<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 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 333-48299
SAUER INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3482074
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2800 East 13th Street, Ames, Iowa 50010-8600
- -------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (515) 239-6000
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 / / No /X/
As of March 29, 1998, 24,225,000 shares of Sauer Inc. common stock were
outstanding.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I FINANCIAL STATEMENTS
Item 1. Financial Statements:
Consolidated Statements of Income:
Thirteen Weeks Ended March 30, 1997 and March 29, 1998 3
Consolidated Balance Sheets:
As of December 31, 1997 and March 29, 1998 4
Consolidated Statements of Cash Flows:
Thirteen Weeks Ended March 30, 1997 and March 29, 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 12
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 16
</TABLE>
<PAGE> 3
SAUER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
-------------------------------------
March 30, March 29,
1997 1998
------------ ------------
<S> <C> <C>
NET SALES $ 135,860 $ 152,876
------------ ------------
COSTS AND EXPENSES:
Cost of sales 101,340 118,137
Selling, general and administrative 12,028 13,400
Research and development 5,183 5,750
------------ ------------
Total costs and expenses 118,551 137,287
------------ ------------
Operating income 17,309 15,589
------------ ------------
NONOPERATING INCOME (EXPENSES):
Interest expense, net (1,352) (2,219)
Royalty income 250 250
Other, net (679) (59)
------------ ------------
Nonoperating expenses, net (1,781) (2,028)
------------ ------------
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST 15,528 13,561
PROVISION FOR INCOME TAXES (4,641) (3,931)
------------ ------------
INCOME BEFORE MINORITY INTEREST 10,887 9,630
MINORITY INTEREST IN INCOME OF
CONSOLIDATED COMPANIES (2,993) (3,158)
------------ ------------
Net income $ 7,894 $ 6,472
============ ============
Basic and diluted net income per
common share $ 0.33 $ 0.27
============ ============
Basic and diluted weighted average
common shares outstanding 24,225,000 24,225,000
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 4
SAUER INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share data)
<TABLE>
<CAPTION>
(Unaudited)
December 31, March 29,
ASSETS 1997 1998
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,363 $ 6,606
Accounts receivable, less allowances 77,170 101,587
Inventories 89,031 85,963
Other current assets 9,557 9,867
--------- ---------
Total current assets 183,121 204,023
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, net 191,690 202,110
--------- ---------
OTHER ASSETS
Intangible assets, net 2,964 2,629
Deferred income taxes 8,631 8,247
Other 4,497 3,720
--------- ---------
Total other assets 16,092 14,596
--------- ---------
$ 390,903 $ 420,729
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and bank overdrafts $ 60,278 $ 53,750
Long-term debt due within one year 952 2,104
Accounts payable 46,392 53,688
Accrued salaries and wages 6,385 8,360
Accrued warranty 9,398 8,918
Other accrued liabilities 15,897 24,293
--------- ---------
Total current liabilities 139,302 151,113
--------- ---------
LONG-TERM DEBT 75,198 88,676
--------- ---------
OTHER LIABILITIES:
Long-term pension liability 28,959 28,875
Postretirement benefits other than pensions 11,989 12,678
Deferred income taxes 4,018 4,043
Other 13,337 12,317
--------- ---------
Total other liabilities 58,303 57,913
--------- ---------
MINORITY INTEREST IN NET ASSETS OF
CONSOLIDATED COMPANIES 32,799 33,255
--------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01 per share,
authorized 4,500,000 shares in 1997 and 1998;
none outstanding in 1997 and 1998 -- --
Common stock, par value $.01 per share, authorized
45,000,000 shares in 1997 and 1998; issued 24,900,000
and outstanding 24,225,000 shares in 1997 and 1998 249 249
Additional paid-in capital 74,723 74,723
Cumulative translation adjustment 256 193
Retained earnings 12,773 17,307
Common stock in treasury (at cost),
675,000 shares in 1997 and 1998 (2,700) (2,700)
--------- ---------
Total stockholders' equity 85,301 89,772
--------- ---------
$ 390,903 $ 420,729
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 5
SAUER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
-----------------------------
March 30, March 29,
1997 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,894 $ 6,472
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation and amortization - 5,732 6,924
Minority interest in income of
consolidated companies 2,993 3,158
(Increase) decrease in working capital -
Accounts receivable, net (24,330) (24,774)
Inventories 430 2,422
Accounts payable 7,481 7,607
Accrued liabilities 8,096 9,981
Other (541) 837
-------- --------
Net cash provided by operating activities 7,755 12,627
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES -
Purchases of property, plant and equipment (8,320) (17,410)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on notes
payable and bank overdrafts 2,290 3,711
Net borrowings (repayments) of long-term debt (1,720) 5,184
