<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 March 31, 1998
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 March 31, 1998
- --------------------------------------------------------------------------------
Common Stock, $1.00 Par Value 1,938,835
<PAGE> 2
PART I - FINANCIAL INFORMATION PAGE 2
ITEM 1. FINANCIAL STATEMENTS.
THE OILGEAR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS MARCH 31, 1998 December 31, 1997
============================================================================================================
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,580,685 3,010,929
Trade accounts receivable, less allowance for doubtful receivables
of $190,882 and $211,372 in 1998 and 1997, respectively 21,561,263 18,677,849
Inventories 27,581,343 26,396,825
Prepaid expenses 303,400 444,099
Other current assets 1,416,014 1,106,497
- ------------------------------------------------------------------------------------------------------------
Total current assets 53,442,705 49,636,199
- ------------------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost
Land 1,060,034 1,072,366
Buildings 11,274,923 11,231,982
Machinery and equipment 47,987,660 46,628,669
Drawings, patterns and patents 3,338,069 3,280,865
- ------------------------------------------------------------------------------------------------------------
63,660,686 62,213,882
Less accumulated depreciation and amortization (31,923,128) (30,834,701)
- ------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 31,737,558 31,379,181
Pension intangible 500,000 500,000
Other assets 6,961,661 7,681,978
- ------------------------------------------------------------------------------------------------------------
$ 92,641,924 89,197,358
============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY MARCH 31, 1998 December 31, 1997
============================================================================================================
Current liabilities:
Short-term borrowings $ 4,001,822 4,078,147
Current installments of long-term debt 1,347,172 1,488,301
Accounts payable 8,624,053 8,166,590
Customer deposits 2,957,786 2,396,477
Accrued compensation 2,728,575 2,546,207
Other accrued expenses and income taxes 3,694,862 3,535,224
- ------------------------------------------------------------------------------------------------------------
Total current liabilities 23,354,270 22,210,946
- ------------------------------------------------------------------------------------------------------------
Long-term debt, less current installments 22,573,721 20,791,956
Unfunded employee retirement plan costs 1,700,000 1,700,000
Unfunded postretirement health care costs 10,970,000 10,970,000
Other noncurrent liabilities 1,240,805 1,194,928
- ------------------------------------------------------------------------------------------------------------
Total liabilities 59,838,796 56,867,830
- ------------------------------------------------------------------------------------------------------------
Minority Interest in consolidated subsidiaries 515,921 501,965
Shareholders' equity:
Common stock, par value $1 per share, authorized 4,000,000 shares;
issued 1,938,825 and 1,927,103 shares in 1998 and 1997, respectively 1,938,825 1,927,103
- ------------------------------------------------------------------------------------------------------------
Capital in excess of par value 8,952,342 8,793,822
Retained earnings 23,265,176 22,999,174
34,156,343 33,720,099
Add(deduct):
Notes receivable from employees for purchase of common stock of the Company (250,761) (182,221)
Other comprehensive income:
Equity adjustments from foreign currency translations (898,375) (990,315)
Equity adjustments for pension liability (720,000) (720,000)
- ------------------------------------------------------------------------------------------------------------
(1,618,375) (1,710,315)
- ------------------------------------------------------------------------------------------------------------
Total shareholders' equity 32,287,207 31,827,563
- ------------------------------------------------------------------------------------------------------------
$ 92,641,924 89,197,358
============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
THE OILGEAR COMPANY AND SUBSIDIARIES PAGE 3
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED
MARCH 31
OPERATIONS 1998 1997
=========================================================================
<S> <C> <C>
Net sales $21,971,038 20,308,945
Cost of sales 15,212,085 13,481,720
- -------------------------------------------------------------------------
Gross profit 6,758,953 6,827,225
Selling, general and
administrative expenses 5,891,670 5,890,340
- -------------------------------------------------------------------------
Operating income 867,283 936,885
Interest expense (461,756) (359,653)
Other non-operating income 135,149 41,507
- -------------------------------------------------------------------------
Earnings before income taxes 540,676 618,739
Income taxes 125,000 133,894
- -------------------------------------------------------------------------
Net earnings before minority interest 415,676 484,846
Net earnings from minority interest 13,956 8,470
- -------------------------------------------------------------------------
Net earnings $401,720 476,375
=========================================================================
Basic earnings per share of common stock $0.21 0.25
=========================================================================
Diluted earnings per share of common stock $0.21 0.25
=========================================================================
Dividend per share $0.07 0.07
=========================================================================
Basic weighted average outstanding shares 1,930,028 1,881,092
=========================================================================
Diluted weighted average outstanding shares 1,943,308 1,893,646
=========================================================================
