<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-822
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THE OILGEAR COMPANY
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(Exact name of registrant as specified in its charter)
WISCONSIN 39-0514580
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2300 SOUTH 51ST STREET, POST OFFICE BOX 343924, MILWAUKEE, WISCONSIN 53234-3924
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (414) 327-1700
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Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $1.00 PAR VALUE
-----------------------------------------
(Title of Class)
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]
As of March 4, 1996, 1,197,114 shares of Common Stock were
outstanding, and the aggregate market value of the shares of Common Stock
(based upon the $14.75 last sale price on March 20, 1996 in the Nasdaq Stock
Market) held by non-affiliates (excludes a total of 676,981 shares reported as
beneficially owned by directors and officers or held by Company plans--does not
constitute an admission as to affiliate status) was approximately $7,671,962.
DOCUMENTS INCORPORATED BY REFERENCE
PART OF FORM 10-K
INTO WHICH PORTIONS OF
DOCUMENT DOCUMENT ARE INCORPORATED
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Annual Report to Shareholders for
year ended December 31, 1995 Parts I and II
Proxy Statement for Annual Meeting
of Shareholders on April 16, 1996 Part III
<PAGE> 2
PART I
ITEM 1. BUSINESS.
The primary business of The Oilgear Company ("Oilgear" or the
"Registrant"; together with its subsidiaries, the "Company") and its
subsidiaries is the manufacture and distribution of systems and value
engineered components for a broad range of industrial machinery and industrial
processes. Oilgear was incorporated under the laws of Wisconsin in 1921.
Principal Products, Markets and Methods of Distribution
The Company's products primarily involve the flow, pressure, condition,
control and measurement of liquids, which the Company refers to as Fluid Power.
The Company provides advanced technology in the design and production of Fluid
Power components, systems and electronic controls. Its product line includes
hydraulic pumps, high pressure intensifier pumps, valves, controls, cylinders,
motors, and fluid meters. The Company manufactures both radial and axial piston
type hydraulic pumps in sizes delivering from approximately 4 gallons per
minute to approximately 230 gallons per minute at pressures ranging up to
15,000 pounds per square inch. The intensifier pumps are reciprocating pumps
operating at pressures up to 120,000 pounds per square inch. The valves
manufactured are pressure control, directional control, servo valves and
prefill valves for pressures up to 15,000 pounds per square inch. The Company's
pumps and valves are controlled through the actions of manual, hydraulic,
pneumatic, electric, and electrohydraulic controls or control systems. The
cylinders manufactured are heavy duty special purpose cylinders operating at up
to 3,500 pounds per square inch. The Company's bent axis and axial piston
motors are produced in sizes ranging from .85 cubic inch per revolution to 44
cubic inch per revolution.
The Company offers an engineering and manufacturing team capable of
providing advanced technology in the design and production of unique fluid
power components, systems and electronic controls. The Company's global
involvement focuses its expertise on markets in which customers demand top
quality, prompt delivery, high performance and responsive aftermarket support.
Its piston pumps, motors, valves, controls, manifolds, electronic systems and
components, cylinders, reservoirs, skids, meters and other products are
utilized in many industries such as the primary metals, machine tool,
automobile, petroleum, construction equipment, chemical, plastic, glass,
lumber, rubber and food industries. The Company strives to serve those markets
requiring high technology and expertise where reliability, top performance and
longer service life are needed. The products are sold as individual components
or integrated into high performance systems. A portion of the Company's
business comes from responsive, high quality aftermarket sales and flexible
rebuilding services which include exchange, factory rebuild and field repair
service, along with customer education.
The Company's products are sold in the United States and Canada directly
through 8 district sales offices and by a network of approximately 60
distributors. Sales offices are located in Milwaukee, Wisconsin; Novi,
Michigan; Cleveland, Ohio; Dallas and Longview, Texas; Laguna Hills,
California; Lynnwood, Washington; Atlanta, Georgia; Kansas City, Missouri; St.
George, Utah; and Doylestown, Pennsylvania. The Company's international sales
are generated directly by employees located in Milwaukee, Wisconsin; Bedford
and Leeds, England; Paris and Lyons, France; Hernani, Spain;
Hattersheim-Eddersheim, Germany; Montirone, Italy; Taren Point, Australia;
Belgaum, India; Song Nam City, South Korea; and Mexico City, Mexico; and by a
worldwide network of approximately 20 distributors. An Oilgear licensee,
Oilgear Japan, is responsible for sales of all equipment sold in Japan. The
Company is also part of a joint venture company in India, Oilgear Towler
Polyhydron Pvt. Ltd., which distributes products manufactured in the United
States, as well as repairs and manufactures designated Oilgear products for the
Indian market.
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Competition
The Company is a supplier of components for the capital goods industry.
Vigorous competition exists in this industry. The Company's products compete
worldwide against the products of a number of domestic and foreign firms
presently engaged in the industry, most of which are of greater overall size
and resources than the Company. The principal methods of competition include
price, product performance, product availability, service, and warranty.
Customers
No material part of the Company's business is dependent upon a single
customer or a very few customers.
Backlog
The Company's backlog of orders believed to be firm as of December 31,
1995 was approximately $21,900,000, an increase of approximately $7,000,000
from the backlog of orders as of December 31, 1994, which was approximately
$14,900,000. The Company expects that substantially all such orders will be
filled in 1996. The Company's backlog is significant to its operations but is
not seasonal in any significant respect. Backlog is generally dependent upon
economic cycles affecting capital spending in the industries that utilize the
Company's products.
Raw Materials
During the year, iron and steel castings, bearings, steel and other raw
materials were generally available from a number of sources, and the Company is
generally not dependent on any one supplier.
Patents, Licenses, Franchises
The Company has a number of United States and foreign patents. It does not
consider its business to be materially dependent upon any patent, patent
application or patent license agreement.
Research and Development
The Company's research and development activities are conducted by members
of the engineering staff at its Milwaukee and Leeds, England plants, who spend
a substantial amount of their time on research and development. During 1995,
the Company expended $2,127,000, and during 1994 and 1993, $1,752,000 and
$1,653,000, respectively, on the research and development activities of its
engineering staff. The emphasis of the Company's product development efforts
continues to be the expansion of its line of axial piston pumps and the
customizing of products to suit specific customer applications.
Environmental Matters
To date, compliance with federal, state and local provisions which have
been enacted or adopted regulating the discharge of materials into the
environment, or otherwise relating to the protection of the environment, has
not had any material effect on the capital expenditures, earnings and
competitive position of the Company. The Company does not presently anticipate
that compliance with such provisions will have any material effect on its
capital expenditures, earnings and competitive position in the future.
Employees
At December 31, 1995, the Company had 932 employees.
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Seasonal Aspects of Business
The Company's business is not seasonal to any significant extent.
Industry Segments and Principal Products
The Company is engaged in one industry, the manufacture and distribution
of fluid power systems and components for industrial machinery and industrial
processes. The Company also provides repair parts and service for most of the
products it manufactures. See "Principal Products, Markets and Methods of
Distribution" above.
Foreign and Domestic Operations and Export Sales
Incorporated by reference to Note 2 of "Notes To Consolidated Financial
Statements" on page 15 of the Registrant's Annual Report to Shareholders for the
fiscal year ended December 31, 1995 ("1995 Annual Report").
ITEM 2. PROPERTIES.
Oilgear owns a one-story general office and factory building located on 20
acres of land at 2300 South 51st Street in Milwaukee, Wisconsin. This building
is constructed of concrete, steel and brick and contains approximately 276,000
square feet of floor space.
Oilgear owns a manufacturing plant in Longview, Texas, constructed of
concrete block and steel, which contains approximately 44,000 square feet.
A 99,000 square foot manufacturing facility is located in Fremont,
Nebraska. To manage the increased demand for the Company's new products, the
Company expanded its Fremont, Nebraska facility in 1995.
The Company's Oilgear Towler GmbH subsidiary owns an approximately 25,000
square foot concrete block and steel manufacturing facility in Hattersheim-
Eddersheim, Germany, subject to a mortgage.
The Company's Oilgear Towler Ltd. subsidiary owns a one-story
manufacturing plant and two office buildings constructed of concrete, steel and
brick totaling approximately 62,000 square feet on six acres of land in Leeds,
England, and an additional prefabricated facility being used by the electrical
engineering department.
The Company's Oilgear Towler Ltd. subsidiary also owns a small service and
sales facility in Bedford, England.
The Company's Oilgear Towler S.A. Spanish subsidiary owns a two-story
manufacturing plant and office constructed of concrete and brick totaling
approximately 35,000 square feet on approximately one acre of land in Hernani,
Spain.
The Company's Oilgear Towler S.A. French subsidiary owns, subject to a
mortgage, a 9,000 square foot office building constructed of prefabricated
steel materials located on approximately one-half acre of land in Paris,
France.
The Company's Oilgear Towler S.r.l. Italian subsidiary owns a two-story
prefabricated concrete building on .6 acre of land in Montirone, Italy. The
facility is used to repair and assemble customer equipment, as well as house
sales and service functions.
These properties are maintained in good condition and are adequate for
present operations.
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Borrowings under the Company's domestic and foreign loan agreements are
collateralized by substantially all domestic property, plant and equipment and
by substantially all assets of the applicable foreign subsidiaries,
respectively. See Notes 4 and 5 of "Notes To Consolidated Financial
Statements" on page 16 in the 1995 Annual Report.
ITEM 3. LEGAL PROCEEDINGS.
The Company is a defendant in several product liability actions which it
believes are adequately covered by insurance, and certain other litigation
incidental to its business.
In October 1992, the United States Environmental Protection Agency ("EPA")
contacted the Company for information regarding the possible disposal of waste
at the Muskego Sanitary Landfill in Muskego, Wisconsin. The EPA made its
request pursuant to the provisions of the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") and the Resource Conservation and
Recovery Act. The Company duly responded, noting that "ordinary trash" may have
been hauled to the Muskego site. In November 1992, the EPA notified the Company
that it had been identified as a responsible party for purposes of remedial
action at the Muskego Sanitary Landfill. On December 9, 1992, the EPA issued a
unilateral administrative order under CERCLA directing 46 respondents to
perform remedial action for the first operable unit (source control) and to
reimburse the EPA for oversight costs. The Company was not named in the order.
In a subsequent unilateral administrative order dated June 6, 1995 (the "1995
Order"), the EPA directed the Company and 55 other respondents to design and
implement remedial measures for the second operable unit (groundwater
remediation) at the Muskego site. The Company is participating with a group of
respondents to address allocation issues. While the cost of remediation under
the 1995 Order is not yet known, and while the allocation process is not yet
complete, the Company's share is presently expected to be less than $40,000.
It is not certain what further action involving the Company, if any, may be
brought regarding this matter, nor is it possible at this time to predict the
ultimate outcome of any litigation or negotiation that might involve the
Company.
Oilgear is a member of a De Minimis Group of small volume waste
contributors to the Conservation Chemical Company of Illinois, Inc. facility
located in Gary, Indiana (the "CCCI Site"). The CCCI Site is the subject of a
clean-up effort commenced by the EPA under CERCLA in 1985. The amount of waste
contributed by Oilgear to the CCCI Site has been identified by the EPA as
.0046% of the total contributed by the more than 200 waste generators
identified by the EPA. The Company has accepted a de minimis settlement
offered by the EPA pursuant to which the Company has agreed to pay $1,388.25.
The Company expects the settlement to be finalized by mid-1996.
In August 1995, the EPA contacted the Company for information regarding
the possible disposal of waste by the Company at the former PCB Treatment, Inc.
facilities in Kansas City, Missouri and Kansas, respectively. The EPA made its
request pursuant to the provisions of CERCLA. The Company duly responded. The
Company has had no further communications from the EPA since its response. It
is not certain what further involvement the Company may have in this matter, if
any, and, accordingly, it is not possible at this time to predict the exposure,
if any, to the Company as a result of this matter.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT.
The names, ages, offices and positions held, and periods of service in
their present offices, of all executive officers of the Registrant are listed
below. Except in the case of mid-term vacancies, officers are elected for
one-year terms at the Board of Directors meeting following the annual meeting
of shareholders each year.
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<TABLE>
<CAPTION>
OFFICES AND POSITIONS PRESENT OFFICE
NAME AGE HELD WITH REGISTRANT HELD SINCE
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<S> <C> <C> <C>
David A. Zuege 54 President and Chief Executive 1996(1)
Officer; Director; Member of
Executive Committee
Gerhard W. Bahner 57 Vice President - Engineering; 1991(2)
Director
Doward L. Runyan 64 Vice President - Manufacturing 1987
Thomas J. Price 52 Vice President - Finance and Corporate
Secretary 1994(3)
Hubert Bursch 56 Vice President - European 1994(4)
Operations
</TABLE>
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(1) Mr. Zuege was Secretary - Treasurer from 1972 to 1978, Vice President -
Finance and Secretary from 1979 to 1993, Senior Vice President and
Secretary for a portion of 1993, and Executive Vice President and Chief
Operating Officer during the remainder of 1993 through 1995. He has been
a member of the Board of Directors since 1982.
(2) Mr. Bahner has been employed with the Company in the engineering
department since 1973. He has served as Director of Engineering from 1987
to 1991 and Managing Director of Oilgear's subsidiary, Oilgear Towler
Ltd., from 1989 to 1991. He has been a member of the Board of Directors
since 1992.
(3) Mr. Price has been employed in various positions with the Company since
1966. He served as Controller of the Company from 1977 to 1986, as
Treasurer/Controller from 1987 to 1993, and as Treasurer/Controller and
Secretary from 1993 to 1994.
(4) Mr. Bursch has been employed in various positions with the Company's
European operations since 1966. He served as Geschaftsfuhrer of Oilgear
GmbH (now Oilgear Towler GmbH) before his appointment as Chairman of the
Board of Management - Europe in 1991, which office he held until January
1, 1994.
