Compensation 656,082 549,210 Warranty reserve 406,903 286,384 Other 291,953 496,847 ------------ ------------ TOTAL CURRENT LIABILITIES 7,552,201 6,224,802 DEFERRED INCOME TAXES 99,962 86,768 COMMITMENTS -- -- STOCKHOLDERS' EQUITY Common stock - authorized, 4,000,000 shares of $1 par value; issued and outstanding, 1,451,992 and 1,446,742 shares in 1997 and 1996, respectively 1,451,992 1,446,742 Additional paid-in capital 2,535,221 2,489,879 Unamortized value of restricted stock grants (44,625) (33,750) Cumulative foreign currency translation adjustment (93,944) 23,842 Retained earnings 7,580,786 7,953,143 ------------ ------------ 11,429,430 11,879,856 ------------ ------------ $ 19,081,593 $ 18,191,426 ============ ============
The accompanying notes are an integral part of these statements. 12 13 PEERLESS MFG. CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS Year ended June 30,
1997 1996 1995 ---- ---- ---- NET SALES $ 41,486,492 $ 33,643,998 $ 32,089,132 COST OF GOODS SOLD 29,961,203 23,430,761 21,506,004 ------------ ------------ ------------ GROSS PROFIT 11,525,289 10,213,237 10,583,128 OPERATING EXPENSES Marketing and engineering 9,129,347 7,524,363 7,011,380 General and administrative 1,988,618 1,485,113 1,758,432 ------------ ------------ ------------ 11,117,965 9,009,476 8,769,812 ------------ ------------ ------------ OPERATING PROFIT 407,324 1,203,761 1,813,316 OTHER INCOME (EXPENSE) Interest income 24,687 45,559 93,974 Interest expense (55,475) (16,858) (8,040) Foreign exchange gains (losses) 103,583 (28,628) (56,368) Other, net 57,877 (21,686) 65,779 ------------ ------------ ------------ 130,672 (21,613) 95,345 ------------ ------------ ------------ EARNINGS BEFORE INCOME TAXES 537,996 1,182,148 1,908,661 INCOME TAX EXPENSE (BENEFIT) Current 65,766 397,023 661,046 Deferred (65,186) (4,596) 21,369 ------------ ------------ ------------ 580 392,427 682,415 ------------ ------------ ------------ NET EARNINGS $ 537,416 $ 789,721 $ 1,226,246 ============ ============ ============ Earnings per common share $ .37 $ .55 $ .85 ============ ============ ============ Weighted average number of common shares outstanding 1,454,045 1,446,742 1,442,039 ============ ============ ============
The accompanying notes are an integral part of these statements. 13 14 PEERLESS MFG. CO. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Cumulative Unamortized foreign Additional value of currency Common paid-in restricted translation Retained stock capital stock grants adjustment earnings Total ----- ------- ------------ ---------- -------- ----- Balances as of July 1995 1,436,742 $ 2,383,870 $ (49,841) $ (76,063) $ 7,381,682 $ 11,076,390 Net earnings -- -- -- -- 1,226,246 1,226,246 Issuance of 12,000 shares of common stock 12,000 123,000 (135,000) -- -- -- Forfeiture of 2,000 shares of common stock (2,000) (18,500) 20,500 -- -- -- Translation adjustment -- -- -- 132,173 -- 132,173 Cash dividends paid ($.50 per share) -- -- -- -- (721,122) (721,122) Amortization of restricted stock grants -- -- 67,234 -- -- 67,234 Income tax benefit related to restricted stock plans -- 5,058 -- -- -- 5,058 ----------- ----------- --------- --------- ----------- ------------ Balances as of June 30, 1995 1,446,742 2,493,428 (97,107) 56,110 7,886,806 11,785,979 Net earnings -- -- -- -- 789,721 789,721 Translation adjustment -- -- -- (32,268) -- (32,268) Cash dividends paid ($.50 per share) -- -- -- -- (723,384) (723,384) Amortization of restricted stock grants -- -- 63,357 -- -- 63,357 Income tax expense related to restricted stock plans -- (3,549) -- -- -- (3,549) ----------- ----------- --------- --------- ----------- ------------ Balances as of June 30, 1996 1,446,742 2,489,879 (33,750) 23,842 7,953,143 11,879,856 Net earnings -- -- -- -- 537,416 537,416 Issuance of 8,000 shares of common stock 8,000 72,250 (80,250) -- -- -- Forfeiture of 4,000 shares of common stock (4,000) (38,750) 42,750 -- -- -- Stock options exercised 1,250 10,312 -- -- -- 11,562 Translation adjustment -- -- -- (117,786) -- (117,786) Cash dividends paid ($.50 per share) -- -- -- -- (727,149) (727,149) Cash dividends declared ($.125 per share) -- -- -- -- (182,624) (182,624) Amortization of restricted stock grants -- -- 26,625 -- -- 26,625 Income tax benefit related to restricted stock plans -- 1,530 -- -- -- 1,530 ----------- ----------- --------- --------- ----------- ------------ Balances as of June 30, 1997 $ 1,451,992 $ 2,535,221 $ (44,625) $ (93,944) $ 7,580,786 $ 11,429,430 =========== =========== ========= ========= =========== ============
