SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark One)
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
____ SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 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
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 preceding 12 months (or for shorter periods 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 latest practicable date.
Class Outstanding at May 12, 2000
----------------------------- ---------------------------
Common stock, $1.00 par value 1,463,192 Shares
<PAGE>
PEERLESS MFG. CO.
INDEX
Page
Number
------
Part I: Financial Information
Item 1: Consolidated Financial Statements
Condensed Consolidated Balance Sheets for the
periods ended March 31, 2000 and June 30, 1999. 3
Condensed Consolidated Statements of Earnings for the
three and nine months ended March 31, 2000 and 1999. 4
Condensed Consolidated Statements of Cash Flows for
the nine months ended March 31, 2000 and 1999. 5
Notes to the Condensed Consolidated Financial Statements 6 - 8
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations. 9 - 11
Part II: Other Information
Legal Proceedings 12
Exhibits and Reports 12 - 14
Signatures 15
2 of 15
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
PEERLESS MFG. CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, June 30,
2000 1999
---------- ----------
Assets: (UNAUDITED) (AUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 173,979 $ 210,866
Short term investments 273,343 273,343
Accounts receivable-principally trade-net
of allowance for doubtful accounts of
$757,364 at March 31, 2000 and $685,330
at June 30, 1999 13,136,104 12,195,037
Inventories:
Raw materials 1,501,120 961,450
Work in process 1,396,935 2,522,182
Finished goods 498,941 247,338
Costs and earnings in excess of billings
on uncompleted contracts 3,769,819 3,268,181
Other 3,208,413 777,635
---------- ----------
Total current assets 23,958,654 20,456,032
Property, plant and equipment-at Cost,
less accumulated depreciation 3,512,871 2,102,546
Property held for investment-at Cost,
less accumulated depreciation 68,900 68,900
Deferred income taxes 59,613 59,613
Other assets 925,093 791,681
---------- ----------
$28,525,131 $23,478,772
========== ==========
Liabilities and Stockholders' Equity:
Current liabilities:
Notes payable $ 2,806,144 $ -
Accounts payable-trade 5,008,743 5,626,058
Billings in excess of costs and earnings
on uncompleted contracts 2,808,417 572,970
Commissions payable 875,764 1,204,584
Accrued liabilities:
Compensation 800,328 1,188,165
Warranty 245,373 313,773
Deferred income taxes 42,736 42,736
Other 886,476 38,669
---------- ----------
Total current liabilities 13,473,981 8,986,955
Stockholders' equity:
Common stock-authorized 10,000,000 shares of $1
par value; issued and outstanding, 1,463,192
shares and 1,452,492 shares at March 31, 2000
and June 30, 1999, respectively 1,463,192 1,452,492
Additional paid-in capital 2,637,401 2,539,951
Unamortized value of restricted stock grants (37,363) (4,719)
Cumulative foreign currency
translation adjustment (178,966) (103,824)
Retained earnings 11,166,886 10,607,917
---------- ----------
15,051,150 14,491,817
---------- ----------
$28,525,131 23,478,772
========== ==========
The accompanying notes are an integral part of these statements.
3 of 15
</TABLE>
<PAGE>
<TABLE>
PEERLESS MFG. CO.
CONDENSED STATEMENTS OF EARNINGS
(UNAUDITED)
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $13,764,001 $ 9,741,644 $36,429,369 $30,043,169
Cost of goods sold 9,384,365 6,226,860 24,554,877 19,949,123
---------- ---------- ---------- ----------
Gross profit 4,379,636 3,514,784 11,874,492 10,094,046
Operating expenses 3,444,649 2,670,421 9,832,641 7,991,510
---------- ---------- ---------- ----------
Operating income 934,987 844,363 2,041,851 2,102,536
Other income(expense)
Interest income 29,990 16,840 33,179 40,513
Interest expense (19,837) - (40,323) (18,898)
Foreign exchange gains(losses) (25,572) (25,808) 38,314 (119,163)
Other, net (43,768) (59,802) (70,238) (72,607)
---------- ---------- ---------- ----------
(59,187) (68,770) (39,068) (170,155)
---------- ---------- ---------- ----------
Earnings before Federal income tax 875,800 775,593 2,002,783 1,932,381
Federal income tax
Current 314,004 261,746 716,059 698,058
Deferred - 18,713 (741) 27,618
---------- ---------- ---------- ----------
314,004 280,459 715,318 725,676
---------- ---------- ---------- ----------
Net earnings 561,796 495,134 1,287,465 1,206,705
========== ========== ========== ==========
Basic and diluted earnings per share $0.38 $0.34 $0.88 $0.83
========== ========== ========== ==========
Basic weighted average shares 1,462,363 1,454,048 1,457,619 1,456,361
Dilutive options 17,237 563 9,985 3,084
---------- ---------- ---------- ----------
Adjusted weighted average shares 1,479,600 1,454,611 1,467,604 1,459,445
========== ========== ========== ==========
Cash dividend per common share $0.125 $0.125 $0.375 $0.375
========== ========== ========== ==========
The accompanying notes are an integral part of these statements.
