<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2300 SOUTH 51ST STREET, MILWAUKEE, WISCONSIN 53219
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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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NOT APPLICABLE
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(Former name, former address and former fiscal year, if changed since
last report.)
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding September 30, 1997
- --------------------------------------------------------------------------------
Common Stock, $1.00 Par Value 1,271,606
<PAGE> 2
PART I - FINANCIAL INFORMATION PAGE 2
ITEM 1. FINANCIAL STATEMENTS.
THE OILGEAR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30, 1997 DECEMBER 31, 1996
=======================================================================================================
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,607,143 2,367,684
Trade accounts receivable less allowance for doubtful receivables
of $211,557 and $218,154 in 1997 and 1996, respectively 18,140,897 14,894,195
Inventories 28,299,466 26,229,868
Prepaid expenses 520,792 528,854
Other current assets 621,265 537,795
- -------------------------------------------------------------------------------------------------------
Total current assets 50,189,563 44,558,396
- -------------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost
Land 1,194,228 1,283,679
Buildings 10,898,522 10,213,472
Machinery and equipment 45,649,716 42,512,215
Drawings, patterns and patents 2,761,583 2,585,379
- -------------------------------------------------------------------------------------------------------
60,504,049 56,594,745
Less accumulated depreciation and amortization (30,110,379) (27,740,588)
- -------------------------------------------------------------------------------------------------------
Net property, plant and equipment 30,393,670 28,854,157
Pension intangible 600,000 600,000
Other assets 3,830,061 3,826,274
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$85,013,294 77,838,827
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<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY SEPTEMBER 30, 1997 DECEMBER 31, 1996
=======================================================================================================
<S> <C> <C>
Current liabilities:
Short-term borrowings $ 169,400 113,414
Current installments of long-term debt 649,471 2,182,838
Accounts payable 7,989,048 5,728,452
Customer deposits 2,690,296 1,992,367
Accrued compensation 2,850,812 2,724,274
Other accrued expenses and income taxes 2,854,182 3,154,282
- -------------------------------------------------------------------------------------------------------
Total current liabilities 17,203,209 15,895,627
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Deferred income taxes 65,411 74,300
Long-term debt, less current installments 21,680,267 16,154,961
Unfunded employee retirement plan costs 5,600,000 5,600,000
Unfunded postretirement health care costs 11,109,000 11,109,000
Other non-current liabilities 1,048,502 1,339,800
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Total liabilities 56,706,389 50,173,688
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Minority interest 449,450 348,002
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Shareholders' equity:
Common stock par value $1 per share, authorized 4,000,000 shares;
issued 1,271,606 and 1,248,859 shares in 1997 and 1996, respectively 1,271,606 1,248,859
Capital in excess of par value 9,346,482 9,090,627
Retained earnings 22,239,370 20,828,365
- -------------------------------------------------------------------------------------------------------
Add (deduct): 32,857,458 31,167,851
Notes receivable from employees for purchase
of common stock of the Company (197,631) (220,781)
Equity adjustments for foreign currency translation (722,372) 450,067
Equity adjustments for pension liability (4,080,000) (4,080,000)
- -------------------------------------------------------------------------------------------------------
Total shareholders' equity 27,857,455 27,317,137
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$ 85,013,294 77,838,827
=======================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
PAGE 3
THE OILGEAR COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED FOR NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
Operations 1997 1996 1997 1996
===============================================================================
<S> <C> <C> <C> <C>
Net Sales $21,644,085 22,160,979 64,639,187 67,260,350
Cost of sales 14,368,526 14,499,210 42,819,679 44,615,494
- -------------------------------------------------------------------------------
Gross Profit 7,275,559 7,661,769 21,819,508 22,644,856
Selling, general and
administrative
expenses 6,070,072 6,277,657 18,313,277 18,688,153
- -------------------------------------------------------------------------------
Operating income 1,205,487 1,384,112 3,506,231 3,956,703
Interest expense (404,128) (441,995) (1,199,346) (1,280,387)
Other income
and expense 120,773 13,435 126,810 (33,816)
- -------------------------------------------------------------------------------
Income before
income taxes 922,132 955,552 2,433,695 2,642,499
Income taxes 242,744 313,999 610,000 834,000
- -------------------------------------------------------------------------------
Net earnings before
minority interest 679,388 641,553 1,823,695 1,808,500
Net earnings from
minority interest (6,212) 0 34,490 0
- -------------------------------------------------------------------------------
Net earnings $ 685,600 641,553 1,789,205 1,808,500
