SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1999
OR
[ ] 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 (IRS Employer
Incorporation or Organization) Identification No.)
2819 Walnut Hill Lane, Dallas, Texas 75229
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (214) 357-6181
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of Each Exchange on Which Registered
Common Stock, par value $1.00 The Nasdaq Stock Market's National Market
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 21, 1999, Peerless Mfg. Co. had 1,452,492 shares of
common stock, $1.00 par value outstanding. The aggregate market value
of the registrant's common stock on September 21, 1999 (based upon the
closing price of these shares on Nasdaq) held by non-affiliates was
approximately $13,200,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for Annual Meeting of
Shareholders to be held on or about November 18, 1999 (to be filed)
are incorporated by reference into Part III of this Form 10-K.
<PAGE>
This amendment to the Form 10-K for the period ended June 30, 1999,
is filed for the purpose of revising ITEM 8, NOTE J-INDUSTRY SEGMENT
AND GEOGRAPHIC INFORMATION with respect to the 1999 Revenues from
customers and Segment profit (loss).
**********************************************************************
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index to Financial Statements
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS ........................................... 17
CONSOLIDATED BALANCE SHEETS AT JUNE 30, 1999 AND 1998....... 18
CONSOLIDATED STATEMENTS OF EARNINGS FOR THE YEARS
ENDED JUNE 30, 1999, 1998 AND 1997..................... 20
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
EQUITY FOR THE YEARS ENDED JUNE 30, 1999,
1998 AND 1997.......................................... 21
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS
ENDED JUNE 30, 1999, 1998 AND 1997..................... 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1999, 1998 AND 1997............... 25
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON SCHEDULE............................................ 36
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS............. 37
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
Peerless Mfg. Co.
We have audited the accompanying consolidated balance sheets of
Peerless Mfg. Co. and Subsidiaries as of June 30, 1999 and 1998, and
the related consolidated statements of earnings, changes in
stockholders' equity, and cash flows for each of the three years in
the period ended June 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present
fairly, in all material respects, the consolidated financial position
of Peerless Mfg. Co. and Subsidiaries as of June 30, 1999 and 1998,
and the consolidated results of their operations and their
consolidated cash flows for each of the three years in the period
ended June 30, 1999, in conformity with generally accepted accounting
principles.
GRANT THORNTON LLP
Dallas, Texas
September 10, 1999
<PAGE>
<TABLE>
Peerless Mfg. Co. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
June 30,
ASSETS 1999 1998
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 210,866 $ 428,482
Short-term investments 273,343 268,065
Accounts receivable - principally trade,
net of allowance for uncollectible
accounts of $685,330 and $806,200 in
1999 and 1998, respectively 12,195,037 14,241,036
Inventories 3,730,970 2,419,845
Costs and earnings in excess of billings
on uncompleted contracts 3,268,181 1,838,641
Deferred income taxes - 433,596
Other 777,635 165,631
---------- ----------
Total current assets 20,456,032 19,795,296
PROPERTY, PLANT AND EQUIPMENT - AT COST,
less accumulated depreciation 2,102,546 2,268,405
DEFERRED INCOME TAXES 59,613 -
OTHER ASSETS 860,581 692,520
---------- ----------
$23,478,772 $22,756,221
========== ==========
</TABLE>
<PAGE>
<TABLE>
Peerless Mfg. Co. and Subsidiaries
CONSOLIDATED BALANCE SHEETS - CONTINUED
June 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable - trade $ 5,626,058 $ 5,566,068
Notes payable - 200,000
Billings in excess of costs and
earnings on uncompleted contracts 572,970 49,977
Commissions payable 1,204,584 1,205,391
Accrued expenses
Compensation 1,188,165 1,499,443
Warranty reserve 313,773 434,588
Deferred income taxes 42,736 -
Other 38,669 366,408
---------- ----------
Total current liabilities 8,986,955 9,321,875
DEFERRED INCOME TAXES - 38,543
COMMITMENTS - -
STOCKHOLDERS' EQUITY
Common stock - authorized, 10,000,000
shares of $1 par value; issued and
outstanding, 1,452,492 and 1,457,492
