<PAGE>
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 December 31, 1995 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 December 31, 1995
_____________________________ _________________________________
Common stock, $1.00 par value 1,446,742 Shares
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PEERLESS MFG. CO.
INDEX
Page
Number
Part I: Financial Information _________
Condensed Consolidated Balance Sheets for the
periods ended December 31, 1995 and June 30, 1995 3
Condensed Consolidated Statements of Earnings
for the three and six months ended December 31,
1995 and 1994 4
Condensed Consolidated Statement of Cash Flows for
the six months ended December 31, 1995 and 1994 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
<C> <C>
DECEMBER 31, JUNE 30,
------------- -------------
1995 1995
<S> ------------- -------------
ASSETS (UNAUDITED) (AUDITED)
Current assets:
Cash and cash equivalents $7,259 $961,747
Short term investments 833,073 821,968
Accounts receivable 10,476,507 9,135,623
Inventories:
Raw materials 968,814 988,275
Work in process 2,473,758 1,590,050
Finished goods 61,371 238,449
Deferred income taxes 232,554 232,554
Other 369,466 334,876
----------- -----------
Total current assets 15,422,802 14,303,542
Property,plant and equipment-net 1,178,766 1,282,275
Property held for investment-net 922,625 952,823
Other assets 355,850 617,415
----------- -----------
$17,880,043 $17,156,055
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $0 $0
Accounts payable-trade 3,980,075 3,096,025
Advance payments from customers 1,173,297 600,957
Commissions payable 389,934 509,512
Accrued liabilities 1,001,564 1,065,878
----------- -----------
Total current liabilities 6,544,870 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 (65,428) (97,107)
Cumulative foreign currency translation adjustmen 51,506 56,110
Retained earnings 7,311,221 7,886,806
----------- -----------
11,237,469 11,785,979
----------- -----------
$17,880,043 $17,156,055
=========== ===========
<FN>
The accompanying notes are an integral part of these statements.
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PEERLESS MFG. CO.
CONDENSED STATEMENTS OF EARNINGS
(UNAUDITED)
Three Months Ended Six Months Ended
-------------------------- ---------------------------
December 31, December 31,
-------------------------- ---------------------------
<C> <C> <C> <C>
1995 1994 1995 1994
<S> ---------- ---------- ----------- -----------
Net sales $9,206,547 $7,312,258 $15,307,009 $17,481,398
Cost of goods sold 6,501,070 5,209,592 11,254,278 11,553,593
---------- ---------- ----------- -----------
Gross profit 2,705,477 2,102,666 4,052,731 5,927,805
Operating expenses
Marketing and engineering 1,927,711 1,694,368 3,710,133 3,473,289
General and administrative 365,979 412,926 672,946 829,704
---------- ---------- ----------- -----------
Operating income(loss) 411,787 (4,628) (330,348) 1,624,812
Other income(expense)
Interest 15,531 24,827 30,112 25,965
Sundry (36,649) (29,494) (31,239) (89,805)
---------- ---------- ----------- -----------
(21,118) (4,667) (1,127) (63,840)
---------- ---------- ----------- -----------
Earnings(loss) from operations
before Federal income tax 390,669 (9,295) (331,475) 1,560,972
Federal income tax
Current 111,324 17,614 (117,586) 547,801
Deferred 0 0 0 0
---------- ---------- ----------- -----------
111,324 17,614 (117,586) 547,801
---------- ---------- ----------- -----------
Net earnings(loss) 279,345 (26,909) (213,889) 1,013,171
========== ========== ========== ==========
Net earnings per common share $0.19 ($0.02) ($0.15) $0.70
========== ========== ========== ==========
Weighted average number of common
shares outstanding 1,446,742 1,437,192 1,446,742 1,437,192
========== ========== ========== ==========
Cash dividend per common share $0.125 $0.125 $0.250 $0.250
========== ========== ========== ==========
<FN>
The accompanying notes are an integral part of these statements.
4 of 9
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PEERLESS MFG. CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the six months ended
December 31,
--------------------------
<C> <C>
1995 1994
<S> ------------ -------------
Cash flows from operating activities:
Net earnings(loss) from operating activities ($213,889) $1,013,171
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:
Depreciation and amortization 167,121 188,045
Other 31,679 17,103
Changes in assets and liabilities
(Increase) decrease in:
Accounts receivable (1,340,884) 3,727,891
Inventories (687,169) 2,317,618
Other current assets (34,590) 165,721
Other assets 256,349 1,542
Increase (decrease) in:
Accounts payable 884,050 (1,234,062)
Commissions payable (119,578) 205,645
Advance payments from customers 572,340 (1,537,564)
Income taxes payable 0 18,228
Accrued liabilities (64,314) (3,281)
---------- ----------
(334,996) 3,866,886
---------- ----------
Net cash (used in) provided by continuing operations (548,885) 4,880,057
Cash flows from investing activities:
Net purchases of short term investments (11,105) (2,949,649)
Purchase of equipment net of disposals (28,198) (222,285)
---------- ----------
Net cash used in investing activities (39,303) (3,171,934)
Cash flows from financing activities:
Dividends paid (361,696) (359,186)
Net borrowing 0 (260,400)
---------- ----------
Net cash used in financing activities (361,696) (619,586)
Effect of exchange rate on cash (4,604) 16,859
---------- ----------
Net increase (decrease) in cash
and cash equivalents (954,488) 1,105,396
Cash and cash equivalents at beginning of period 961,747 619,990
---------- ----------
Cash and cash equivalents at end period $7,259 $1,725,386
========== ==========
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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 December 31,
1995 and 1994, the results of operations for the three and
six month periods ended December 31, 1995 and 1994 and the
cash flows for the six months ended December 31, 1995 and
1994.
