<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 September 30, 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 September 30, 1996
_____________________________ _________________________________
Common stock, $1.00 par value 1,454,742 Shares
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PEERLESS MFG. CO.
INDEX
Page
Number
Part I: Financial Information _________
Condensed Consolidated Balance Sheets for the
periods ended September 30, 1996 and June 30, 1996 3
Condensed Consolidated Statements of Earnings for
the three months ended September 30, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows for
the three months ended September 30, 1996 and 1995 5
Notes to the Condensed Consolidated Financial
Statements 6
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>
SEPTEMBER 30, JUNE 30,
1996 1996
<S> ------------- -------------
ASSETS (UNAUDITED) (AUDITED)
Current assets:
Cash and cash equivalents $1,480,894 $2,082,329
Short term investments 246,659 246,659
Accounts receivable 8,981,226 8,700,762
Inventories:
Raw materials 1,052,302 1,094,774
Work in process 3,130,442 2,757,798
Finished goods 172,037 286,393
Deferred income taxes 226,214 226,214
Other 147,034 620,072
----------- -----------
Total current assets 15,436,808 16,015,001
Property,plant and equipment-net 1,243,398 1,213,859
Property held for investment-net 934,844 948,775
Other assets 376,920 453,390
----------- -----------
$17,991,970 $18,631,025
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $0 $0
Accounts payable-trade 3,539,763 4,329,645
Advance payments from customers 1,722,918 435,549
Commissions payable 451,731 566,766
Accrued liabilities 956,795 1,332,441
----------- -----------
Total current liabilities 6,671,207 6,664,401
Deferred income taxes 86,768 86,768
Stockholders' equity:
Common stock-authorized 4,000,000 shares of $1 par
value; issued and outstanding, 1,454,742 shares at
September 30, 1996 and 1,446,742 at June 30, 1996 1,454,742 1,446,742
Additional paid-in capital 2,562,129 2,489,879
Unamortized value of restricted stock issue (104,538) (33,750)
Cumulative foreign currency translation adjustment 13,324 23,842
Retained earnings 7,308,338 7,953,143
----------- -----------
11,233,995 11,879,856
----------- -----------
$17,991,970 $18,631,025
=========== ===========
<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
---------------------------
September 30,
---------------------------
<C> <C>
1996 1995
<S> ----------- -----------
Net sales $7,515,449 $6,100,462
Cost of goods sold 5,405,228 4,753,208
----------- -----------
Gross profit 2,110,221 1,347,254
Operating expenses
Marketing and engineering 2,087,297 1,797,422
General and administrative 396,257 306,967
----------- -----------
Operating earnings(loss) (373,333) (757,135)
Other income(expense)
Interest 11,996 14,581
Sundry 23,243 20,410
----------- -----------
35,239 34,991
----------- -----------
Earnings(loss) from operations
before Federal Income Tax (338,094) (722,144)
Federal Income Tax
Current (56,974) (228,910)
Deferred 0 0
----------- -----------
(56,974) (228,910)
----------- -----------
Net earnings(loss) (281,120) (493,234)
========== ==========
Earnings(loss) per common share ($0.19) ($0.34)
========== ==========
Weighted average number of common
shares outstanding 1,453,459 1,446,742
========== ==========
Cash dividend per common share $0.125 $0.125
========== ==========
<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 three months ended
September 30,
---------------------------
<C> <C>
1996 1995
<S> ----------- -----------
Cash flows from operating activities:
Net earnings(loss) from operating activities ($281,120) ($493,234)
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:
Depreciation and amortization 78,130 82,270
Other 9,462 15,839
Changes in assets and liabilities
(Increase) decrease in:
Accounts receivable (280,464) 1,836,469
Inventories (215,816) (1,609,802)
Other current assets 473,038 (173,323)
Other assets 72,924 256,839
Increase (decrease) in:
Accounts payable (789,880) 570,107
Commissions payable (115,035) (94,292)
Advance payments from customers 1,287,369 380,072
Accrued liabilities (557,489) (260,557)
----------- -----------
(37,761) 1,003,622
----------- -----------
Cash provided by (used in) operating activities (318,881) 510,388
Cash flows from investing activities:
Net purchases of short term investments 0 (31,643)
Purchase of equipment net of disposals (90,193) (22,984)
----------- -----------
Net cash used in investing activities (90,193) (54,627)
Cash flows from financing activities:
Dividends paid (181,843) (180,843)
Net borrowing 0 0
----------- -----------
Net cash used in financing activities (181,843) (180,843)
Effect of exchange rate on cash (10,518) (11,460)
----------- -----------
Net increase (decrease) in cash
and cash equivalents (601,435) 263,458
Cash and cash equivalents at beginning of period 2,082,329 1,561,747
----------- -----------
Cash and cash equivalents at end period $1,480,894 $1,825,205
=========== ===========
<FN>
The accompanying notes are an integral part of these statements.