The accompanying notes are an integral part of these statements. 14 15 PEERLESS MFG. CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended June 30,
1997 1996 1995 --------- ---------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 537,416 $ 789,721 $ 1,226,246 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities Depreciation and amortization 370,525 416,207 386,364 Deferred income taxes (65,185) (4,596) 21,369 Foreign exchange loss (gain) (103,583) 28,628 56,368 Other 1,530 (2,342) 5,058 Changes in operating assets and liabilities Accounts receivable (1,586,991) 508,764 (323,226) Inventories (11,463) (154,231) 1,695,052 Cost and profit in excess of billings on uncompleted contracts (468,618) (1,287,644) 115,555 Other current assets (59,501) (285,196) 108,174 Other assets (40,466) 156,025 (195,985) Accounts payable 791,364 1,240,661 464,022 Billings in excess of costs and earnings on uncompleted contracts 363,257 (197,010) (1,624,268) Commissions payable 212,708 57,254 6,981 Accrued expenses 22,497 266,563 (133,144) ----------- ----------- ----------- (573,926) 743,083 582,320 ----------- ----------- ----------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (36,510) 1,532,804 1,808,566 CASH FLOWS FROM INVESTING ACTIVITIES Net sales (purchases) of short-term investments (12,348) (24,691) 415,017 Purchase of property and equipment (596,395) (273,593) (339,199) ----------- ----------- ----------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (608,743) (298,284) 75,818
15 16 PEERLESS MFG. CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED Year ended June 30,
1997 1996 1995 --------- ---------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Sale of common stock $ 11,562 $ -- $ -- Net changes in short-term borrowings -- -- (260,400) Dividends paid (727,149) (723,384) (721,122) ----------- ----------- ----------- NET CASH USED IN FINANCING ACTIVITIES (715,587) (723,384) (981,522) EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS 51,064 9,446 25,691 ----------- ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,309,776) 520,582 928,553 Cash and cash equivalents at beginning of year 2,082,329 1,561,747 633,194 ----------- ----------- ----------- Cash and cash equivalents at end of year $ 772,553 $ 2,082,329 $ 1,561,747 =========== =========== =========== Supplemental information on cash flows: Interest paid $ 55,475 $ 16,858 $ 9,597 Income taxes paid $ 379,347 $ 138,018 $ 1,059,500
The accompanying notes are an integral part of these statements. 16 17 PEERLESS MFG. CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1997, 1996 and 1995 NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES Nature of Operations Peerless Mfg. Co. designs, engineers, and manufactures specialized products for the removal of contaminants from gases and liquids and for air pollution abatement. The Company's products are manufactured principally at plants located in Dallas, Texas and are sold worldwide with the principal markets located in the United States and Europe. Primary customers are equipment manufacturers, engineering contractors and operators of power plants. Consolidation The Company consolidates the accounts of its wholly-owned foreign subsidiaries, Peerless Europe Limited (Europe Limited), Peerless International N.V. (International) and Peerless Europe B.V. (Europe B.V.). All significant intercompany accounts and transactions have been eliminated in consolidation. Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market. Depreciable Assets Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives, principally by the straight-line method. 17 18 PEERLESS MFG. CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 1997, 1996 and 1995 NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES - CONTINUED Revenue Recognition The Company generally recognizes sales of custom-contracted products at the completion of the manufacturing process. The percentage-of-completion method is used for significant long-term contracts. Percentage-of-completion is generally determined using the actual labor incurred to date as compared to management's estimate of total labor to be incurred on each contract. Stock-Based Compensation Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting for Stock-Based Compensation, encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees, and related interpretations. Earnings Per Common Share Earnings per common share are computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the year. The dilutive effect of stock options is not material. Statement of Financial Accounting Standards No. 