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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K/A
AMENDMENT NO. 1
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934[FEE REQUIRED]
For the fiscal year ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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Commission File Number 0-5214
PEERLESS MFG. CO.
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(Exact name of registrant as specified in its charter)
Texas 75-0724417
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(State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number)
2819 Walnut Hill Lane, Dallas, Texas 75229
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 357-6181
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Securities registered pursuant to Section 12(g) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, par value $1.00 The Nasdaq Stock Market's National Market
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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. [x]
At September 19, 1996, Peerless Mfg. Co. had 1,454,742 shares of common stock,
$1.00 par value outstanding. The Company estimates that the aggregate market
value of the common stock on September 19, 1996 (based upon the closing price
of these shares on Nasdaq) held by non-affiliates was approximately
$15,539,946.
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DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for Annual Meeting of Shareholders to be held on or about
November 21, 1996 (Part III).
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AMENDMENT 1
PART I
ITEM 1. BUSINESS.
Peerless Mfg. Co. (the "Company" or "Registrant") was organized in 1933
as a proprietorship and was incorporated as a Texas corporation in 1946. The
Company has wholly owned subsidiaries in the Netherlands, the United Kingdom,
the Netherlands Antilles and Barbados.
Products and Operations
The Company is engaged in the business of designing, engineering,
manufacturing and selling highly specialized products, referred to as
"separators" or "filters," which are used for a variety of purposes in cleaning
gases and liquids as they move through a piping system. The Company also
packages these products on skids complete with instruments, controls and
related valves and piping. These products are used, among other applications,
to remove solid and liquid contaminants from natural gas, and salt water
aerosols from the combustion intake air of ship board gas turbine and diesel
engines.
The Company also designs, engineers, manufactures and sells specialized
products referred to as "pulsation dampeners." These products are used
primarily to reduce or eliminate vibrations caused by acoustical pulsations
commonly found in piping connected to the reciprocating compressors generally
used to move gases and air. Pulsation dampeners reduce noise levels, improve
efficiency and prolong the life of piping systems.
The Company's products are also used as components in selective
catalytic reduction systems. Selective catalytic reduction equipment is used
to separate nitrogen oxide (NOx) emissions from exhaust gases caused by burning
hydrocarbon fuels such as gasoline, natural gas and oil. Additionally, the
Company sells gas odorization equipment, quick-opening closures, parts for its
products and other miscellaneous items. It also renders certain engineering
services.
While the Company manufactures and stocks a limited number of items of
equipment for immediate delivery, the vast majority of its products are
designed and constructed for specific customer requirements or specifications.
In certain cases, the Company's products and components are designed by the
Company but produced by subcontractors under Company supervision.
The Company markets its products worldwide through manufacturers'
representatives, who sell on a commission basis under the general direction of
an officer of the Company. Additionally, a number of the Company's employees
sell Company products directly to
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customers. The Company has a sales office in Singapore with a staff of seven
engineering and administrative employees. The Company's United Kingdom
subsidiary, Peerless Europe Ltd., began operations in January of 1992 and
currently has a staff of ten full-time employees. The Company's Netherlands
subsidiary has three full-time employees.
Customers and Export Sales
Gas separators and filters are sold to gas producers and gas gathering,
transmission and distribution companies, and to chemical manufacturers and oil
refineries, either directly or through contractors engaged to build plants and
pipelines. Separators and filters are also sold to manufacturers of
compressors, turbines, and nuclear and conventional steam generating equipment.
Marine separation/filtration systems are sold primarily to ship builders.
Pulsation dampeners are purchased by customers in the same industries as
purchasers of separators and filters (except ship builders and steam generating
equipment manufacturers). Selective catalytic reduction equipment is sold to
gas turbine operators, refineries and others who desire or may be required to
reduce nitrogen oxide (NOx) emissions.
The Company is not dependent upon any single customer or group of
customers. Due to the custom-designed nature of its business and the nature of
the products it sells, the Company's major customers typically vary from year
to year. During Fiscal 1996 and 1995 no single customer accounted for 10% or
more of Company revenues. During Fiscal 1994, the Company's largest customer,
Mobil Oil Indonesia, accounted for approximately 10.5% of Company revenues. No
other customer accounted for 10% or more of Company revenues during Fiscal
1994.
Sales to foreign customers have been a part of the Company's business
for more than forty years. During Fiscal 1996, foreign sales amounted to
$19,434,000, or 57.8% of total consolidated revenue. Sales in Asia were
approximately $4.5 million, or 13.4%, $7.0 million, or 21.8%, and $6.3 million,
or 24.6%, of net sales in Fiscal 1996, 1995 and 1994, respectively. Due to the
custom-designed and project-specific nature of its products, the Company's
sales to any geographic region may vary from year to year. For a breakdown of
the Company's foreign sales by geographic area during Fiscal 1996, 1995 and
1994, see Note I of the Notes to Consolidated Financial Statements.
There are certain risks attendant to the Company's foreign sales. These
include 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, that foreign exchange rates may fluctuate adversely, 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 Company has not, however, incurred substantial expenses to date
involving these risks.