FORWARD-LOOKING INFORMATION
Items 1, 3 and 7 of this Annual Report on Form 10-K and other documents or
oral presentations contain or may contain forward-looking statements made by or
on behalf of the Registrant which involve risks and uncertainties that could
cause the Company's actual results to differ materially from those discussed in
such forward-looking statements. Factors that could cause or contribute to
such differences include, but are not limited to, the following: world
economies, foreign currency conversion rates and world political stability.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Incorporated by reference to "Quarterly Financial Information" and
"Equity" on pages 9 and 10, respectively, of the 1995 Annual Report.
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ITEM 6. SELECTED FINANCIAL DATA.
Incorporated by reference to "5 Year Summary" on page 11 of the 1995
Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Incorporated by reference to "Management's Discussion" on pages 8 through
11 of the 1995 Annual Report.
The second, third and fourth paragraphs under "Legal Proceedings" in Item
3 hereof are also incorporated herein in response to this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary financial information required
by this item are set forth on pages 12 through 20 and page 11, respectively, of
the 1995 Annual Report and are incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Incorporated by reference to "Election of Directors" on pages 2 and 3 of
the Registrant's Proxy Statement, dated March 22, 1996, for its Annual Meeting
of Shareholders on April 16, 1996 ("1996 Annual Meeting Proxy Statement"), and
"Executive Officers of the Registrant" in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated by reference to "Executive Compensation" and "Compensation
Committee Interlocks and Insider Participation" on pages 6 through 10 and page
13, respectively, of the 1996 Annual Meeting Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated by reference to "Security Ownership of Certain Beneficial
Owners and Management" on pages 4 and 5 of the 1996 Annual Meeting Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Documents filed:
1. and 2. Financial Statements and Financial Statement Schedules.
See following "Index to Consolidated Financial Statements
and Schedule," which is incorporated herein by reference.
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3. Exhibits. See Exhibit Index included as last part of
this report, which index is incorporated herein by
reference. Each management contract or compensatory plan
or arrangement required to be filed as an exhibit to this
report is identified in the Exhibit Index by two
asterisks preceding its exhibit number.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the last quarter of 1995.
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THE OILGEAR COMPANY AND SUBSIDIARIES
Index to Consolidated Financial Statements and Schedule
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The consolidated financial statements of The Oilgear Company and subsidiaries
together with the report thereon of KPMG Peat Marwick LLP dated February 28,
1996, appearing on pages 12 through 20 of the 1995 Annual Report, are
incorporated by reference into this Annual Report on Form 10-K. The following
additional financial data should be read in conjunction with the
consolidated financial statements in the 1995 Annual Report.
ADDITIONAL FINANCIAL DATA
Independent Auditors' Report on Financial Statement Schedule
Submitted:
II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or because the
required information is given in the consolidated financial statements and the
notes thereto.
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INDEPENDENT AUDITORS' REPORT ON
FINANCIAL STATEMENT SCHEDULE
The Board of Directors
The Oilgear Company:
Under date of February 28, 1996, we reported on the consolidated balance sheets
of The Oilgear Company and subsidiaries as of December 31, 1995 and 1994, and
the related consolidated statements of operations and shareholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
1995, which are incorporated by reference in the Company's annual report on
Form 10-K for the year ended December 31, 1995. In connection with our audits
of the aforementioned consolidated financial statements, we also audited the
related financial statement schedule as listed in the accompanying index. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement
schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Milwaukee, Wisconsin
February 28, 1996
<PAGE> 11
THE OILGEAR COMPANY AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Additions Deductions
----------------------- ----------
Balance at Charged to Amounts
beginning costs and Other written off, Balance at
of year expenses Adjustments(1) net of recoveries end of year
---------- ---------- ----------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
Allowances for losses from obsolescence
which is deducted on the balance sheet
from inventories:
Year ended
December 31, 1995 $3,026,743 517,109 26,940 (404,678) 3,166,114
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Year ended
December 31, 1994 $2,759,435 147,549 133,329 (13,570) 3,026,743
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Year ended
December 31, 1993 $2,977,406 71,686 (104,656) (185,001) 2,759,435
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Allowances for losses in collection which is
deducted on the balance sheet from
trade accounts receivable:
Year ended
December 31, 1995 $ 275,893 16,201 9,756 12,035 313,885
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Year ended
December 31, 1994 $ 401,000 378,257 9,298 (512,662) 275,893
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Year ended
December 31, 1993 $ 477,788 263,825 (60) (340,553) 401,000
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</TABLE>
(1) INCLUDES ADJUSTMENTS DUE TO FOREIGN CURRENCY TRANSLATION.
<PAGE> 12
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.
THE OILGEAR COMPANY
(Registrant)
By /s/ THOMAS J. PRICE March 29, 1996
-------------------------------------
Thomas J. Price, Vice President of
Finance and Corporate Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Carl L. Gosewehr, Otto F. Klieve and David A.
Zuege, and each of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments to this
report, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their substitutes,
may lawfully do or cause to be done by virtue hereof.
______________________
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.*
<TABLE>
<S> <C>
/s/ DAVID A. ZUEGE /s/ ROGER G. DE LONG
- --------------------------------------------------- ----------------------------------------
David A. Zuege, President Roger G. DeLong, Director
and Chief Executive Officer
(Principal Executive Officer) and Director
/s/ THOMAS J. PRICE /s/ OTTO F. KLIEVE
- --------------------------------------------------- ----------------------------------------
Thomas J. Price, Vice President of Otto F. Klieve, Director
Finance and Corporate Secretary
(Principal Financial Officer
and Principal Accounting Officer)
/s/ CARL L. GOSEWEHR
- --------------------------------------------------- --------------------------------------------
Carl L. Gosewehr, Chairman of the Board Thomas L. Misiak, Director
/s/ GERHARD W. BAHNER /s/ EDWARD NEUWIRTH, JR.
- --------------------------------------------------- --------------------------------------------
Gerhard W. Bahner, Director Edward Neuwirth, Jr., Director
/s/ RANDOLPH W. CARSON /s/ FRANK L. SCHMIT
- --------------------------------------------------- --------------------------------------------
Randolph W. Carson, Director Frank L. Schmit, Director
</TABLE>
*Each of these signatures is affixed as of March 29, 1996.
S-1
<PAGE> 13
THE OILGEAR COMPANY
(THE "REGISTRANT")
(COMMISSION FILE NO. 0-822)
* * * * *
EXHIBIT INDEX
1995 ANNUAL REPORT ON FORM 10-K
<TABLE>
<CAPTION>
INCORPORATED
EXHIBIT HEREIN BY FILED
NUMBER DESCRIPTION REFERENCE TO: HEREWITH
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<S> <C> <C> <C>
3.1 Restated Articles of Incorporation of The Exhibit 3.1 to Registrant's
Oilgear Company (as adopted March 18, 10-K for year ended
1969) December 31, 1994
("1994 10-K")
3.2 Bylaws of The Oilgear Company (as Exhibit 3.2 to Registrant's
amended and restated by the Board of 10-K for year ended
Directors, effective January 1, 1992, to December 31, 1991 ("1991
reflect the revised Wisconsin Business 10-K")
Corporation Law)
*4
4.1 (a) Loan Agreement between The Oilgear Exhibit 4.3 to Registrant's 10-Q
Company and M&I Marshall & Ilsley for the quarterly period ended
Bank dated as of September 28, 1990, June 30, 1994
as amended and restated by a Second
Amendatory Loan Agreement dated
July 15, 1994
(b) Amendment No. 1 to Second Amendatory Exhibit 4.3(a) to
Loan Agreement dated April 30, 1995 Registrant's 10-Q for
the quarterly period
ended June 30, 1995
(c) Amendment No. 2 to Second Amendatory X
Loan Agreement dated November 20, 1995
**10.1 Consulting and Deferred Compensation Exhibit 10.1 to 1991 10-K
Agreement between Carl L. Gosewehr
and The Oilgear Company, dated as of
January 1, 1992
</TABLE>
____________________
*Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, the Registrant agrees to
furnish to the Securities and Exchange Commission, upon request, a copy of any
unfiled instrument with respect to long-term debt.
**Management contracts and executive compensation plans or arrangements
required to be filed as exhibits pursuant to Item 14(c) of Form 10-K.
EI-1
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<TABLE>
<CAPTION>
INCORPORATED
EXHIBIT HEREIN BY FILED
NUMBER DESCRIPTION REFERENCE TO: HEREWITH
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<S> <C> <C> <C>
**10.2 The Oilgear Company Key Employee Exhibit 10.5(a) to
Stock Purchase Plan, as amended and Registrant's 10-K for
restated September 6, 1990 year ended December 31,
1990 ("1990 10-K")
**10.3 (a) The Oilgear Company Retirement Exhibit 10.6 to 1990 10-K
Benefits Equalization Plan, effective as
of March 1, 1991
(b) Amendment to The Oilgear Company X
Retirement Benefits Equalization Plan
adopted on December 13, 1995
**10.4 (a) Oilgear Profit Sharing Program for Exhibit 10.4(b) to
Corporate Officers and Certain Registrant's 10-K for
Executives, as amended effective year ended December 31,
January 1, 1993 1992
(b) Oilgear Variable Compensation Exhibit 10.4(b)
Program to 1994 10-K
**10.5 (a) Form of Deferred Compensation Exhibit 10.9 to
Agreement with certain directors Registrant's 10-K
(December 8, 1971) for year ended
December 31, 1980
(b) The Oilgear Company Deferred Directors' Exhibit 10.9(b) to
Fee Plan, as amended and restated Registrant's 10-K for
December 14, 1983 year ended December 31,
1983
(c) Amendment to The Oilgear Company X
Deferred Directors' Fee Plan
adopted on December 11, 1991
**10.6 The Oilgear Company 1992 Stock Exhibit A to Registrant's
Option Plan 1993 Annual Meeting
Proxy Statement dated
March 26, 1993
**10.7 (a) The Oilgear Company Directors' Stock Exhibit 10.7 to Registrant's
Plan 10-K for year ended December 31,
1993
(b) The Oilgear Company Amended and Exhibit 10.7(b) to
Restated Directors' Stock Plan 1994 10-K
**10.8 Consulting and Deferred Compensation X
Agreement between Otto F. Klieve
and The Oilgear Company, dated
as of January 1, 1996
</TABLE>
____________________
**Management contracts and executive compensation plans or arrangements
required to be filed as exhibits pursuant to Item 14(c) of Form 10-K.
EI-2
<PAGE> 15
<TABLE>
<CAPTION>
INCORPORATED
EXHIBIT HEREIN BY FILED
NUMBER DESCRIPTION REFERENCE TO: HEREWITH
- ------ ----------- ------------- --------
<S> <C> <C> <C>
13 Portions of The Oilgear Company 1995 X
Annual Report incorporated by
reference in this Form 10-K (pages
8 through 20 thereof)
21 Subsidiaries of The Oilgear Company X
23 Consent of KPMG Peat Marwick LLP X
24 Power of Attorney Signature
Page in
this
Report
27 Financial Data Schedule for the X
year ended December 31, 1995
99 Financial Statements and Exhibits To be
furnished in lieu of Form 11-K Annual filed by
Report for 1995 with respect to The Amend-
Oilgear Salaried Savings Plus Plan ment
(including related consent of KPMG
Peat Marwick LLP)
</TABLE>
EI-3
<PAGE> 1
EXHIBIT 4.1(c)
(1995 10-K)
AMENDMENT NO. 2 TO SECOND AMENDATORY LOAN AGREEMENT
THIS AMENDMENT NO. 2 TO SECOND AMENDATORY LOAN AGREEMENT is made as
of the 20th day of November, 1995 by and between THE OILGEAR COMPANY (the
"Company") and M&I MARSHALL & ILSLEY BANK ("M&I").
IN CONSIDERATION of the mutual covenants, conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, it is hereby agreed that:
ARTICLE I
DEFINITIONS
When used herein, the following terms shall have the meanings
specified:
1.1 Amendment. "Amendment" shall mean this Amendment No. 2 to
Second Amendatory Loan Agreement.
1.2 Loan Agreement. "Loan Agreement" shall mean the Loan Agreement
by and between M&I and the Company, dated as of September 28, 1990, as
amended and restated by a Second Amendatory Loan Agreement dated as of July
15, 1994, as amended by Amendment No. 1 to Second Amendatory Loan Agreement
dated as of April 30, 1995.
1.3 Other Terms. The other capitalized terms used in this
Amendment shall have the definitions assigned in the Loan Agreement.
ARTICLE II
AMENDMENTS
The Loan Agreement is hereby amended as follows:
2.1 Section 1.1 - Banking Day. Section 1.1 of the Loan Agreement
is amended in its entirety to read as follows:
1.1 Banking Day. "Banking Day" shall mean: (a)
with respect to Loans other than Pounds Sterling Loans,
any day of the year on which banks are open for business in
Milwaukee; and (b) with respect to Pounds Sterling Loans, any
Banking Day on which commercial banks are open for
international business.
2.2 Section 1.20 - Interest Period. Section 1.20 of the Loan
Agreement is amended in its entirety to read as follows:
<PAGE> 2
1.20 Interest Period. "Interest Period" shall mean:
(a) with respect to a Money Market Loan, the period
selected by the Company for a Money Market Loan to be
outstanding pursuant to this Loan Agreement; provided that such
period shall not exceed thirty (30) days; and (b) with respect
to a Pounds Sterling Loan, each Interest Period shall commence
on the date such Pounds Sterling Loan is made or continued
pursuant to Section 2.11 of this Loan Agreement and shall end
on the date which is three (3) months thereafter. Each
Interest Period which would otherwise end on a day which is not
a Banking Day shall end on the next succeeding Banking Day
(unless such next succeeding Banking Day is the first Banking
Day of a calendar month, in which case such Interest Period
shall end on the preceding Banking Day).
2.3 Section 1.22 - Loans. Section 1.22 of the Loan Agreement is
amended by inserting "and the Pounds Sterling Loans made by M&I to the
Company pursuant to Section 2.11 of this Loan Agreement" at the end of such
Section before the period.
2.4 Section 1.26 - Note or Notes. Section 1.26 of the Loan
Agreement is amended by inserting "and the Pounds Sterling Note" at the
end of such Section before the period.