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 December 31, 1995 was approximately $19,000,000 as
compared to a December 31, 1994 backlog of approximately
$15,263,000. Of the $19,000,000 backlog at December 31,
1995, approximately 92% 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 December 31, 1995 and 1994, the Company had
no loans outstanding.
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.
6 of 9
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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 $954,488 from June 30, 1995.
Company operations used $548,885 of cash during the six months
ended December 31, 1995. Additional cash distributions for the
period were composed of fixed asset acquisitions amounting to
$28,198, dividend distributions of $361,696, and additional
short-term investments of $11,105.
As indicated, operations used $548,885 of cash in the six months
ended December 31, 1995. Primarily, this decrease of funds
resulted from (a) an increase in accounts receivable of
$1,340,884, increased inventories for continued and new projects
of $687,169, and a decrease in commissions payable of $119,578;
offset by (b) an increase in accounts payable of $884,050,
increased customer advances of $572,340 and a decrease in other
assets of $256,349.
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 of 1994 Three Months Ended Six Months Ended
and 1995 for the Dec. 31, 1995 Dec. 31, 1995
Relevant Periods 1995-1996 1995-1996
- - ------------------- ------------------- -------------------
Sales $1,894,289 ($2,174,389)
25.9% (12.4%)
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 and the Pressure Products
Division of approximately $1,600,000 and $850,000 respectively,
offset by decreased shipments from the SCR Systems Division of
approximately $400,000. Additionally, sales for the six months
ended December 31, 1994 were augmented by two large deliveries
which totaled approximately $5,000,000.
7 of 9
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Dollar and Percentage Variance
Three Months Ended Six Months Ended
Dec. 31, 1995 Dec. 31, 1995
1995-1996 1995-1996
- - ------------------- ------------------- --------------------
Gross Profit $602,811 ($1,875,074)
28.7% (31.6%)
In the second quarter, gross profit as a percentage of sales was
29.4% for the three months ended December 31, 1995 vs. 28.8% for
the three months ended December 31, 1994. The increase in gross
profit percentages in the current quarter was primarily due to
the higher profits available on the mix of products shipped
during this period which included more value added engineering
when compared to the same period for 1994. The decline in gross
profit percentages for the six month period was primarily due to
lower profit margins available on the mix of products shipped in
the current six month period ended December 31, 1995 compared to
higher margins on products shipped for the six month period ended
December 1994.
- - ------------------- ------------------- ---------------------
Operating Expenses $186,396 $80,086
8.8% 1.9%
The second quarter increase in operating expenses is primarily
attributable to an increase in sales expenses of approximately
$300,000 offset by decreases in commission and engineering
expenses.
- - ------------------- ------------------- ---------------------
Other Income(Expense) ($16,451) $62,713
In the quarter ended December 31, 1995, the Company incurred
additional expenses related to foreign currency losses of
approximately $28,000 offset by decreases in certain rental
property costs as compared to the quarter ended December 31,
1994.
- - ------------------- ------------------- ---------------------
Net Earnings (Loss) $306,254 ($1,227,060)
The increase in net earnings for the three months ended December
31, 1995, when compared to the preceding fiscal year, is directly
attributable to the increased sales volume of $1,894,289.
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PEERLESS MFG. CO.
PART II
OTHER INFORMATION
Item 1 -- Legal proceedings
- - ---------------------------
On November 13, 1995, the Company filed a complaint with the
United States District Court for the Northern District of
Texas, Dallas Division, against Senior Engineering Company.
The complaint seeks to enjoin Senior Engineering from using
or marketing Peerless' P8X vane or similar moisture
separation technology. The Company alleges that Senior
Engineering, through its joint venture with Peerless,
obtained valuable trade secret information. The complaint
states claims for misappropriation of trade secrets and
breach of contract.
Item 6 -- Exhibits and Reports on Form 8-K
- - ------------------------------------------
There were no reports on Form 8-K for the six months ended
December 31, 1995.
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: February 7, 1996
Sherrill Stone
Chairman, President and
Chief Executive Officer
Kent J. Van Houten
Secretary - Treasurer and
Chief Financial Officer
9 of 9
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 7259
<SECURITIES> 833073
<RECEIVABLES> 10604530
<ALLOWANCES> 128023
<INVENTORY> 3503943
<CURRENT-ASSETS> 15422802
<PP&E> 7228137
<DEPRECIATION> 5126746
<TOTAL-ASSETS> 17880043
<CURRENT-LIABILITIES> 6544870
<BONDS> 0
<COMMON> 1446742
0
0
<OTHER-SE> 9790727
<TOTAL-LIABILITY-AND-EQUITY> 17880043
<SALES> 15307009
<TOTAL-REVENUES> 15307009
<CGS> 11254278
<TOTAL-COSTS> 11254278
<OTHER-EXPENSES> 3710133
<LOSS-PROVISION> 21592
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (331475)
<INCOME-TAX> (117586)
<INCOME-CONTINUING> (213889)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (213889)
<EPS-PRIMARY> (.15)
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</TABLE>