Cash dividends (1,938) (1,938)
Distributions to minority interest partners -- (2,701)
-------- --------
Net cash provided by (used in)
financing activities (1,368) 4,256
-------- --------
EFFECT OF EXCHANGE RATE CHANGES (608) (230)
-------- --------
CASH AND CASH EQUIVALENTS:
Net decrease during the period (2,541) (757)
Beginning balance 12,029 7,363
-------- --------
Ending balance $ 9,488 $ 6,606
======== ========
Supplemental Cash Flow Disclosures:
Interest paid $ 1,495 $ 1,612
Income taxes paid $ 2,048 $ 423
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 6
SAUER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands except share and per share data)
(Unaudited)
1) Basis of Presentation and Use of Estimates --
The consolidated financial statements of Sauer Inc. and subsidiaries (the
"Company") included herein have been prepared by the Company without
audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in the financial statements, prepared in accordance with
generally accepted accounting principles, have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to make the information presented not
misleading. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses. Actual results could differ from those
estimates. In the opinion of management, the statements reflect all
adjustments, which are of a normal recurring nature, necessary to present
fairly the Company's financial position as of December 31, 1997 and March
29, 1998, and results of operations and cash flows for the thirteen weeks
ended March 30, 1997 and March 29, 1998. These financial statements and
notes are to be read in conjunction with the financial statements and
notes included in the Company's Initial Public Offering prospectus as
filed with the Securities and Exchange Commission dated May 11, 1998.
2) New Accounting Principles --
In the first quarter of 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income."
Total comprehensive income, consisting of net income and foreign currency
translation adjustments, amounted to $4,242 and $6,409 for the
thirteen-week period ended March 30, 1997 and March 29, 1998,
respectively.
3) Basic and Diluted Per Share Data --
Basic and diluted income per common share data have been computed by
dividing net income by the basic and diluted weighted average number of
shares of common stock outstanding.
4) Segment and Geographic Information --
The Company's two reportable segments are defined by geographic region due
to the difference in economic characteristics in which these segments
operate. The activities of each reportable segment consists of the design,
manufacture and sale of hydraulic systems and other related components.
The following table presents the significant items by segment for the
results of operations for each of the thirteen week periods ending March
30, 1997 and March 29, 1998 and balance sheet data as of December 31, 1997
and March 29, 1998, respectively:
<PAGE> 7
<TABLE>
<CAPTION>
All
1997 North America Europe Other Eliminations Total
------------- ------ ------- ------------- -----
<S> <C> <C> <C> <C> <C>
Trade sales $ 82,854 $ 52,878 $ 128 - $135,860
Intersegment sales 8,429 7,985 - (16,414) (1) -
Net income (loss) 6,976 3,402 (653) (1,831) (2) 7,894
Total assets 202,335 184,533 159,223 (155,188) (3) 390,903
1998
Trade sales $ 97,518 $ 55,063 $ 295 - $152,876
Intersegment sales 9,322 10,783 165 (20,270) (1) -
Net income (loss) 6,467 1,652 (497) (1,150) (2) 6,472
Total assets 229,891 195,580 159,093 (163,835) (3) 420,729
</TABLE>
Reconciliations:
(1) Elimination of intersegment sales.
(2) Net income eliminations:
<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Minority interest in German Operating Company $(1,164) $ (937)
Other (667) (213)
------- -------
Total net income eliminations $(1,831) $(1,150)
======= =======
</TABLE>
(3) Total assets eliminations:
<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Investment in subsidiaries $(137,095) $(137,095)
Intersegment receivables (16,230) (25,789)
Intersegment profit in inventory and other (1,863) (951)
--------- ---------
Total assets eliminations $(155,188) $(163,835)
========= =========
</TABLE>
A summary of the Company's net sales by product line is presented below:
<TABLE>
<CAPTION>
Net sales
----------------------------
1997 1998
-------- --------
<S> <C> <C>
Hydrostatic transmissions $105,117 $118,690
Gear pumps and motors 19,846 20,475
Electrohydraulics and others 10,897 13,711
-------- --------
Total $135,860 $152,876
======== ========
</TABLE>
<PAGE> 8
A summary of the Company's net sales and long-lived assets by geographic area is
presented below :
<TABLE>
<CAPTION>
Long-Lived
Net sales (1) Assets (2)
---------------------------- ----------------------------
1997 1998 1997 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
United States $ 79,493 $ 95,931 $106,120 $114,671
Germany 34,630 40,094 26,517 23,257
United Kingdom 15,376 15,547 19,400 20,860
Other countries 6,361 1,304 44,067 45,951
-------- -------- -------- --------
Total $135,860 $152,876 $196,104 $204,739
======== ======== ======== ========
</TABLE>
(1) Net sales are attributed to countries based on location of customer.