2.5 Section 1.31.1 - Pounds Sterling Loans. Section 1.31.1 is
added to the Loan Agreement to read as follows:
1.31.1 Pounds Sterling Loans. "Pounds Sterling Loans"
shall mean the loans made from time to time to the Company by
M&I pursuant to Section 2.11 of this Loan Agreement.
2.6 Section 1.31.2 - Pounds Sterling Note. Section 1.31.2 is
added to the Loan Agreement to read as follows:
1.31.2 Pounds Sterling Note. "Pounds Sterling Note"
shall mean a promissory note from the Company to M&I,
in form and substance satisfactory to M&I, evidencing the
Pounds Sterling Loans together with all extensions, renewals,
amendments, modifications and refinancings thereof.
2.7 Section 1.31.3 - Pounds Sterling Rate. Section 1.31.3 is
added to the Loan Agreement to read as follows:
1.31.3 Pounds Sterling Rate. "Pounds Sterling Rate"
shall mean with respect to any Pounds Sterling Loan for
any Interest Period, the rate per annum based on Pounds
Sterling quoted to the Company by M&I for such Interest Period.
The Company agrees that the interest rate quoted by
2
<PAGE> 3
M&I for any Interest Period for a Pounds Sterling Loan
is the rate at which M&I in its sole and exclusive discretion is
willing to make such Pounds Sterling Loan to the Company for the
specified amount and that each determination of the applicable
Pounds Sterling Rate by M&I shall be conclusive and binding
upon the parties hereto in the absence of demonstrable error.
2.8 Section 2.11 - Pounds Sterling Loans. Section 2.11 is added to
the Loan Agreement to read as follows:
2.11 Pounds Sterling Loans. (a) From time to
time prior to June 30, 1997 and subject to the terms
and conditions set forth in this Loan Agreement, M&I agrees to
extend to the Company Pounds Sterling Loans in an aggregate
principal amount not to exceed One Million Pounds Sterling
(pound 1,000,000) for working capital and other purposes of the
Company and the Existing Subsidiaries. The Company may borrow,
repay and reborrow under this Section subject to the terms and
conditions of this Loan Agreement.
(b) All payments of principal of and interest on
the Pounds Sterling Note shall be made in Pounds
Sterling, except as otherwise provided herein. The outstanding
unpaid principal balance of and accrued and unpaid interest on
the Pounds Sterling Loans shall be paid in full on June 30,
1997.
(c) In the event of the occurrence of an Event
of Default specified in Section 1.16(a) or (b) or an
acceleration pursuant to Section 11.1 of this Loan Agreement,
M&I may at any time in its sole and exclusive discretion,
convert the outstanding principal of and accrued interest on
the Pounds Sterling Loans to US Dollars at the exchange rate in
effect at the time M&I chooses to convert. After such a
conversion, all payments of principal of and interest on the
Pounds Sterling Note shall be made in US Dollars.
(d) Each Pounds Sterling Loan shall be made on
written or telephonic notice at least two (2) Banking
Days prior to the day of a borrowing. Each day of a borrowing
shall be a Banking Day. Each notice shall specify the date and
amount of such Pounds Sterling Loan. Each such notice shall be
effective upon receipt by M&I, and must be received by 10:30
A.M., Milwaukee time, to be considered as received on the day
given.
3
<PAGE> 4
(e) At the end of any Interest Period for any Pounds
Sterling Loan, the Company shall give M&I two (2)
Banking Days prior notice of its election to either: (i)
continue all or part of such Pounds Sterling Loan from the
current Interest Period into a subsequent Interest Period
(which shall begin on the day after the last day of such
current Interest Period); and/or (ii) repay all or part of such
Pounds Sterling Loan. Each notice shall be received by M&I by
10:30 A.M., Milwaukee time, at least two (2) Banking Days prior
to repayment and/or continuation and shall be in writing or by
telephone and shall specify the date and amount of the Pounds
Sterling Loan to be repaid and/or continued. Absent such
notice, each Pounds Sterling Loan shall automatically be
continued for a subsequent Interest Period on the day after the
last day of the current Interest Period of such Pounds Sterling
Loan at the Pounds Sterling Rate quoted by M&I for such
Interest Period.
(f) Each notice of borrowing or continuation shall
automatically constitute a warranty by the Company to
M&I that, on the date of the requested date of such borrowing
or continuation: (i) all of the representations and warranties
of the Company contained in this Loan Agreement shall be true
and correct on such date as though made on such date; and (ii)
no Event of Default shall exist on such date and no event shall
have occurred and be continuing which would constitute and
Event of Default but for the requirement that notice be given
or time elapse, or both.
2.9 Section 3.1 - Notes. Section 3.1(e) is added to the Loan
Agreement to read as follows:
(e) All Pounds Sterling Loans shall be evidenced by the
Pounds Sterling Note, the Company being obligated,
however, to pay only the amount of Pounds Sterling Loans
actually made and outstanding from time to time, together with
interest on the amount which remains outstanding from time to
time, all as provided in the Pounds Sterling Note and this Loan
Agreement. Each Pounds Sterling Loan shall mature on June 30,
1997.
2.10 Section 3.2 - Recordkeeping. Section 3.2(b) of the Loan
agreement is amended by: (a) inserting ", each Pounds Sterling Loan"
immediately before the words "and each Line of Credit Loan" in the third
line of such Section; (b) inserting ", any outstanding Pounds Sterling Loan"
immediately before the words "and any outstanding Line of Credit Loan" in
the sixth line
4
<PAGE> 5
of such Section; and (c) inserting ", the Pounds Sterling Note" immediately
before the words "or any Line of Credit Note" in the tenth line of such
Section.
2.12 Section 4.11 - Interest on Pounds Sterling Loans. Section
4.11 is added to the Loan Agreement to read as follows:
4.11 Interest on Pounds Sterling Loans.
(a) The unpaid principal of Pounds Sterling Loans
shall bear interest until maturity at an annual rate
equal to the Pounds Sterling Rate. Interest accrued on any
Pounds Sterling Loan shall be paid at the end of each Interest
Period.
(b) In the event that any amount of the
principal of, or interest on, the Pounds Sterling Note
is not paid on the date when due (whether at stated maturity,
by acceleration or otherwise), M&I may in its sole and
exclusive discretion convert the principal of and interest on
the Pounds Sterling Loans to U.S. Dollars pursuant to Section
2.11(c) of this Loan Agreement and the entire principal amount
outstanding under such Note shall bear interest from the day
following the due date until all such overdue amounts have been
paid in full at the rate per annum which is equal to the
greater of: (a) 2% of the interest rate then-applicable to the
Pounds Sterling Note, or (b) 2% in excess of the Prime Rate.
2.13 Section 5.3 - Prepayments. The first sentence of Section 5.3
of the Loan Agreement is amended in its entirety to read as follows:
The Company may from time to time prepay the Loans in
whole or in part, provided, that: (a) with respect to Loans
other than Pounds Sterling Loans, the Company shall give M&I
not less than one (1) Banking Day's prior notice thereof,
specifying the Loans to be prepaid, and the date and amount of
prepayment; (b) with respect to Pounds Sterling Loans, the
Company shall give M&I not less than two (2) Banking Day's
prior notice thereof; (c) Money Market Loans and Pounds
Sterling Loans shall be prepaid only on the last day of the
Interest Period thereto in accordance with the terms of this
Loan Agreement; (d) each partial prepayment shall be in a
minimum aggregate principal amount of $100,000 in respect of
all Loans other than Pounds Sterling Loans and in a minimum
aggregate principal amount of pound 100,000 in respect of Pounds
Sterling Loans; and (e) any prepayment of the entire principal
amount of all
5
<PAGE> 6
Loans shall include accrued interest to the date of prepayment.
2.14 Section 6.1 - Indemnity. Section 6.1 of the Loan Agreement is
amended by: (a) inserting "Pounds Sterling Loans," immediately before
the words "Money Market Loans" in the fifth line of such Section; (b)
inserting "Pounds Sterling Loans," immediately before the words "Money
Market Loans" in the seventh line of such Section; (c) inserting "Pounds
Sterling Loans," immediately before the words "Money Market Loans" in the
tenth line of such Section; and (d) inserting "or any payment or prepayment
of any Pounds Sterling Loan" immediately after the words "Money Market Loan"
in the fifteen line of such Section.
2.15 Section 6.4 - Deposits Unavailable or Interest Rate
Unascertainable. Section 6.4 is added to the Loan Agreement to read as
follows:
6.4 Deposits Unavailable or Interest Rate
Unascertainable. (a) If M&I is advised that deposits
in Pounds Sterling (in the applicable amount) are not being
offered to banks in the relevant market for an Interest Period,
or M&I otherwise determines (which determination shall be
binding and conclusive on all parties) that by reason of
circumstances affecting the currency market adequate and
reasonable means do not exist for ascertaining the applicable
Pounds Sterling Rate; or
(b) If lenders similar to M&I have determined that the
Pounds Sterling Rate will not adequately and fairly
reflect the cost to such lenders of maintaining or funding
loans based on the Pounds Sterling Rate for an Interest Period,
or that the making or funding of such Pounds Sterling Loans has
become impracticable as a result of an event occurring after
the date of this Loan Agreement which in the opinion of M&I
materially affects such Pounds Sterling Loans; then so long as
such circumstances shall continue, M&I shall not be under any
obligation to make or continue Loans based on the Pounds
Sterling Rate and on the last day of the then-current Interest
Period, such Loans shall bear interest at an annual rate of
interest mutually agreed to by M&I and the Company. If such an
agreement cannot be reached, such Loans shall be repaid in full
by the Company.
2.16 Section 6.5 - Change in Law Rendering Pounds Sterling Loans
Unlawful. Section 6.5 is added to the Loan Agreement to read as follows:
6
<PAGE> 7
6.5 Change in Law Rendering Pounds Sterling Loans
Unlawful. In the event that any change in (including the
adoption of any new) applicable laws or regulations, or any
change in the interpretation of applicable laws or regulations
by any governmental or other regulatory body charged with the
administration thereof, should make it unlawful for any M&I to
make, maintain or fund Loans based on the Pounds Sterling Rate,
then: (a) M&I shall promptly notify the Company; (b) the
obligation of M&I to make or continue Loans based on the Pounds
Sterling Rate shall be suspended for the duration of such
unlawfulness; and (c) on the last day of the then-current
Interest Period, such Loans shall bear interest at an annual
rate of interest mutually agreed to by M&I and the Company. If
such an agreement cannot be reached, such Loans shall be repaid
in full by the Company.
2.17 Section 6.6 - Taxes. Section 6.6 is added to the Loan
Agreement to read as follows:
6.6 Taxes. (a) Any and all payments by the
Company hereunder shall be made without deduction or
withholding for any and all present or future taxes, levies,
imposts, deductions or charges and all liabilities with respect
thereto (collectively, "Taxes"). If the Company shall be
required by law to deduct any Taxes from or in respect of any
sum payable hereunder: (i) the sum payable shall be increased
as may be necessary so that after making all required
deductions M&I receives an amount equal to the sum it would
have received had no such deductions been made; and (ii) the
Company shall pay, or cause to be paid, the full amount
deducted to the relevant taxation authority or other authority
in accordance with applicable law.
(b) If the Company makes, or causes to be
made, any payment hereunder in respect of which the
Company, or any Subsidiary, is required by law to make any
deduction or withholding of any Taxes, it shall pay the full
amount to be deducted or withheld to the relevant taxation or
other authority within the time allowed for such payment under
applicable law and shall deliver to M&I, as soon as practicable
after it has made such payment to the applicable authority, a
receipt issued by such authority or, if no such receipt is
available, a statement of the Company confirming the payment to
such authority of all amounts so required to be deducted or
withheld from such payment.
7
<PAGE> 8
2.18 Pounds Sterling Note. The Company shall execute and deliver
to M&I a Pounds Sterling Note evidencing the Pounds Sterling Loans in
substantially for form of Exhibit A hereto.
2.19 Miscellaneous Amendments. The Loan Agreement, the Security
Agreement, and all other documents, instruments and materials executed
and delivered heretofore or hereafter pursuant to the Loan Agreement are
deemed hereby to be amended so that any reference therein to the Loan
Agreement shall be a reference to such document as amended by or pursuant to
this Amendment. Any references in the Security Agreement to the Notes,
including, without limitation, the definition of "Notes" contained in the
Security Agreement, shall include the Pounds Sterling Note dated November
20, 1995 issued by the Company payable to M&I in the aggregate principal
amount of pound 1,000,000 and evidencing the Pounds Sterling Loans made
pursuant to the Loan Agreement, as amended, as such Pounds Sterling Note
may be amended, modified, extended or renewed from time to time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to M&I that:
3.1 Loan Agreement. All of the representations and warranties
made by the Company in the Loan Agreement are true and correct on the
date of this Amendment. No Event of Default under the Loan Agreement has
occurred and is continuing as of the date of this Amendment. No event has
occurred which with the lapse of time or giving of notice or both would
constitute an Event of Default under the Loan Agreement as of the date of
this Amendment.
3.2 Authorization; Enforceability. The making, execution and
delivery of this Amendment and the Pounds Sterling Note, and
performance of and compliance with the terms of the Loan Agreement as
amended and the Pounds Sterling Note, have been duly authorized by all
necessary corporate action by the Company. This Amendment and the Pounds
Sterling Note are the valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms.
3.3 Absence of Conflicting Obligations. The making, execution and
delivery of this Amendment and the Pounds Sterling Note, and
performance of and compliance with the terms of the Loan Agreement as
amended and the Pounds Sterling Note, do not violate any presently existing
provision of law or the articles or certificate of incorporation or bylaws
of the Company or any agreement to which the Company is a party or by which
it is bound.
8
<PAGE> 9
ARTICLE IV
MISCELLANEOUS
4.1 Continuance of Loan Agreement. Except as specifically amended
by this Amendment, the Loan Agreement and the Security Agreement shall
remain in full force and effect.
4.2 Survival. All agreements, representations and warranties made
in this Amendment or in any documents delivered pursuant to this Amendment
shall survive the execution of this Amendment and the delivery of any such
document.
4.3 Governing Law. This Amendment and the Pounds Sterling Note
shall be governed by the laws of the State of Wisconsin.
