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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --------- EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2000
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 Identification No.)
Incorporation or Organization)
2819 WALNUT HILL LANE, DALLAS, TEXAS 75229
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
(214) 357-6181
(Registrant's Telephone Number, Including Area Code)
Indicate by check 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 past 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
As of February 9, 2001, there were 1,474,492 shares of the Registrant's
common stock outstanding.
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PEERLESS MFG. CO. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
NUMBER
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PART I: FINANCIAL INFORMATION.
Item 1. Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at December 31, 2000
and June 30, 2000....................................................................... 1
Condensed Consolidated Statements of Operations for the
three and six months ended December 31, 2000 and 1999................................... 2
Condensed Consolidated Statements of Cash Flows for
the six months ended December 31, 2000 and 1999......................................... 3
Notes to the Condensed Consolidated Financial Statements................................ 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. ................................................... 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk................... 12
PART II:.OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.................................... 13
Item 4. Submission of Matters to a Vote of Security Holders.......................... 13
Item 6. Exhibits and Reports on Form 8-K............................................. 13
SIGNATURES....................................................................................... 16
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PEERLESS MFG. CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
December 31, June 30,
2000 2000
------------ --------
ASSETS
Current assets:
Cash and cash equivalents $ 1,419 $ 561
Short term investments 240 273
Accounts receivable-principally trade-net 16,986 12,319
Inventories 3,877 3,288
Costs and earnings in excess of billings 7,912 9,912
Other 1,105 1,175
-------- --------
Total current assets 31,539 27,528
Property, plant and equipment-net 3,274 3,509
Other assets 772 1,083
-------- --------
$ 35,585 $ 32,120
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 7,016 $ 5,800
Accounts payable-trade 7,606 6,471
Current maturities of long-term debt 400 421
Billings in excess of costs and earnings 1,068 364
Commissions payable 1,222 985
Accrued liabilities and other 2,297 1,548
-------- --------
Total current liabilities 19,609 15,589
Long-term debt, net of current maturities 1,400 1,406
Deferred income taxes 376 376
Shareholders' equity:
Common stock 1,473 1,467
Additional paid-in capital 2,749 2,692
Unamortized value of restricted stock grants (50) (71)
Cumulative foreign currency
translation adjustment (13) (148)
Retained earnings 10,041 10,809
-------- --------
Total shareholders' equity 14,200 14,749
-------- --------
$ 35,585 $ 32,120
======== ========
See accompanying notes to condensed consolidated financial statements.
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PEERLESS MFG. CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended Six Months Ended
December 31, December 31,
---------------------- ----------------------
2000 1999 2000 1999
-------- -------- -------- --------
Revenues $ 16,383 $ 10,358 $ 27,442 $ 22,665
Cost of goods sold 12,001 6,458 19,983 15,170
-------- -------- -------- --------
Gross profit 4,382 3,900 7,459 7,495
Operating expenses 3,922 3,187 7,538 6,388
-------- -------- -------- --------
Operating income (loss) 460 713 (79) 1,107
Other income (expense)
Interest expense, net (231) (10) (415) (17)
Foreign exchange gains (losses) 7 (13) (83) 64
Other, net (27) (9) (58) (27)
-------- -------- -------- --------
(251) (32) (556) 20
-------- -------- -------- --------
Earnings (loss) before federal income tax 209 681 (635) 1,127
Federal income tax (benefit) 77 242 (235) 401
-------- -------- -------- --------
Net earnings (loss) 132 439 (400) 726
======== ======== ======== ========
Basic earnings (loss) per share $ 0.09 $ 0.30 $ (0.27) $ 0.50
======== ======== ======== ========
Diluted earnings (loss) per share $ 0.09 $ 0.30 $ (0.27) $ 0.50
======== ======== ======== ========
See accompanying notes to condensed consolidated financial statements
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PEERLESS MFG. CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Six months ended
December 31,
------------
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (400) $ 726
Adjustments to reconcile earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 179 207
Other 21 3
Changes in assets and liabilities:
Accounts receivable (4,667) 1,796
Inventories (589) 1,586
Cost and earnings in excess of billings 2,000 (1,301)
Other current assets 70 (515)
Other assets 412 102
Accounts payable 1,135 (499)
Billings in excess of costs and earnings 704 1,271
Commissions payable 237 (15)
Accrued liabilities 749 (508)
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251 2,127
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Net cash provided by (used in) operating activities (149) 2,853
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchases of property and equipment (12) (192)
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Net cash used in investing activities (12) (192)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term borrowings 1,189 0
Proceeds from issuance of common stock 63 37
Dividends paid (368) (363)
------- -------
Net cash provided by (used in) financing activities 884 (326)
Effect of exchange rate changes on cash and cash equivalents 135 (17)
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Net increase in cash and cash equivalents 858 2,318
Cash and cash equivalents at beginning of period 561 211
------- -------
Cash and cash equivalents at end period $ 1,419 $ 2,529
======= =======
See accompanying notes to condensed consolidated financial statements.