</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 THREE MONTHS ENDED
MARCH 31 MARCH 31
1998 1997
========================================================================================================
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 401,720 476,375
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities:
Depreciation 1,024,567 843,859
Common stock issued in connection with:
Compensation element of sales to employees
and employee savings plan 33,585 43,878
Minority interest in consolidated subsidiary 13,956 8,470
Change in assets and liabilities:
Trade accounts receivable (2,904,984) (1,322,069)
Inventories (1,136,068) (399,927)
Prepaid expenses 135,355 211,943
Accounts payable 442,378 42,967
Customer deposits 573,592 1,145,697
Accrued compensation 194,407 (48,914)
Other, net (165,818) (719,592)
- --------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities (1,387,310) 282,686
- --------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (1,377,774) (965,619)
Investments in subsidiaries 0 (81,000)
- --------------------------------------------------------------------------------------------------------
Net cash used by investing activities (1,377,774) (1,046,619)
- --------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings (repayments) under line-of-credit agreements (76,627) 220
Repayment of long-term debt (208,251) (616,308)
Proceeds from issuance of long-term debt 1,869,710 2,331,680
Use of cash restricted for capital expenditures 794,487 0
Dividends paid (135,718) (125,872)
Proceeds from sale of common stock 47,112 9,963
Payments received on notes receivable from employees 21,005 20,288
- --------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 2,311,717 1,619,971
- --------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 23,123 (197,244)
- --------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (430,244) 658,794
Cash and cash equivalents:
At beginning of period 3,010,929 2,367,684
- --------------------------------------------------------------------------------------------------------
At end of period $ 2,580,685 3,026,478
========================================================================================================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
======================================================================
Interest $ 417,929 254,154
======================================================================
Income taxes $ 40,873 59,756
========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
PAGE 5
THE OILGEAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
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, 1997 Annual Report, a copy of which
is available upon request. These notes should be read in conjunction with the
consolidated financial statements and notes in the 1997 Annual Report.
INVENTORIES
Inventories at March 31, 1998 and December 31, 1997 consist of the following:
<TABLE>
<CAPTION>
3-31-98 12-31-97
======================================================================
<S> <C> <C>
Raw Materials $ 2,799,998 1,740,946
Work in process 22,553,006 21,924,987
Finished goods 4,453,339 4,960,892
======================================================================
29,806,343 28,626,825
======================================================================
LIFO reserve (2,225,000) (2,230,000)
======================================================================
Total $27,581,343 26,396,825
======================================================================
</TABLE>
Inventories stated on the LIFO basis are valued at $18,524,000 at March 31,
1998. If the first-in, first-out (FIFO) method of inventory valuation had been
used for such inventories, the inventories would have been stated approximately
$2,225,000 higher.
EARNINGS PER SHARE
Earnings per share is based upon weighted average outstanding shares.
OTHER COMPREHENSIVE INCOME
Effective January 1, 1998 the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 130, Reporting Comprehensive Income. SFAS No. 130 requires
the reporting of comprehensive income in addition to net income from operations.
Comprehensive income is a more inclusive financial reporting methodology that
includes disclosure of certain financial information that historically has not
been recognized in the calculation of net income.
Comprehensive income (loss) and the components of other comprehensive income
(loss) for the three months ended March 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net earnings $401,720 476,375
Other comprehensive income (loss) -
foreign currency translation 91,940 (712,729)
---------------------
Comprehensive income (loss) 493,660 (236,354)
=====================
</TABLE>
<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 were shipped late in the first quarter of
1998, increasing trade accounts receivable from the balance at December 31,
1997. An increase in orders backlog, from $24 million at December 31, 1997 to
$30.6 million at March 31, 1998, caused inventories and accounts payable to
increase from their balances at December 31, 1997. Working capital increased by
$2.7 million which was partially financed with the $1.7 increase in long-term
debt.
The Company's management believes the Company has adequate means for meeting
future capital needs.
RESULTS OF OPERATIONS
Record-high first quarter orders for 1998 are up slightly from the level of
orders for the first quarter of 1997. Orders for systems were especially strong
in the forging industry and the Company has continued to gain new customers in
the mobile market for piston pumps.
The first quarter net sales of approximately $22.0 million, up from
$21.3 million for the first quarter of 1997, was a record for the Company. The
decrease in gross earnings reflects a change in the product mix and additional
costs incurred from expanding the Company's piston pump production to meet
increased customer demand.
Interest expense has increased by approximately $102,000 because interest
bearing debt increased.
