SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period
Ended March 31, 1996 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 report.
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 preceeding 12 months (or for 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 close of the period covered by
this report.
Class Outstanding at March 31, 1996
_____________________________ _________________________________
Common stock, $1.00 par value 1,446,742 Shares
PEERLESS MFG. CO.
INDEX
Page
Number
Part I: Financial Information _________
Condensed Consolidated Balance Sheets for the
periods ended March 31, 1996 and June 30, 1995 3
Condensed Consolidated Statements of Earnings
for the three and nine months ended March 31,
1996 and 1995 4
Condensed Consolidated Statements of Cash Flows for
the nine months ended March 31, 1996 and 1995 5
Notes to the Condensed Consolidated Financial 6
Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 & 8
Part II: Other Information 9
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PEERLESS MFG. CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, JUNE 30,
------------- -------------
1996 1995
------------- -------------
ASSETS (UNAUDITED) (AUDITED)
Current assets:
Cash and cash equivalents $722,702 $961,747
Short term investments 478,163 821,968
Accounts receivable 10,673,563 9,135,623
Inventories:
Raw materials 786,090 988,275
Work in process 2,779,517 1,590,050
Finished goods 254,539 238,449
Deferred income taxes 232,554 232,554
Other 370,040 334,876
----------- -----------
Total current assets 16,297,168 14,303,542
Property,plant and equipment-net 1,166,525 1,282,275
Property held for investment-net 909,444 952,823
Other assets 378,815 617,415
----------- -----------
$18,751,952 $17,156,055
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $650,000 $0
Accounts payable-trade 4,280,786 3,096,025
Advance payments from customers 886,164 600,957
Commissions payable 449,206 509,512
Accrued liabilities 1,160,431 1,065,878
----------- -----------
Total current liabilities 7,426,587 5,272,372
Deferred income taxes 97,704 97,704
Stockholders' equity:
Common stock-authorized 4,000,000 shares of $1 par
value; issued and outstanding, 1,446,742 shares 1,446,742 1,446,742
Additional paid-in capital 2,493,428 2,493,428
Unamortized value of restricted stock issue (49,589) (97,107)
Cumulative foreign currency translation adjustmen 42,430 56,110
Retained earnings 7,294,650 7,886,806
----------- -----------
11,227,661 11,785,979
----------- -----------
$18,751,952 $17,156,055
=========== ===========
<FN>
The accompanying notes are an integral part of these statements.
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PEERLESS MFG. CO.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
Three Months Ended Nine Months Ended
-------------------------- ---------------------------
March 31, March 31,
-------------------------- ---------------------------
1996 1995 1996 1995
---------- ---------- ----------- -----------
Net sales $8,625,252 $5,997,883 $23,932,261 $23,479,281
Cost of goods sold 5,865,651 3,977,265 17,119,929 15,530,858
---------- ---------- ---------- ----------
Gross profit 2,759,601 2,020,618 6,812,332 7,948,423
Operating expenses
Marketing and engineering 1,926,270 1,754,629 5,636,403 5,227,918
General and administrative 420,649 465,749 1,093,595 1,295,453
---------- ---------- ---------- ----------
Operating income(loss) 412,682 (199,760) 82,334 1,425,052
Other income(expense)
Interest 3,936 35,335 34,048 61,300
Sundry 84,163 (57,081) 52,924 (146,886)
---------- ---------- ---------- ----------
88,099 (21,746) 86,972 (85,586)
---------- ---------- ---------- ----------
Earnings(loss) from operations
before Federal income tax 500,781 (221,506) 169,306 1,339,466
Federal income tax
Current 155,670 (23,195) 38,084 524,606
Deferred 0 0 0 0
---------- ---------- ---------- ----------
155,670 (23,195) 38,084 524,606
---------- ---------- ---------- ----------
Net earnings(loss) 345,111 (198,311) 131,222 814,860
========== ========== ========== ==========
Net earnings per common share $0.24 ($0.14) $0.09 $0.56
========== ========== ========== ==========
Weighted average number of common
shares outstanding 1,446,742 1,448,053 1,446,742 1,440,471
========== ========== ========== ==========
Cash dividend per common share $0.125 $0.125 $0.375 $0.375
========== ========== ========== ==========
<FN>
The accompanying notes are an integral part of these statements.
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PEERLESS MFG. CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the nine months ended
March 31,
-------------------------
1996 1995
------------ ------------
Cash flows from operating activities:
Net earnings(loss) from operating activities $131,222 $814,860
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:
Depreciation and amortization 228,866 295,158
Other 47,518 35,762
Changes in assets and liabilities
(Increase) decrease in:
Accounts receivable (1,537,940) 3,993,693
Inventories (1,003,372) 1,738,204
Other current assets (35,164) 80,811
Other assets 231,037 (2,938)
Increase (decrease) in:
Accounts payable 1,184,761 (1,140,712)
Commissions payable (60,306) (71,844)
Advance payments from customers 285,207 (1,914,509)
Income taxes payable 0 (250,211)
Accrued liabilities (86,297) (149,412)
---------- ----------
(745,690) 2,614,002
---------- ----------
Net cash (used in) provided by continuing operations (614,468) 3,428,862
Cash flows from investing activities:
Net purchases of short term investments 343,805 (2,100,644)
Purchase of equipment net of disposals (62,174) (294,470)
---------- ----------
Net cash used in investing activities 281,631 (2,395,114)
Cash flows from financing activities:
Dividends paid (542,528) (540,279)
Net borrowing 650,000 (260,400)
---------- ----------
Net cash used in financing activities 107,472 (800,679)
Effect of exchange rate on cash (13,680) 47,624
---------- ----------
Net increase (decrease) in cash
and cash equivalents (239,045) 280,693
Cash and cash equivalents at beginning of period 961,747 619,990
---------- ----------
Cash and cash equivalents at end period $722,702 $900,683
========== ==========
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PEERLESS MFG. CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments,
consisting of only the normal recurring accruals, necessary
to present fairly its financial position as of March 31,
1996 and June 30, 1995, the results of operations for the
three and nine month periods ended March 31, 1996 and 1995
and the cash flows for the nine months ended March 31, 1996
and 1995.