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PEERLESS MFG. CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSAND, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
1. BASIS OF PRESENTATION.
These unaudited condensed consolidated financial statements of Peerless
Mfg. Co. and its subsidiaries have been prepared in accordance with
accounting principles generally accepted in the United States for
interim financial reporting. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements and should be read in
conjunction with the company's Form 10-K for the fiscal year ended June
30, 2000. All significant intercompany transactions and balances have
been eliminated in consolidation. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair presentation of the interim financial
information have been included.
Operating results for the interim periods are not necessarily
indicative of results that may be expected for the fiscal year ending
June 30, 2001. Certain fiscal year 2000 items have been reclassified to
conform with the fiscal year 2001 presentation.
2. EARNINGS (LOSS) PER SHARE.
Basic earnings (loss) per share have been computed by dividing net
earnings (loss) available to common shareholders by the weighted
average number of common shares outstanding during the period. Diluted
earnings (loss) per share reflect the potential dilution that could
occur if securities or other contracts to issue common shares were
exercised or converted into common stock.
The following table presents the calculation of earnings (loss) per
share for the periods indicated. (In thousands, except per share
amounts):
Three Months Ended Six Months Ended
December 31, December 31,
------------------ -------------------
2000 1999 2000 1999
------ ------ ------- ------
Net earnings (loss) $ 132 $ 439 $ (400) $ 726
====== ====== ======= ======
Basic weighted average common
shares outstanding 1,471 1,458 1,471 1,455
Effect of dilutive options 18 5 -- 7
------ ------ ------- ------
Diluted weighted average common
shares outstanding 1,489 1,463 1,471 1,462
Net income (loss) per share - basic $ 0.09 $ 0.30 $ (0.27) $ 0.50
Net income (loss) per share - diluted $ 0.09 $ 0.30 $ (0.27) $ 0.50
The weighted average common shares outstanding-diluted computation for
the three and six months ended December 31, 2000, respectively, excluded
0 and 70,000 stock options because their impact would be anti-dilutive.
For the three and six months ended December 31, 1999, respectively,
48,300 stock options were excluded because their impact
would be anti-dilutive.
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PEERLESS MFG. CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSAND, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
3. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) is defined as the change in equity during a
period from transactions or other events and circumstances from
non-ownership sources. It includes all changes in equity during a
period, except those resulting from investments by owners and
distributions to owners. The components of comprehensive income were as
follows.
Three Months Ended Six Months Ended
December 31, December 31,
------------------ ----------------
2000 1999 2000 1999
---- ----- ----- -----
Net earnings (loss) $132 $ 439 $(400) $ 726
Foreign currency translation 74 (4) 135 (17)
---- ----- ----- -----
Comprehensive income (loss) $206 $ 435 $(265) $ 709
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4. SUPPLEMENTAL CASH FLOW INFORMATION
Net cash flow from operating activities reflects cash payments for
interest and income taxes as follows:
Six Months Ended
December 31,
----------------
2000 1999
---- ---
Interest paid $284 $ 8
Income taxes paid $ 94 $18
5. USE OF ESTIMATES.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management
to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could
differ from those estimates.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSAND, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
6. INVENTORIES.
Inventories are stated at the lower of cost or market. Principal
components of inventories are as follows:
December 31, June 30,
2000 2000
------------ --------
Raw materials $1,592 $1,252
Work in process 1,248 1,669
Finished goods 1,037 367
------ ------
Total inventories $3,877 $3,288
7. SEGMENT INFORMATION.
The company has two reportable industry segments: (1) gas/liquid
filtration; and (2) selective catalytic reduction systems. The
gas/liquid filtration segment produces various types of separators and
filters used for removing liquids and solids from gases and air. This
segment also provides engineering design and services, pulsation
dampeners, natural gas odorizers, quick-opening closures and parts for
its products. The selective catalytic reduction systems segment
produces "Selective Catalytic Reduction Systems (SCR)" used to separate
nitrogen oxide (NOx) emissions from exhaust gases caused by burning
hydrocarbon fuels such as coal, gasoline, natural gas and oil. We
combine these products with other components as totally integrated
systems. Many of the company's components are packaged on skids
complete with instruments, controls and related valves and piping.
Segment profit and loss is based on revenue, less direct costs of the
segment before allocation of general, administrative, research and
development costs. There were no sales or transfers between segments.
Segment information and a reconciliation to operating profit for the
three and six months ended December 31, 2000 and 1999 are presented
below. Note that the company does not allocate assets, expenditures for
assets or depreciation expense on a segment basis for internal
management reporting and, therefore, such information is not presented.
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PEERLESS MFG. CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSAND, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Selective
Catalytic Unallocated Consolidated
Gas/Liquid Reduction Corporate
Filtration Systems Overhead
------------------------------------------------------
THREE MONTHS ENDED
DECEMBER 31, 2000
Revenues from customers $6,402 $9,981 $ -- $16,383
Segment profit (loss) 1,455 1,392 (2,387) 460
THREE MONTHS ENDED
DECEMBER 31, 1999
Revenues from customers $6,785 $3,573 $ -- $10,358
Segment profit (loss) 1,110 686 (1,083) 713
Selective
Catalytic Unallocated Consolidated
Gas/Liquid Reduction Corporate
Filtration Systems Overhead
- ---------------------------------------------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 2000
Revenues from customers $11,059 $16,383 $ -- $ 27,442
Segment profit (loss) 1,158 3,237 (4,474) (79)
SIX MONTHS ENDED
DECEMBER 31, 1999
Revenues from customers $16,200 $ 6,465 $ -- $ 22,665
Segment profit (loss) 2,001 1,328 (2,222) 1,107
8. BUSINESS COMBINATION.
On February 25, 2000, the company purchased substantially all the
assets of ABCO Industries, Inc. ("ABCO") for approximately $1.7
million. The ABCO acquisition was accounted for as a purchase and,
accordingly, the condensed consolidated financial statements reflect
the operations of the acquired entity since the acquisition date. ABCO
is in the business of designing and manufacturing industrial boilers.
The following unaudited proforma financial information presents the
combined results of operations as if the ABCO acquisition had occurred
at the beginning of fiscal year 2000, after giving effect to certain
adjustments. The proforma results do not necessarily represent results
which would have occurred if the ABCO transaction had taken place as
assumed above, nor are they indicative of the results of future
combined operations.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSAND, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended Six Months Ended
December 31,1999 December 31,1999
------------------ ----------------
Sales $ 12,690 $ 29,052
Net loss (86) (42)
Per share-basic (0.06) (0.03)
Per share-diluted (0.06) (0.03)
9. CONTINGENCIES.
The company is involved in various claims and legal actions arising in
the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse
effect on the company's consolidated financial position and results of
operations, taken as a whole.
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PEERLESS MFG. CO. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
The company's fiscal year ends on June 30th. References herein to fiscal 2000
and fiscal 2001 refer to our fiscal years ended June 30, 2000 and 2001,
respectively.