128 (SFAS 128), Earnings Per Share, is effective for financial statements issued after December 15, 1997. The adoption of SFAS 128 is not expected to have a material impact on the disclosure of earnings pr share in the financial statements. Foreign Currency All balance sheet accounts of foreign operations are translated into U.S. dollars at the year-end rate of exchange and statements of earnings items are translated at the weighted average 18 19 PEERLESS MFG. CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 1997, 1996 and 1995 NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES - CONTINUED exchange rates for the year. The resulting translation adjustments are made directly to a separate component of stockholders' equity. Gains and losses from foreign currency transactions, such as those resulting from the settlement of foreign receivables or payables, are included in the consolidated statements of earnings. From time to time, the Company enters into forward exchange contracts in anticipation of future movements in certain foreign exchange rates and to hedge against foreign currency fluctuations. Realized and unrealized gains and losses on these contracts are included in net income, except that gains and losses on contracts to hedge specific foreign currency commitments are deferred and accounted for as part of the underlying transaction. Reclassifications Certain prior years' amounts have been reclassified to conform with the 1997 presentation. Financial Instruments The carrying amounts of cash and cash equivalents and short-term investments approximate fair value because of the short-term nature of these items. 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. 19 20 PEERLESS MFG. CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 1997, 1996 and 1995 NOTE B - CONCENTRATIONS OF CREDIT RISK A significant portion of the Company's sales are to customers whose activities are related to the oil and gas industry, including some who are located in foreign countries. The Company generally extends credit to these customers. Its exposure to credit risk is affected by conditions within the oil and gas industry. Also, with respect to foreign sales, collection may be more difficult in the event of a default. However, the Company closely monitors extensions of credit and has never experienced significant credit losses. Substantially all foreign sales are made to large, well-established companies. The Company generally requires collateral or guarantees on foreign sales to smaller companies. Sales to one customer accounted for approximately 12.3% of revenues for the year ended June 30, 1997. No single customer accounted for more than 10% of revenues in 1996 or 1995. NOTE C - INVENTORIES AND UNCOMPLETED CONTRACTS Principal components of inventories are as follows:
June 30, ----------------------- 1997 1996 ---- ---- Raw materials $1,084,890 $1,094,774 Work in process 1,586,213 1,591,289 Finished goods 322,752 286,393 -------- -------- $2,993,855 $2,972,456 ========== ==========
At June 30, 1997 and 1996, progress payments of $318,043 and $296,431, respectively, have been offset against inventories and costs of uncompleted contracts. 20 21 PEERLESS MFG. CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 1997, 1996 and 1995 NOTE D - PROPERTY, PLANT AND EQUIPMENT AND PROPERTY HELD FOR INVESTMENT Property, plant and equipment is summarized as follows:
June 30, ------------------ 1997 1996 ---- ---- Buildings $ 1,380,241 $ 1,418,842 Equipment 2,432,792 2,300,777 Furniture and fixtures 1,585,930 1,114,583 ----------- ----------- 5,398,963 4,834,202 Less accumulated depreciation (4,131,323) (3,880,559) ----------- ----------- 1,267,640 953,643 Land 260,216 260,216 ----------- ----------- $ 1,527,856 $ 1,213,859 =========== =========== Property held for investment is summarized as follows: June 30, ------------------ 1997 1996 ---- ---- Buildings $ 1,641,769 $ 1,641,776 Equipment 158,171 158,171 ----------- ----------- 1,799,940 1,799,947 Less accumulated depreciation (1,440,967) (1,380,582) ----------- ----------- 358,973 419,365 Land 529,410 529,410 ----------- ----------- $ 888,383 $ 948,775 =========== ===========