4.4 Counterparts; Headings. This Amendment may be executed in
several counterparts, each of which shall be deemed an original, but such
counterparts shall together constitute but one and the same agreement.
Article and Section headings in this Amendment are inserted for convenience
of reference only and shall not constitute a part hereof.
4.5 Severability. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Amendment or affecting the validity or enforceability of such provision in
any other jurisdiction.
4.6 Effectiveness. This Amendment shall be effective as of
November 20, 1995 upon receipt by M&I of the following documents:
(a) this Amendment executed by the Company;
(b) the Pounds Sterling Note, in substantially the form of
Exhibit A attached to this Amendment, executed by the Company;
(c) a certificate of the secretary or an assistant
secretary of the Company dated the date hereof as to: (i) the incumbency
and signature of the officers of the Company who have signed or will sign
this Amendment and the Pounds Sterling Note to be delivered pursuant to this
Amendment; and (ii) the adoption and continuing effect of resolutions of the
Board of Directors of the Company authorizing the execution and delivery of
this Amendment and the Pounds Sterling Note; and
(d) such additional supporting documents and materials
as M&I may reasonably request.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 2
to Second Amendatory Loan Agreement as of the day and year first written above.
THE OILGEAR COMPANY
By: /s/ THOMAS J. PRICE
------------------------
Name: Thomas J. Price
------------------------
Title: Vice President of
-----------------------
Finance/Secretary
-----------------------
M&I MARSHALL & ILSLEY BANK
By: /s/ BRAD D. CHAPIN
------------------------
Name: Brad D. Chapin
-----------------------
Title: Vice President
-----------------------
Attest:
/s/ THOMAS R. JOHNSON
-----------------------------
Name: Thomas R. Johnson
-----------------------
Title: Vice President
-----------------------
10
<PAGE> 11
EXHIBIT A TO AMENDMENT NO. 2
TO SECOND AMENDATORY LOAN AGREEMENT
THE OILGEAR COMPANY
PROMISSORY NOTE
pound 1,000,000 Milwaukee, Wisconsin
November 20, 1995
FOR VALUE RECEIVED, THE OILGEAR COMPANY, a Wisconsin
corporation (the "Company"), hereby promises to pay to the order of M&I
MARSHALL & ILSLEY BANK ("M&I") the principal sum of ONE MILLION POUNDS
STERLING (pound 1,000,000) or the aggregate unpaid principal amount of all
advances made by M&I to the Company pursuant to Section 2.11 of the Loan
Agreement hereinafter referred to, whichever is less, on June 30, 1997. The
unpaid principal shall bear interest from the date hereof until paid at a
rate computed in accordance with the provisions of the Loan Agreement.
Interest shall be payable at the times specified in the Loan Agreement.
Except as otherwise provided in the Loan Agreement,
payments of both principal and interest are to be made in Pounds Sterling at
the offices of M&I Marshall & Ilsley Bank, Attention: Loan and Discount
Department, 770 North Water Street, Milwaukee, Wisconsin 53202, or at such
other place as the holder shall designate in writing to the maker.
The maker and all endorsers hereby severally waive
presentment for payment, protest and demand, notice of protest, demand and
of dishonor and nonpayment of this Note, and consent that the holder may
extend the time of payment or otherwise modify the terms of payment of any
part or the whole of the debt evidenced by this Note, at the request of any
other person liable hereon, and such consent shall not alter or diminish the
liability of any person.
This Note constitutes the Pounds Sterling Note issued
pursuant to the Loan Agreement dated as of September 28, 1990, as amended by
a Second Amendatory Loan Agreement dated as of July 15, 1994, as amended by
an Amendment No. 1 to Second Amendatory Loan Agreement dated as of April 30,
1995, as amended by an Amendment No. 2 to Second Amendatory Loan Agreement
dated as of November 20, 1995 and as further amended from time to time in
accordance with the terms thereof, by and between the Company and M&I (the
"Loan Agreement"). Reference is hereby made to the Loan Agreement for a
statement of the terms and conditions under which the Loans evidenced hereby
may be made, and a description of the terms and conditions upon which this
Note may be prepaid in whole or in part. In case an Event of Default, as
defined in the Loan Agreement, shall occur, the entire unpaid principal and
all accrued interest represented by this Note may be
<PAGE> 12
automatically due and payable or may be declared due and payable as provided in
the Loan Agreement.
THE OILGEAR COMPANY
By:
-----------------------
Name: Thomas J. Price
---------------------
Its: Treasurer/Secretary
---------------------
2
<PAGE> 1
EXHIBIT 10.3(b)
(1995 10-K)
AMENDMENT TO THE OILGEAR COMPANY RETIREMENT BENEFITS EQUALIZATION PLAN
(ADOPTED ON DECEMBER 13, 1995)
NOW, THEREFORE, BE IT RESOLVED, that a new Section II is hereby added to
the Plan to read as follows, effective as of the date of adoption of
these resolutions:
Section II
Special Provisions in the Event of a Change in Control
For purposes of this Section II, a "Change in Control" with respect to
Oilgear shall be deemed to have occurred if and when: (i) any "person"
(as such term is used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934), other than the Oilgear Stock Retirement Plan, the
Oilgear Salaried Savings Plus Plan, or any other qualified or
non-qualified plan maintained by Oilgear or any of its affiliates, is or
becomes a beneficial owner (as defined in Rule 13d-3 promulgated under
such Act), directly or indirectly, of securities of Oilgear representing
20% or more of the combined voting power of Oilgear's then outstanding
securities, or (ii) at any time less than a majority of the members of
the Oilgear Board of Directors shall be persons who were either
nominated for election by the Board of Directors (prior to any Change in
Control) or were elected by the Board of Directors (prior to any Change
in Control). Upon the occurrence of a Change in Control, then
notwithstanding any other provision of this Plan, Oilgear shall promptly
cause to be paid to each active Eligible Employee, retired former
Eligible Employee or Beneficiary a lump sum amount equal to the then
present value of all benefits then accrued under this Plan, calculated
using the "applicable interest rate" and the "applicable mortality
table." The term "applicable interest rate" shall mean either (i) the
interest rate (immediate or deferred, as appropriate) then determined
under regulations of the Pension Benefit Guaranty Corporation (the
"PBGC") for determining the present value of a lump sum distribution
from a terminating defined benefit pension plan, if such PBGC rates are
then in use under the Retirement Plan, or (ii) the annual rate of
interest on 30 year Treasury securities as published by the Internal
Revenue Service for the month immediately prior to the occurrence of a
Change in Control event as described above, if the above described PBGC
rates are not then in use under the Retirement Plan. The term
"applicable mortality table" shall mean the mortality table then in use
under the Retirement Plan for purposes of calculating alternate
benefits. Such payment shall be made without regard to whether an
active Eligible Employee's employment with Oilgear or any of its
affiliates is continuing. However, if an active Eligible Employee in
fact so continues and the Plan also continues, appropriate provisions
shall be made so that any subsequent payments made from this Plan are
reduced to reflect the value of such lump sum payment.
<PAGE> 1
EXHIBIT 10.5(c)
(1995 10-K)
AMENDMENT TO THE OILGEAR COMPANY DEFERRED DIRECTORS' FEE PLAN
(ADOPTED ON DECEMBER 11, 1991)
NOW, THEREFORE, BE IT RESOLVED, that the Plan shall be amended to be a
deferred compensation plan covering the inside directors of the company
under which Plan the inside directors will defer an amount of
compensation, approximately equal to the monthly retainer paid to outside
directors, and
FURTHER RESOLVED, that the provisions of the Plan shall otherwise remain
unchanged, with the exception that the interest rate to be recovered by
the company on any funds advanced shall be determined to be an amount
approximately equal to the after tax effective borrowing rate of the
corporation rather than the 12% specified in the original Plan.
<PAGE> 1
EXHIBIT 10.8
(1995 10-K)
CONSULTING
AND
DEFERRED COMPENSATION
AGREEMENT
This Consulting and Deferred Compensation Agreement ("Agreement") is made as of
the 1st day of January, 1996 by and between Otto F. Klieve of Franklin,
Wisconsin ("Consultant") and The Oilgear Company (together with its
subsidiaries, "Oilgear"), with its principal place of business in Milwaukee,
Wisconsin.
WHEREAS, Consultant is the retired President and Chief Executive Officer of
Oilgear and Oilgear wishes to continue to draw upon consultant's experience in
its business and affairs;
WHEREAS, Oilgear, in order to obtain the benefits of the advice, skills, and
experience of Consultant, deems it necessary and desirable to retain Consultant
on the terms and conditions herein provided; and
WHEREAS, Consultant is willing to serve as a consultant to Oilgear on the terms
and conditions herein provided.
NOW, THEREFORE, in consideration of the foregoing and of the covenants and
agreements herein contained, Oilgear and Consultant agree as follows:
(1) Appointment: Oilgear hereby appoints and retains Consultant as a
consultant and Consultant hereby accepts appointment and agreements to
serve as a consultant to Oilgear on the terms and conditions specified
herein.
a. Consultant's duties shall be as specified in Exhibit A hereto, which is
incorporated herein by reference. It is understood that in the
performance of such duties Consultant will not be required to undertake any
assignment inconsistent with the dignity, importance, and scope of his
prior position as President of Oilgear. It is further understood that
Consultant will be an independent contractor and will not be subject to the
direction, control, or supervision of Oilgear with respect to the time
spent or procedures followed in the performance of his consulting services
hereunder. In particular, Consultant will not be required without his
consent to undertake any assignment for Oilgear which would require him to
leave the Milwaukee area for any extended period of time.
b. Consultant will perform under the direction of the President of Oilgear,
and will work in conjunction with the management of Oilgear in
performing his duties under this Agreement. Consultant will not be under
any obligation to devote a specific amount of time at the Oilgear offices
to the performance of his duties hereunder, but rather the manner and place
of performance of such duties shall be within the discretion of Consultant.
Page 1 of 5
<PAGE> 2
c. During the term hereof, Consultant shall not participate in any activity
which conflicts with the business interests of Oilgear. Oilgear
recognizes that Consultant may be asked to serve, with or without
remuneration, in the capacity of director of certain other businesses or
trustee or personal representative of trusts or estates. Consultant may
serve in such capacity, but it shall not affect the performance of the
duties of Consultant under this Agreement.
d. This Agreement is entirely independent of Consultant's current duties as a
member of the Board of Oilgear and nothing in this Agreement shall restrict
the Board of Directors of Oilgear from declining to re-elect Consultant
to the Board of Oilgear. For so long as Mr. Klieve is receiving a
consulting fee pursuant to this agreement, he is not entitled to any
directors fees for his service on the Oilgear Board of Directors.
(2) Compensation; Term and Termination:
a. This Agreement shall remain in effect for a period of sixteen (16) full
months from the date hereof, and Consultant's compensation for services
rendered hereunder shall be the amount of $5,000.00 per month for this
sixteen month period. Thereafter, Consultant's compensation shall be an
amount to be mutually agreed upon by Oilgear and Consultant at the
beginning of each calendar year based on the level of the consulting duties
to be performed. The amount of Consultant's compensation for each
twelve-month period shall be deemed to accrue at the rate of 1/12th of the
total yearly compensation per month at the end of each month (the "Monthly
Accrual Date") payable as provided in paragraph (5). In addition,
Oilgear shall pay or reimburse the Consultant for all reasonable travel and
other expenses paid or incurred by Consultant in performing his duties
hereunder.
b. Oilgear's obligations under this Agreement shall be terminable only in the
event of: (i) Consultant's gross negligence, misconduct, or dishonesty, or
(ii) other material breach of this Agreement which remains
uncured after ninety (90) days written notice thereof to Consultant.
(3) Death or Disability:
a. If Consultant dies while this Agreement is in effect, including death while
disabled under paragraph (3)(b), this Agreement shall terminate, but
Oilgear's obligation to pay compensation under paragraph (2)(a) shall
continue through and including the Monthly Accrual Date for the month in
which Consultant dies. In addition, Oilgear shall pay to consultant's
widow, her estate, or her designee if such designation is made in writing
and delivered to the Secretary of Oilgear, a single cash lump sum equal
to the balance in consultant's deferred compensation account established
under paragraph (5)(a).
Page 2 of 5
<PAGE> 3
b. If Consultant becomes unable due to ill health or other incapacity to
perform his duties hereunder as determined by an independent physician
selected with the approval of Oilgear and Consultant, he shall be deemed to
be disabled. In any period of disability, Consultant shall comply with the
provisions of paragraph (6), furnish information and assistance to Oilgear
consistent with his health and well-being, and shall be paid for the month
of disability and two subsequent months. If his period of disability ends
during the term of this Agreement, Consultant shall again be compensated
pursuant to paragraph 2(a).
(4) Change in Control:
a. In the event of a Change in Control of Oilgear as herein defined, this
Agreement shall terminate effective immediately. In the event of such
termination, Consultant shall forthwith be paid a lump sum equal to the
balance accrued in the Deferred Compensation Account.
b. For the purpose of this Agreement, the term "Change in Control" shall be
deemed to have occurred if and when: (i) any "person" (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934), other than the Oilgear Stock Retirement Plan and the Oilgear
Salaried Savings Plan, is or becomes a beneficial owner, directly or
indirectly, of securities of Oilgear representing 20% or more of the
combined voting power of Oilgear's then outstanding securities, or (ii) at
any time less than a majority of the members of the Oilgear Board of
Directors shall be persons who were either nominated for election by the
Board of Directors (prior to any Change in Control) or were elected by the
Board of Directors (prior to any Change in Control).