The following table displays the company's statements of operations as a
percentage of net revenues:
Three Months Ended Six Months Ended
December 31, December 31,
------------------- -------------------
2000 1999 2000 1999
------ ------ ------ ------
Net revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues 73.3 62.3 72.8 66.9
Gross margin 26.7 37.7 27.2 33.1
Operating expenses 23.9 30.8 27.5 28.2
------ ------ ------ ------
Earnings (loss) from operations 2.8 6.9 (0.3) 4.9
Interest expense, net (1.4) (0.1) (1.5) (0.1)
Other, net (0.1) (0.2) (0.5) 0.2
------ ------ ------ ------
Earnings (loss) before income taxes 1.3 6.6 (2.3) 5.0
Income taxes (benefit) 0.5 2.4 (0.8) 1.8
Net earnings (loss) 0.8% 4.2% (1.5)% 3.2%
====== ====== ====== ======
THREE MONTHS ENDED DECEMBER 31, 2000 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1999
Net revenues increased $6.0 million, or 58%, to $16.4 million for the three
months ended December 31, 2000 from $10.4 million for the three months ended
December 31, 1999. Domestic revenues increased 50% to $15.0 million for the
three months ended December 31, 2000 from $10.0 million from the same period a
year ago. Domestic revenues increase was caused by the increase in demand for
our SCR products.
Additional SCR opportunities are the direct result of the new gas turbine
powered electric generating facilities being built to fill demand for
electricity in the U.S. These projects use clean burning gas, which in turn
creates the opportunity to sell our gas cleaning equipment. Coal fired electric
power plants are also contributing to the stronger demand we are seeing for our
SCR products. These products are necessary to insure compliance with the U.S.
government's mandate for lower NOx emission levels. We provide ammonia storage
and delivery systems to be used as part of the SCR systems to be installed at
these coal fired plants.
Foreign revenues increased 273% to $1.4 million for the three months ended
December 31, 2000 from $0.4 million for the three months ended December 31,
1999. The increase was attributable to the timing and size of new orders
received by the company from its foreign customers.
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Our backlog of unfilled orders was approximately $24 million at December 31,
2000 as compared to approximately $39 million at December 31, 1999. The decrease
is primarily due to a significant SCR order booked in December of 1999. The
company's backlog as of January 31, 2001 was approximately $42 million as a
result of several SCR orders placed.
Our gross profit increased $0.5 million, to $4.4 million for the three months
ended December 31, 2000 from $3.9 million for the same period a year ago. Gross
profit, as a percentage of sales, decreased to 26.7% for the current quarter
from 37.7% a year ago. The lower gross profit margin was primarily due to
increased SCR revenues, which had a lower gross margin percentage in the period
as compared to the gas and liquid filtration products, along with the additional
costs associated with the manufacturing capacity acquired with the ABCO
Industries, Inc. ("ABCO") acquisition in February 2000.
Operating expenses increased by $0.7 million, or 23%, to $3.9 million for the
three months ended December 31, 2000, from $3.2 million for the three months
ended December 31, 1999. Operating expenses decreased as a percent of sales to
23.9 % versus 30.8% for the comparable period. The increase in operating
expenses was primarily due to costs associated with the ABCO acquisition and
additional costs of engineering and project management required for the
increased SCR activities.
Interest expense increased by $0.2 million, as a result of increased debt
incurred to finance our working capital needs and as a result of the financing
required to acquire the ABCO operations.
As a result of the factors discussed above, we recorded net earnings for the
quarter ended December 31, 2000 of $0.1 million compared to net income of $0.4
million for the same period a year ago.
SIX MONTHS ENDED DECEMBER 31, 2000 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1999
Net revenues increased $4.8 million, or 21%, to $27.4 million for the six months
ended December 31, 2000, compared to $22.7 million for the same period a year
ago. Domestic revenues increased 28% to $25.0 million for the six months ended
December 31, 2000, compared to $19.5 million from the same period a year ago.
Domestic revenues increase was caused by the increase in demand for our SCR
products, for the same reasons as described in the three month comparison above.
Foreign sales decreased 25% to $2.4 million for the six months ended December
31, 2000 from $3.2 million for the six months ended December 31, 1999. The
decrease was attributable to the timing and size of new orders received by the
company from its customers.
Our gross profit remained at $7.5 million for the six months ended December 31,
2000 compared to the same period a year ago. Gross profit as a percentage of
sales decreased to 27.2% for the six months ended December 31, 2000, from 33.1%
a year ago. The lower gross profit margin was primarily due to increased SCR
revenues, which had a lower gross margin percentage than the gas and liquid
filtration products, along with the additional costs associated with the
manufacturing capacity acquired with the ABCO acquisition in February 2000.