===============================================================================
Net income per share $ 0.54 0.53 1.42 1.51
===============================================================================
Dividend per share $ 0.10 0.10 0.30 0.30
===============================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
THE OILGEAR COMPANY AND SUBSIDIARIES PAGE 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1997 1996
=====================================================================================================================
<S> <C> <C>
Cash flows from operating activities:
Net earnings $1,789,205 1,808,499
Depreciation 2,860,182 2,538,200
Common stock issued in connection with:
Compensation element of sales to employees
and employee savings plan 129,121 124,779
Minority interest in consolidated subsidiary 34,490 0
Change in assets and liabilities:
Trade accounts receivable (3,832,332) (3,936,802)
Inventories (2,563,991) 914,748
Prepaid expenses (23,584) 157,996
Accounts payable 2,468,305 (1,671,772)
Customer deposits 756,565 372,718
Accrued compensation and pension expense 229,620 155,972
Unfunded employee benefit costs 0 0
Other, net (283,786) 1,014,245
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Net cash provided (used) by operating activities 1,563,796 1,478,585
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Cash flows from investing activities:
Additions to property, plant and equipment (4,967,759) (3,052,726)
Reductions (additions) to other assets (256,410) 0
- ---------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (5,224,169) (3,052,726)
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Cash flows from financing activities:
Net borrowings (repayments) under line-of-credit agreement 54,436 (500,000)
Repayment of long-term debt (1,874,251) (1,253,406)
Proceeds from issuance of long-term debt 6,020,069 1,400,000
Dividends paid (379,134) (364,015)
Purchase of treasury stock (47,975) 0
Proceeds from sale of treasury stock 48,909 0
Proceeds from sale of common stock 129,871 283,095
Payments received on notes receivable from employees 42,760 35,518
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Net cash provided (used) by financing activities 3,994,686 (398,807)
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Effect of exchange rate changes on cash (94,853) (58,481)
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Net increase (decrease) in cash and cash equivalents 239,460 (2,031,430)
Cash and cash equivalents:
At beginning of year 2,367,684 2,779,186
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At end of period $2,607,144 747,756
=====================================================================================================================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
=====================================================================================================================
Interest $935,061 1,219,430
=====================================================================================================================
Income taxes $351,377 429,196
=====================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
PAGE 5
THE OILGEAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INVENTORIES
Inventories at September 30, 1997 and December 31, 1996 consist of the
following:
9-30-97 12-31-96
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Raw Materials $1,417,020 $1,497,513
Work in process $23,429,936 $23,212,707
Finished goods $5,488,510 $4,431,648
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$30,335,466 $29,141,868
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LIFO reserve $2,036,000 $2,912,000
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Total $28,299,466 $26,229,868
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Inventories stated on the LIFO basis are valued at $18,231,245 at September 30,
1997. If the first-in, first-out (FIFO) method of inventory valuation had been
used for such inventories, the inventories would have been stated approximately
$2,036,000 higher.
EARNINGS PER SHARE
Earnings per share is based upon weighted average outstanding shares.
OTHER INFORMATION
The financial statements reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results for the interim
period. All such adjustments are of a normal recurring nature. Management
assumes the reader will have access to the December 31, 1996 Annual Report, a
copy of which is available upon request. These notes should be read in
conjunction with the notes in the Annual Report.
<PAGE> 6
PAGE 6
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
A large amount of orders shipped late in the third quarter of 1997
increased trade accounts receivable from the balance at December 31, 1996. A
60% increase in orders backlog, from approximately $18 million at December 31,
1996 to approximately $29 million at September 30, 1997, caused inventories
and accounts payable to increase from their balances at December 31, 1996.
Increased demand for Oilgear products resulted in the expansion of the
Fremont, NE plant and the improvement of certain manufacturing processes during
the first three quarters of 1997 caused an increase in additions to property,
plant and equipment when compared to the same period of 1996.
Most of the additions of property, plant and equipment have been
financed with bank debt at September 30, 1997. On October 30, 1997 the Company
closed on a $4,000,000 County of Dodge, Nebraska Variable Rate Demand
Industrial Revenue Bonds issue. The proceeds were used to finance the building
addition in Fremont, NE and will be used to finance future purchases of
machinery and equipment at the Fremont, NE plant.