(2) Long-lived assets include property, plant and equipment net of accumulated
depreciation, intangible assets net of accumulated amortization and
certain other long-term assets.
No single customer accounted for 10% or more of total consolidated sales
in any period presented.
5) Subsequent Events --
On April 6, 1998, the Board of Directors adopted, and on April 22, 1998,
the Stockholders approved, an amendment to the Certificate of
Incorporation increasing the number of authorized shares of common stock
from 3,000 to 45,000,000 and an increase in the number of shares of
preferred stock from 300 to 4,500,000.
on April 7, 1998, the Board of Directors adopted, and on April 22, 1998,
the Stockholders approved, a 12,500-for-1 common stock split, in the form
of a reclassification and exchange, increasing the number of shares of
common stock issued and outstanding from 1,992 and 1,938, respectively, to
24,900,000 and 24,225,000, respectively, and the par value of a share of
common stock was reduced from $5,000 to $.01. As a result of the reduction
in the par value of the common stock, the amount of the Company's common
stock was reduced by transferring $9,711 from the common stock account to
the additional paid-in-capital account. The financial statements
(including share and per share amounts) have been restated to reflect
these actions.
Effective May 15, 1998, Sauer Inc. completed an initial public offering of
its common stock. The net proceeds to the Company from the sale of this
stock amounted to $48,965. The net proceeds were used to repay $15,000 of
long-term indebtedness, $14,625 to fund the purchase of the real estate
and building for the Company's main facility in Germany, and the balance
was used to repay short-term indebtedness.
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information discussed below in Management's Discussion and Analysis of
Financial Condition and Results of Operations contains statements regarding
matters that are not historical facts, but rather are forward-looking
statements. These statements are based on current financial and economic
conditions and rely heavily on the Company's interpretations of what it
considers key economic assumptions, and involve risks and uncertainties. Actual
future results may differ materially depending on a variety of factors. These
factors, some of which are identified in the discussion accompanying such
forward-looking statements , include, but are not limited to, general economic
conditions, foreign currency movements, pricing and product initiatives and
other actions taken by competitors, labor relations, the Company's execution of
internal performance plans, and other changes to business conditions.
Results of Operations
Net sales - Net sales for first quarter 1998 of $152.9 million increased by
$17.0 million, or 12.5% from first quarter 1997 net sales of $135.9 million. Net
sales increased by 15.0% excluding the impact of currency fluctuation. Sales of
electrohydraulics and other products and hydrostatic transmissions continue to
account for the major portion of the growth in net sales. North American net
sales for the first quarter 1998 of $97.5 million increased by $14.6 million, or
17.7% from first quarter 1997 net sales of $82.9 million. European net sales for
the first quarter 1998 of $55.1 million increased by $2.2 million, or 4.2% from
first quarter 1997 net sales of $52.9 million. European net sales increased by
10.6% excluding the impact of currency fluctuation. Net sales to East Asia for
the first quarter 1998 decreased by $3.1 million, or 55.7% from the first
quarter of 1997, reflecting the impact of the Asian crisis and timing of receipt
of orders for shipment between quarters.
Cost of sales - Cost of sales for first quarter 1998 of $118.1 million were
77.2% of net sales, compared to 74.6% of net sales for first quarter 1997. The
first quarter 1998 cost of sales were adversely impacted by costs relating to
the significant investments being made in manufacturing processes and capacity,
including the move of the Minneapolis electrohydraulics operations to a larger
facility, construction of the Lawrence plant, equipment repair and removal costs
in the German operations, and production start-up costs of a new cam lobe motor
in Slovakia, as well as the decrease in the higher margin East Asia net sales.