shares in 1999 and 1998, respectively 1,452,492 1,457,492
Additional paid-in capital 2,539,951 2,583,701
Unamortized value of restricted
stock grants (4,719) (51,385)
Accumulated other comprehensive
income (loss) (103,824) (79,849)
Retained earnings 10,607,917 9,485,844
---------- ----------
14,491,817 13,395,803
---------- ----------
$23,478,772 $22,756,221
========== ==========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
Peerless Mfg. Co. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
Year ended June 30,
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net sales $40,568,443 $43,455,136 $41,486,492
Cost of goods sold 26,296,724 28,215,330 29,961,203
---------- ---------- ----------
Gross profit 14,271,719 15,239,806 11,525,289
Operating expenses
Marketing and engineering 8,630,962 8,932,180 9,129,347
General and administrative 2,662,289 2,662,725 1,988,618
---------- ---------- ----------
11,293,251 11,594,905 11,117,965
---------- ---------- ----------
Operating profit 2,978,468 3,644,901 407,324
Other income (expense)
Interest income 58,987 34,055 24,687
Interest expense (23,696) (27,430) (55,475)
Foreign exchange gains (losses) (118,866) (90,050) 103,583
Other, net (49,323) (39,338) 57,877
---------- ---------- ----------
(132,898) (122,763) 130,672
---------- ---------- ----------
Earnings before income taxes 2,845,570 3,522,138 537,996
Income tax expense (benefit)
Current 617,824 1,262,998 65,766
Deferred 378,176 (190,421) (65,186)
---------- ---------- ----------
996,000 1,072,577 580
---------- ---------- ----------
NET EARNINGS $ 1,849,570 $ 2,449,561 $ 537,416
========== ========== ==========
Earnings per common share - basic
and diluted $1.27 $1.68 $.37
==== ==== ===
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
Peerless Mfg. Co. and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Unamortized Accumulated
Additional value of other
Common paid-in restricted comprehensive Retained
stock capital stock grants income (loss) earnings Total
--------- --------- ------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balances as of July 1, 1996 1,446,742 $2,489,879 $(33,750) $ 23,842 $ 7,953,143 $11,879,856
Comprehensive income
Net earnings - - - - 537,416 537,416
Foreign currency translation
adjustment - - - (117,786) - (117,786)
Total comprehensive income 419,630
Issuance of 8,000 shares of
common stock 8,000 72,250 (80,250) - - -
Forfeiture of 4,000 shares of
common stock (4,000) (38,750) 42,750 - - -
Stock options exercised 1,250 10,312 - - - 11,562
Cash dividends paid
($.50 per share) - - - - (727,149) (727,149)
Cash dividends declared
($.125 per share) - - - - (182,624) (182,624)
Amortization of restricted
stock grants - - 26,625 - - 26,625
Income tax benefit related to
restricted stock plans - 1,530 - - - 1,530
--------- --------- ------- --------- ----------- ----------
Balances as of June 30, 1997 1,451,992 2,535,221 (44,625) (93,944) 7,580,786 11,429,430
Comprehensive income
Net earnings - - - - 2,449,561 2,449,561
Foreign currency translation
adjustment - - - 14,095 - 14,095
----------
Total comprehensive income 2,463,656
Issuance of 3,000 shares of
common stock 3,000 28,875 (31,875) - - -
Stock options exercised 2,500 20,625 - - - 23,125
Cash dividends ($.375 per share) - - - - (544,503) (544,503)
Amortization of restricted
stock grants - - 25,115 - - 25,115
Income tax expense related to
restricted stock plans - (1,020) - - - (1,020)
--------- --------- ------- --------- ----------- ----------
Balances as of June 30, 1998 1,457,492 2,583,701 (51,385) (79,849) 9,485,844 13,395,803
</TABLE>
<PAGE>
<TABLE>
Peerless Mfg. Co. and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - CONTINUED
Unamortized Accumulated
Additional value of other
Common paid-in restricted comprehensive Retained
stock capital stock grants income (loss) earnings Total
--------- --------- ------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Comprehensive income
Net earnings - $ - $ - $ - $ 1,849,570 $ 1,849,570
Foreign currency translation
adjustment - - - (23,975) (23,975)
----------
Total comprehensive income 1,825,595
Cash dividends paid
($.50 per share) - - - - (727,497) (727,497)
Forfeiture of restricted
stock grant (5,000) (43,750) 29,250 - - (19,500)
Amortization of restricted
stock grants - - 17,416 - - 17,416
--------- --------- ------- --------- ----------- ----------
Balance at June 30, 1999 1,452,492 $2,539,951 $ (4,719) $ (103,824) $ 10,607,917 $14,491,817
========= ========= ======= ========= =========== ==========
The accompanying notes are an integral part of this statement.
