<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, 2000
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 000-00822
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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
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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, 2000
Common Stock, $1.00 Par Value 1,981,983
<PAGE> 2
PAGE 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
THE OILGEAR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS MARCH 31, 2000 December 31, 1999
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,269,727 6,698,452
Trade accounts receivable, less allowance for doubtful
receivables of $265,000 and $268,000 in 2000 and 1999, respectively 18,085,157 17,563,376
Costs and estimated earnings in excess of billings on uncompleted contracts 3,317,840 511,564
Inventories 21,773,937 23,232,920
Prepaid expenses 540,929 378,680
Other current assets 915,969 976,355
- ------------------------------------------------------------------------------------------------------------------------
Total current assets 49,903,559 49,361,347
- ------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost
Land 977,210 1,010,165
Buildings 11,114,625 11,196,541
Machinery and equipment 47,754,388 47,233,691
Drawings, patterns and patents 4,323,192 4,249,083
- ------------------------------------------------------------------------------------------------------------------------
64,169,415 63,689,480
Less accumulated depreciation and amortization 37,852,938 37,103,920
- ------------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 26,316,477 26,585,560
Intangible pension asset 240,000 240,000
Other assets 5,112,766 5,178,340
- ------------------------------------------------------------------------------------------------------------------------
$ 81,572,802 81,365,247
- ------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Short-term borrowings $ 1,698 158,244
Current installments of long-term debt 1,923,419 2,014,355
Accounts payable 6,646,933 6,219,199
Billings in excess of costs and estimated earnings on uncompleted contracts 313,594 726,671
Customer deposits 1,180,015 523,717
Accrued compensation and employee benefits 2,758,258 2,612,856
Other accrued expenses and income taxes 3,765,156 3,605,491
- ------------------------------------------------------------------------------------------------------------------------
Total current liabilities 16,589,073 15,860,533
- ------------------------------------------------------------------------------------------------------------------------
Long-term debt, less current installments 18,103,597 18,546,233
Unfunded employee retirement plan costs 790,000 790,000
Unfunded post-retirement health care costs 10,809,000 10,809,000
Other noncurrent liabilities 1,600,626 1,483,998
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities 47,892,296 47,489,764
- ------------------------------------------------------------------------------------------------------------------------
Minority interest in consolidated subsidiaries 855,051 797,472
Shareholders' equity:
Common stock, par value $1 per share, authorized 4,000,000 shares;
issued 1,990,783 shares in 2000 and 1999, respectively 1,990,783 1,990,783
Capital in excess of par value 9,497,906 9,497,906
Retained earnings 24,194,504 23,794,315
- ------------------------------------------------------------------------------------------------------------------------
35,683,193 35,283,004
Deduct:
Treasury stock, 8,800 and 800 shares in 2000 and 1999, respectively,
at cost (72,494) (8,800)
Notes receivable from employees for purchase of Company
common stock (237,288) (223,819)
Accumulated other comprehensive income:
Foreign currency translation adjustment (2,477,956) (1,902,374)
Minimum pension liability adjustment (70,000) (70,000)
- ------------------------------------------------------------------------------------------------------------------------
(2,547,956) (1,972,374)
- ------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 32,825,455 33,078,011
- ------------------------------------------------------------------------------------------------------------------------
$ 81,572,802 81,365,247
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</TABLE>
See accompanying notes to consolidated financial statements.