5 of 9
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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 September 30,
and June 30, 1996 and the results of operations and cash
flows for the three months ended September 30, 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 custom contracted
pressure vessels and other products 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 generally recognizes sales of
custom-contracted products at the completion of the
manufacturing process, which normally is less than one year.
The percentage-of-completion method is used for significant
long-term contracts.
3. The adjusted backlog of uncompleted orders and letters of
intent at September 30, 1996 was approximately $26,300,000
as compared to a September 30, 1995 backlog of $19,100,000.
Of the $26,300,000 backlog at September 30, 1996,
approximately 95% 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, 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 September 30, 1996 and 1995, 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
This report contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Such
statements are subject to inherent risks and uncertainties, some
of which cannot be predicted or quantified. Actual results could
differ materially from those projected in the forward-looking
statements as a result of changes in market conditions, increased
competition, or other factors.
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 $601,435 from June 30, 1996.
Company operations used $318,881 of cash during the three months
ended September 30, 1996. Additional uses of cash in the
Company's first quarter ended September 30, 1996 were fixed asset
acquisitions and dividend payments of $90,193 and $181,843
respectively.
As indicated, operations used $318,881 of cash in the three
months ended September 30, 1996. Funds used in operations were
primarily from increases in accounts receivable and inventories
of $280,464 and $215,816 respectively, and decreases in accounts
payable, commissions payable and accrued liabilities of $789,880,
$115,035 and $557,489 respectively. These uses of cash were
offset by increases in advances from customers of $1,287,369 and
decreases in current and noncurrent assets of $473,038 and
$72,924 respectively.
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 its established program of maintaining
existing plant and equipment.
7 of 9
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Changes - First Quarter of Fiscal 1996 vs. First Quarter 1997
-------------------------------------------------------------
Results of 1st Qtr.
Operations 1996 vs.1997
- ------------------- -------------------- ---------------------------
Sales $1,414,987 increase
23.2%
Increased quarterly sales in the first quarter of Fiscal 1997
compared to the first quarter of Fiscal 1996 reflect increased
product shipment and fewer delays by customers in taking product
as scheduled.
- ------------------- -------------------- ---------------------------
Gross Profit $762,967 increase
56.6%
Gross profit increased $762,967 as the result of increased sales
volume and the product mix of sales which increased gross margin
compared to the equivalent period in 1996. This reflects
relatively greater sales of the Company's SCR and assembled
products.
- ------------------- -------------------- ---------------------------
Operating Expenses $379,165 increase
18.0%
Operating expenses increased 18.0% from the first quarter of
Fiscal 1996 to the first quarter of Fiscal 1997. The increase is
primarily attributable to agent commissions and engineering
expenses, which each increased approximately $130,000 and reflect
the increase in sales over the equivalent period in Fiscal 1996,
and increased general administrative expenses of $90,000
reflecting increased sales expenses and the hiring of additional
administrative employees.
- ------------------- -------------------- ---------------------------
Other Income(Expense) $248 increase
Changes in other income reflect decreases in interest income as a
result of increased use of cash which was offset primarily by
foreign exchange gains associated with a stronger dollar.
- ------------------- -------------------- ---------------------------
Net Earnings (Loss) $212,114 increase
The increase in net earnings for the three months ended September
30, 1996, when compared to the preceding fiscal year, reflects
the increase in sales of $1,414,987.
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PEERLESS MFG. CO.
PART II
OTHER INFORMATION
Item 1 -- Legal proceedings
- ---------------------------
Reference is made to Form 10-K Annual Report, as amended,
Item 3, Page 6, "Legal Proceedings" for the Fiscal year
ended June 30, 1996. For the three months ended September
30, 1996 there were no new proceedings filed against the
Company.
Item 9 -- Exhibits and Reports -- Form 8-K
- ------------------------------------------
There were no reports on Form 8-K for the three months ended
September 30, 1996.
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: November 14, 1996
Sherrill Stone
Chairman, President and
Chief Executive Officer
Kent J. Van Houten
Secretary - Treasurer and
Chief Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 1,480,894
<SECURITIES> 246,659
<RECEIVABLES> 9,109,746
<ALLOWANCES> 128,520
<INVENTORY> 4,354,781
<CURRENT-ASSETS> 15,436,808
<PP&E> 7,513,967
<DEPRECIATION> 5,335,725
<TOTAL-ASSETS> 17,991,970
<CURRENT-LIABILITIES> 6,671,207
<BONDS> 0
0
0
<COMMON> 1,454,742
<OTHER-SE> 9,779,253
<TOTAL-LIABILITY-AND-EQUITY> 17,991,970
<SALES> 7,515,449
<TOTAL-REVENUES> 7,515,449
<CGS> 5,405,228
<TOTAL-COSTS> 5,405,228
<OTHER-EXPENSES> 2,087,297
<LOSS-PROVISION> 16,576
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (338,094)
<INCOME-TAX> (56,974)
<INCOME-CONTINUING> (281,120)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (281,120)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> 0
</TABLE>