With the exception of the costs relating to the Minneapolis and German
operations, the Company expects that cost of sales will continue to be
negatively impacted by the above mentioned items for the remainder of 1998.
Selling, general and administrative expenses - Selling, general and
administrative expenses for first quarter 1998 of $13.4 million increased by
$1.4 million, or 11.6% from first quarter 1997 expenses of $12.0 million. The
increase reflects the investment being made in sales and marketing, information
technology, and training to support the Company's growth plans and investments
being made in manufacturing and research and development.
Research and development expenses - Research and development expenses for first
quarter 1998 of $5.8 million increased by $.6 million, or 11.5% from first
quarter 1997 expenses of $5.2 million.
Nonoperating expenses, net - Net nonoperating expenses for first quarter 1998 of
$2.0 million increased by $.2 million from first quarter 1997 net expenses of
$1.8 million. Net interest expense for first quarter 1998 of $2.2 million
increased by $.9 million from first quarter 1997 net expense of $1.3 million,
reflecting higher bank borrowings from increased capital expenditures and
working capital to support growth in sales. Other, net expenses for the first
quarter 1998 decreased by $.6 million from first quarter 1997 relating to
numerous immaterial items.
<PAGE> 10
Provision for income taxes - Provision for income taxes for first quarter 1998
of $3.9 million decreased by $.7 million from first quarter 1997 expenses of
$4.6 million. The decrease comes from the decrease in net income before income
taxes and minority interest of $2.0 million and the decrease in the effective
tax rate for first quarter 1998 of 29.0% from the first quarter 1997 rate of
29.9%.
Net income - Net income for the first quarter 1998 of $6.5 million decreased by
$1.4 million, or 17.7% from first quarter 1997 net income of $7.9 million. Net
income was impacted by the higher cost of sales, selling, general and
administrative expenses, and research and development expenses, all relating to
the investments being made as detailed above. Net income was also impacted by
the increase in interest expense of $.9 million. North American first quarter
1998 net income of $6.5 million decreased by $.5 million, or 7.1%, from first
quarter 1997 net income of $7.0 million. European first quarter 1998 net income
of $1.7 million decreased by $1.7 million, or 50%, from first quarter 1997 net
income of $3.4 million.
Liquidity and Capital Resources
The Company's principal sources of liquidity have been from internally generated
funds and from borrowings under it's credit facilities.
Net cash provided by operating activities for first quarter 1998 of $12.6
million increased by $4.8 million from first quarter 1997 of $7.8 million. The
increase comes from a reduction in inventories and increases in accounts payable
and accrued liabilities.
Net borrowing increases under short and long term credit facilitates for the
first quarter 1998 were $8.9 million compared to first quarter 1997 of $.6
million.
The cash provided by operating activities and borrowings have funded first
quarter 1998 capital expenditures of $17.4 million, dividends of $1.9 million
and distributions to minority interest partners of $2.7 million.
Capital expenditures for the first quarter 1998 of $17.4 million increased by
$9.1 million from first quarter 1997 capital expenditures of $8.3 million. The
increase relates to investments made in manufacturing equipment and the building
of the manufacturing plant in Lawrence, Kansas.
The Company believes that increased levels of capital expenditures will be
required over the next three years to expand capacity, improve efficiency and
remain competitive. As a result, the Company expects capital expenditures to be
in the range of $150-$230 million during 1998-2000. Capital expenditures will be
applied primarily to the building of a new manufacturing facility in Lawrence,
to the acquisition of the real estate and building of its main facility in
Germany previously leased, to the purchase of manufacturing equipment for each
of its manufacturing plants to increase production capacity for new and existing
products, to increase production efficiencies, to improve product quality and
for replacement purposes. The Lawrence plant will produce medium power
hydrostatic transmissions. The additional plant will free up capacity at the
Company's Ames facility which will be used to expand the production of high
power hydrostatic transmissions. The Company's manufacturing plants in Slovakia
and China, which started production in 1995 and 1997, respectively, are still
under development and will require further investment in production machinery to
increase their operating capacity and efficiency. The Company plans to fund this
increased level of capital expenditures from internally generated funds,
increased borrowings under its credit facilities and funds obtained from the
sale of shares. These sources of funds are expected to be sufficient to support
the planned capital expenditures and the Company's working capital requirements.