4 of 15
</TABLE>
<PAGE>
<TABLE>
PEERLESS MFG. CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the nine months ended
------------------------
March 31,
2000 1999
---------- ----------
<S> <C> <C>
Cash flows from operating activities
Net earnings $ 1,287,465 $ 1,206,705
Adjustments to reconcile earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 331,116 251,740
Other 8,219 (19,323)
Changes in operating assets and liabilities
Accounts receivable (941,067) 3,380,562
Inventories 333,974 (114,182)
Cost and earnings in excess of billings
on uncompleted contracts (501,638) (1,498,838)
Other current assets (2,430,778) (105,773)
Other assets (133,412) (41,030)
Accounts payable (617,315) (1,757,246)
Billings in excess of costs and earnings
on uncompleted contracts 2,235,447 90,005
Commissions payable (328,820) 89,543
Accrued liabilities 209,508 (366,767)
---------- ----------
(1,834,766) (91,309)
---------- ----------
Net cash provided by (used in) operating activities (547,301) 1,115,396
Cash flows from investing activities:
Net sales (purchases) of property and equipment (1,741,441) (180,605)
---------- ----------
Net cash provided by (used in) investing activities (1,741,441) (180,605)
Cash flows from financing activities:
Net change in short-term borrowings 2,806,144 (200,000)
Proceeds from issuance of common stock 67,288 -
Dividends paid (546,435) (545,935)
---------- ----------
Net cash provided by (used in) financing activities 2,326,997 (745,935)
Effect of exchange rate on cash and cash equivalents (75,142) (9,795)
---------- ----------
Net increase (decrease) in cash and cash equivalents (36,888) 179,061
Cash and cash equivalents at beginning of period 210,866 428,482
---------- ----------
Cash and cash equivalents at end period 173,979 607,543
========= ==========
The accompanying notes are an integral part of these statements.
5 of 15
</TABLE>
<PAGE>
PEERLESS MFG. CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying consolidated financial statements of Peerless Mfg. Co.
and its subsidiaries (the "Company") have been prepared without audit.
In our opinion, the financial statements reflect all adjustments
necessary to present fairly the results of operations for the three and
nine months ending March 31, 2000 and 1999, the Company's financial
position at March 31, 2000 and cash flows for the nine months ending
March 31, 2000 and 1999. These adjustments are of a normal and
recurring nature, which are in the opinion of management, necessary for
a fair presentation of the financial position and results of operations
for the interim periods.
Certain notes and other information have been condensed or omitted from
the interim financial statements presented in this Quarterly Report on
Form 10-Q. Therefore, these financial statements should be read in
conjunction with our Annual Report Form 10-K, as amended, for the
Fiscal year ended June 30, 1999 and the consolidated financial
statements and notes included in our June 30, 1999, audited financial
statements.
2. The results for interim periods are not necessarily indicative of the
results to be expected for the full year.
3. We have formal agreements with Bank of America N.A., formerly
NationsBank N.A., and Chase Bank of Texas N.A. for $5,500,000 and
$3,500,000 respectively. The Bank of America credit line was
temporarily increased to accommodate the acquisition of ABCO
Industries. This $2,000,000 increase will be refinanced into a medium
term loan by the end of the current fiscal year. The credit line will
then be reduced to the original $3,500,000. The lines of credit are
renewable annually. Under the terms of these agreements, loans bear
interest at the prevailing prime rate and we are required to pay 1/4 of
1% per annum on the unused portion of the facility. Bank of America
and Chase Bank of Texas provide us with a LIBOR rate option. As of
March 31, 2000, we had $2,806,000 outstanding against these lines of
credit. The Company had no amounts outstanding as of June 30, 1999.