Operating expenses increased by $1.1 million, or 18%, to $7.5 million for the
six months ended December 31, 2000, from $6.4 million for the six months ended
December 31, 1999. Operating expenses decreased as a percent of sales to 27.5 %
versus 28.2% for the comparable period. The increase in operating
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PEERLESS MFG. CO. AND SUBSIDIARIES
expenses was primarily due to costs associated with the ABCO acquisition plus
additional costs of engineering and project management required for the
increased SCR activities.
Interest expense increased by $0.4 million, as a result of increased debt
incurred to finance our working capital needs and as a result of the financing
required to acquire the ABCO operations.
As a result of the factors discussed above, we recorded net loss for the six
months ended December 31, 2000 of $0.4 million compared to net income of $0.7
million for the same period a year ago.
LIQUIDITY AND CAPITAL RESOURCES
We maintain two separate short-term lines of credit, each in the amount of
$5.5 million, one of which is with The Chase Manhattan Bank and the other with
Bank of America, N.A. In addition, we have an installment note payable that was
utilized to finance the ABCO acquisition.
The credit lines currently expire in August 2001. The credit lines currently
carry a floating interest rate based on the prime rate (9.0% at December 31,
2000) plus 2.50 percent and are secured by substantially all of our assets.
Prior to January 31, 2001, the credit lines carried a floating interest rate at
prime. As of December 31, 2000, we had $7.0 million outstanding under the credit
lines, $2.2 million outstanding under letters of credit, and we had $1.8 million
of availability under the credit lines. We pay an annual commitment fee of 0.25%
of the unused balance under the credit lines. The credit lines contain customary
financial covenants, including a restriction on the payment of dividends in the
event of a default. We intend to refinance the lines of credit prior to the end
of August 2001, though there can be no assurance that the refinanced banking
arrangements will be at the same terms and conditions as the existing lines of
credit.
We completed the ABCO acquisition in February 2000, which was financed with a
5 year term note payable to Bank of America, N.A., in the original principal
amount of $2.0 million. The term note will be repaid with equal quarterly
principal installments plus accrued interest. The assets acquired by the
company in the ABCO acquisition secure the term note. The term note is due
June 30, 2005 and currently bears interest at the bank's prime rate (9.0% at
December 31, 2000) plus 2.50 percent. Prior to January 31, 2001, the interest
rate was at prime. The balance on the term note as of December 31, 2000 was
$1.8 million.
We have historically been a net user of cash from operations and have financed
our working capital requirements and capital expenditures through the retention
of earnings and the use of our short-term credit lines. Cash used in operating
activities was $0.2 million for the first six months of fiscal 2001 compared to
cash provided by operating activities of $2.9 million for the same period in
fiscal 2000. The change was primarily the result of the increased accounts
receivable, due to higher revenues, the increase in cost and earnings in excess
of billings, and the $0.4 million net loss we incurred in the first six months
of fiscal 2001 compared to net income of $0.7 million in the first six months of
fiscal 2000.
We believe we maintain adequate liquidity to support existing operations and
planned growth, as well as to continue operations during reasonable periods of
unanticipated adversity. Management directs additional resources to strategic
new product development, market expansion and continuing improvement of existing
products to enhance our position as a market leader and to promote planned
internal growth and profitability. In January 2001, we announced that we would
not pay a dividend for the quarter ending March 31, 2001, which will help
preserve working capital for future growth.
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CAUTION REGARDING FORWARD-LOOKING STATEMENTS
The company occasionally makes forward-looking statements concerning its plans,
goals, product and service offerings, and anticipated financial performance.
These forward-looking statements may generally be identified by introductions
such as "outlook" for an upcoming period of time, or words and phrases such as
"should", "expect", "hope", "plans", "projected", "believes", "forward-looking"
(or variants of those words and phrases) or similar language indicating the
expression of an opinion or view concerning the future.
These forward-looking statements are subject to risks and uncertainties based on
a number of factors and actual results or events may differ materially from
those anticipated by such forward-looking statements. These factors include, but
are not limited to: the growth rate of the company's revenue and market share;
the consummation of new, and the non-termination of, existing contracts; the
company's ability to effectively manage its business functions while growing its
business in a rapidly changing environment; the company's ability to adapt and
expand its services in such an environment; the company's ability to
successfully refinance or extend its lines of credit or obtain alternative
sources of financing; the effective and efficient management of the company's
backlog, inventory levels and processing of sales orders; the quality of the
company's plans and strategies; and the company's ability to execute such plans
and strategies.