Page 3 of 5
<PAGE> 4
(5) Deferral of Benefits:
a. Amounts payable to Consultant under paragraph (2) (a) hereof shall be
deferred until the earlier of the first business day in January of 2001 or
his death (the "Payout Date"). As of each Monthly Accrual Date, Oilgear
shall credit 1/12th of the amount of Consultant's yearly compensation to
the bookkeeping reserve account established by it solely as a device for
determining the amounts which become payable to Consultant (his "Deferred
Compensation Account"). Such account shall not constitute or be treated
as a trust fund of any kind, it being expressly understood that all amounts
credited to such account shall at all times be and remain the sole
property of Oilgear. Further, solely as a device for measuring Oilgear's
ultimate payment obligation to Consultant hereunder, the Consultant shall
be allowed to give written instructions to Oilgear from time to time
directing that all amounts credited to his Deferred Compensation Account be
treated as if invested in one or more mutual funds generally available to
the investing public or in one or more common, collective or group trusts
sponsored by a bank or trust company operating in Wisconsin or one of such
bank or trust company's affiliates. The Consultant may change any previous
investment election regarding the then existing Deferred Compensation
Account or any future additions thereto or both no more than four times per
year. Oilgear will maintain or cause to be maintained a written record of
the balances in the Deferred Compensation Account, valuing the same as if
the amounts credited thereto were actually so invested. However, any
brokerage commissions, transaction costs or tax consequences which would
have been incurred by Oilgear if it actually made such investments shall be
disregarded. Oilgear will provide or cause to be provided to Consultant a
written statement of the value of the Deferred Compensation Account at
least annually. Whenever this Agreement provides for payment of the amount
in the Deferred Compensation Account, Oilgear's payment obligation will be
equal to the value of such Account at the time of payment and Oilgear may
satisfy its obligation, in its sole discretion, by either a lump sum cash
payment equal to such value or by transfer to Consultant (or his
Beneficiary) of actual investments identical to those credited to the
Deferred Compensation Account at the time of payment. The parties hereto
recognize that all references to investment of the Deferred Compensation
Account are made only for the purpose of determining the value of such
Account from time to time and that Oilgear is not obligated to make or
preclude from making any investments as it may deem appropriate in
connection with this Agreement. The establishment or maintenance of, or
allocation of credits or debits to the Deferred Compensation Account or the
making of any investments by Oilgear in connection with this Agreement
shall not vest Consultant or his Beneficiary with any right, title, or
interest in any specific asset of Oilgear's. Upon the Payout Date, Oilgear
shall pay the amount in Consultant's Deferred Compensation Account in a
single cash lump sum to Consultant or his designee. In the event of
Consultant's death, payments shall be made as specified in paragraph (3)
(a) hereof.
Page 4 of 5
<PAGE> 5
b. All payments to Consultant hereunder shall be paid in cash from the general
funds of Oilgear and no special or separate funds need be established
and no other segregation of assets need be made to assure the payment of
any deferred amount. Nothing contained in this Agreement and no action
taken pursuant to its provisions shall be construed to create a fiduciary
relationship between Oilgear and Consultant or any other person.
(6) Non-Competition and Confidential Information:
a. During the term hereof, Consultant agrees that he will not, without the
written consent of Oilgear, participate in, be employed by, perform
services for or otherwise be connected with any firm, person, corporation,
or other enterprise which is competitive with any business in which Oilgear
is presently engaged or may in the future be engaged during the term hereof
in any geographic area serviced by Oilgear.
b. Consultant acknowledges that he is in the possession of trade secrets and
other confidential information concerning the business of Oilgear.
Consultant confirms that all such information constitutes the exclusive
property of Oilgear and agrees that he will not at any time disclose to any
other person or entity any trade secrets or other confidential information
of Oilgear.
(7) Assignment: If Oilgear merges or engages in any other form of business
combination with another corporation or entity, and Oilgear is not the
surviving entity, or transfers substantially all of its assets to another
corporation or entity, such other corporation or entity shall be bound by
this Agreement, and Oilgear will require the other corporation or entity to
assume Oilgear's obligations under this Agreement. This Agreement is
personal to Consultant and cannot be assigned by him.
(8) Governing Law: This Agreement shall be subject to and interpreted in
accordance with the laws of the State of Wisconsin.
(9) Entire Agreement and Amendment: This Agreement expresses the entire
understanding of the parties and may be amended only by an agreement in
writing signed by the parties hereto.
IN WITNESS WHERE, Oilgear has caused this Agreement to be executed by its
duly authorized officers and the corporate seal has been affixed and Consultant
has hereunto set his hand and seal on this, but effective as the date first
above written.
(CORPORATE SEAL) THE OILGEAR COMPANY
ATTEST:
/s/ Thomas J. Price
- ----------------------
By: /s/ David A. Zuege, President
-------------------------------------
Secretary
WITNESS:
CONSULTANT
/s/ Mary F. Block
- ----------------------
/s/ Otto F. Klieve
-------------------------------------
Otto F. Klieve (SEAL)
Page 5 of 5
<PAGE> 6
EXHIBIT A
1. The position would primarily entail active involvement in the
development process and the resolution of technical problems as they
occur.
2. You would be a member of the Development Team and the Marketing Team
(which teams are to be the replacement for the current AIM team), and
serve as a liaison between these two functions.
3. You would continue to serve as a member of the Board of Directors
through the end of your current term ending with the annual meeting in
1997.
<PAGE> 1
EXHIBIT 13
(1995 10-K)
MANAGEMENT'S DISCUSSION
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
ORDERS, SHIPMENTS & BACKLOG 1995 1994 1993
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net orders $89,146,000 69,982,000 63,920,000
Percentage increase 27.4% 9.5% 3.3%
Net sales (shipments) $82,157,000 69,840,000 61,779,000
Percentage increase
(decrease) 17.6% 13.0% (9.5%)
Backlog at
December 31 $21,901,000 14,913,000 14,771,000
Percentage increase 46.9% 1.0% 17.0%
</TABLE>
Domestic and US export orders for 1995 were approximately 15% higher
than 1994 and the December 31, 1995 backlog of these orders increased by
approximately 15% as compared to 1994. The increase was attributed to a strong
United States economy and a significant increase (approximately 32%) in export
business. Combined domestic and US export order bookings have continued at 1995
levels early in 1996. Additional growth will depend on the continued strength of
the United States economy and the continued success in the export markets.
Domestic orders for 1994 increased approximately 28%. Although most
product lines showed an increase in orders, the largest increase in 1994 came
from engineered hydraulic systems. The increased orders for new products
introduced over the last few years and increased business with original
equipment manufacturers such as John Deere resulted in increased orders in
component products in 1994. Process improvements in the Company's marketing
programs increased orders in 1994. The backlog in Europe at December 31, 1995
increased by 74% as compared to 1994.
European orders for 1995 were approximately 61% higher than 1994. The
increase was attributed to the recovery of the European economy.
European orders for 1994 decreased by approximately 20%. The economic
recession in the capital goods industry was the principal reason for the
decrease. The European companies down sized in 1994 to meet the lower level of
demand.
An increased beginning backlog of domestic orders and increased orders
from all business throughout the year caused shipments for 1995 to increase by
approximately 18% from 1994. The backlog at December 31, 1995 increased by
approximately 47% as compared to 1994.
The increase in shipments for 1994 was directly affected by the increase
in domestic orders.
The Company is going into 1996 with an increased backlog of orders and a
cautious outlook for a continued strong capital goods market. Orders for
domestic and European business are expected to stabilize in 1996. If there is
increased demand in the world for capital equipment projects that require our
systems technology, then the Company is ready to supply the engineering,
hydraulic and electrical products, and customer service required to meet the
demand.
The gross margin was 32.0%, 33.6% and 32.0% for 1995, 1994 and 1993,
respectively. Despite process improvements resulting in a higher gross margin in
1994, price competition and the mix of products shipped reduced the gross margin
in 1995. See Footnote 3 on pages 15 and 16 for the LIFO inventory effect on cost
of sales in 1995 and 1994.
<TABLE>
<CAPTION>
OPERATING EXPENSES 1995 1994 1993
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Research and development $ 2,127,000 1,752,000 1,653,000
Percent change 21.4% 6.0% 2.4%
Selling, general and administrative
less research and development $19,690,122 18,718,707 17,767,568
Percent change 5.2% 5.4% (9.4%)
</TABLE>
In 1995, due to increased demand from the Original Equipment
Manufacturing market segment for new products, the Company increased the level
of its development projects.
The Company continued to be committed to developing new products and
enhancing existing products with technological improvements to better satisfy
customer needs. It is also committed to reducing the time it takes from the
conceptual design phase to the market entry phase.
The translation of foreign currencies to US dollars at higher rates in
1995 and in 1994 increased operating expenses in 1995 and in 1994. Other items
affecting operating expenses were inflation and in 1994 the employee severance
expenses. The cost awareness, total quality and employee empowerment programs
have been successful in maximizing positive output from all costs and expenses
incurred.
8
<PAGE> 2
The increased level of debt arising from the expansion of the business
and construction of an addition to the building at the Fremont, Neb. plant
caused interest expense to increase approximately 20% in 1995.
Footnote 7 to the consolidated financial statements on page 16
summarizes the non-operating income and expense. The Company's effective income
tax rate was 28.6% in 1995, 10.5% in 1994 and (17.1)% in 1993. See Footnote 8 to
the consolidated financial statements on page 17 for an explanation of the
effective income tax rates.
INFLATION AND CHANGING PRICES
Oilgear uses the LIFO method of accounting for most of its inventories
and has reserves for obsolete and slow moving inventory. The majority of the
Company's assets were purchased over the last forty years and reside in the
United States and Western Europe. These assets are in operation and have been
maintained through the years. Management believes that inflation has not
significantly distorted the net earnings reported for the Company. However,
because of inflation and the extent to which these assets have been depreciated,
management believes the book value of the Company, stated in historical dollars
at $19.33 per share, significantly understates the current or replacement value
of the Company's assets.
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
1995 FIRST SECOND THIRD FOURTH
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $17,760,031 19,274,473 21,499,167 23,623,699
Net earnings 351,888 567,423 617,957 654,466
Net earnings per share of common stock 0.31 0.49 0.53 0.56
Dividends per share of common stock 0.10 0.10 0.10 0.10
Stock price low* 12.50 13.50 17 15.25
Stock price high* 14.25 18.50 19.50 18.50
<CAPTION>
1994 FIRST SECOND THIRD FOURTH
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $15,839,746 16,309,616 17,963,673 19,726,608
Net earnings** 153,465 356,000 662,002 593,694
Net earnings per share of common stock 0.15 0.32 0.60 0.53
Dividends per share of common stock 0.05 0.05 0.05 0.10
Stock price low* 10.50 11 11 12.50
Stock price high* 13 12.37 14 14.25
</TABLE>
* High and low sales prices in the Nasdaq Stock Market.
**Fourth quarter net earnings includes changes in year end accounting estimates
and effect of change in method in calculating LIFO as noted in Footnote 3 to
the consolidated financial statements.
9
<PAGE> 3
MANAGEMENT'S DISCUSSION
DISCUSSION OF FINANCIAL POSITION
<TABLE>
<CAPTION>
CAPITALIZATION 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Bearing Debt $19,899,255 18,403,414 18,499,778
- ------------------------------------------------------------------------
Shareholders' Equity 22,771,627 20,542,443 17,270,867
- ------------------------------------------------------------------------
Debt and Equity 42,670,882 38,945,857 35,770,645
- ------------------------------------------------------------------------
Ratio 46.6% 47.3% 51.7%
- ------------------------------------------------------------------------
</TABLE>
EQUITY
The increase in shareholders' equity in 1995 was primarily the result of
net earnings. In 1994, shareholders' equity increased as a result of higher
earnings, approximately $1,000,000 of issued common stock and an increase of
approximately $1,000,000 in the equity adjustment for foreign currency
translation, which was the result of a weaker US dollar at year-end 1994.
The dividend for all four quarters of 1995 was $.10 per share. The
dividend was increased from $.05 to $.10 in the fourth quarter of 1994.
The Company's common stock is traded over-the-counter in the Nasdaq
Stock Market, symbol OLGR. At December 31, 1995, there were approximately 649
shareholders of record. Oilgear believes it is desirable for its employees to
have an ownership interest in the Company. This concept is supported by several
programs that are described in Footnote 9 to the consolidated financial
statements starting on page 17. The Company sold and made contributions to the
employee benefit plans of:
<TABLE>
<CAPTION>
1995 SHARES VALUE
=============================================================
<S> <C> <C>
Common stock 40,317 $ 533,000
<CAPTION>
1994 SHARES VALUE
=============================================================
<S> <C> <C>
Common stock 94,780 $1,040,000
<CAPTION>
1993 SHARES VALUE
=============================================================
<S> <C> <C>
Common stock 32,324 $ 364,000
</TABLE>
INTEREST BEARING DEBT
Interest bearing debt increased in 1995 from the financing of the
approximately 21,000 square foot addition to the plant in Fremont, Neb. This
addition was financed with an $850,000 ten year bank term loan with an interest
rate of 8.5% and a $500,000 ten year municipal term loan with an interest rate
of 4.25%. During 1995, the Company amended its revolving loan agreement. The
amended agreement provides for borrowings up to $11,000,000 through June 1997
and replaced the prior agreement which provided for borrowings up to $9,000,000
through June 1996. At December 31, 1995, $10,200,000 was outstanding. In
addition, 1,000,000 Pounds Sterling ($1,586,296) of additional borrowings were
added to the revolving loan agreement. This amount was used to pay down the
European short-term borrowings.
During 1994, the Industrial Revenue Bond was replaced by an equal amount
of a bank term loan. The new term loan has an interest rate of 7.1% compared to
the Industrial Revenue Bond rate of 7.91%. A second bank term loan was taken out
in 1994 to replace $3,000,000 of the Company's revolving loan agreement. The
interest rate on this second term loan is .25% above the bank prime rate. Both
of the above term loans have monthly payment terms and will mature on September
1, 1997.
A domestic bank line of credit of $2,000,000 was made available to the
Company during 1994 for the purpose of financing the inventory costs of large
customer orders. The interest rate on this line is .25% above the bank prime
rate. $500,000 was borrowed against this line at December 31, 1995.
Approximately $1,500,000 under a line of credit was available to one of
the Company's foreign subsidiaries at December 31, 1995. There were no
borrowings against these lines at December 31, 1995. See Footnotes 4 and 5 to
the consolidated financial statements on page 16.