6 of 15
<PAGE>
4. We consolidate the accounts of our wholly-owned subsidiaries, Peerless
Europe Limited, Peerless Europe B.V., and ABCO Industries. All
significant intercompany accounts and transactions have been eliminated
in the consolidation.
5. We identify reportable segments based on management responsibility
within our corporate structure. We have two reportable industry
segments which are set out below:
<TABLE>
Gas/Liquid Selective Unallocated Consolidated
Filtration Catalytic Corporate
Reduction Expenses
Systems
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Three months
ending 3/31/00
--------------
Revenues from $6,086,000 $7,678,000 - $13,764,000
Customers
Segment ($264,000) $2,360,000 ($1,161,000) $935,000
profit (loss)
Three months
ending 3/31/99
--------------
Revenues from $8,308,000 1,433,000 - $ 9,741,000
Customers
Segment $1,345,000 222,000 ($723,000) $ 844,000
profit (loss)
7 of 15
<PAGE>
Nine months
ending 3/31/00
--------------
Revenues from $22,286,000 $14,143,000 - $36,429,000
Customers
Segment $1,737,000 $3,688,000 ($3,383,000) $2,042,000
profit (loss)
Nine months
ending 3/31/99
--------------
Revenues from $26,626,000 $3,417,000 - $30,043,000
Customers
Segment $3,877,000 $494,000 ($2,268,000) $2,103,000
profit (loss)
</TABLE>
8 of 15
<PAGE>
Item 2. 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, global and domestic economic conditions, or other factors. The
following discussion and analysis should be read in conjunction with the
attached consolidated financial statements and notes thereto, and with the
Company's audited financial statements and notes thereto for the fiscal year
ended June 30, 1999.
Capital Resources and Liquidity
As a general policy, corporate liquidity is maintained 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 $37,000 from June 30, 1999. Company
operations used $547,000. This was comprised primarily from net earnings of
$1,287,000, increased net billings in excess of costs of $1,734,000, lower
inventories of $334,000, and depreciation and amortization of $331,000.
These positive cashflows were offset by increased Account Receivable of
$941,000, increases in other assets of $2,431,000 representing advance
payment to sub-contractors, reductions in both accounts payable and
commissions payable of $617,000 and $329,000 respectively. Investing
activities used $1,741,000 for the purchase of the assets of ABCO
Industries. Financing activities provided $2,327,000 through increased
short-term bank borrowings of $2,806,000 offset by dividends paid of
$546,000.
9 of 15
<PAGE>
We continue to finance plant expansion, equipment purchases, and working
capital requirements primarily through the retention of earnings. In
addition to retained earnings, we have from time to time used two short-term
bank credit lines totaling $7,000,000 to supplement working capital. The
acquisition of the assets of ABCO Industries Inc., was financed through a
$2,000,000 increase in the line of credit with Bank of America. This will
be rolled into a medium term loan by the end of the current fiscal year.
We currently have no material commitments for capital expenditures other
than with respect to our established plant and equipment maintenance
program.
REVENUE: Revenue increased 41% from $9,742,000 for the three months ended
March 31, 1999 to $13,764,000 for the three months ended March 31, 2000. The
increase in revenues was due to improved revenues from the SCR product line
and was partially offset by lower sales from the traditional products of
filtration and separation systems. For the nine month period, revenues
increased 21% from $30,043,000 for the nine months ended March 31, 1999 to
$36,429,000 for the nine months ended March 31, 2000. The year to date sales
improvement is due to strong sales of SCR products.
The backlog of uncompleted orders and letters of intent at March 31, 2000
was approximately $38,600,000 as compared to a March 31, 1999 backlog of
$25,500,000. Of the $38,600,000 backlog at March 31, 2000, approximately
50% is scheduled to be completed in the current fiscal year.
GROSS PROFIT: Gross profit increased 24% from $3,515,000 for the three
months ended March 31,1999 to $4,380,000 for the three months ended March
31, 2000. For the nine month period ending March 31, 2000, gross profit
increased 17% to $11,874,000 from $10,094,000 for the nine months ending
March 31, 1999. The increased gross profit is primarily attributable to the
increased revenue from environmental, nuclear, and marine products.
OPERATING EXPENSES: Operating expenses increased 29% from $2,670,000 for
the three months ended March 31, 1999 to $3,445,000 for the three months
ended March 31,2000. For the nine months, operating expenses increased 23%
from $7,992,000 for the nine months ending March 31, 1999 compared to
$9,833,000 for the nine months ending March 31, 2000. Year to date higher
operating expenses are primarily due to increased implementation cost for an
ERP System, combined with greater warranty expense.