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 pressure vessels
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 recognizes sales of
custom-contracted products at the completion of the
manufacturing process, which normally is less than one year.
3. The adjusted backlog of unshipped orders and letters of
intent at March 31, 1996 was approximately $17,600,000 as
compared to a March 31, 1995 backlog of approximately
$15,100,000. Of the $17,600,000 backlog at March 31, 1996,
approximately 66% is scheduled to be shipped in the current
fiscal year.
4. The Company has a formal agreement with a bank for a
$5,000,000 continuing line of credit, renewable annually.
Under the terms of this agreement, the 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. As of March 31, 1996 and 1995, the Company had
$650,000 and 0 loans outstanding respectively.
5. The Company consolidates the accounts of its wholly-owned
foreign subsidiaries, Peerless Europe Limited, Peerless
International N.V. and its wholly-owned foreign subsidiary,
Peerless Europe B.V. All significant intercompany accounts
and transactions have been eliminated in consolidation.
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PEERLESS MFG. CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 $239,045 from June 30, 1995.
Company operations used $614,468 of cash during the nine months
ended March 31, 1996. Additional cash distributions for the
period were composed of fixed asset acquisitions amounting to
$62,174, dividend distributions of $542,528, and additional
short-term investments of $343,805.
As indicated, operations used $614,468 of cash in the nine months
ended March 31, 1996. Primarily, this use of funds resulted from
(a) an increase in accounts receivable of $1,537,940, increased
inventories for continued and new projects of $1,003,372, an
increase in other current assets of $35,164, a decrease in
commissions payable of $60,306 and a decrease in accrued
liabilities of $86,297; offset by (b) an increase in accounts
payable of $1,184,761, increased customer advances of $285,207,
and a decrease in other assets of $231,037.
The Company has historically financed 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 addition
to retained earnings, the Company has from time to time used a
short-term bank credit line of $5,000,000 to supplement working
capital. The Company has no material commitments for capital
expenditures other than those required to maintain existing plant
and equipment.
Results Of Operations
---------------------
Dollar and Percentage Variance
Comparison to Three Months Ended Nine Months Ended
Fiscal 1995 Mar. 31, 1996 Mar. 31, 1996
Relevant Periods 1995-1996 1995-1996
- - -------------------- ------------------- -------------------
Sales $2,627,369 $452,980
43.8% 1.9%
The increase of current quarter sales compared to the same
quarter of the previous year is the result of sales increases
from the United Kingdom Subsidiary, Pressure Products Division
and the SCR Systems Division of approximately $348,000, $781,000
and $1,634,000 respectively.
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Dollar and Percentage Variance
Three Months Ended Nine Months Ended
Mar. 31, 1996 Mar. 31, 1996
1995-1996 1995-1996
- - -------------------- ------------------- -------------------
Gross Profit $738,983 ($1,136,091)
36.6% (14.3%)
In the third quarter, gross profit as a percentage of sales was
32.0% for the three months ended March 31, 1996 vs. 33.7% for the
three months ended March 31, 1995. The decrease in gross profit
percentages in the current quarter was primarily due to lower
profits available on the mix of products shipped during this
period. The overall margin was impacted with more SCR Systems
Division shipments containing lower margin value added components
used in the manufacturing process. The decline in gross profit
percentages for the nine month period was primarily due to lower
profit margins available on the mix of products shipped in the
current nine month period ended March 31, 1996 compared to higher
margins on products shipped for the nine month period ended March
31, 1995.
- - -------------------- ------------------- -------------------
Operating Expenses $126,541 $206,627
5.7% 3.2%
The third quarter increase in operating expenses is primarily
attributable to an increase in sales expenses of approximately
$178,000 offset by decreases in commission expenses.
- - -------------------- ------------------- -------------------
Other Income(Expense) $109,845 $172,558
In the quarter ended March 31, 1996, the Company recorded other
income of approximately $110,000 related to insurance proceeds
received in excess of cost for refurbishment.
- - -------------------- ------------------- -------------------
Net Earnings (Loss) $543,422 ($683,638)
The increase in net earnings for the three months ended March 31,
1996, when compared to the preceding fiscal year, is directly
attributable to the increased sales volume of $2,627,369.
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PEERLESS MFG. CO.
PART II
OTHER INFORMATION
NOT APPLICABLE
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. -- Registrant
Dated: May 1, 1996
Sherrill Stone
Chairman, President and
Chief Executive Officer
Kent J. Van Houten
Secretary - Treasurer and
Chief Financial Officer
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