WORKING CAPITAL
<TABLE>
<CAPTION>
LIQUIDITY 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and cash equivalents $ 2,779,186 2,830,474 1,746,673
Short-term borrowings 500,000 2,172,055 1,534,280
Working capital 26,833,493 26,075,737 24,407,954
Current ratio 2.4 2.5 2.8
Quick ratio 1.0 1.0 1.2
Cash provided by operations 3,880,014 4,298,399 4,156,393
Cash used by investing activities (5,366,080) (2,973,405) (4,626,738)
Cash provided (used) by
financing activities 1,149,135 (391,387) (1,078,470)
</TABLE>
The current ratio and the quick ratio continued to remain strong in all
three years reported.
Operations generated a positive net cash flow for 1995 and 1994 as
presented in the above table. A large dollar value of shipments were shipped in
December of 1995 causing trade receivables to increase at year end. The
improvement in the domestic (including exports) and European business created an
increase in work in process inventories in 1995.
An increased demand for our new products and a stronger domestic market
caused domestic inventories to increase by approximately $2,800,000 in 1994.
After adjusting for currency exchange, the Company's European subsidiaries
increased inventories by approximately $1,000,000 in 1994. The 1994 increase was
the result of anticipated increased orders in 1995 from stronger European
economies.
10
<PAGE> 4
In 1995, investing activities included the expansion of the Fremont,
Neb facility, the acquisition of multiple spindle machine tools and upgrading
of computer equipment. Cash used for investing activities in 1994 was primarily
for machine tools. To manage the increased demand for the Company's new
products and continue to deliver excellent customer service, the Company
anticipates that capital expenditures will decrease only slightly in 1996.
The Company's financial position at December 31, 1995 continues to be
strong and management believes the Company has adequate means for meeting its
future capital and operating needs.
BUSINESS DESCRIPTION
A business description is provided in Footnote 2 to the consolidated
financial statements on page 15.
NEW ACCOUNTING PRONOUNCEMENTS
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) 121 and 123. SFAS 121 establishes
accounting standards for the impairment of long-lived assets and certain
identifiable intangible assets. The adoption of SFAS 121 in 1996 will have no
material effect on the financial statements. SFAS 123 establishes financial and
reporting standards for stock-based compensation plans. The Company expects to
retain its current accounting methodology and expand its footnote disclosure
when SFAS 123 is adopted in 1996.
5 YEAR SUMMARY
<TABLE>
<CAPTION>
OPERATIONS 1995 1994 1993 1992** 1991
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $82,157,370 69,839,643 61,779,060 68,265,617 66,043,956
Net earnings 2,191,734 1,765,161 349,532 1,078,417 1,017,057
Net earnings after accounting change -- -- -- (6,675,583) --
Earnings per share 1.89 1.60 0.34 1.07 1.06
Earnings per share after accounting change -- -- -- (6.67) --
Dividends per share 0.40 0.25 0.35 0.60 0.80
CAPITALIZATION
- --------------------------------------------------------------------------------------------------------------
Interest bearing debt $19,899,255 18,403,414 18,499,778 19,637,606 20,542,911
Shareholders' equity 22,771,627 20,542,443 17,270,867 19,549,833 30,933,501
Total assets 77,902,162 69,879,022 63,704,350 65,470,908 68,837,403
Book value per share 19.33 18.05 16.56 19.34 31.24
December 31st stock price* 17.00 14.25 11.13 11.00 13.25
</TABLE>
*The last sale price for the year in the Nasdaq Stock Market.
**Reflects an accounting change to recognize postretirement employee benefits
on an accrual basis from a cash basis of accounting. The result of this
accounting change reduced 1992 net earnings by $7,754,000.
11
<PAGE> 5
CONSOLIDATED STATEMENTS OF OPERATIONS AND SHAREHOLDERS' EQUITY
The Oilgear Company and Subsidiaries Years ended December 31, 1995, 1994 and
1993
<TABLE>
<CAPTION>
OPERATIONS 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales (note 2) $82,157,370 69,839,643 61,779,060
Cost of sales (note 3) 55,858,297 46,340,042 41,985,086
- --------------------------------------------------------------------------------------------------------------------------------
Gross profit 26,299,073 23,499,601 19,793,974
Selling, general and administrative expenses 21,817,122 20,470,707 19,420,568
- --------------------------------------------------------------------------------------------------------------------------------
Operating income 4,481,951 3,028,894 373,406
Interest expense 1,690,107 1,407,648 1,334,899
Other non-operating income, net (note 7) 277,890 349,915 1,260,025
- --------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 3,069,734 1,971,161 298,532
Income tax expense (benefit) (note 8) 878,000 206,000 (51,000)
- --------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 2,191,734 1,765,161 349,532
===============================================
Weighted average outstanding shares 1,162,713 1,102,865 1,031,961
- --------------------------------------------------------------------------------------------------------------------------------
Earnings per share of common stock $ 1.89 1.60 0.34
===============================================
SHAREHOLDERS' EQUITY:
- --------------------------------------------------------------------------------------------------------------------------------
Common stock (note 9):
Balance at beginning of year $ 1,137,938 1,043,158 1,010,834
Sales to employee and director benefit plans (40,317, 36,940 and
32,324 shares in 1995, 1994 and 1993, respectively) 40,317 36,940 32,324
Contributions to employee benefit plans
(57,840 shares in 1994) - 57,840 -
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 1,178,255 1,137,938 1,043,158
- --------------------------------------------------------------------------------------------------------------------------------
Capital in excess of par value (note 9):
Balance at beginning of year 7,803,727 6,858,845 6,527,334
Sales to employee and director benefit plans 492,635 376,863 331,511
Contributions to employee benefit plans - 568,019 -
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 8,296,362 7,803,727 6,858,845
- --------------------------------------------------------------------------------------------------------------------------------
Retained earnings (note 9):
Balance at beginning of year 17,072,882 15,586,766 15,600,089
Net earnings 2,191,734 1,765,161 349,532
Cash dividends declared ($.40, $.25 and $.35
per share in 1995, 1994 and 1993, respectively) (467,675) (279,045) (362,855)
Treasury stock disposals under cost (121,428) - -
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 18,675,513 17,072,882 15,586,766
- --------------------------------------------------------------------------------------------------------------------------------
Notes receivable from employees (note 9):
Balance at beginning of year (168,044) (207,745) (198,293)
Sales under employee stock purchase plan (66,250) (36,750) (99,660)
Payments received/forgiven on notes 86,884 76,451 90,208
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of year (147,410) (168,044) (207,745)
- --------------------------------------------------------------------------------------------------------------------------------
Equity adjustment for foreign currency translation:
Balance at beginning of year (124,060) (1,130,157) (110,131)
Translation adjustment 372,967 1,006,097 (1,020,026)
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 248,907 (124,060) (1,130,157)
- --------------------------------------------------------------------------------------------------------------------------------
Equity adjustment for pension liability:
Balance at beginning of year (5,180,000) (4,880,000) (3,280,000)
Pension liability adjustment (300,000) (300,000) (1,600,000)
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of year (5,480,000) (5,180,000) (4,880,000)
- --------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity $22,771,627 20,542,443 17,270,867
===============================================
</TABLE>
See accompanying notes to consolidated financial statements.
12
<PAGE> 6
CONSOLIDATED BALANCE SHEETS
THE OILGEAR COMPANY AND SUBSIDIARIES DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
- --------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,779,186 2,830,474
Trade accounts receivable, less allowance
for doubtful receivables of $313,885 and
$275,893 in 1995 and 1994, respectively 16,383,534 14,966,715
Inventories (note 3) 26,595,579 22,296,710
Prepaid expenses 414,029 309,740
Other current assets 409,726 645,266
- --------------------------------------------------------------------------
Total current assets 46,582,054 41,048,905
- --------------------------------------------------------------------------
Property, plant and equipment, at cost (note 5):
Land 1,281,471 1,217,743
Buildings 10,773,276 9,393,778
Machinery and equipment 36,964,751 33,128,068
Drawings, patterns and patents 2,302,638 1,981,992
- --------------------------------------------------------------------------
51,322,136 45,721,581
Less accumulated depreciation and amortization 24,214,130 21,019,373
- --------------------------------------------------------------------------
Net property, plant and equipment 27,108,006 24,702,208
Pension intangible (note 9) 700,000 800,000
Other assets (note 9) 3,512,102 3,327,909
- --------------------------------------------------------------------------
$77,902,162 69,879,022
=======================
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994
- --------------------------------------------------------------------------
Current liabilities:
Short-term borrowings (note 4) $ 500,000 2,172,055
Current installments of long-term
debt (note 5) 3,324,359 3,038,515
Accounts payable 7,922,093 6,529,990
Customer deposits 2,704,924 1,022,109
Accrued compensation 2,555,159 2,270,593
Other accrued expenses and income
taxes (note 8) 2,742,026 2,302,716
- --------------------------------------------------------------------------
Total current liabilities 19,748,561 17,335,978
- --------------------------------------------------------------------------
Long-term debt, less current installments (note 5) 16,074,896 13,192,844
Unfunded employee retirement plan costs (note 9) 7,100,000 6,900,000
Unfunded postretirement health care costs (note 9) 11,180,000 11,180,000
Other noncurrent liabilities 1,027,078 727,757
- --------------------------------------------------------------------------
Total liabilities 55,130,535 49,336,579
- --------------------------------------------------------------------------
Commitments and contingencies (notes 9 and 11)
Shareholders' equity (notes 5 and 9):
Common stock, par value $1 per share,
authorized 4,000,000 shares; issued
1,178,255 and 1,137,938 shares in 1995 and
1994, respectively 1,178,255 1,137,938
Capital in excess of par value 8,296,362 7,803,727
Retained earnings 18,675,513 17,072,882
- --------------------------------------------------------------------------
28,150,130 26,014,547
Deduct:
Notes receivable from employees for purchase of
common stock of the Company (147,410) (168,044)
Equity adjustment for foreign currency
translation 248,907 (124,060)
Equity adjustment for pension liability
(note 9) (5,480,000) (5,180,000)
- --------------------------------------------------------------------------
Total shareholders' equity 22,771,627 20,542,443
- --------------------------------------------------------------------------
$77,902,162 69,879,022
=======================
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE> 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Oilgear Company and Subsidiaries Years ended December 31, 1995, 1994 and
1993
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,191,734 1,765,161 349,532
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 3,061,675 2,787,251 2,669,968
Common and treasury stock issued in connection with:
Funding of expense for the employee retirement plans - 625,859 -
Compensation element of sales to employees
and employee savings plan 115,632 123,871 113,161
Deferred income taxes - 17,000 (77,000)
Change in assets and liabilities:
Trade accounts receivable (1,132,502) 271,779 521,504
Inventories (4,158,041) (3,397,219) (1,808,268)
Prepaid expenses (93,225) 89,092 867,431
Accounts payable 1,295,429 2,112,262 441,041
Customer deposits 1,650,842 (1,067,995) 992,508
Accrued compensation 229,310 507,538 583,756
Other, net 719,160 463,800 (497,240)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 3,880,014 4,298,399 4,156,393
- -------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property, plant and equipment (5,241,948) (2,865,346) (4,035,747)
Additions to other assets (124,132) (108,059) (590,991)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (5,366,080) (2,973,405) (4,626,738)
- -------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings (repayments) under line of credit agreement (1,778,345) 440,895 (359,218)
Repayment of long-term debt (2,613,177) (1,850,820) (1,335,677)
Proceeds from issuance of long-term debt 5,691,806 967,950 738,059
Dividends paid (467,675) (279,045) (362,855)
Proceeds from sale of common stock 272,950 300,942 199,452
Payments received on notes receivable from employees 43,576 28,691 41,769
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 1,149,135 (391,387) (1,078,470)
- -------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 285,643 150,194 (355,228)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (51,288) 1,083,801 (1,904,043)
Cash and cash equivalents:
At beginning of year 2,830,474 1,746,673 3,650,716
- -------------------------------------------------------------------------------------------------------------------------------
At end of year $ 2,779,186 2,830,474 1,746,673
==============================================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 1,582,959 1,515,300 1,322,536
Income taxes $ 522,723 320,507 266,311
==============================================
</TABLE>
See accompanying notes to consolidated financial statements.
14
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Oilgear Company and Subsidiaries Years ended December 31, 1995, 1994 and
1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) CONSOLIDATION
These consolidated financial statements include the accounts of The
Oilgear Company and its subsidiaries (Company). All significant intercompany
balances and transactions have been eliminated.
(b) FOREIGN CURRENCY TRANSLATION
Substantially all assets and liabilities of foreign subsidiaries are
translated at the exchange rate prevailing at the balance sheet date and
substantially all income and expense accounts are translated at the weighted
average exchange rate during the year. Translation adjustments are not included
in determining net earnings, but are accumulated as a component of
shareholders' equity. Gains and losses resulting from foreign currency
transactions are included in net earnings.
(c) CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents. Cash equivalents totaled approximately
$444,000 and $1,007,000 at December 31, 1995 and 1994, respectively, and
consisted primarily of commercial paper.
(d) INVENTORIES
Inventories are stated at the lower of cost or market. Cost has been
calculated on the last-in, first-out (LIFO) method for the majority of the
domestic inventories. As discussed in note 3, effective January 1, 1994, the
Company changed its method of accounting for LIFO inventories from the dollar
value approach to the specific goods approach. For the balance of the
inventories, cost has been calculated under the first-in, first-out (FIFO) or
average actual cost methods. Market means current replacement cost not to
exceed net realizable value. Products returned from customers are inspected to
verify that the product is in as new condition. Products verified to be in as
new condition, are added to inventory. Reserves are charged to cost of sales
for obsolete and slow moving inventory.
(e) DEPRECIATION AND AMORTIZATION
Depreciation and amortization of plant and equipment are provided over
the estimated useful lives of the respective assets under the straight-line
method. Estimated useful lives range from 20 to 40 years for buildings, 5 to 15
years for machinery and equipment and 5 to 17 years for drawings, patterns and
patents.
(f) REVENUE RECOGNITION
The Company recognizes revenue on some system contracts on a
percentage-of-completion basis, measured by an estimate of the revenue
generated by each component of the system upon its completion. Losses are
recognized at the time a loss is projected. Revenue is recognized on other
sales of products generally upon shipment to the customer.