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PAGE 3
THE OILGEAR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR QUARTER ENDED
MARCH 31,
2000 1999
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $24,464,767 23,209,883
Cost of sales 17,758,718 16,590,849
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Gross profit 6,706,049 6,619,034
Selling, general and
administrative expenses 5,611,024 5,602,920
- -----------------------------------------------------------------------------------------------------
Operating income 1,095,025 1,016,114
Interest expense 341,859 447,893
Other non-operating income, net 31,848 87,044
- -----------------------------------------------------------------------------------------------------
Earnings before income taxes 785,014 655,265
Income tax expense 189,846 152,547
- -----------------------------------------------------------------------------------------------------
Net earnings before minority interest 595,168 502,718
Net earnings from minority interest 56,295 20,606
- -----------------------------------------------------------------------------------------------------
Net earnings $ 538,873 482,112
- ------------------------------------------------------===============================================
Basic earnings per share of common stock $ 0.27 0.25
- ------------------------------------------------------===============================================
Diluted earnings per share of common stock $ 0.27 0.25
- ------------------------------------------------------===============================================
Dividend per share of common stock $ 0.07 0.07
- ------------------------------------------------------===============================================
Basic weighted average outstanding shares 1,981,570 1,966,160
- ------------------------------------------------------===============================================
Diluted weighted average outstanding shares 1,985,321 1,966,440
- ------------------------------------------------------===============================================
</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 QUARTER ENDED
MARCH 31,
2000 1999
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 538,873 482,112
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 971,321 936,330
Common and treasury stock issued in connection with:
Compensation element of sales to employees
and employee savings plan 11,722 41,816
Minority interest in consolidated subsidiaries 56,295 20,606
Change in assets and liabilities:
Trade accounts receivable (780,588) (1,061,534)
Inventories 1,250,143 889,541
Prepaid expenses (174,562) (179,780)
Accounts payable 490,537 (2,358,435)
Customer deposits 674,039 409,391
Accrued compensation 201,305 593,693
Other, net (2,780,977) 313,330
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Net cash provided by operating activities $ 458,108 87,070
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property, plant and equipment (872,020) (490,201)
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Net cash used by investing activities $ (872,020) (490,201)
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net repayments under line of credit agreements (156,236) (21,891)
Repayment of long-term debt 583,870 (405,385)
Proceeds from issuance of long-term debt 93,427 851,787
Restricted cash used for capital expenditures - 227,390
Dividends paid (138,683) (138,290)
Purchase of treasury stock (118,155) (18,769)
Proceeds from sale of common stock - 100,762
Payments received on notes receivable from employees 29,270 35,614
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities $ (874,247) 631,218
- ----------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents (140,566) (10,804)
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Net increase (decrease) in cash and cash equivalents $(1,428,725) 217,283
- ----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents:
At beginning of period 6,698,452 4,058,530
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At end of period $ 5,269,727 4,275,813
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Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 333,192 421,084
----------------------------------------
Income taxes $ 67,374 48,289
========================================
</TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR QUARTER ENDED
March 31,
2000 1999
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net earnings $ 538,873 482,112
Other comprehensive loss:
Foreign currency translation adjustment (575,582) (815,770)
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Total comprehensive loss $ (36,709) (333,658)
- ------------------------------------------------------------------------------========================================
</TABLE>
See accompanying notes to consolidated financial statements.
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PAGE 5
THE OILGEAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Basis of Presentation
These interim financial statements reflect all adjustments which are, in the
opinion of management, necessary for 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, 1999 Annual
Report, a copy of which is available upon request. These notes should be read in
conjunction with the Consolidated Financial Statements and the related notes
thereto in the 1999 Annual Report.
Business Description and Operations
The Company manages its operations in three reportable segments based upon
geographic area. Domestic includes the United States and Canada, European
includes Europe and International includes Asia, Latin America, Australia and
most of Africa.