10 of 15
<PAGE>
OTHER INCOME/(EXPENSE): We recognized net other expense of approximately
$59,000 for the three months ended March 31, 2000 compared to net other
expenses of approximately $69,000 for the three months ended March 31, 1999.
This decline was primarily due to reductions in legal settlements.
INTERNATIONAL MARKETS:
Demand for the Company's products in Southeast Asia remained slow as a
result of the current financial situation there. However, we are
experiencing an increase in orders of our company's products through our UK
subsidiary, Peerless Europe Ltd.
SCR Products:
Orders for the purchase of SCR environmental protection products have
continued to be strong. New SCR opportunities are the result of the new gas
turbine powered electric generating facilities being built to fill demand
for electric power in the U.S. These projects require clean burning gas
which in turn creates the opportunity to sell the Company's gas cleaning
equipment. Coal fired electric power plants are also adding SCR products to
comply with US Government mandated lower NOx emission levels. Peerless
provides ammonia storage and delivery systems to be used as part of the SCR
systems installed at these coal fired plants.
11 of 15
<PAGE>
PEERLESS MFG. CO.
PART II
OTHER INFORMATION
ITEM 1 -- LEGAL PROCEEDINGS
REFERENCE IS MADE TO OUR ANNUAL REPORT ON FORM 10-K, AS AMENDED, ITEM
3, PAGE 5, "LEGAL PROCEEDINGS" FOR THE FISCAL YEAR ENDED JUNE 30, 1999.
FOR THE NINE MONTHS ENDED MARCH 31, 2000 THERE WERE NO MATERIAL
DEVELOPMENTS OR NEW PROCEEDINGS FILED AGAINST THE COMPANY.
ITEM 6 -- EXHIBITS AND REPORTS -- FORM 8-K
(a) EXHIBITS:
References are to the Company's SEC File Number 0-05214.
3(a) Articles of Incorporation, as amended to date (filed as Exhibit
3(a) to our Quarterly Report on Form 10-Q, dated 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, dated 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, dated 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, dated 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 dated June 30, 1991, and
incorporated herein by reference).
12 of 15
<PAGE>
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) Agreement, dated as of April 29, 1994 by and between Peerless Mfg.
Co. and Sherrill Stone (filed as Exhibit 10(e) to our Annual
Report on Form 10-K dated June 30, 1994 and incorporated herein by
reference).
10(f) 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, dated February 14, 2000 and
incorporated herein by reference), as amended by Amendment A
thereto, dated February 25, 2000.*
10(g) 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, dated February 14,
2000 and incorporated herein by reference).
10(h) Peerless Mfg. Co. 1995 Stock Option and Restricted Stock Plan,
adopted by the Board of Directors 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 dated 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, dated September 30, 1999 and incorporated
herein by reference).
10(i) 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(j) Employment Agreement dated as of July 23, 1999 by and between
Peerless Mfg. Co. and G.D. Cornwell (filed as exhibit 10(j) to our
Quarterly Report on Form 10-Q, dated September 30, 1999 and
incorporated herein by reference).
13 of 15
<PAGE>
10(k) Agreement dated as of July 23, 1999 by and between Peerless Mfg.
Co. and G.D. Cornwell (filed as exhibit 10(k) to our Quarterly
Report on Form 10-Q, dated September 30, 1999 and incorporated
herein by reference).
21 Our Subsidiaries (filed as Exhibit 21 to our Annual Report on Form
10-K dated September 30, 1999, and incorporated herein by
reference).
27 Financial Data Schedule.*
* Filed herewith
(b) Reports on Form 8-K. We filed a Current Report on Form 8-K on
March 13, 2000 to report our acquisition of substantially all the
assets of ABCO Industries, Inc. We subsequently filed an amendment
to such Form 8-K on May 12, 2000 to include the financial statements
of ABCO Industries, Inc. as of and for the periods ending September
30, 1997, September 30, 1998, and September 30, 1999, and proforma
financial information as of and for the periods ending June 30,
1999, and December 31, 1999.