Effective May 15, 1998, the Company completed its initial public offering of
common stock. The net proceeds to the Company from the sale amounted to
approximately $49.0 million. The net proceeds were used to repay $15.0 million
of long-term indebtedness, $14.6 million to fund the purchase of the real estate
and building for the Company's main facility in Germany, and the balance was
used to repay short-term indebtedness.
<PAGE> 11
Other Matters
Year 2000 Compliance - The Company is currently in the process of evaluating its
information technology infrastructure for Year 2000 compliance. The Company has
plans in place to upgrade its business systems software in the U.S. and Europe
that will modify the software to make it Year 2000 compliant. The upgrades are
obtained from the Company's software vendors under the normal ongoing
maintenance agreements. The upgrades will be implemented primarily by the
Company's information technology staff, with support from outside contractors as
needed. The cost of the Company's information technology staff to upgrade the
business systems software is not separately accounted for or estimated. The cost
of outside contractors is not expected to be material to the Company's results
of operations. The Company's manufacturing operations make extensive use of
computer controlled machine tools. The Company is currently evaluating Year 2000
compliance impact on these machine tools and has determined they will need to be
upgraded to make them Year 2000 compliant. The Company does not have an estimate
of the cost of upgrading these machine tools. As part of the evaluation the
Company is working with suppliers of the machine tools to understand their
plans. The Company's products are not affected by the Year 2000 issue. The
Company does not currently have any information concerning Year 2000 compliance
status of its suppliers and customers. In the event that any of the Company's
significant suppliers or customers does not successfully and timely achieve Year
2000 compliance, the Company's business or operations could be adversely
affected.
Euro Currency Conversion - The Company has formed a team to evaluate and plan
for the Euro currency conversion. The Company's business systems are
multi-currency functional and the Company's European operations transact
business today in various European currencies. The Company does not have an
estimate of the cost to implement the Euro currency, but does not expect the
cost to have a material effect on the Company's financial condition or results
of operations.
Asian Crisis Impact - Several countries in Asia are experiencing a severe
economic crisis, characterized by reduced economic activity, lack of liquidity,
highly volatile foreign currency exchange and interest rates and unstable stock
markets. The Company has a 60% interest in a joint venture located in Shanghai,
China, which manufactures and sells high power hydrostatic transmissions, and
the Company also has export sales into Asia. The joint venture business and
export sales have been and will continue to be affected by the economic crisis.
With total assets of $10.5 million located in China and total Asian sales for
1997 of $15.5 million, the Company expects the crisis to have some effect on
results of operations, particularly given the higher margins of such sales.
Many of the Company's customers also sell into Asia. Any impact on their sales
could have an impact on the Company's sales. The Company's does not believe
this impact on its sales, either individually or together with the impact of
the Asian crisis on export sales and the joint venture business, will have a
material adverse effect on its financial condition or results of operations,
although there can be no assurance in this regard.
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds.
(d) The following information relates to the registration statement
filed by the Company under the Securities Act of 1933 on Form S-1
(the "Registration Statement").
The Registration Statement was declared effective on May 11, 1998,
and the Commission File No. is 333-48299. The offering commenced on
May 12, 1998. The offering has terminated with all registered
securities being sold. The managing underwriters were Credit Suisse
First Boston Corporation, global lead manager, Smith Barney Inc.,
and Deutsche Morgan Grenfell Inc.
All securities registered were shares of the Company's Common Stock, par
value $.01 per share. The following information relates to securities sold
by the Company and the selling stockholders:
<TABLE>
<CAPTION>
Aggregate
Aggregate Offering
Amount Offering Price Of
Registered Price Amount Sold Amount Sold
---------- ----- ----------- -----------
<S> <C> <C> <C> <C>
Company 3,000,000 shares $ 54,000,000 3,000,000 shares $ 54,000,000
Selling Stockholders 6,000,000 shares $108,000,000 6,000,000 shares $108,000,000
</TABLE>
From the May 11, 1998 effective date of the Registration Statement through
June 25, 1998, the following expenses have been incurred for the Company's
account in connection with the issuance and distribution of the common
stock registered:
<TABLE>
<CAPTION>
Amount
------
<S> <C>
Underwriting Discounts and Commissions $2,700,000
Other Expenses (including accounting, legal, and printing) $2,335,000(1)
----------
Total $5,035,000
==========
</TABLE>
(1)These expenses are based upon reasonable estimates.