</TABLE>
<PAGE>
<TABLE>
Peerless Mfg. Co. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended June 30,
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities
Net earnings $ 1,849,570 $ 2,449,561 $ 537,416
Adjustments to reconcile net
earnings to net cash provided by
(used in) operating activities
Depreciation and amortization 413,026 379,752 370,526
Deferred income taxes 378,176 (190,421) (65,186)
Foreign exchange loss (gain) 118,886 90,050 (103,583)
Other (34,160) (1,020) 1,530
Changes in operating assets
and liabilities
Accounts receivable 1,949,880 (4,703,504) (1,586,991)
Inventories (1,301,720) 544,993 (11,463)
Cost and earnings in excess
of billings on uncompleted
contracts (1,429,540) 33,176 (468,618)
Other current assets (612,004) 132,974 (59,501)
Other assets (186,421) (231,004) (40,466)
Accounts payable 59,008 837,205 791,364
Billings in excess of costs
and earnings on uncompleted
contracts 522,993 (353,174) 363,257
Commissions payable (807) 425,917 212,708
Accrued expenses (788,479) 985,395 22,497
---------- ---------- ----------
(911,162) (2,049,661) (573,926)
---------- ---------- ----------
Net cash provided by (used in)
operating activities 938,408 399,900 (36,510)
Cash flows from investing activities
Net purchases of short-term
investments (5,278) (9,058) (12,348)
Proceeds from sale of property
and equipment 30,850 - -
Purchase of property and equipment (233,323) (262,362) (596,395)
---------- ---------- ----------
Net cash used in investing activities (207,751) (271,420) (608,743)
</TABLE>
<PAGE>
<TABLE>
Peerless Mfg. Co. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Year ended June 30,
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from financing activities
Sale of common stock $ - $ 23,125 $ 11,562
Advances on short-term borrowings - 200,000 -
Net payments on short-term borrowings (200,000) - -
Dividends paid (727,497) (727,127) (727,149)
---------- ---------- ----------
Net cash used in financing activities (927,497) (504,002) (715,587)
Effect of exchange rate changes on
cash and cash equivalents (20,776) 31,451 51,064
---------- ---------- ----------
Net decrease in cash and cash
equivalents (217,616) (344,071) (1,309,776)
Cash and cash equivalents at
beginning of year 428,482 772,553 2,082,329
---------- ---------- ----------
Cash and cash equivalents at
end of year $ 210,866 $ 428,482 $ 772,553
========== ========== ==========
Supplemental information on cash flows:
Interest paid $ 21,170 $ 29,956 $ 55,475
Income taxes paid $ 900,814 $ 957,860 $ 379,347
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
Peerless Mfg. Co. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999, 1998 and 1997
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature of Operations
--------------------
Peerless Mfg. Co. designs, engineers, and manufactures specialized
products for the removal of contaminants from gases and liquids and
for air pollution abatement. The Company's products are
manufactured principally at plants located in Dallas, Texas and are
sold worldwide with the principal markets located in the United
States and Europe. Primary customers are equipment manufacturers,
engineering contractors and operators of power plants.
A summary of the significant accounting policies consistently
applied in the preparation of the accompanying consolidated
financial statements follows.