(g) INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases, and operating
loss and tax carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
(h) RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to selling, general and
administrative expenses in the year they are incurred. Total research and
development costs were approximately $2,127,000, $1,752,000 and $1,653,000 in
1995, 1994 and 1993, respectively.
(i) USE OF ESTIMATES
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
(j) RECLASSIFICATIONS
Certain amounts as originally reported in 1993 and 1994 have been
reclassified to conform with the 1995 presentation.
(2) BUSINESS DESCRIPTION AND OPERATIONS
The Oilgear Company provides advanced technology in the design and
production of unique fluid power components, systems and electronic controls.
Products include piston pumps, motors, valves, controls, manifolds, electronic
systems and components, cylinders, reservoirs, skids and meters. Industries
that use these products are primary metals, machine tool, automobile,
petroleum, construction equipment, chemical, plastic, glass, lumber, rubber and
food. The products are sold as individual components or integrated into high
performance systems.
Geographic area information is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales to unaffiliated customers:
Within the United States $44,118,481 39,452,849 31,545,020
United States exports 11,319,811 8,587,932 8,166,736
- ---------------------------------------------------------------------------------------
Total United States 55,438,292 48,040,781 39,711,756
Foreign 26,719,078 21,798,862 22,067,304
- ---------------------------------------------------------------------------------------
$82,157,370 69,839,643 61,779,060
==========================================
Transfers between geographic areas:
United States exports $ 3,909,946 3,426,753 2,747,325
==========================================
United States imports $ 989,147 986,425 726,224
==========================================
Earnings (loss) before income taxes:
United States $ 1,953,373 2,311,246 89,325
Foreign 1,116,361 (340,085) 209,207
- ---------------------------------------------------------------------------------------
$ 3,069,734 1,971,161 298,532
==========================================
Identifiable assets:
United States $52,345,054 48,000,022 42,610,049
Foreign 25,557,108 21,879,000 21,094,301
- ---------------------------------------------------------------------------------------
$77,902,162 69,879,022 63,704,350
==========================================
</TABLE>
Foreign operations consist predominately of subsidiaries in Europe.
Transfers and sales between geographic areas are accounted for at cost plus a
reasonable profit.
(3) INVENTORIES
Inventories at December 31, 1995 and 1994 consist of the following:
<TABLE>
<CAPTION>
1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 1,440,263 1,294,372
Work in process 24,921,466 22,397,052
Finished goods 3,381,850 3,039,286
- ---------------------------------------------------------------------------------------
29,743,579 26,730,710
LIFO reserve (3,148,000) (4,434,000)
- ---------------------------------------------------------------------------------------
Total $26,595,579 22,296,710
===========================
</TABLE>
Inventories stated on the LIFO basis are valued at $14,820,000 and
$11,358,000 at December 31, 1995 and 1994, respectively.
During 1995, LIFO inventory layers were reduced. This reduction resulted
in charging lower inventory costs prevailing in previous years to cost of sales
in 1995, thus reducing cost of sales by approximately $800,000 below the amount
that would have
15
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Oilgear Company and Subsidiaries Years ended December 31, 1995, 1994 and
1993
resulted from liquidating inventory recorded at December 31, 1995 prices.
Effective January 1, 1994, the Company changed its method of accounting
for inventories valued under the LIFO method from the dollar value approach to
the specific goods approach. The Company believes the specific goods approach
will provide a more accurate presentation of inventories and result in better
matching of revenues with related costs. The cumulative effect of this
accounting change and the pro forma effect on prior years' earnings are not
determinable.
During 1994, LIFO inventory layers were reduced. This reduction
resulted in charging lower inventory costs prevailing in previous years to cost
of sales in 1994, thus reducing cost of sales by approximately $1,300,000 below
the amount that would have resulted from liquidating inventory recorded at
December 31, 1994 prices. The effect was partially offset by higher cost of
sales of $1,000,000 than would have occurred under the dollar value approach
for certain items. The net result was that 1994 operating income was
approximately $300,000 higher due to the change in accounting method discussed
above. The effect of this accounting change on the consolidated financial
statements for the first three quarters of 1994 was not material.
(4) SHORT-TERM BORROWINGS
Short-term borrowings under a domestic line of credit amounted to
$500,000 and $1,147,533 at December 31, 1995 and 1994, respectively.
Compensating balances are not required. The unused portion of the domestic line
of credit at December 31, 1995 amounted to $1,500,000. Borrowings under the
line of credit bear interest at the bank's prime rate plus .25% (8.75% as of
December 31, 1995). This line of credit is collateralized by all domestic
property, plant and equipment.
Short-term borrowings under foreign lines of credit amounted to
$1,024,522 at December 31, 1994. There were no borrowings outstanding at
December 31, 1995. Compensating balances are not required. The unused portion
of the foreign lines of credit at December 31, 1995 amounted to $1,548,000.
These lines of credit bear interest at the bank's rate plus 2% (8.50% as of
December 31, 1995) and are collateralized by substantially all assets of the
applicable foreign subsidiaries.
(5) LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
1995 1994
- ---------------------------------------------------------------------------------
<S> <C>
Revolving loan agreement $10,200,000 8,500,000
Notes payable to banks 5,609,000 4,985,676
Note payable to municipality, due in
monthly installments through January
2006 at 4.25% per annum. 500,000 -
Mortgage notes of German subsidiary,
payable in Deutsche Marks and due in
annual installments through 2003
(interest rates range from 5.7% to 7.6%
as of December 31, 1995). 1,575,711 1,914,867
European Steel and Coal Community
note of UK subsidiary, payable
in Pounds Sterling in four annual
installments beginning in 1995 at
10% interest per annum. 335,366 452,065
Mortgage notes of French subsidiary,
payable in French Francs and due in
quarterly installments through 2002 at
9.2% and 9.8% interest per annum. 308,086 316,114
Capital leases 871,092 62,637
- ---------------------------------------------------------------------------------
19,399,255 16,231,359
Less current installments 3,324,359 3,038,515
- ---------------------------------------------------------------------------------
Long-term debt, less current installments $16,074,896 13,192,844
================================
</TABLE>
In April 1995, the Company amended its revolving loan agreement. The
amended agreement provides for borrowings up to $11,000,000 through June 1997
and replaced the prior revolving loan agreement which provided for borrowings up
to $9,000,000 through June 1996. Interest on borrowings under the agreement is
at varying rates based, at the Company's option, on the bank's prime rate or
money market rate. Under the agreement, the Company is required to pay a
commitment fee of .375 of 1% per annum on unused loan amounts available. Amounts
outstanding at December 31, 1995 bear interest at 8.2%.
In November 1995, the Company amended its revolving loan agreement. The
amended agreement provides for additional borrowings of 1,000,000 Pounds
Sterling ($1,586,000 at December 31, 1995, included in notes payable to banks)
through June 1997. The proceeds were used to decrease short-term borrowings in
the United Kingdom. The interest rate on this loan floats on a quarterly basis
based on bank interest rates in the United Kingdom (8.95% at December 31, 1995).
In connection with the revolving loan agreement, the Company also has
two term loans with remaining balances of $1,470,000 and $1,703,000 payable in
monthly installments through September 1997 and bearing interest at 7.1% and the
bank's prime rate plus .25% (8.75% as of December 31, 1995), respectively.
During 1994, the Company used the proceeds of one term loan to repay an
Industrial Revenue Bond.
The Company also has notes payable to a bank and a municipality with
balances of $850,000 and $500,000, respectively, at December 31, 1995. These
notes bear interest at 8.5% and 4.25%, respectively. These notes are payable in
monthly installments through January 2006.
All borrowings under the amended revolving loan agreement and notes
payable are collateralized by domestic property, plant and equipment. Covenants
in connection with long-term debt provide for, among other things, a specified
minimum level of consolidated net worth and working capital and limitations on
additional long-term debt and capital expenditures.
Aggregate annual principal payments for long-term debt maturing during
the next five years, including capital leases, are: 1996 - $3,324,359; 1997 -
$13,750,617; 1998 - $464,255; 1999 - $285,513 and 2000 - $296,637.
(6) LEASES
The Company has noncancelable operating leases, primarily for
automobiles, equipment, and sales facilities. Rent expense for operating leases
during 1995, 1994 and 1993 was $863,000, $646,000 and $556,000, respectively.
Future minimum lease payments under noncancelable operating leases for
each of the next five years are: 1996 - $720,000; 1997 - $616,000; 1998 -
$324,000; 1999 - $105,000; 2000 - $27,000.
(7) NON-OPERATING INCOME, NET
Non-operating income (expense) consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income $158,316 130,502 711,965
Foreign currency
exchange gain (loss) 149,159 67,640 (25,549)
Miscellaneous, net (29,585) 151,773 573,609
- ---------------------------------------------------------------------------------
$277,890 349,915 1,260,025
======================================
</TABLE>
16
<PAGE> 10
(8) INCOME TAXES
Income tax expense (benefit) attributable to income from continuing operations
consists of:
<TABLE>
<CAPTION>
1995 1994 1993
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $520,000 59,000 (54,000)
State 50,000 40,000 -
Foreign 308,000 90,000 80,000
- ----------------------------------------------------------------------
878,000 189,000 26,000
Deferred - 17,000 (77,000)
- ----------------------------------------------------------------------
Total $878,000 206,000 (51,000)
====================================
</TABLE>
The rate of expected income tax expense (benefit) differs from the effective
income tax rate as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Computed "expected" income tax rate 34.0% 34.0% 34.0%
State taxes (net of federal income
tax benefit) 1.1 1.2 -
Adjustment of prior years'
income taxes - - (17.1)
Change in balance of valuation
allowance allocated to
income tax expense (5.8) (27.5) (11.2)
Unremitted foreign earnings &
foreign tax rate differential 0.9 3.0 (22.8)
Exempt foreign sales
corporation income (1.5) (1.2) -
Other (0.1) 1.0 -
- ---------------------------------------------------------------------------
Effective income tax rate 28.6% 10.5% (17.1)%
===============================
</TABLE>
The significant components of deferred income tax expense (benefit)
attributable to income from continuing operations are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax expense (benefit)
(exclusive of the effects of other
components listed below) $469,000 385,000 (647,000)
Effects of adjustments in the beginning
of year valuation allowance (469,000) (368,000) 570,000
- --------------------------------------------------------------------------------------------------------------
$ - 17,000 (77,000)
========================================
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Accounts receivable $ 60,000 60,000
Inventories 335,000 266,000
Compensation 544,000 447,000
Warranty reserve 60,000 95,000
Employee benefits accruals 6,019,000 5,994,000
Tax credit carryforwards 1,019,000 470,000
Net operating loss carryforwards 779,000 1,703,000
- ----------------------------------------------------------------------------
Total gross deferred tax assets 8,816,000 9,035,000
Less valuation allowance 4,586,000 5,055,000
- ----------------------------------------------------------------------------
Net deferred tax assets 4,230,000 3,980,000
- ----------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation 4,138,000 3,929,000
Other 178,000 137,000
- ----------------------------------------------------------------------------
Total gross deferred tax liabilities 4,316,000 4,066,000
- ----------------------------------------------------------------------------
Net deferred tax liability $ (86,000) (86,000)
=========================
</TABLE>
The valuation allowance for deferred tax assets as of January 1, 1994
was $5,423,000. The net change in the total valuation allowance for the years
ended December 31, 1995 and 1994 was a decrease of $469,000 and $368,000,
respectively. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income, and tax planning strategies in making this assessment.
Subsequently recognized tax benefits relating to the valuation allowance
for deferred tax assets as of December 31, 1995 will be allocated as follows:
<TABLE>
- --------------------------------------------------------------
<S> <C>
Income tax benefit reported in the
consolidated statement of operations $ 2,946,000
Shareholders' equity 1,640,000
- --------------------------------------------------------------
$ 4,586,000
============
</TABLE>
The valuation allowance allocated to shareholders' equity relates to the
portion of the equity adjustment for pension liability under Statement of
Financial Accounting Standards No. 87 for which no tax benefit has been
recognized.
At December 31, 1995 the Company has a U.S. tax operating loss
carryforward of approximately $740,000, a foreign tax credit carryforward of
approximately $190,000, a general business tax credit carryforward of
approximately $410,000 and an AMT tax credit carryforward of approximately
$419,000. The U.S. tax operating loss carryforward expires in 2006 and 2007, the
foreign tax credits begin expiring in 1996 through 2000, the business tax
credits begin expiring in 2001 through 2010 and the AMT tax credits have no
expiration. The Company also has a tax operating loss carryforward applicable to
a foreign subsidiary of approximately $1,600,000 which can be carried forward
indefinitely.
The unremitted earnings of the Company's foreign subsidiaries, on which
income taxes have not been provided, are considered permanently invested and
aggregated approximately $5,800,000 at December 31, 1995.
(9) EMPLOYEE BENEFIT PLANS
(a) PENSION PLANS
The Company has non-contributory defined benefit retirement plans
covering substantially all domestic employees. The plan covering salaried and
management employees provides pension benefits that are based on years of
service and the employee's compensation during the last ten years prior to
retirement. Benefits payable under this plan may be reduced by benefits payable
under The Oilgear Stock Retirement Plan (Stock Retirement Plan). The plan
covering hourly employees and union members generally provides benefits of
stated amounts for each year of service. The Company's policy is to fund
pension costs to conform with the Employee Retirement Income Security Act of
1974.