None of the above expenses were paid directly or indirectly to directors
or officers of the Company, or to persons owning 10% or more of the
Company's common stock, or to affiliates of the Company.
The net offering proceeds to the issuer after deducting the total expenses
described in the preceding paragraph were $48,965,000. From the May 11,
1998 effective date of the Registration Statement through June 25, 1998,
the net offering proceeds to the Company have been used as follows:
<TABLE>
<CAPTION>
Amount
------
<S> <C>
Repayment of long-term indebtedness $15,000,000
Purchase of real estate, plant, and building for the Company's
main facility in Germany $14,625,000(1)
Reduce short-term indebtedness $19,340,000
-----------
Total $48,965,000
===========
</TABLE>
<PAGE> 13
(1)The real estate and improvements were purchased from, and the proceeds
were paid to, Sauer Hydraulik, which is wholly-owned by Klaus Murmann and
his family. Klaus Murmann is Chairman of the Board of Directors and Chief
Executive Officer and a 10% stockholder of the Company.
All payments other than the payment to Sauer Hydraulik were made to
others.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
By consent of stockholders in lieu of special meeting dated March 13,
1998, the stockholders of the Company approved the Restated Certificate of
Incorporation of the Company which added a class of Preferred Stock and
amended and added provisions regarding corporate governance. The consent
was executed by stockholders owning 90% of the Company's outstanding
capital stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description of Document
--- -----------------------
<S> <C>
3.1 The Restated Certificate of Incorporation of the Company dated March
13, 1998, is attached as Exhibit 3.1 to the Company's Form S-1
Registration Statement filed on March 20, 1998, and is incorporated
herein by reference.
3.2 The Restated Bylaws of the Company dated March 13, 1998, are
attached as Exhibit 3.2 to the Company's Form S-1 Registration
Statement filed on March 20, 1998, and is incorporated herein by
reference.
4 The form of Certificate of the Company's Common Stock, $.01 Par
Value, is attached as Exhibit 4.1 to Amendment No. 1 to the
Company's Form S-1 Registration Statement filed on April 23, 1998,
and is incorporated herein by reference.
10.1(a) The Registration Rights Agreement is attached as Exhibit 10.1(b) to
Amendment No. 1 to the Company's Form S-1 Registration Statement
filed on April 23, 1998, and is incorporated herein by reference.
10.1(b) The form of Indemnification Agreement entered into between the
Company and each of its directors and certain officers is attached
as Exhibit 10.1(c) to Amendment No. 1 to the Company's Form S-1
Registration Statement filed on April 23, 1998, and is incorporated
herein by reference.
10.1(c) The Lease Agreement for the Company's Neumunster, Germany facility
is attached as Exhibit 10.1(e) to Amendment No. 1 to the Company's
Form S-1 Registration Statement filed on April 23, 1998, and is
incorporated herein by reference.
10.1(d) The Lease Agreement for the Company's Dubnica, Slovakia facility is
attached as Exhibit 10.1(f) to Amendment No. 1 to the Company's Form
S-1 Registration Statement filed on April 23, 1998, and is
incorporated herein by reference.
10.1(e) The Lease Agreement for the Company's Swindon, England facility is
attached as Exhibit 10.1(g) to Amendment No. 1 to the Company's Form
S-1 Registration Statement filed on April 23, 1998, and is
incorporated herein by reference.
</TABLE>
<PAGE> 14
<TABLE>
<S> <C>
10.1(f) The Lease Agreement for the Company's Minneapolis, Minnesota
facility is attached as Exhibit 10.1(h) to Amendment No. 1 to the
Company's Form S-1 Registration Statement filed on April 23, 1998,
and is incorporated herein by reference.
10.1(g) The Lease Agreement for the Company's Newtown, Pennsylvania facility
is attached as Exhibit 10.1(i) to Amendment No. 1 to the Company's
Form S-1 Registration Statement filed on April 23, 1998, and is
incorporated herein by reference.
10.1(h) The Lease Agreement for the Company's Shanghai/Pudong, China
facility is attached as Exhibit 10.1(j) to Amendment No. 1 to the
Company's Form S-1 Registration Statement filed on April 23, 1998,
and is incorporated herein by reference.
10.1(i) The Employment Contract with Klaus Murmann is attached as Exhibit
10.1(k) to Amendment No. 1 to the Company's Form S-1 Registration
Statement filed on April 23, 1998, and is incorporated herein by
reference.