Consolidation
-------------
The Company consolidates the accounts of its wholly-owned
subsidiaries, all of which are foreign. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
Cash Equivalents
----------------
For purposes of the statement of cash flows, the Company considers
all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.
Inventories
-----------
Inventories are stated at the lower of cost (first-in, first-out) or
market.
Depreciable Assets
------------------
Depreciation is provided for in amounts sufficient to relate the
cost of depreciable assets to operations over their estimated
service lives, principally by the straight-line method.
Revenue Recognition
-------------------
The Company generally recognizes sales of custom-contracted products
at the completion of the manufacturing process. The percentage-of-
completion method is used for significant long-term contracts.
Percentage-of-completion is generally determined based upon
engineering work performed, materials purchased and manufacturing
labor hours incurred.
<PAGE>
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - Continued
Stock-Based Compensation
------------------------
Statement of Financial Accounting Standards No. 123 (SFAS 123),
Accounting for Stock-Based Compensation, encourages, but does not
require, companies to record compensation cost for stock-based
employee compensation plans at fair value. The Company has chosen
to account for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25 (APB
25), Accounting for Stock Issued to Employees, and related
interpretations.
Earnings Per Common Share
-------------------------
Basic earnings per common share is computed by dividing net earnings
by the weighted average number of common shares outstanding during
each year presented. Diluted earnings per common share give effect
to the assumed issuance of shares pursuant to outstanding stock
option plans, when dilutive.
Foreign Currency
----------------
All balance sheet accounts of foreign operations are translated into
U.S. dollars at the year-end rate of exchange and statements of
earnings items are translated at the weighted average exchange rates
for the year. The resulting translation adjustments are made
directly to a separate component of stockholders' equity. Gains and
losses from foreign currency transactions, such as those resulting
from the settlement of foreign receivables or payables, are included
in the consolidated statements of earnings.
From time to time, the Company enters into forward exchange
contracts in anticipation of future movements in certain foreign
exchange rates and to hedge against foreign currency fluctuations.
Realized and unrealized gains and losses on these contracts are
included in net income, except that gains and losses on contracts to
hedge specific foreign currency commitments are deferred and
accounted for as part of the underlying transaction.
Financial Instruments
---------------------
The carrying amounts of cash and cash equivalents and short-term
investments approximate fair value because of the short-term nature
of these items.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
<PAGE>
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - Continued
Reclassification
----------------
Certain reclassifications of prior year amounts have been made to
conform to the current year presentation.
NOTE B - CONCENTRATIONS OF CREDIT RISK
A significant portion of the Company's sales are to customers whose
activities are related to the oil and gas industry, including some
who are located in foreign countries. The Company generally extends
credit to these customers. Its exposure to credit risk is affected
by conditions within the oil and gas industry. Also, with respect
to foreign sales, collection may be more difficult in the event of a
default.
However, the Company closely monitors extensions of credit and has
never experienced significant credit losses. Substantially all
foreign sales are made to large, well-established companies. The
Company generally requires collateral or guarantees on foreign sales
to smaller companies.
No single customer accounted for more than 10% of revenues in the
years ended June 30, 1999 or 1998. Sales to one customer accounted
for approximately 12.3% of revenues for the year ended June 30,
1997.
NOTE C - INVENTORIES
Principal components of inventories are as follows:
June 30,
1999 1998
---------- ----------
Raw materials $ 961,450 $ 973,906
Work in process 2,522,182 1,114,524
Finished goods 247,338 331,415
---------- ----------
$ 3,730,970 $ 2,419,845
========== ==========
At June 30, 1999 and 1998, progress payments of $1,237,771 and
$100,472, respectively, have been offset against inventories and
costs of uncompleted contracts.