17
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Oilgear Company and Subsidiaries Years ended December 31, 1995, 1994 and
1993
Unfunded employee retirement plan costs reflect the excess of the
unfunded accumulated benefit obligation over accrued pension cost. This excess
has been partially offset by an intangible asset with the remainder reflected
as an adjustment to shareholders' equity. Plan assets are primarily invested in
The Oilgear Company common stock (88,840 shares at December 31, 1995 and 1994),
money market, equity and long-term bond mutual funds. Data relative to 1995 and
1994 is as follows:
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of vested
benefit obligation $ 16,500,000 13,900,000
=============================
Accumulated benefit obligation
including vested benefits $ 17,600,000 14,900,000
=============================
Projected benefit obligation $ 17,900,000 14,900,000
Plan assets at fair value (13,100,000) (10,400,000)
- ----------------------------------------------------------------------
Projected benefit obligation
in excess of plan assets 4,800,000 4,500,000
Unrecognized net transition liability
being recognized over 15 years (600,000) (700,000)
Unrecognized net loss from past
experience, experience different
from that assumed and effects
of changes in assumptions (6,800,000) (6,200,000)
- ----------------------------------------------------------------------
Prepaid pension cost, included
in other assets (2,600,000) (2,400,000)
Adjustment for additional minimum
liability, reflected as unfunded
employee retirement plan costs 7,100,000 6,900,000
- ----------------------------------------------------------------------
Total pension liability $ 4,500,000 4,500,000
=============================
</TABLE>
Net pension expense under these plans for the year is comprised of the
following:
<TABLE>
<CAPTION>
1995 1994 1993
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 300,000 300,000 300,000
Interest cost on projected
benefit obligation 1,200,000 1,100,000 1,100,000
Return on plan assets (2,800,000) 500,000 (800,000)
Net amortization and deferral
of net transition liability 2,200,000 (1,200,000) 100,000
- ----------------------------------------------------------------------
Net pension expense $ 900,000 700,000 700,000
====================================
</TABLE>
The actuarial present value of the projected benefit obligation was
determined using a weighted average discount rate of 7.4% in 1995, 8.5% in 1994
and 7.5% in 1993 and a rate of increase in compensation levels (as applicable)
of 3% offset by projected payments from the Stock Retirement Plan as outlined
in the plan's provisions. The expected long-term rate of return used to measure
plan assets was 10% in 1995, 1994 and 1993.
The Company has a pension plan (UK Plan) for substantially all United
Kingdom employees that provides defined benefits based upon years of service
and salary. The provisions of the UK Plan provide for vesting after six months
of continuous employment and employee contributions equal to 6% of salary. At
the most recent actuarial determination date, April 1995, the pension plan data
comprised the following:
<TABLE>
- -----------------------------------------------------------------------------
<S> <C>
Actuarial present value of vested accumulated plan benefits $ 7,000,000
============
Market value of net assets available for benefits $ 7,000,000
============
</TABLE>
Pension expense for the UK Plan was $199,000, $205,000 and $215,000 in
1995, 1994 and 1993, respectively.
The Stock Retirement Plan is a defined contribution plan covering
substantially all domestic salaried employees. The Stock Retirement Plan is
non-contributory and provides for Company contributions based on a percentage
of defined earnings of eligible employees. The Stock Retirement Plan owned
272,131 and 273,095 shares of the Company's common stock as of December 31,
1995 and 1994, respectively. Certain benefits payable under the Stock
Retirement Plan serve to reduce benefits payable under the non-contributory
defined benefit retirement plans referred to above.
(b) EMPLOYEE SAVINGS PLANS
The Company has an employee savings plan (Savings Plan), under which
eligible domestic salaried employees may elect, through payroll deduction, to
defer from 2% to 12% of their base salary, subject to certain limitations, on a
pretax basis. The Company will contribute an additional 50% of the minimum 2%
contribution and 25% of any additional contribution up to 3% above the minimum
contribution. Contributions are placed in trust for investment in defined
funds, including a stock plan for investment primarily in common stock of the
Company. The Savings Plan trustee may purchase for the stock plan the Company's
common stock, subject to certain limitations, at a price equal to 80% of the
previous month's average low bid price. This discount is considered an
additional contribution to the Savings Plan in the year of purchase. The
amounts charged to expense under the Savings Plan, including the stock
discount, were $216,000, $208,000 and $192,000 in 1995, 1994 and 1993,
respectively. The Savings Plan owned 226,281 and 218,362 shares of the
Company's common stock as of December 31, 1995 and 1994, respectively.
During 1994 the Company adopted the Oilgear Milwaukee Shop Savings
Plan, under which eligible domestic collective bargaining unit employees may
elect, through payroll deductions, to defer from 1% to 15% of their earnings,
subject to certain limitations, on a pretax basis. The plan does not require
matching Company contributions. Employee contributions are placed in a trust
for investment in defined funds.
(c) EMPLOYEE STOCK PURCHASE PLAN
The Company has a key employee stock purchase plan under which shares
of common stock may be sold to key employees under restricted sales agreements.
The shares are sold at the market price at the time of the sale. One-half of
the purchase price is payable under 5% promissory notes over a three-year
period. The last portion of the note is forgiven by the Company over a
five-year period, beginning the year in which the first half is repaid, if
employment has continued. The anticipated compensation element of the shares
sold, represented by the potential forgiveness of the last one-half of the
principal due, is charged to operations on the straight-line basis over the
life of the note. The amounts charged to operations were $54,000, $58,000 and
$68,000 in 1995, 1994 and 1993, respectively.
(d) STOCK OPTION PLAN
In 1992, the Company adopted The Oilgear Company 1992 Stock Option Plan
(Option Plan). The Option Plan provides for the issuance of both incentive
stock options and nonqualified stock options. Eligibility for participation in
the Option Plan is determined by the Compensation Committee of the Board of
Directors (Committee). The exercise price of the options is determined by the
Committee but shall be greater than or equal
18
<PAGE> 12
to the fair market value of the Company's common stock when the option is
granted. The Committee establishes the period or periods of time within which
the option may be exercised within the parameters of the Option Plan document.
Changes in stock options outstanding are as follows:
<TABLE>
<CAPTION>
Number Price
of Shares Per Share
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at December 31, 1992 72,500 $11.00
Cancelled in 1993 and available for reissue 1,000 11.00
- -----------------------------------------------------------------------------------------
Options outstanding at December 31,
1993 and 1994 71,500 11.00
Granted 19,161 15.50 - 18.00
Exercised (11,039) 11.00
- -----------------------------------------------------------------------------------------
Options outstanding at December 31, 1995 79,622 11.00 - 18.00
- -----------------------------------------------------------------------------------------
Options exercisable at December 31, 1995 73,628 11.00 - 17.50
- -----------------------------------------------------------------------------------------
Options available for grant at
December 31, 1995 28,500
- -----------------------------------------------------------------------------------------
</TABLE>
(e) DIRECTORS' STOCK PLAN
The Company adopted The Oilgear Company Directors' Stock Plan (Plan).
The Plan provides for any director of Oilgear, eligible to receive directors'
fees, to receive Oilgear common stock in lieu of all or part of their directors
fees. There are 10,000 shares available for issuance under the Plan of which 500
and 1,000 shares were issued in 1995 and 1994, respectively.
(f) POSTRETIREMENT HEALTH AND LIFE CARE BENEFITS
In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits for retired domestic employees. All
nonbargaining unit domestic employees eligible to receive retiree health care
benefits as of December 31, 1991, are eligible to receive a health care credit
based upon a defined formula or a percentage multiplied by the Medicare eligible
premium. Nonbargaining unit domestic employees hired subsequent to, or
ineligible at December 31, 1991, will receive no future retiree health care
benefits. Bargaining unit domestic employees are provided retiree health care
benefits in accordance with the employment agreement. Employees terminating
their employment prior to normal retirement age forfeit their rights, if any, to
receive health care and life insurance benefits.
The following table presents the plan's funded status reconciled with
amounts recognized in the Company's Consolidated Balance Sheet at December 31,
1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 4,980,000 6,575,000
Fully eligible active plan participants 692,000 971,000
Other active plan participants 2,626,000 2,325,000
- ----------------------------------------------------------------------------------------
8,298,000 9,871,000
- ----------------------------------------------------------------------------------------
Plan assets at fair value - -
- ----------------------------------------------------------------------------------------
Accumulated postretirement benefit
in excess of plan assets 8,298,000 9,871,000
Unrecognized net gain 2,882,000 1,309,000
- ----------------------------------------------------------------------------------------
Accrued postretirement benefit cost, reflected
as unfunded postretirement health care costs $11,180,000 11,180,000
==========================
</TABLE>
Net periodic postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 117,000 110,000 110,000
Interest cost 633,000 704,000 671,000
Net amortization and deferral (273,000) (16,000) (60,000)
- --------------------------------------------------------------------------------
Net periodic postretirement
benefit cost $ 477,000 798,000 721,000
=======================================
</TABLE>
For measurement purposes, the following health care cost assumptions were made:
FOR THE CURRENT RETIREE GROUP AND CURRENT ACTIVE BARGAINING GROUP:
-Health care costs increase at a rate of 8.5% in years one to three,
grading down to a rate of 4.5% in year 13 and thereafter.
FOR THE CURRENT NONBARGAINING ACTIVE GROUP:
-Health care costs increase at a rate of 13.5% in years one and two,
grading down to a rate of 4.5% in year 13 and thereafter.
FOR ALL PARTICIPANTS:
-Medicare costs increase at a rate of 6.0% in year one, grading down to
a rate of 4.5% in year eight and thereafter.
The health care cost trend rate assumption has a significant effect on
the amounts reported. For example, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1995 by $1,439,000 and the
aggregate of the service and interest cost components of net periodic
postretirement cost for the year ended December 31, 1995 by $105,000. The
weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.4%, 8.5% and 7.5% at December 31, 1995,
1994 and 1993, respectively.
(10) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating the fair value of financial instruments as of December 31, 1995:
CASH AND CASH EQUIVALENTS:
The carrying amount reported in the consolidated balance sheet for cash
and cash equivalents approximates their fair value.
SHORT-TERM BORROWINGS AND LONG-TERM DEBT:
The carrying amounts of the Company's short-term borrowings, its
revolving loan agreement and variable rate long-term debt instruments as
reported in notes 4 and 5 approximate their fair value. The fair value of the
Company's other long-term debt is estimated using discounted cash flow analyses,
based on the Company's current incremental borrowing rates for similar types of
borrowing arrangements. The carrying amounts of other long-term debt as reported
in note 5 approximate their fair value.
(11) LEGAL CONTINGENCIES
The Company is a defendant in several product liability actions which it
believes are adequately covered by insurance.
19
<PAGE> 13
MANAGEMENT'S REPORT
The management of The Oilgear Company is responsible for the integrity
and objectivity of the financial information presented in this annual report.
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles, applying best estimates and
judgements as required.
The Oilgear Company maintains a system of internal accounting control
designed to provide reasonable assurance for the safeguarding of the Company's
assets and the reliability of financial records. Essential elements of this
system are the selection of qualified personnel, appropriate division of
responsibilities, communication of policies and procedures, and appropriate
follow-up by management. Management believes that this system provides
reasonable assurance that transactions are executed in accordance with
management authority and that they are properly recorded.
KPMG Peat Marwick LLP is the firm of independent auditors retained to
express their opinion as to whether the consolidated financial statements
present fairly the financial position, results of operations and cash flows of
The Oilgear Company. Their audit procedures include an evaluation and review of
the Company's system of internal control to establish the audit scope, tests of
selected transactions, and other audit procedures.
The entire Board of Directors functions as an audit committee and meets
with the independent auditors and the Company's management to review the scope
and findings of the audit, review the Company's system of internal control, and
review other accounting and financial matters. The Company will continue to
conduct its business affairs in accordance with the highest ethical standards.
/s/ David A. Zuege
David A. Zuege,
President and Chief Executive Officer
/s/ T. J. Price
Thomas J. Price,
Vice President - Finance
and Corporate Secretary
INDEPENDENT AUDITORS' REPORT
The Board of Directors
The Oilgear Company:
We have audited the accompanying consolidated balance sheets of The
Oilgear Company and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations and shareholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Oilgear
Company and subsidiaries as of December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 3 to the consolidated financial statements, the
Company changed its method of accounting for LIFO inventories in 1994.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Milwaukee, Wisconsin
February 28, 1996
20
<PAGE> 1
EXHIBIT 21
(1995 10-K)
SUBSIDIARIES OF THE OILGEAR COMPANY
<TABLE>
<CAPTION>
JURISDICTION
IN WHICH
NAME OF SUBSIDIARY INCORPORATED
------------------ ------------
<S> <C>
Oilgear Towler GmbH Republic of Germany
Oilgear F.S.C., Inc. Virgin Islands
Oilgear Ltd. England
Oilgear Towler Ltd. England
Oilgear Towler S.A. France
Oilgear Towler S.A. Spain
Oilgear Towler S.r.l. Italy
Oilgear Towler Australia Pty. Ltd. Australia
Oilgear Mexicana S.A. de C.V. Mexico
</TABLE>
<PAGE> 1
EXHIBIT 23
(1995 10-K)
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors
The Oilgear Company:
We consent to incorporation by reference in the registration statements (Nos.
33-67672 and 33-59033) on Form S-8 of The Oilgear Company of our reports dated
February 28, 1996, relating to the consolidated balance sheets of The Oilgear
Company and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations and shareholders' equity, and cash flows
and the related financial statement schedule for each of the years in the
three-year period ended December 31, 1995, which reports appear or are
incorporated by reference in the December 31, 1995 annual report on Form 10-K
of The Oilgear Company.
KPMG Peat Marwick LLP
Milwaukee, Wisconsin
March 29, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AUDITED FINANCIAL STATEMENTS OF THE OILGEAR COMPANY FOR THE YEAR ENDED DECEMBER
31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,779,186
<SECURITIES> 0
<RECEIVABLES> 16,697,419
<ALLOWANCES> 313,885
<INVENTORY> 26,595,579
<CURRENT-ASSETS> 46,582,054
<PP&E> 51,322,136
<DEPRECIATION> 24,214,130
<TOTAL-ASSETS> 77,902,162
<CURRENT-LIABILITIES> 19,748,561
<BONDS> 19,399,255
0
0
<COMMON> 9,474,617
<OTHER-SE> 13,297,010
<TOTAL-LIABILITY-AND-EQUITY> 77,902,162
<SALES> 82,157,370
<TOTAL-REVENUES> 82,157,370
<CGS> 55,858,297
<TOTAL-COSTS> 55,858,297
<OTHER-EXPENSES> 21,817,122
<LOSS-PROVISION> 37,992
<INTEREST-EXPENSE> 1,690,107
<INCOME-PRETAX> 3,069,734
<INCOME-TAX> 878,000
<INCOME-CONTINUING> 2,191,734
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,191,734
<EPS-PRIMARY> 1.89
<EPS-DILUTED> 1.89
</TABLE>
