<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 June 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
--------------------- ------------------
Commission file number 0-822
--------------------------
THE OILGEAR COMPANY
-------------------
(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
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (414) 327-1700
NOT APPLICABLE
================================================================================
(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 at June 30, 1997
- --------------------------------------------------------------------------------
Common Stock, $1.00 Par Value 1,261,014
<PAGE> 2
PART I - FINANCIAL INFORMATION PAGE 2
ITEM 1. FINANCIAL STATEMENTS.
THE OILGEAR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS JUNE 30, 1997 DECEMBER 31, 1996
===========================================================================================================================
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,368,452 2,367,684
Trade accounts receivable less allowance for doubtful receivables
of $211,862 and $218,154 in 1997 and 1996, respectively 16,344,686 14,894,195
Inventories 27,023,139 26,229,868
Prepaid expenses 443,045 528,854
Other current assets 636,589 537,795
- ---------------------------------------------------------------------------------------------------------------------------
Total current assets 46,815,911 44,558,396
- ---------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost
Land 1,191,628 1,283,679
Buildings 9,989,948 10,213,472
Machinery and equipment 45,165,774 42,512,215
Drawings, patterns and patents 2,710,879 2,585,379
- ---------------------------------------------------------------------------------------------------------------------------
59,058,229 56,594,745
Less accumulated depreciation and amortization (29,239,214) (27,740,588)
- ---------------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 29,819,015 28,854,157
Pension intangible 600,000 600,000
Other assets 3,925,031 3,826,274
- ---------------------------------------------------------------------------------------------------------------------------
$ 81,159,957 77,838,827
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY JUNE 30, 1997 DECEMBER 31, 1996
===========================================================================================================================
<S> <C> <C>
Current liabilities:
Short-term borrowings $233,132 113,414
Current installments of long-term debt 1,228,762 2,182,838
Accounts payable 7,182,805 5,728,452
Customer deposits 2,303,059 1,992,367
Accrued compensation 2,751,668 2,724,274
Other accrued expenses and income taxes 2,692,549 3,154,282
- ---------------------------------------------------------------------------------------------------------------------------
Total current liabilities 16,391,975 15,895,627
- ---------------------------------------------------------------------------------------------------------------------------
Deferred income taxes 66,596 74,300
Long-term debt, less current installments 18,903,275 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 1,160,568 1,339,800
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 53,231,414 50,173,688
- ---------------------------------------------------------------------------------------------------------------------------
Minority Interest 455,447 348,002
- ---------------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Common stock par value $1 per share, authorized 4,000,000 shares;
issued 1,261,014 and 1,248,859 shares in 1997 and 1996, respectively 1,261,014 1,248,859
Capital in excess of par value 9,232,597 9,090,627
Retained earnings 21,680,931 20,828,365
- ---------------------------------------------------------------------------------------------------------------------------
32,174,542 31,167,851
Add(deduct):
Notes receivable from employees for purchase
of common stock of the Company (216,571) (220,781)
Equity adjustments for foreign currency translation (404,875) 450,067
Equity adjustments for pension liability (4,080,000) (4,080,000)
- ---------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 27,473,096 27,317,137
- ---------------------------------------------------------------------------------------------------------------------------
$ 81,159,957 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 SIX MONTHS ENDED
JUNE 30 JUNE 30
OPERATIONS 1997 1996 1997 1996
==================================================================================================================
<S> <C> <C> <C> <C>
Net sales $22,686,156 23,576,057 42,995,102 45,099,371
Cost of sales 14,969,432 15,620,069 28,451,153 30,116,284
- ------------------------------------------------------------------------------------------------------------------
Gross profit 7,716,724 7,955,987 14,543,949 14,983,087
Selling, general and
administrative expenses 6,352,866 6,443,829 12,243,205 12,410,496
- ------------------------------------------------------------------------------------------------------------------
Operating income 1,363,859 1,512,158 2,300,744 2,572,591
Interest expense (435,565) (451,438) (795,218) (838,392)
Other income and expense (35,469) (19,999) 6,037 (47,251)
- ------------------------------------------------------------------------------------------------------------------
Income before income taxes 892,824 1,040,721 1,511,563 1,686,947
Income taxes 233,363 368,000 367,256 520,000
- ------------------------------------------------------------------------------------------------------------------
Net earnings before minority interest 659,461 672,721 1,144,307 1,166,947
Net earnings from minority interest 32,231 0 40,702 0
- ------------------------------------------------------------------------------------------------------------------
Net earnings $ 627,230 672,721 1,103,605 1,166,947
==================================================================================================================
Net income per share $ 0.50 0.56 0.87 0.98
==================================================================================================================
Dividend per share $ 0.10 0.10 0.20 0.20
==================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
PAGE 4
THE OILGEAR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR SIX MONTHS ENDED
JUNE 30 JUNE 30
1997 1996
===============================================================================================================
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,103,605 1,166,947
Depreciation 1,805,956 1,644,534
Common stock issued in connection with:
Compensation element of sales to employees
and employee savings plan 91,508 91,288
Minority interest in consolidated subsidiary 40,702 0
Change in assets and liabilities:
Trade accounts receivable (1,935,442) (2,552,328)
Inventories (1,149,798) 387,645
Prepaid expenses 57,482 90,203
Accounts payable 1,625,269 (1,717,909)
Customer deposits 361,153 (810,002)