<PAGE>
NOTE D - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized as follows:
June 30,
1999 1998
---------- ----------
Buildings $ 3,096,993 $ 3,029,175
Equipment 2,670,878 2,842,401
Furniture and fixtures 1,815,592 1,587,383
---------- ----------
7,583,463 7,458,959
Less accumulated depreciation (6,201,643) (5,911,280)
---------- ----------
1,381,820 1,547,679
Land 720,726 720,726
---------- ----------
$ 2,102,546 $ 2,268,405
========== ==========
NOTE E - CREDIT ARRANGEMENT
The Company has banking agreements for unsecured revolving lines of
credit in the combined amount of $7,000,000 due upon demand, with
interest at the banks' prime lending rate (7.75% at June 30, 1999),
payable monthly. The banks charge usage fees at an annual rate of
.25% of the average daily unused portion of the line. No amounts
were borrowed under these arrangements at June 30, 1999. At
June 30, 1998, $200,000 was outstanding under the lines of credit.
The Company had letters of credit outstanding under separate
arrangements of $3,246,567 and $3,027,911 at June 30, 1999 and 1998,
respectively. Other assets with a cost of approximately $635,000
and $526,000 were pledged against the letters of credit outstanding
at June 30, 1999 and 1998, respectively.
NOTE F - STOCKHOLDERS' EQUITY
The Company has a 1985 restricted stock plan (the 1985 Plan) under
which 75,000 shares of common stock were reserved for awards to
employees. Restricted stock grants made under the 1985 Plan
generally vest ratably over a three-year period. The Company
awarded 8,000 shares (fair value at date of grant of $80,250) in
fiscal 1997, of which 5,000 and 3,000 shares were subsequently
forfeited, in fiscal 1999 and 1997, respectively, and awarded 3,000
shares (fair value at date of grant of $31,875) in fiscal 1998.
Compensation expense for stock grants is charged to earnings over
the restriction period and amounted to $17,416, $25,115, and $26,625
in fiscal 1999, 1998, and 1997, respectively. The tax effect of
differences between compensation expense for financial statement and
income tax purposes is charged or credited to additional paid-in
capital.
<PAGE>
NOTE F - STOCKHOLDERS' EQUITY - Continued
In December 1995, the Company adopted a stock option and restricted
stock plan (the 1995 Plan), which provides for a maximum of 100,000
shares of common stock to be issued. Stock options are granted at
market value, generally vest ratably over four years, and expire ten
years from date of grant.
At June 30, 1999, 36,250 shares of common stock were available for
issuance under the 1995 Plan, and 1,750 shares were available under
the 1985 Plan.
The Company has adopted the disclosure provisions of SFAS 123. It
applies APB 25 and related interpretations in accounting for stock
options issued and, therefore, does not recognize compensation
expense for stock options granted at or greater than market value.
If the Company had elected to recognize compensation expense based
upon the fair value at the grant date for awards under this plan
consistent with the methodology prescribed by SFAS 123, the effect
on net earnings and earnings per share would have been as follows:
Year ended June 30,
1999 1998 1997
--------- --------- -------
Net earnings - as reported $1,849,570 $2,449,561 $537,416
Net earnings - pro forma 1,813,141 2,440,327 527,012
Basic earnings per share
As reported 1.27 1.68 .37
Pro forma 1.25 1.68 .36
Diluted earnings per share
As reported 1.27 1.68 .37
Pro forma 1.24 1.67 .36
The fair value of these options was estimated at the date of grant
using the Black-Scholes option pricing model with the following
weighted-average assumptions: expected volatility of 43% for fiscal
1999, 41% for fiscal 1998 and 45% for fiscal 1997; risk-free
interest rates ranging from 4.6% to 5.6%; dividend yield of 3.7%,
5.6%, and 3.8% in fiscal 1999, 1998 and 1997, respectively; and
expected lives of five to seven years.