In addition, forward-looking statements concerning the company's expected
revenue or earnings levels are subject to many additional uncertainties
applicable to competitors generally and to general economic conditions over
which the company has no control. The company does not plan to publicly update
prior forward-looking statements for unanticipated events or otherwise and,
accordingly, prior forward-looking statements should not be considered to be
"fresh" simply because the company has not made additional comments on those
forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our earnings are affected by changes in interest rates due to the impact those
changes have on the interest expense payable by us under our variable rate debt
revolving line of credit and installment debt, for which the outstanding
balances total $8.9 million as of December 31, 2000. A 1.0% change in the
underlying LIBOR or prime rate would result in a $89,000 change in the annual
amount of interest based on the impact of the hypothetical interest rates on our
revolving line of credit outstanding as of December 31, 2000.
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PEERLESS MFG. CO. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
During the three and six month periods ended December 31, 2000, options to
acquire 3,000 and 6,500 shares, respectively, were exercised by former employees
of the company under terms of the company's stock option plan.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
As contemplated in the company's Proxy Statement which was mailed to
shareholders beginning on October 19, 2000, the company's shareholders elected
Sherrill Stone and Donald A. Sillers, Jr. as Class III directors of the company,
each to serve until the annual meeting of shareholders to be held in 2003. The
company's shareholders also considered a proposal to ratify the selection of
Grant Thornton LLP as the independent auditor of the company for the year ending
June 30, 2001.
Each of the foregoing proposals were approved at the company's annual meeting of
shareholders on November 16, 2000. Each Board nominee received the number of
votes indicated below.
No. of Votes Cast No. of Votes Cast
Nominee For Election Against or Withheld
------- ----------------- -------------------
Sherrill Stone 1,334,901 29,890
Donald A. Sillers, Jr. 1,334,508 30,283
With respect to the approval of the proposal to ratify the selection of Grant
Thornton LLP, the votes cast for, against and abstaining were as follows:
Votes For 1,361,553
Votes Against or Withheld 3,238
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. Exhibits.
The following exhibits are filed as part of this report:
Exhibit
Number Exhibit
- ------- -------
3(a) Articles of Incorporation, as amended to date (filed as Exhibit
3(a) to our Quarterly Report on Form 10-Q, for the fiscal quarter ended
December 31, 1997, and incorporated herein by reference).
3(b) Bylaws, as amended to date (filed as Exhibit 3(b) to our Annual Report
on Form 10-K, for the fiscal year ended 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 our Annual Report on Form
10-K, for the fiscal year ended June 30, 1991, and incorporated herein
by reference).
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16
PEERLESS MFG. CO. AND SUBSIDIARIES
10(b) 1985 Restricted Stock Plan for Peerless Mfg. Co., effective December
13, 1985 (filed as Exhibit 10(b) to our Annual Report on Form 10-K, for
the fiscal year ended 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 our Annual
Report on Form 10-K for the fiscal year ended June 30, 1991, and
incorporated herein by reference).
10(d) Employment Agreement, dated as of April 29, 1994, by and between
Peerless Mfg. Co. and Sherrill Stone (filed as Exhibit 10(d) to our
Annual Report on Form 10-K for the fiscal year ended June 30, 1994, and
incorporated herein by reference).
10(e) Eighth Amended and Restated Loan Agreement, dated as of December 12,
1999, between Bank of America N.A., formerly NationsBank of Texas,
N.A., and Peerless Mfg. Co. (filed as Exhibit 10(f) to our Quarterly
Report on Form 10-Q, for the fiscal quarter ended December 31, 1999,
and incorporated herein by reference), as amended by Amendment A
thereto, dated February 25, 2000 (filed as Exhibit 10(f) to our Annual
Report on Form 10-K for the fiscal year ended June 30, 2000, and
incorporated herein by reference).
10(f) Second Amended and Restated Loan Agreement, dated as of December 12,
1999, and Waiver and First Amendment to Second Amended and Restated
Loan Agreement dated December 12, 1999, by and between Chase Bank of
Texas N.A, and Peerless Mfg. Co. (filed as Exhibit 10(g) to our
Quarterly Report on Form 10-Q, for the fiscal quarter ended December
31, 1999, and incorporated herein by reference).