The US dollar continued to rise against other currencies during 1997
which resulted in a lower US dollar value of the assets and liabilities
converted from foreign currencies to US dollars. The net change in these US
dollar amounts caused the change in the "Equity adjustments for foreign
currency translation" balance sheet line.
The Company's management believes the Company has adequate means for
meeting future capital needs.
RESULTS OF OPERATIONS
Third quarter orders for 1997 are up approximately 12% from the third
quarter of 1996 and for the first three quarters of 1997 orders are up
approximately 12% from the first three quarters of 1996. The backlog of orders
increased to nearly $29 million at the end of the third quarter from $21
million at the end of the third quarter of 1996.
Unanticipated delays in major projects and labor shortages in certain
key areas are the principle reasons net sales decreased by approximately 2% in
the third quarter of 1997 and decreased by 4% in the first three quarters of
1997 when compared to the respective periods in 1996. The Company began to
ship the delayed orders toward the end of the third quarter and net sales is
anticipated to remain strong during the fourth quarter of 1997.
The last sentence of the preceding paragraph contains a forward-looking
statement concerning the Company's sales prospects for the fourth quarter of
fiscal 1997. This statement is based on the current expectations and beliefs
of management, and involves certain assumptions, risks and uncertainties, many
of which are beyond the Company's control, that could cause the Company's
actual sales to differ materially from what is expected. In particular, the
following factors may affect the Company's sales in the fourth quarter:
foreign currency exchange rates, the financial and business conditions of the
Company's customers and the state of the economy generally, unanticipated
technological developments made by the Company's competitors and the Company's
ability to maintain an effective sales force.
The decrease in net sales is the primary reason gross profit and
operating income decreased in the third quarter of 1997 and the first three
quarters of 1997 compared to the respective periods in 1996.
Non-Operating income (expense) for the nine months ended September 30, 1997 and
1996, respectively, consists of the following:
<TABLE>
<CAPTION>
9-30-97 9-30-96
- ----------------------------------------------------------------------------
<S> <C> <C>
Interest income $85,992 91,102
Foreign currency exchange gain (loss) (85,347) (69,800)
Miscellaneous, net 126,165 (55,118)
============================================================================
126,810 (33,816)
============================================================================
</TABLE>
Income taxes have decreased in the third quarter of 1997 and first
three quarters of 1997 by tax credits and net operating loss carryforwards from
prior years.
<PAGE> 7
PAGE 7
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
<PAGE> 8
PAGE 8
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
See Exhibit Index following the last page of this Form 10-Q
which Exhibit Index is incorporated herein by reference.
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
<PAGE> 9
PAGE 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
11-14-97 THE OILGEAR COMPANY
- --------------------------------------------------------------------------------
REGISTRANT
/s/ DAVID A. ZUEGE
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PRESIDENT AND CEO
/s/ THOMAS J. PRICE
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VP-FINANCE AND CORPORATE
SECRETARY
<PAGE> 10
PAGE 10
THE OILGEAR COMPANY
COMMISSION FILE NUMBER 0-822
EXHIBIT INDEX
Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 1997
Exhibit
Number
27 The Oilgear Company Financial Data Schedule for the nine
months ended September 30, 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS OF THE OILGEAR COMPANY FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,607,143
<SECURITIES> 0
<RECEIVABLES> 18,352,454
<ALLOWANCES> 211,557
<INVENTORY> 28,299,466
<CURRENT-ASSETS> 50,189,563
<PP&E> 60,504,049
<DEPRECIATION> 30,110,379
<TOTAL-ASSETS> 85,013,294
<CURRENT-LIABILITIES> 17,203,209
<BONDS> 22,329,738
0
0
<COMMON> 10,618,088
<OTHER-SE> 17,239,367
<TOTAL-LIABILITY-AND-EQUITY> 85,013,294
<SALES> 64,639,187
<TOTAL-REVENUES> 64,639,187
<CGS> 42,819,679
<TOTAL-COSTS> 42,819,679
<OTHER-EXPENSES> 18,313,277
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,199,346
<INCOME-PRETAX> 2,433,695
<INCOME-TAX> 610,000
<INCOME-CONTINUING> 1,789,205
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,789,205
<EPS-PRIMARY> 1.42
<EPS-DILUTED> 1.42
</TABLE>