<PAGE>
NOTE F - STOCKHOLDERS' EQUITY - Continued
Additional information with respect to options outstanding under the
plan is as follows:
Number of Weighted
shares average
underlying exercise
Stock options options price
------ ------
Outstanding at July 1, 1996 34,000 $ 9.25
Granted 2,500 13.33
Exercised (1,250) 9.25
Canceled/forfeited (3,750) 9.25
------
Outstanding at June 30, 1997 31,500 9.57
Granted 24,000 10.73
Exercised (2,500) 9.25
------
Outstanding at June 30, 1998 53,000 10.11
Granted 7,000 13.64
------
Outstanding at June 30, 1999 60,000 10.52
======
Options exercisable at June 30, 1997 9,250 10.14
======
Options exercisable at June 30, 1998 16,125 10.12
======
Options exercisable at June 30, 1999 31,000 10.15
======
Weighted average fair value of options granted:
Year ended June 30, 1997 $3.22
Year ended June 30, 1998 $3.24
Year ended June 30, 1999 $4.72
<PAGE>
NOTE F - STOCKHOLDERS' EQUITY - Continued
The following table summarizes information about the Plan's stock
options at June 30, 1999:
Options outstanding
---------------------------------------------------
Weighted average
Range of Number remaining contractual Weighted average
Exercise Prices outstanding life (in years) exercise price
--------------- ----------- --------------- --------------
$9.25 26,500 6.6 $ 9.25
$10.625-$11.875 24,000 8.6 10.73
$12.125-$14.25 9,500 8.7 13.56
------
60,000
======
Options exercisable
-----------------------------------
Range of Number Weighted average
Exercise Prices exercisable exercise price
--------------- --------------- ---------------
$9.25 19,250 $ 9.25
$10.625-$11.875 7,500 10.96
$12.125-$14.25 4,250 12.77
------
31,000
======
On May 21, 1997, the Board of Directors declared a dividend of one
common share purchase right for each outstanding share of common
stock to shareholders of record at the close of business on June 2,
1997. Each Right entitles the registered holder to purchase from
the Company one common share at a price of $30.00, subject to
adjustment, as more fully set forth in a Rights Agreement dated May
22, 1997.
The Rights will become exercisable only in the event that any person
or group of affiliated persons acquires, or obtains the right to
acquire, beneficial ownership of 20% or more of the outstanding
common shares or commences a tender or exchange offer, the
consummation of which would result in the beneficial ownership by a
person or group of 20% or more of such outstanding common shares.
The rights are redeemable under certain circumstances at $.01 each
and expire in May 2007.
<PAGE>
NOTE G - EMPLOYEE BENEFIT PLANS
The Company has a 401(k) Plan to provide eligible employees with a
retirement savings plan. All employees are eligible to participate
in the plan upon completing 90 days of service. Company
contributions are voluntary and at the discretion of the Board of
Directors of the Company. The Company's contribution expense for
the years ended June 30, 1999, 1998 and 1997 was approximately
$157,000, $128,000, and $119,500, respectively.
NOTE H - INCOME TAXES
Deferred taxes are provided for the temporary differences between
the financial reporting bases and the tax bases of the Company's
assets and liabilities. The temporary differences that give rise to
the deferred tax assets or liabilities are as follows:
June 30,
1999 1998
-------- --------
Deferred tax assets
Restricted stock grants $ 6,083 $ 10,760
Inventories 80,597 22,349
Foreign subsidiaries' net
operating loss carryforwards 232,122 115,473
Accrued expenses 164,317 253,012
Accounts receivable 108,285 148,983
Other 29,461 -
-------- --------
620,865 550,577
Deferred tax liabilities
Property, plant and equipment (100,088) (111,762)
Uncompleted contracts (500,396) (40,258)
Other (3,504) (3,504)
-------- --------
(603,988) (155,524)
-------- --------
Net deferred tax asset $ 16,877 $ 395,053
======== ========
Deferred tax assets and liabilities included in the balance sheet
are as follows:
June 30,
1999 1998
-------- --------
Current deferred tax asset (liability) $ (42,736) $ 433,596
Noncurrent deferred tax asset (liability) 59,613 (38,543)
-------- --------
$ 16,877 $ 395,053
======== ========
<PAGE>
NOTE H - INCOME TAXES - Continued
The provision for income taxes consisted of the following:
Years ended June 30,
1999 1998 1997
------- --------- --------
Federal
Current $552,824 $1,157,345 $ 41,765
Deferred 378,176 (190,421) (65,185)
State 65,000 105,653 24,000
------- --------- --------
$996,000 $1,072,577 $ 580
======= ========= ========
The Company had provided a valuation allowance at June 30, 1997
related to deferred tax assets of foreign subsidiaries. These
assets are recoverable only from future income of the respective
foreign subsidiaries. Because of a recapitalization and a
reorganization of European operations, the Company concluded at June
30, 1997 that it was more likely than not that certain of the
deferred tax assets are recoverable. The valuation allowance was
reduced in 1997 and eliminated in 1998. Utilization of foreign net
operating carryforwards reduced income tax expense by approximately
$12,000 and $130,000 for 1998 and 1997, respectively.