The individual subsidiaries of the Company operate predominantly in the fluid
power industry. The 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,
electrohydraulic 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 segment information is as follows:
<TABLE>
<CAPTION>
For Quarter Ended
SALES TO UNAFFILIATED CUSTOMERS MARCH 31, 2000 March 31, 1999
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Domestic $ 14,712,357 13,037,669
European 6,550,053 7,646,653
International 3,202,357 2,525,561
- ------------------------------------------------------------------------------------------------------------------------
Total $ 24,464,767 23,209,883
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INTERSEGMENT SALES
- ------------------------------------------------------------------------------------------------------------------------
Domestic $ 2,023,013 2,009,887
European 238,293 625,932
OPERATING INCOME
- ------------------------------------------------------------------------------------------------------------------------
Domestic $ 910,843 837,107
European 373,991 423,245
International 424,909 423,058
Corporate expenses, including R&D (614,718) (667,296)
- ------------------------------------------------------------------------------------------------------------------------
Total $ 1,095,025 1,016,114
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IDENTIFIABLE ASSETS
- ------------------------------------------------------------------------------------------------------------------------
Domestic $ 49,287,817 58,630,975
European 24,569,624 24,885,447
International 6,140,042 4,074,465
Corporate 1,575,319 1,415,390
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Total $ 81,572,802 89,006,277
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
Inventories
Inventories at March 31, 2000 and December 31, 1999 consist of the following:
<TABLE>
<CAPTION>
3-31-2000 12-31-1999
- --------------------------------------------------
<S> <C> <C>
Raw materials $ 2,786,751 2,447,402
Work in process 16,741,279 17,634,558
Finished goods 3,749,907 4,777,960
- --------------------------------------------------
23,277,937 24,859,920
LIFO reserve (1,504,000) (1,627,000)
- --------------------------------------------------
Total $ 21,773,937 23,232,920
==================================================
</TABLE>
Inventories stated on the last-in, first-out basis (LIFO) are valued at
$13,784,000 and $15,642,000 at March 31, 2000 and December 31, 1999,
respectively.
Earnings per share
The following table sets forth the computation of basic and diluted earnings per
common share:
<TABLE>
<CAPTION>
Three Months Ended
March 31, 2000 March 31, 1999
<S> <C> <C>
Net income for basic and diluted earnings per share $ 538,873 $ 482,112
Weighted average common shares outstanding 1,981,570 1,966,160
Dilutive stock options 3,751 280
Dilutive average common shares outstanding 1,985,321 1,966,440
Basic earnings per common share $ 0.27 $ .25
Diluted earnings per common share $ 0.27 $ .25
</TABLE>
Options to purchase 87,630 shares of common stock with a weighted average
exercise price of $10.26 per share were outstanding at March 31, 2000. Options
to purchase 61,742 shares of common stock with a weighted average exercise price
of $12.22 per share were outstanding at March 31, 1999.
Options to purchase 60,630 and 52,687 shares of common stock were not included
in the March 31, 2000 and 1999, respectively, computation of diluted earnings
per share because the options' exercise price was greater than the average
market price of common stock during the three month periods then ended.
<PAGE> 7
Page 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
FINANCIAL CONDITION
The increase of systems work-in-process, mainly in the domestic and
international segments, at March 31, 2000 compared to March 31, 1999 caused the
increase in "Costs and estimated earnings in excess of billings on uncompleted
contracts". The continued weakening of the EURO caused the loss in "Foreign
currency translation adjustment". The Company's management believes the Company
has adequate means for meeting future capital needs.
RESULTS OF OPERATIONS
Sales of $24,465,000 for the first quarter of 2000 were up 5.4% from sales of
$23,210,000 for the same period in 1999. Net earnings were $539,000 or $0.27 per
share for the first quarter of 2000, an 11.8% increase from earnings of $482,000
or $0.25 per share in the first quarter of 1999.
The increase in first quarter sales reflected strong systems sales in the
domestic segment and also in our international operations. Domestic sales were
up 12.8% with particular strength in electrohydraulic systems. Our international
segments sales were up 26.8% with very strong sales from the Mexican market.
The $28.7 million level of orders exceeded sales in the first quarter of 2000,
with backlog reaching $23.1 million at the end of the first quarter, up from
$18.8 million at the end of 1999.
Interest expense has decreased primarily because the amount of borrowings
decreased.
Non-operating income consists of the following:
<TABLE>
<CAPTION>
FOR QUARTER ENDED
March 31,2000 March 31, 1999
<S> <C> <C>
Interest income $ 76,989 60,592
Foreign currency exchange gain (loss) (82,957) 1,063
Miscellaneous, net 37,816 25,389
- --------------------------------------------------------------------
Non-operating income $ 31,848 87,044
</TABLE>
Cautionary Factors
The discussions in this section and elsewhere contain various forward-looking
statements concerning the Company's prospects that are based on the current
expectations and beliefs of management. Forward-looking statements may also be
made by the Company from time to time in other reports and documents as well as
oral presentations. When used in written documents or oral statements, the words
"anticipate", "believe", "estimate", "expect", "objective", and similar
expressions are intended to identify forward-looking statements. The statements
contained herein and such future statements involve or may involve certain
assumptions, risks and uncertainties, many of which are beyond the Company's
control, that could cause the Company's actual results and performance to differ
materially from what is expected. In addition to the assumptions and other
factors referenced specifically in connection with such statements, the
following factors could impact the business and financial prospects of the
Company.