14 of 15
<PAGE>
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: May 12, 2000
/s/ Sherrill Stone /s/ Thomas J. Reeve
---------------------------- ----------------------------
By: Sherrill Stone By: Thomas J. Reeve
Chairman, President and Chief Financial Officer
Chief Executive Officer
15 of 15
EXHIBIT 10 (f)
AMENDMENT A
TO
EIGHTH AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDMENT A TO EIGHTH AMENDED AND RESTATED LOAN AGREEMENT (this
"Amendment") is made as of February 25, 2000, between BANK OF AMERICA, N.A.,
a national banking association (the "Bank"), and PEERLESS MFG. CO., a Texas
corporation (the "Borrower").
R E C I T A L S:
A. The Borrower and the Bank are parties to that certain Eighth
Amended and Restated Loan Agreement dated as of December 12, 1999 (the
"Existing Loan Agreement").
B. The Borrower and the Bank have agreed to amend the Existing Loan
Agreement as hereinafter provided (i) to increase the revolving facility on
a temporary basis by $2,000,000 to $5,500,000, (ii) to provide an
alternative rate of interest which may be selected by the Borrower, (iii) to
make various other changes necessary to effect the foregoing, and (iv) to
execute a new note in connection with such amendments.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Bank and the Borrower agree as follows:
1.0 Same Terms. All terms used herein which are defined in the
Existing Loan Agreement shall have the same meanings when used herein,
unless the context hereof otherwise requires or provides. In addition, all
references in the Loan Documents to the "Agreement" shall mean the Existing
Loan Agreement, as amended by this Amendment, and as the same shall
hereafter be amended from time to time. All references to the "Line" and
the "Note" in the Existing Loan Agreement and the other Loan Documents shall
mean the "Line" and the "Line of Credit Note," each as defined in this
Amendment. In addition, the following terms have the meanings set forth
below:
"Affiliate:" See Section 2.2 of this Amendment.
"Affiliate Loan Agreement:" See Section 2.2 of this Amendment.
"Effective Date" means February 25, 2000, or such later date as
the Borrower has satisfied the conditions precedent specified in Section 3.0
of this Amendment.
"Origination Fee:" See Section 2.2 of this Amendment.
"Reduction Date:" See Section 2.2 of this Amendment.
2.0 Amendments to Existing Loan Agreement. On the Effective Date, the
Existing Loan Agreement shall be deemed to be amended as follows:
<PAGE>
2.1 Amendment to Section 2.A.i. Section 2.A of the Existing Loan Agreement
shall be amended to delete the current text thereof and insert in lieu
thereof the following:
A. Loan. Until the Reduction Date specified in
subsection v hereof, Bank hereby agrees to make (or has
made) one or more loans to Borrower in the aggregate
principal face amount of $5,500,000 (as such amount may
be reduced, the "Line"), provided that the aggregate
unpaid principal amount of all loans shall not at any
time exceed the difference between (i) the Line, minus
(ii) the undrawn amount of all outstanding Letters of
Credit, minus (iii) the amount of all drawings under any
Letter of Credit for which Bank has not been reimbursed.
The obligation to repay the loans is evidenced by the
promissory note dated February 25, 2000 (the "Line of
Credit Note" or "Note," together with any and all
renewals, extensions, or rearrangements thereof being
hereafter collectively referred to as the "Note"),
having a maturity date, repayment terms, and interest
rate as set forth in the Note (a copy of which is
attached as Exhibit A.
2.2 Amendment to Section 2. Section 2.A of the Existing Loan Agreement is
hereby amended to insert following Section 2.A.iii and preceding Section 3
thereof the following:
iv. Origination/Commitment Fee. Borrower will pay
on the Effective Date an origination/commitment fee of
$20,000 (the "Origination Fee"). If Borrower or any
affiliate of Borrower acceptable to Bank (such affiliate
being called the "Affiliate") enters into a loan
agreement with Bank for an amount not in excess of
$2,000,000 and on terms otherwise acceptable to Bank in
its sole discretion (the "Affiliate Loan Agreement")
within sixty (60) days from the Effective Date, the
Origination Fee shall be credited to any origination or
similar fee required to be paid by Borrower or the
Affiliate under the terms of such other loan agreement.
v. Reduction of Line. The Line shall be reduced
to $3,500,000 on the day (the "Reduction Date") which is
the earlier of the sixtieth (60th) day following the
Effective Date or the date on which Bank and Borrower or
the Affiliate enter into the Affiliate Loan Agreement.