The Company believes that its credit and collection risks are reduced to
a significant extent because a substantial part of foreign sales are made
either to large, well-established
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foreign companies or to foreign operations of domestic companies. When sales
are made to smaller foreign enterprises, the Company generally requires an
appropriate guarantee of payment or a letter of credit from a banking
institution. In addition, products sold to foreign customers are generally
priced to provide a higher profit margin, designed in part to cover the risk of
potentially greater warranty costs. In order to minimize the risks of
fluctuating currency exchange rates, the Company generally requires payment in
U.S. dollars (or in the functional currency of its foreign subsidiaries) for
its foreign product sales. The Company hedges its exposure, if substantial, to
foreign currency fluctuations on firm commitment sales under contracts that are
not denominated in U.S. dollars.
Backlog
The Company's backlog of incomplete orders at June 30, 1996 was
approximately $15,300,000 compared to approximately $15,875,000 in 1995.
Virtually all of the June 30, 1996 backlog is presently expected to be
completed and shipped in Fiscal 1997. Backlog has been calculated under the
Company's normal practice of including incomplete orders for products that are
deliverable over various periods and that may be changed or cancelled in the
future.
Competition and Other Market Factors
There are a number of competitors in the manufacture and sale 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. The Company believes that
performance, reliability and warranty service are the prime competitive factors
in the markets in which it competes. The Company believes that because of its
reputation in those areas, it is a world leader in sales of custom-built
separators, filters and pulsation dampeners.
The markets for the Company's products are highly competitive worldwide.
In addition, competition may increase as larger and better financed foreign
companies become attracted to the market potential for products manufactured by
the Company.
Patents, Licenses and Product Development
The Company considers itself a world leader in the technology required
to design and apply its high efficiency vapor/liquid separation and filtration
equipment. The Company believes it is also a leader in the design, manufacture
and application of high efficiency pulsation dampeners for reciprocating
compressors, and in the production of selective catalytic reduction component
equipment. The Company's expenditures for new product development and
improvements were approximately $515,000 in Fiscal 1996 and $526,000 in Fiscal
1995.
The Company has several patents on its products and processes that are
important to its business. However, other companies are marketing competitive
products which may not infringe upon the Company's patents.
Historically the Company's approach to its international markets was
through licensing arrangements with fabricators throughout the world. However,
in 1992
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the Company shifted its emphasis from licensing its foreign sales to a strategy
of focusing on direct international marketing through its Singapore sales
branch and its European subsidiaries, Peerless Europe B.V. and Peerless Europe
Ltd. The Company derives royalty income from older license arrangements in
France and England and engineering fees on certain projects. Royalty and
engineering fee revenues, included in net sales, are $451,620, $272,673 and
$143,394 in Fiscal 1996, 1995 and 1994, respectively.
Employees
At June 30, 1996, the Company and its subsidiaries had approximately 160
employees.
Raw Materials
The Company purchases the raw materials and component parts essential to
its business from established sources with which it has had commercial
relationships for many years. During the fiscal year ended June 30, 1996, the
Company experienced no unusual problems in purchasing required materials and
parts, and the Company believes that raw materials and component parts will be
available in sufficient quantities for it to meet anticipated demand for its
products. However, conditions may occur from time to time which could make it
difficult to obtain desired materials within timely delivery schedules.
Environmental Regulation
The Company does not believe that its compliance with federal, state or
local statutes or regulations relating to the protection of the environment has
had any material effect upon capital expenditures, earnings or the competitive
position of the Company. The manufacturing processes of the Company do not emit
substantial foreign substances into the environment. Regulations related to
nitrous oxide (NOx) emissions have in the past resulted in increased sales of
the Company's component parts for selective catalytic reduction equipment, and
further regulations in that area could increase demand for that equipment.
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Executive Officers of the Company
The executive officers of the Company on September 19, 1996 are listed
below. Each of these officers has been employed by the Company for at least
five years in the same position or a similar capacity, except as noted:
Name and Age Position
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Sherrill Stone, 59 Chairman of the Board, President
and Chief Executive Officer (1)
Dayle B. Ellis, 43 Executive Vice President and Chief
Operating Officer (2)
Edward Perry, 58 Vice President (3)
G. D. Cornwell, 52 Vice President (4)
Kent J. Van Houten, 43 Chief Financial Officer and
Secretary - Treasurer (5)
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(1) Responsible for formulation of corporate policy, investment and new
business opportunities. Mr. Stone assumed the duties of Chairman of
the Board and Chief Executive Officer of the Company on March 31, 1993.
(2) Responsible for marketing, manufacturing and engineering operations of
the Company. Mr. Ellis assumed the duties of Executive Vice President
and Chief Operating Officer of the Company on July 17, 1996.
(3) Responsible for marketing, manufacturing and engineering of filters
and separators associated with pressure applications.
(4) Responsible for marketing, manufacturing and engineering of liquid
vapor separators.
(5) Mr. Van Houten is responsible for financial and administrative
operations, and has been employed by the Company since May 22, 1995.
He previously was Manager of Financial Accounting at The Austin Company.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PEERLESS MFG. CO.
(Registrant)
By: /s/ Kent J. Van Houten
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Kent J. Van Houten,
Chief Financial Officer
Secretary/Treasurer
Date: October 14, 1996.
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