*Factors affecting the Company's international operations, including relevant
foreign currency exchange rates, which can affect the cost to produce the
Company's products or the ability to sell the Company's products in foreign
markets, and the value in United States dollars of sales made in foreign
currencies. Other factors include foreign trade, monetary and fiscal policies;
laws, regulations and other activities of foreign governments, agencies and
similar organizations; and risks associated with having major facilities located
in countries which have historically been less stable than the United States in
several respects, including fiscal and political stability.
*Factors affecting the Company's ability to hire and retain competent
employees, including unionization of the Company's non-union employees and
changes in relationships with the Company's unionized employees.
*The risk of strikes or other labor disputes at those locations that are
unionized which could affect the Company's operations.
*Factors affecting the economy generally, including the financial and business
conditions of the Company's customers and the demand for customers' products and
services that utilize Company products.
*Factors affecting the fair market value of the Company's common stock or other
factors that would negatively impact the funding of the employee benefit plans.
*Factors affecting the Company's financial performance or condition, including
tax legislation, unanticipated restrictions on the Company's ability to
transfer funds from its subsidiaries and changes in applicable accounting
principles or environmental laws and regulations.
*The cost and other effects of claims involving the Company's products and
other legal and administrative proceedings, including the expense of
investigating, litigating and settling any claims.
*Factors affecting the Company's ability to produce products on a competitive
basis, including the availability of raw materials at reasonable prices.
*Unanticipated technological developments that result in competitive
disadvantages and create the potential for impairment of existing assets.
<PAGE> 8
PAGE 7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Companys' market risk exposure has not changed substantially from the year
ended December 31, 1999. See Item 7A Quantitative and Qualitative Disclosures
About Market Risk in the Company's annual report on Form 10-K for the year ended
December 31, 1999.
<PAGE> 9
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> 10
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.
May 12, 2000
THE OILGEAR COMPANY
Registrant
/S/ David A. Zuege
David A. Zuege
President and CEO
(Principal Executive Officer)
/S/ THOMAS J. PRICE
Thomas J. Price
VP-CFO and Secretary
(Principal financial and accounting officer)
<PAGE> 11
PAGE 10
THE OILGEAR COMPANY
COMMISSION FILE NUMBER 000-000822
EXHIBIT INDEX
Quarterly Report on Form 10-Q
For the Quarter Ended March 31, 2000
<TABLE>
<CAPTION>
Exhibit
Number
<S> <C>
27 The Oilgear Company Financial Data Schedule for the quarter
ended March 31, 2000.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS OF THE OILGEAR COMPANY FOR THE QUARTER ENDED
MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 5,269,727
<SECURITIES> 0
<RECEIVABLES> 18,085,157
<ALLOWANCES> 265,000
<INVENTORY> 21,773,937
<CURRENT-ASSETS> 49,903,559
<PP&E> 64,169,415
<DEPRECIATION> 37,852,938
<TOTAL-ASSETS> 81,572,802
<CURRENT-LIABILITIES> 16,589,073
<BONDS> 20,027,016
0
0
<COMMON> 11,488,689
<OTHER-SE> 21,336,766
<TOTAL-LIABILITY-AND-EQUITY> 81,572,802
<SALES> 24,464,767
<TOTAL-REVENUES> 24,464,767
<CGS> 17,758,718
<TOTAL-COSTS> 17,758,718
<OTHER-EXPENSES> 5,611,024
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 341,859
<INCOME-PRETAX> 785,014
<INCOME-TAX> 189,846
<INCOME-CONTINUING> 538,873
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 538,873
<EPS-BASIC> 0.27
<EPS-DILUTED> 0.27
</TABLE>