10(g) Peerless Mfg. Co. 1995 Stock Option and Restricted Stock Plan, adopted
by the Board of Directors on December 31, 1995 and approved by the
Shareholders on November 21, 1996 (filed as Exhibit 10(h) to our Annual
Report on Form 10-K for the fiscal year ended June 30, 1997 and
incorporated herein by reference), as amended by Amendment #1 dated
November 11, 1999 (filed as exhibit 10(h) to our Quarterly Report on
Form 10-Q, for the fiscal quarter ended December 31, 1999 and
incorporated herein by reference).
10(h) 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 our Registration Statement on Form 8-A(File No.
0-05214) and incorporated herein by reference).
10(i) Term Note with Bank of America dated May 30, 2000 by and between Bank
of America, N.A. and Peerless Mfg. Co. (filed as Exhibit 10(m) to our
Annual Report on Form 10-K for the fiscal year ended June 30, 2000, and
incorporated herein by reference.
10(j) Amendment and Waiver to Credit Agreement dated as of December 1, 2000,
by and between Peerless Mfg. Co. and The Chase Manhattan Bank.*
10(k) Amendment C to Eighth Amended and Restated Loan Agreement dated
November 30, 2000, between Bank of America, N.A. and Peerless Mfg. Co.*
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17
PEERLESS MFG. CO. AND SUBSIDIARIES
10(l) Second Note Modification Agreement dated December 12, 2000, between
Bank of America, N.A., and Peerless Mfg. Co.*
10(m) Intercreditor Agreement dated November 30, 2000, among Bank of America,
N.A., The Chase Manhattan Bank and Peerless Mfg. Co.*
10(n) Security Agreement dated November 30, 2000, between Bank of America,
N.A. and Peerless Mfg. Co.*
10(o) Deed of Trust dated November 30, 2000, granted by Peerless Mfg. Co. in
favor of Bank of America, N.A.*
10(p) Renewal Line of Credit Note dated January 31, 2001, executed by
Peerless Mfg. Co. payable to Bank of America, N.A. in the stated
principal amount of $5,500,000.*
10(q) Note Modification Agreement dated January 31, 2001, between PMC
Acquisition, Inc. d/b/a ABCO Industries and Bank of America, N.A.*
10(r) Amendment D to Eighth Amended and Restated Loan Agreement dated January
31, 2001 between Bank of America, N.A. and Peerless Mfg. Co.*
10(s) Waiver and Fifth Amendment to Second Amended and Restated Loan
Agreement dated January 31, 2001, between The Chase Manhattan Bank and
Peerless Mfg. Co.*
10(t) Fourth Amended and Restated Promissory Note dated January 31, 2001,
executed by Peerless Mfg. Co. payable to The Chase Manhattan Bank on
the stated principal amount of $5,500,000.*
21 Our Subsidiaries (filed as Exhibit 21 to our Annual Report on Form 10-K
for the fiscal year ended June 30, 2000, and incorporated herein by
reference).
- ------------------------
* Filed herewith
B. Reports on Form 8-K.
None.
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18
PEERLESS MFG. CO. AND SUBSIDIARIES
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: February 13, 2001 /s/ Sherrill Stone
---------------------------------------------
Sherrill Stone, Chairman, President and Chief
Executive Officer
/s/ Robert J. Boutin
---------------------------------------------
Robert J. Boutin, Chief Financial Officer
(Principal Financial and Accounting Officer)
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19
PEERLESS MFG. CO. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit
Number Exhibit
- ------- -------
3(a) Articles of Incorporation, as amended to date (filed as Exhibit 3(a) to
our Quarterly Report on Form 10-Q, for the fiscal quarter ended
December 31, 1997, and incorporated herein by reference).
3(b) Bylaws, as amended to date (filed as Exhibit 3(b) to our Annual Report
on Form 10-K, for the fiscal year ended 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 our Annual Report on Form
10-K, for the fiscal year ended 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 our Annual Report on Form 10-K, for
the fiscal year ended 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 our Annual
Report on Form 10-K for the fiscal year ended June 30, 1991, and
incorporated herein by reference).