10.1(j) The Employment Contract with Tonio Barlage is attached as Exhibit
10.1(l) to Amendment No. 1 to the Company's Form S-1 Registration
Statement filed on April 23, 1998, and is incorporated herein by
reference.
10.1(k) The Employment Contract with Thomas Kittel is attached as Exhibit
10.1(m) to Amendment No. 1 to the Company's Form S-1 Registration
Statement filed on April 23, 1998, and is incorporated herein by
reference.
10.1(l) The Sauer Inc. Phantom Share Plan is attached as Exhibit 10.1(n) to
Amendment No. 1 to the Company's Form S-1 Registration Statement
filed on April 23, 1998, and is incorporated herein by reference.
10.1(m) The Sauer Inc. Bonus Plan is attached as Exhibit 10.1(o) to
Amendment No. 1 to the Company's Form S-1 Registration Statement
filed on April 23, 1998, and is incorporated herein by reference.
10.1(n) The Sauer Inc. Management Incentive Plan is attached as Exhibit
10.1(r) to Amendment No. 1 to the Company's Form S-1 Registration
Statement filed on April 23, 1998, and is incorporated herein by
reference.
10.1(o) The Sauer-Sundstrand Employees' Retirement Plan is attached as
Exhibit 10.1(s) to Amendment No. 1 to the Company's Form S-1
Registration Statement filed on April 23, 1998, and is incorporated
herein by reference.
10.1(p) The Sauer-Sundstrand Company Supplemental Retirement Benefit Plan
for Certain Key Executives is attached as Exhibit 10.1(t) to
Amendment No. 1 to the Company's Form S-1 Registration Statement
filed on April 23, 1998, and is incorporated herein by reference.
10.1(q) The Sauer-Sundstrand Company Supplemental Retirement Benefit Plan
for Certain Key Executives Previously Employed by the Sundstrand
Corporation is attached as Exhibit 10.1(u) to Amendment No. 1 to the
Company's Form S-1 Registration Statement filed on April 23, 1998,
and is incorporated herein by reference.
10.1(r) The Sauer-Sundstrand Employees' Savings & Retirement Plan is
attached as Exhibit 10.1(v) to Amendment No. 1 to the Company's Form
S-1 Registration Statement filed on April 23, 1998, and is
incorporated herein by reference.
</TABLE>
<PAGE> 15
<TABLE>
<S> <C>
10.1(s) The Retirement Benefits Agreement for Klaus Murmann is attached as
Exhibit 10.1(w) to Amendment No. 1 to the Company's Form S-1
Registration Statement filed on April 23, 1998, and is incorporated
herein by reference.
10.1(t) The Retirement Benefits Agreement for Tonio Barlage is attached as
Exhibit 10.1(x) to Amendment No. 1 to the Company's Form S-1
Registration Statement filed on April 23, 1998, and is incorporated
herein by reference.
10.1(u) The European Employees' Pension Plan is attached as Exhibit 10.1(y)
to Amendment No. 1 to the Company's Form S-1 Registration Statement
filed on April 23, 1998, and is incorporated herein by reference.
27.1 Financial data schedule.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the quarter ended
March 29, 1998.
</TABLE>
<PAGE> 16
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.
Sauer Inc.
By /s/ Kenneth D. McCuskey
-------------------------------
Kenneth D. McCuskey, Secretary/Treasurer and
Chief Accounting Officer
Sauer Inc.
June 24, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-29-1998
<EXCHANGE-RATE> 1
<CASH> 6,606
<SECURITIES> 0
<RECEIVABLES> 101,587
<ALLOWANCES> 3,160
<INVENTORY> 85,963
<CURRENT-ASSETS> 204,023
<PP&E> 202,110
<DEPRECIATION> 197,240
<TOTAL-ASSETS> 420,729
<CURRENT-LIABILITIES> 151,113
<BONDS> 0
0
0
<COMMON> 249
<OTHER-SE> 89,523
<TOTAL-LIABILITY-AND-EQUITY> 420,729
<SALES> 152,876
<TOTAL-REVENUES> 152,876
<CGS> 118,137
<TOTAL-COSTS> 137,287
<OTHER-EXPENSES> 2,028
<LOSS-PROVISION> (4)
<INTEREST-EXPENSE> 2,219
<INCOME-PRETAX> 10,403
<INCOME-TAX> 3,931
<INCOME-CONTINUING> 6,472
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,472
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