The effective income tax rate varies from the statutory rate due to
the following:
As a percentage
of pretax earnings
1999 1998 1997
----- ----- -----
Income tax expense at statutory rate 34.0% 34.0% 34.0%
Increase (decrease) in income taxes
resulting from
State tax, net of federal benefits 1.5 2.0 2.9
Foreign sales corporation exclusions (2.9) (6.7) (10.2)
Change in valuation allowance - (0.8) (24.3)
Other 2.4 2.0 (2.3)
----- ----- -----
Income tax expense at effective rate 35.0% 30.5% 0.1%
===== ===== =====
<PAGE>
NOTE I - EARNINGS PER SHARE
<TABLE>
Summarized basic and diluted earnings per common share for each of
the three years ended June 30, 1999 is as follows:
1999 1998 1997
---------------------------- --------------------------- -------------------------
Per Per Per
Net share Net share Net share
earnings Shares amount earnings Shares amount earnings Shares amount
--------- --------- ---- --------- --------- ---- ------- --------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic earnings
per share $1,849,570 1,455,396 $1.27 $2,449,561 1,454,277 $1.68 $537,416 1,454,045 $.37
Effect of
dilutive
options - 4,751 - - 2,698 - - 1,034 -
--------- --------- ---- --------- --------- ---- ------- --------- ---
Diluted earnings
per share $1,849,570 1,460,147 $1.27 $2,449,561 1,456,975 $1.68 $537,416 1,455,079 $.37
========= ========= ==== ========= ========= ==== ======= ========= ===
</TABLE>
For fiscal 1999, 1998 and 1997, stock options covering 11,500, 2,500,
and 2,500 shares, respectively were excluded in the computations of
diluted earnings per share because their effect was antidilutive.
NOTE J - INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION
The Company identifies reportable segments based on management
responsibility within the corporate structure. The Company has two
reportable industry segments: gas/liquid filtration and 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. The segment also provides
engineering design and services, pulsation dampeners, natural gas
odorizers, quick-opening closures and parts for its products. The
catalytic reduction systems segment produces selective catalytic
reduction systems used for air pollution abatement to reduce
nitrogen oxide emissions.
<PAGE>
NOTE J - INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION - Continued
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 years ended June 30, 1999, 1998 and 1997 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.