10(d) Employment Agreement, dated as of April 29, 1994, by and between
Peerless Mfg. Co. and Sherrill Stone (filed as Exhibit 10(d) to our
Annual Report on Form 10-K for the fiscal year ended June 30, 1994, and
incorporated herein by reference).
10(e) Eighth Amended and Restated Loan Agreement, dated as of December 12,
1999, between Bank of America N.A., formerly NationsBank of Texas,
N.A., and Peerless Mfg. Co. (filed as Exhibit 10(f) to our Quarterly
Report on Form 10-Q, for the fiscal quarter ended December 31, 1999,
and incorporated herein by reference), as amended by Amendment A
thereto, dated February 25, 2000. (filed as Exhibit 10(f) to our
Annual Report on Form 10-K for the fiscal year ended June 30, 2000,
and incorporated herein by reference).
10(f) Second Amended and Restated Loan Agreement, dated as of December 12,
1999, and Waiver and First Amendment to Second Amended and Restated
Loan Agreement dated December 12, 1999, by and between Chase Bank of
Texas N.A, and Peerless Mfg. Co. (filed as Exhibit 10(g) to our
Quarterly Report on Form 10-Q, for the fiscal quarter ended December
31, 1999, and incorporated herein by reference).
10(g) Peerless Mfg. Co. 1995 Stock Option and Restricted Stock Plan, adopted
by the Board of Directors on December 31, 1995 and approved by the
Shareholders on November 21, 1996 (filed as Exhibit 10(h) to our Annual
Report on Form 10-K for the fiscal year ended June 30, 1997 and
incorporated herein by reference), as amended by Amendment #1 dated
November 11, 1999 (filed as exhibit 10(h) to our Quarterly Report on
Form 10-Q, for the fiscal quarter ended September 30, 1999 and
incorporated herein by reference).
20
10(h) 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 our Registration Statement on Form 8-A(File No.
0-05214) and incorporated herein by reference).
10(i) The Term Note with Bank of America date May 30th of 2000 by and between
Bank of America, N.A. and Peerless Mfg. Co. (filed as Exhibit 10(m) to
our Annual Report on Form 10-K for the fiscal year ended June 30,
2000, and incorporated herein by reference.
10(j) Amendment and Waiver to Credit Agreement dated as of December 1, 2000,
by and between Peerless Mfg. Co. and the Chase Manhattan Bank.*
10(k) Amendment C to Eighth Amended and Restated Loan Agreement dated
November 30, 2000, between Bank of America, N.A. and Peerless Mfg. Co.*
10(l) Second Note Modification Agreement dated December 12, 2000, between
Bank of America, N.A., and Peerless Mfg. Co.*
10(m) Intercreditor Agreement dated November 30, 2000, among Bank of America,
N.A., The Chase Manhattan Bank and Peerless Mfg. Co.*
10(n) Security Agreement dated November 30, 2000, between Bank of America,
N.A. and Peerless Mfg. Co.*
10(o) Deed of Trust dated November 30, 2000, granted by Peerless Mfg. Co. in
favor of Bank of America, N.A.*
10(p) Renewal Line of Credit Note dated January 31, 2001, executed by
Peerless Mfg. Co. payable to Bank of America, N.A. in the stated
principal amount of $5,500,000.*
10(q) Note Modification Agreement dated January 31, 2001, between PMC
Acquisition, Inc. d/b/a ABCO Industries and Bank of America, N.A.*
10(r) Amendment D to Eighth Amended and Restated Loan Agreement dated January
31, 2001 between Bank of America, N.A. and Peerless Mfg. Co.*
10(s) Waiver and Fifth Amendment to Second Amended and Restated Loan
Agreement dated January 31, 2001, between The Chase Manhattan Bank and
Peerless Mfg. Co.*
10(t) Fourth Amended and Restated Promissory Note dated January 31, 2001,
executed by Peerless Mfg. Co. payable to The Chase Manhattan Bank in
the stated principal amount of $5,500,000.*
21 Our Subsidiaries (filed as Exhibit 21 to our Annual Report on Form 10-K
for the fiscal year ended June 30, 2000, and incorporated herein by
reference).
- ------------------------
* Filed herewith