2.3 Amendment to Section 5.A.ii. Section 5.A.ii of the Existing Loan
Agreement shall be amended to delete the current text thereof in its
entirety and insert in lieu thereof the following:
ii. Borrower shall not permit Net Income to be
less than $1,100,000 during any period of four (4)
consecutive calendar quarters.
3.0 Conditions Precedent. The transactions contemplated by this Amendment
shall be deemed effective on the Effective Date when the following
conditions have been complied with to the satisfaction of the Bank, unless
waived by the Bank in writing:
<PAGE>
3.1 Origination Fee and Other Fees. The Borrower has paid the Bank the
Origination Fee and the fees and expenses of Bank's counsel incurred in
preparing this Amendment and the other Loan Documents.
3.2 Amendment. The Borrower shall have executed and delivered to the Bank
this Amendment.
3.3 Line of Credit Note. The Borrower shall have executed and delivered to
the Bank the Line of Credit Note.
3.4 Other Documents. The Bank shall have received in form and substance
satisfactory to the Bank and its counsel such other approvals, documents,
certificates, and other instruments as the Bank in its sole discretion shall
require.
4.0 Certain Representations and Warranties. To induce the Bank to enter
into this Amendment, the Borrower represents and warrants as follows (which
representations and warranties shall survive the execution and delivery
hereof):
4.1 Authority and Compliance. The Borrower has full power and authority to
execute, deliver, and perform all of the Loan Documents to which it is a
party and to incur and perform the obligations provided for therein. No
consent or approval of any public authority or third party is required as a
condition to the validity or performance of any of the Loan Documents.
4.2 Binding Agreements. This Amendment and the Line of Credit Note
executed by the Borrower constitute valid and legally binding obligations of
the Borrower, enforceable in accordance with their terms.
4.3 No Conflicting Agreements. There is no charter, bylaw, stock
provision, partnership agreement, or other document pertaining to the power
or authority of the Borrower and no provision of any existing agreement,
mortgage, indenture, or contract binding upon the Borrower or affecting any
of the property of the Borrower which would conflict with or in any way
prevent in any material respect the execution, delivery, or carrying out of
the terms of this Amendment and the Line of Credit Note.
4.4 Previous Representations. All of the representations by Borrower in
the Existing Loan Agreement are true and correct as of the date hereof as if
set forth herein.
5.0 Limitation on Agreements. The modifications set forth herein are
limited precisely as written and shall not be deemed (a) to be a consent
under or a waiver of or an amendment to any other term or condition of the
Existing Loan Agreement or any of the Loan Documents, or (b) to prejudice
any right or rights which the Bank now has or may in the future have under
or in connection with the Existing Loan Agreement and the Loan Documents,
each as amended hereby.
6.0 Incorporation of Certain Provisions by Reference. The provisions of
Section 10.B and Section 11 of the Existing Loan Agreement are incorporated
herein by reference for all purposes.
<PAGE>
7.0 Entirety, Etc. This instrument and all of the other Loan Documents
embody the entire agreement between the parties. THIS AGREEMENT AND ALL OF
THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties have executed this Amendment A to
Eighth Amended and Restated Loan Agreement to be effective as of the
Effective Date.
BANK OF AMERICA, N.A.
By: /s/
------------------
BO CONRAD
Title: Vice President
PEERLESS MFG. CO.
By: /s/
------------------
Name: Sherrill Stone
Title: President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 173,979
<SECURITIES> 273,343
<RECEIVABLES> 13,893,468
<ALLOWANCES> 757,364
<INVENTORY> 3,396,996
<CURRENT-ASSETS> 23,958,654
<PP&E> 10,114,531
<DEPRECIATION> 6,532,760
<TOTAL-ASSETS> 28,525,131
<CURRENT-LIABILITIES> 13,473,981
<BONDS> 0
0
0
<COMMON> 1,464,192
<OTHER-SE> 13,586,958
<TOTAL-LIABILITY-AND-EQUITY> 28,525,131
<SALES> 36,429,369
<TOTAL-REVENUES> 36,429,369
<CGS> 24,554,877
<TOTAL-COSTS> 24,554,877
<OTHER-EXPENSES> 7,148,933
<LOSS-PROVISION> 45,000
<INTEREST-EXPENSE> 40,323
<INCOME-PRETAX> 2,002,783
<INCOME-TAX> 715,318
<INCOME-CONTINUING> 1,287,465
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,287,465
<EPS-BASIC> 0.88
<EPS-DILUTED> 0.88
</TABLE>