<TABLE>
Catalytic Unallocated
Gas/liquid reduction corporate
Filtration Systems overhead Consolidated
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1999
Revenues from customers $34,436,000 $ 6,132,000 $ - $40,568,000
Segment profit (loss) 5,580,000 849,000 (3,451,000) 2,978,000
1998
Revenues from customers 39,234,000 4,221,000 - 43,455,000
Segment profit (loss) 6,708,000 84,000 (3,147,000) 3,645,000
1997
Revenues from customers 31,854,000 9,632,000 - 41,486,000
Segment profit (loss) 4,207,000 (1,038,000) (2,762,000) 407,000
The Company attributes revenues from external customers to
individual geographic areas based on the country where the sale is
originated. Information about the Company's operations in different
geographic areas as of and for the years ended June 30, 1999, 1998
and 1997 is as follows:
United
States Europe Eliminations Consolidated
---------- --------- ---------- ----------
1999
Net sales to unaffiliated
customers $34,707,000 $5,861,000 $ - $40,568,000
Transfers between
geographic areas 726,000 - (726,000) -
---------- --------- ---------- ----------
Total $35,433,000 $5,861,000 $ (726,000) $40,568,000
========== ========= ========== ==========
Identifiable assets $21,723,000 $4,285,000 $(2,529,000) $23,479,000
========== ========= ========== ==========
</TABLE>
<PAGE>
NOTE J - INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION - Continued
<TABLE>
United
States Europe Eliminations Consolidated
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
1998
Net sales to unaffiliated
customers $37,357,000 $6,098,000 $ - $43,455,000
Transfers between
geographic areas 1,847,000 1,000 (1,848,000) -
---------- --------- ---------- ----------
Total $39,204,000 $6,099,000 $(1,848,000) $43,455,000
========== ========= ========== ==========
Identifiable assets $20,736,000 $4,521,000 $(2,501,000) $22,756,000
========== ========= ========== ==========
United
States Europe Eliminations Consolidated
---------- --------- ---------- ----------
1997
Net sales to unaffiliated
customers $35,553,000 $5,933,000 $ - $41,486,000
Transfers between
geographic areas 889,000 4,000 (893,000) -
---------- --------- ---------- ----------
Total $36,442,000 $5,937,000 $ (893,000) $41,486,000
========== ========= ========== ==========
Identifiable assets $17,374,000 $3,817,000 $(2,144,000) $19,047,000
========== ========= ========== ==========
</TABLE>
Transfers between the geographic areas primarily represent
intercompany export sales and are accounted for based on established
sales prices between the related companies.
Identifiable assets of geographic areas are those assets related to
the Company's operations in each area. United States assets consist
of all other operating assets of the Company.
<PAGE>
Report of Independent Certified Public Accountants on Schedules
Board of Directors
Peerless Mfg. Co.
In connection with our audit of the consolidated financial statements
of Peerless Mfg. Co. and Subsidiaries referred to in our report dated
September 10, 1999, which is included in Part II of this form, we have
also audited Schedule II for each of the three years in the period
ended June 30, 1999. In our opinion, this schedule presents fairly,
in all material respects, the information required to be set forth
therein.
GRANT THORNTON LLP
Dallas, Texas
September 10, 1999
<PAGE>
<TABLE>
Peerless Mfg. Co. and Subsidiaries
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
June 30,
Balance at Additions
beginning of Charged to Charged to Balance at
Description period expenses other accounts (1) Deductions (2) end of period
----------- ------- -------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
1999
Allowance for uncollectible
accounts $806,200 $184,471 $ - $305,341 $685,330
======= ======= ===== ======= =======
1998
Allowance for uncollectible
accounts $312,450 $621,560 $ - $127,810 (2) $806,200
======= ======= ===== ======= =======
Deferred tax valuation allowance $ 29,710 $ - $ - $ 29,710 (3) $ -
======= ======= ===== ======= =======
1997
Allowance for uncollectible
accounts $100,000 $249,612 $ - $ 37,162 (2) $312,450
======= ======= ===== ======= =======
Deferred tax valuation allowance $160,405 $ - $ - $130,695 (3) $ 29,710
======= ======= ===== ======= =======
(1) Collections on accounts previously written off.
(2) Write offs.
(3) Utilization and/or revaluation of deferred tax assets.
</TABLE>
<PAGE>
<PAGE>
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/ Sherrill Stone
Sherrill Stone, Chairman,
President, and Chief
Executive Officer
Date: October 19, 1999
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Date:
October 19, 1999 /s/ Sherrill Stone
Sherrill Stone, Chairman of the
Board, President, Director and
Chief Executive Officer
October 19, 1999 /s/ Paul W. Willey
Paul W. Willey,
Principal Financial Officer,
October 19, 1999 /s/ Kent J. Van Houten
Kent J. Van Houten,
Principal Accounting Officer
October 19, 1999 /s/ Donald A. Sillers, Jr.
Donald A. Sillers, Jr., Director
October 19, 1999 /s/ Bernard S. Lee
Bernard S. Lee, Director
October 19, 1999 /s/ D. D. Battershell
D. D. Battershell, Director
<PAGE>