Non-operating income (expense) consists of the following:
<TABLE>
<CAPTION>
3-31-98 3-31-97
- --------------------------------------------------------------
<S> <C> <C>
Interest income $ 55,719 56,798
Foreign currency exchange gain (loss) 50,994 (35,686)
Miscellaneous, net 28,436 20,395
==============================================================
135,149 41,507
==============================================================
</TABLE>
<PAGE> 7
PAGE 7
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
<PAGE> 8
PAGE 8
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
(C) On February 28, 1998, the Company sold an aggregate of 6,800
unregistered shares of its Common Stock ("Shares") pursuant to the Company's
Key Employee Stock Purchase Plan, as amended and restated September 6, 1990
(the "Plan"). The Shares were sold to certain officers and other key employees
in an exempt offering pursuant to Section 4(2) of the Securities Act of 1933,
as amended. The purchase price paid for each Share was $14.67. In payment,
thereof, each purchaser delivered two promissory notes to the Company bearing
annual interest at a rate of 5%. One of the notes, for one-half of the
aggregate purchase price, is payable in three equal annual installments due on
the 2nd, 3rd and 4th February 28th after the date of purchase. The other note,
for the other half of the aggregate, will be forgiven if none of the Shares has
been resold and the purchaser is still in the employ of the Company on the due
dates, which are the 4th, 5th and 6th February 28th after the date of purchase.
<PAGE> 9
PAGE 9
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> 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.
5-14-98 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 March 31, 1998
Exhibit
Number
- --------
27(a) The Oilgear Company Financial Data Schedule for the three months ended
March 31, 1998
27(b) The Oilgear Company Restated Financial Data Schedule for the three
months ended March 31, 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 THREE MONTHS ENDED
MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,580,685
<SECURITIES> 0
<RECEIVABLES> 21,752,145
<ALLOWANCES> 190,882
<INVENTORY> 27,581,343
<CURRENT-ASSETS> 53,442,705
<PP&E> 63,660,686
<DEPRECIATION> 31,923,128
<TOTAL-ASSETS> 92,641,924
<CURRENT-LIABILITIES> 23,354,270
<BONDS> 23,920,893
0
0
<COMMON> 10,891,167
<OTHER-SE> 21,396,040
<TOTAL-LIABILITY-AND-EQUITY> 92,641,924
<SALES> 21,971,038
<TOTAL-REVENUES> 21,971,038
<CGS> 15,212,085
<TOTAL-COSTS> 15,212,085
<OTHER-EXPENSES> 5,891,670
<LOSS-PROVISION> 43,738
<INTEREST-EXPENSE> 461,756
<INCOME-PRETAX> 540,676
<INCOME-TAX> 125,000
<INCOME-CONTINUING> 401,720
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 401,720
<EPS-PRIMARY> 0.21<F1>
<EPS-DILUTED> 0.21<F1>
<FN>
<F1> Reflects the three-for-two stock split declared on December
10, 1997 and paid on January 20, 1998. Unless otherwise indicated, prior
Financial Data Schedules have not been restated to reflect the stock split.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE UNAUDITED FINANCIAL STATEMENTS OF THE OILGEAR COMPANY FOR THE THREE
MONTHS ENDED MARCH 31, 1997, AS RESTATED TO REFLECT THE ADOPTION OF SFAS NO.
128, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,026,478
<SECURITIES> 0
<RECEIVABLES> 16,034,253
<ALLOWANCES> 213,660
<INVENTORY> 26,275,928
<CURRENT-ASSETS> 46,057,585
<PP&E> 57,245,429
<DEPRECIATION> 28,289,289
<TOTAL-ASSETS> 79,529,718
<CURRENT-LIABILITIES> 16,131,194
<BONDS> 19,946,780
0
0
<COMMON> 10,442,863
<OTHER-SE> 16,586,178
<TOTAL-LIABILITY-AND-EQUITY> 79,529,718
<SALES> 20,308,945
<TOTAL-REVENUES> 20,308,945
<CGS> 13,481,721
<TOTAL-COSTS> 13,481,721
<OTHER-EXPENSES> 5,890,340
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 359,652
<INCOME-PRETAX> 618,739
<INCOME-TAX> 133,894
<INCOME-CONTINUING> 476,375
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 476,375
<EPS-PRIMARY> 0.25<F1>
<EPS-DILUTED> 0.25<F1>
<FN>
<F1>Restated for the three-for-two stock split declared on December 10, 1997 and
paid on January 20, 1998. Unless otherwise indicated, prior Financial Data
Schedules have not been restated to reflect the stock split.
</FN>
</TABLE>