Accrued compensation and pension expense 132,331 325,409
Unfunded employee benefit costs 0 0
Other, net (635,214) 1,543,027
- ---------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities 1,497,553 168,813
- ---------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property, plant and equipment (2,758,617) (1,871,087)
Reductions (additions) to other assets (81,000) 0
- ---------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (2,839,617) (1,871,087)
- ---------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings (repayments) under line-of-credit agreement 119,848 (478,502)
Repayment of long-term debt (1,261,606) (275,120)
Proceeds from issuance of long-term debt 3,214,441 1,500,000
Dividends paid (251,974) (241,974)
Purchase of treasury stock (47,975) 0
Proceeds from sale of treasury stock 48,909 0
Proceeds from sale of common stock 28,044 302,895
Payments received on notes receivable from employees 38,783 30,122
- ---------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 1,888,471 837,421
- ---------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (545,639) (44,188)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 768 (909,040)
Cash and cash equivalents:
At beginning of year 2,367,684 2,779,186
- ---------------------------------------------------------------------------------------------------------------
At end of period $ 2,368,452 1,870,145
===============================================================================================================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
===============================================================================================================
Interest $ 656,873 819,110
===============================================================================================================
Income taxes $ 270,189 253,831
===============================================================================================================
</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 June 30, 1997 and December 31, 1996 consist of the following:
6-30-97 12-31-96
================================================================================
Raw Materials $ 1,469,614 $ 1,497,513
Work in process $ 22,702,359 $ 23,212,707
Finished goods $ 5,344,166 $ 4,431,648
$ 29,516,139 $ 29,141,868
================================================================================
LIFO reserve $ 2,493,000 $ 2,912,000
================================================================================
Total $ 27,023,139 $ 26,229,868
================================================================================
Inventories stated on the LIFO basis are valued at $16,911,576 at June 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
$2,493,000 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 30,000 square foot plant expansion is in progress at the Fremont, Nebraska
facility which increased additions to property plant and equipment by
approximately $900,000 over the additions for the same period in 1996. During
the construction period the Fremont facility expansion is being financed with
the remaining balance of the $16,000,000 revolving line of credit. An
alternate long-term financing arrangement is in process and is expected to be
closed at the end of September or early October 1997.
The US dollar continued to rise against other currencies during the first half
of 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
Second quarter orders for 1997 are up 18% from the second quarter of 1996 and
for the first half of 1997 orders are up 14% from the first half of 1996. The
backlog of orders increased to nearly $27 million at the end of second quarter
from $18 million at the end of 1996.
Several major projects delayed by customers is the principle reason net sales
decreased by 4% in the second quarter of 1997 and decreased by 5% in the first
half of 1997 when compared to the respective periods in 1996.
The decrease in net sales is the primary reason gross profit, operating income,
income before taxes and net income decreased in the second quarter of 1997 and
the first half of 1997 compared to the respective periods in 1996.
Income taxes have decreased in the second quarter of 1997 and first half 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the annual meeting of shareholders on April 15, 1997 management's
nominees named below were elected as directors of the class whose term expires
in 2000, by the indicated votes cast for and withheld with respect to each
nominee. Of the 1,256,190 shares of Common Stock which were entitled to vote
at the meeting, 1,033,884 shares were represented in person or by proxy and
1,028,289 shares (99% of the shares represented) were voted for the election of
all of management's nominees. There were no abstentions or broker non-votes
with respect to the election of directors.
Name of Nominee For Withheld Term-expiring
--------------------------------------------------------------------------
Hubert Bursch 1,028,289 5,595 2000
David A. Zuege 1,028,289 5,595 2000
Randolph W. Carson 1,028,289 5,595 2000
Further information concerning this matter, including the name of each
other director whose term of office as a director continued after the meeting,
to expire in 1998 or 1999, is contained in the registrant's Proxy Statement
dated March 25, 1997 with respect to the 1997 annual meeting of shareholders.
<PAGE> 9
PAGE 9
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> 10
PAGE 10
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.
8-11-97 THE OILGEAR COMPANY
- --------------------------------------------------------------------------------
REGISTRANT
/S/ DAVID A. ZUEGE
- --------------------------------------------------------------------------------
DAVID A. ZUEGE,
PRESIDENT AND CEO
/S/ THOMAS J. PRICE
- --------------------------------------------------------------------------------
THOMAS J. PRICE
VP-FINANCE AND CORPORATE
SECRETARY
<PAGE> 11
PAGE 11
THE OILGEAR COMPANY
COMMISSION FILE NUMBER 0-822
EXHIBIT INDEX
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 1997
Exhibit
Number
- -------
27 The Oilgear Company Financial Data Schedule for the six
months ended June 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 SIX MONTHS ENDED
JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> $2,368,452
<SECURITIES> $0
<RECEIVABLES> $16,556,548
<ALLOWANCES> $211,862
<INVENTORY> $27,023,139
<CURRENT-ASSETS> $46,815,911
<PP&E> $59,058,229
<DEPRECIATION> $29,239,214
<TOTAL-ASSETS> $81,159,957
<CURRENT-LIABILITIES> $16,391,975
<BONDS> $20,132,037
$0
$0
<COMMON> $10,493,611
<OTHER-SE> $16,979,485
<TOTAL-LIABILITY-AND-EQUITY> $81,159,957
<SALES> $42,995,102
<TOTAL-REVENUES> $42,995,102
<CGS> $28,451,153
<TOTAL-COSTS> $28,451,153
<OTHER-EXPENSES> $12,243,205
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $795,217
<INCOME-PRETAX> $1,511,563
<INCOME-TAX> $367,256
<INCOME-CONTINUING> $1,103,605
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $1,103,605
<EPS-PRIMARY> $0.87
<EPS-DILUTED> $0.87
</TABLE>