21 22 PEERLESS MFG. CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 1997, 1996 and 1995 NOTE E - CREDIT ARRANGEMENT The Company has banking agreements for unsecured revolving lines of credit in the combined amount of $7,500,000 due upon demand, with interest at the banks' prime lending rate (8.50% at June 30, 1997), payable monthly. The banks charge usage fees at an annual rate of .25% of the average daily unused portion of the line. At June 30, 1997 and 1996, no amounts were outstanding under the lines. The Company had letters of credit outstanding under separate arrangements of $3,597,646 and $3,259,533 at June 30, 1997 and 1996, respectively. Other assets with a cost of approximately $566,000 were pledged against the letters of credit outstanding at June 30, 1997. NOTE F - STOCKHOLDERS' EQUITY The Company has a 1985 restricted stock plan (the 1985 Plan) under which 75,000 shares of common stock were reserved for awards to employees. Restricted stock grants made under the 1985 Plan vest over a five-year period. The Company awarded 12,000 shares (fair value at date of grant of $135,000) in fiscal 1995 and 8,000 shares (fair value at date of grant of $80,250), of which 3,000 shares were subsequently forfeited, in fiscal 1997. Compensation expense for stock grants is charged to earnings over the five-year restriction period and amounted to $26,625, $63,357 and $67,234 in fiscal 1997, 1996, and 1995, respectively. The tax effect of differences between compensation expense for financial statement and income tax purposes is charged or credited to additional paid-in capital. In December 1995, the Company adopted a stock option and restricted stock plan (the 1995 Plan), which provides for a maximum of 100,000 shares of common stock to be issued. Stock options are granted at market value, vest generally over four years, and expire ten years from date of grant. At June 30, 1997, 67,250 shares of common stock were available for issuance under the 1995 Plan, and 4,750 shares were available under the 1985 Plan. The Company has adopted the disclosure provisions of SFAS 123. It applies APB 25 and related interpretations in accounting for stock options issued and, therefore, does not recognize compensation expense for stock options granted at or greater than market value. If the Company had elected to recognize compensation expense based upon the fair value at the 22 23 PEERLESS MFG. CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 1997, 1996 and 1995 NOTE F - STOCKHOLDERS' EQUITY - CONTINUED grant date for awards under this plan consistent with the methodology prescribed by SFAS 123, the effect on net earnings and earnings per share would have been as follows:
Year ended Year ended June 30, 1997 June 30, 1996 ------------- ------------- Net earnings - as reported $537,416 $789,721 Net earnings - pro forma 527,012 784,896 Earnings per share - as reported .37 .55 Earnings per share - pro forma .36 .54
The fair value of these options was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions: expected volatility of 45%; risk-free interest rates ranging from 4.6% to 5.3%; dividend yield of 3.7% in fiscal 1997 and 5.4% in fiscal 1996; and expected lives of five years. Additional information with respect to options outstanding under the plan is as follows:
Number of shares Weighted average Stock options underlying options exercise price ------------- ------------------ -------------- Outstanding at June 30, 1995 -- $ -- Granted 34,000 9.25 ------ Outstanding at June 30, 1996 34,000 9.25 Granted 2,500 13.33 Exercised (1,250) 9.25 Canceled/forfeited (3,750) 9.25 ------ Outstanding at June 30, 1997 31,500 9.57 ====== Exercisable at June 30, 1997 9,250 9.25 ====== Exercisable at June 30, 1996 -- ======
23 24 PEERLESS MFG. CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 1997, 1996 and 1995 NOTE F - STOCKHOLDERS' EQUITY - CONTINUED The weighted-average remaining life of options outstanding at June 30, 1997 was 9.08 years. The weighted average fair-value at grant date for options granted in 1997 was $1.82. On May 21, 1997, the Board of Directors declared a dividend of one common share purchase right for each outstanding share of common stock to shareholders of record at the close of business on June 2, 1997. Each Right entitles the registered holder to purchase from the Company one common share at a price of $30.00, subject to adjustment, as more fully set forth in a Rights Agreement dated May 22, 1997. The Rights will become exercisable only in the event that any person or group of affiliated persons acquires, or obtains the right to acquire, beneficial ownership of 20% or more of the outstanding common shares or commences a tender or exchange offer, the consummation of which would result in the beneficial ownership by a person or group of 20% or more of such outstanding common shares. The rights are redeemable under certain circumstances at $.01 each and expire in May 2007. NOTE G - EMPLOYEE BENEFIT PLANS The Company has a 401(k) Plan to provide eligible employees with a retirement savings plan. All employees are eligible to participate in the plan upon completing 90 days of service. Company contributions are voluntary and at the discretion of the Board of Directors of the Company. The Company's contribution expense for the years ended June 30, 1997, 1996 and 1995 was $119,500, $109,000 and $103,000, respectively. NOTE H - FEDERAL INCOME TAXES Deferred taxes are provided for the temporary differences between the financial reporting bases and the tax bases of the Company's assets and liabilities. The temporary differences that give rise to the deferred tax assets or liabilities are as follows: 24 25 PEERLESS MFG. CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 1997, 1996 and 1995 NOTE H - FEDERAL INCOME TAXES - CONTINUED
June 30, ---------------- 1997 1996 ---- ---- Deferred tax assets Restricted stock grants $ 13,938 $ 19,125 Inventories 28,362 16,052 Foreign subsidiaries' net operating loss carryforwards 145,157 15,371 Accrued expenses 243,090 311,237 Other 52,701 70,158 --------- --------- 483,248 431,943 Less valuation allowance (29,710) (160,405) --------- --------- $ 453,538 $ 271,538 ========= ========= Deferred tax liabilities Property, plant and equipment $(110,396) $ (88,491) Uncompleted contracts (135,006) (39,014) Other (3,504) (4,587) --------- --------- $(248,906) $(132,092) ========= ========= Net deferred tax asset $ 204,632 $ 139,446 ========= =========
Deferred tax assets and liabilities included in the balance sheet are as follows:
June 30, ------------------- 1997 1996 ---- ---- Current deferred tax asset $ 269,721 $ 226,214 Noncurrent deferred tax asset 34,873 -- Noncurrent deferred tax liability (99,962) (86,768) --------- --------- $ 204,632 $ 139,446 ========= =========
25 26 PEERLESS MFG. CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 1997, 1996 and 1995 NOTE H - FEDERAL INCOME TAXES - CONTINUED The provision for income taxes consisted of the following:
1997 1996 1995 ------ ------ ----- Federal Current $ 41,765 $ 348,830 $581,976 Deferred (65,185) (4,596) 21,369 State 24,000 48,193 79,070 --------- --------- -------- $ 580 $ 392,427 $682,415 ========= ========= ========
The valuation allowance relates to deferred tax assets of foreign subsidiaries. These assets are recoverable only from future income of the respective foreign subsidiaries. Because of a recapitalization of Europe Limited and a reorganization of European operations, the Company concluded at June 30, 1997 that it was more likely than not that certain of the deferred tax assets are recoverable, and the valuation allowance was reduced. Utilization of foreign net operating carryforwards reduced income tax expense by approximately $130,000, $19,000 and $55,000 for 1997, 1996 and 1995, respectively. The effective income tax rate varies from the statutory rate due to the following:
As a percentage of pretax earnings --------------------------- 1997 1996 1995 ---- ---- ---- Income tax expense at statutory rate 34.0% 34.0% 34.0% Increase (decrease) in income taxes resulting from State tax, net of federal benefits 2.9 2.8 2.9 Foreign sales corporation exclusions (10.2) (1.5) (3.1) Change in valuation allowance (24.3) 3.5 (1.4) Other (2.3) (5.6) 3.4 ----- ----- ----- Income tax expense at effective rate .1% 33.2% 35.8% ===== ===== =====
26 27 PEERLESS MFG. CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 1997, 1996 and 1995 NOTE I - INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION The Company's operations consist of a dominant industry segment, the designing and manufacturing of specialized products for the removal of contaminants from gases and liquids and for air pollution abatement, principally in the United States and the United Kingdom. Information about the Company's operations in different geographic areas as of and for the years ended June 30, 1997, 1996 and 1995 is as follows:
United United States Kingdom Other Eliminations Consolidated ------ ------- ----- ------------ ------------ 1997 - ---- Net sales to unaffiliated customers $35,553,000 $ 4,601,000 $ 1,332,000 $ -- $41,486,000 Transfers between geographic areas 889,000 4,000 -- (893,000) -- ----------- ----------- ----------- ----------- ----------- Total $36,442,000 $ 4,605,000 $ 1,332,000 $ (893,000) $41,486,000 =========== =========== =========== =========== =========== Operating profit (loss) $ 549,000 $ (129,000) $ (12,000) $ (1,000) $ 407,000 =========== =========== =========== =========== =========== Identifiable assets $17,409,000 $ 2,790,000 $ 1,027,000 $(2,144,000) $19,082,000 =========== =========== =========== =========== =========== 1996 - ---- Net sales to unaffiliated customers $26,775,000 $ 4,764,000 $ 2,105,000 $ -- $33,644,000 Transfers between geographic areas 984,000 630,000 -- (1,614,000) -- ----------- ----------- ----------- ----------- ----------- Total $27,759,000 $ 5,394,000 $ 2,105,000 $(1,614,000) $33,644,000 =========== =========== =========== =========== =========== Operating profit (loss) $ 1,119,000 $ 145,000 $ (39,000) $ (21,000) $ 1,204,000 =========== =========== =========== =========== =========== Identifiable assets $17,244,000 $ 2,112,000 $ 1,599,000 $(2,764,000) $18,191,000 =========== =========== =========== =========== ===========
27 28 PEERLESS MFG. CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 1997, 1996 and 1995 NOTE I - INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION - CONTINUED
United United States Kingdom Other Eliminations Consolidated ------ ------- ----- ------------ ------------ 1995 - ---- Net sales to unaffiliated customers $27,673,000 $ 3,261,000 $1,155,000 $ -- $32,089,000 Transfers between geographic areas 479,000 373,000 -- (852,000) -- ----------- ----------- ---------- ----------- ----------- Total $28,152,000 $ 3,634,000 $1,155,000 $ (852,000) $32,089,000 =========== =========== ========== =========== =========== Operating profit (loss) $ 1,812,000 $ (13,000) $ 9,000 $ 5,000 $ 1,813,000 =========== =========== ========== =========== =========== Identifiable assets $16,048,000 $ 2,113,000 $1,237,000 $(2,242,000) $17,156,000 =========== =========== ========== =========== ===========
Transfers between the geographic areas primarily represent intercompany export sales and are accounted for based on established sales prices between the related companies. In computing operating profit (loss), no allocations of general corporate expenses have been made. Identifiable assets of geographic areas are those assets related to the Company's operations in each area. United States assets consist of all other operating assets of the Company. Export sales account for a significant portion of the Company's revenues and are summarized by geographic area as follows:
1997 1996 1995 ------ ------- ------ North and South America (excluding U.S.A.) $ 5,899,000 $ 5,864,000 $ 3,817,000 Europe 5,213,000 6,627,000 5,055,000 Asia 11,023,000 5,188,000 8,008,000 Other 3,470,000 1,756,000 826,000 ----------- ----------- ----------- $25,605,000 $19,435,000 $17,706,000 =========== =========== ===========
28 29 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE Board of Directors Peerless Mfg. Co. In connection with our audit of the consolidated financial statements of Peerless Mfg. Co. and Subsidiaries referred to in our report dated September 2, 1997, which is included in Part II of this form, we have also audited Schedule II for each of the three years in the period ended June 30, 1997. In our opinion, this schedule presents fairly, in all material respects, the information required to be set forth therein. GRANT THORNTON LLP Dallas, Texas September 2, 1997 29 30 PEERLESS MFG. CO. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS June 30,
Additions Balance at ---------------------------- beginning of Charged to Charged to Balance at Description period expenses other accounts(1) Deductions(2) end of period ----------- ------ -------- ----------------- ------------- ------------- 1997 - ---- Allowance for doubtful accounts $100,000 $249,612 $ -- $ 37,162(2) $312,450 ======== ======== ==== ======== ======== Deferred tax valuation allowance $160,405 $ -- $ -- $130,695(3) $ 29,710 ======== ======== ==== ======== ======== 1996 - ---- Allowance for doubtful accounts $ 99,082 $ 44,307 $852 $ 44,241(2) $100,000 ======== ======== ==== ======== ======== Deferred tax valuation allowance $121,091 $ 39,314 $ -- $ -- $160,405 ======== ======== ==== ======== ======== 1995 - ---- Allowance for doubtful accounts $ 85,827 $ 55,401 $ -- $ 42,146(2) $ 99,082 ======== ======== ==== ======== ======== Deferred tax valuation allowance $147,071 $ -- $ -- $ 25,980(3) $121,091 ======== ======== ==== ======== ========
(1) Collections on accounts previously written off. (2) Write offs. (3) Utilization and/or revaluation of net operating loss carryovers. 30 31 SIGNATURES Pursuant to the requirements 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. PEERLESS MFG. CO. Date: October 28, 1997 By: /s/ Sherrill Stone ----------------------------- Sherrill Stone, Chairman, President and Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----