<PAGE> 1
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the Period Ended AUGUST 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 0 -25068.
HASKEL INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
CALIFORNIA 95-4107640
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
100 EAST GRAHAM PLACE
BURBANK, CALIFORNIA 91502
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(818) 843 - 4000
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, address and former fiscal year, if changed since last report)
Indicated 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 periods 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 [ ].
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Indicated by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by the court. Yes [ ]. No [ ].
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
AS OF SEPTEMBER 30, 1998 THE REGISTRANT HAD 4,759,205 SHARES OF CLASS A COMMON
STOCK, AND 40,000 SHARES OF CLASS B COMMON STOCK OUTSTANDING.
<PAGE> 2
INDEX
HASKEL INTERNATIONAL, INC.
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets - May 30, 1998 and August 29, 1998 ......................... 3
Consolidated income statements - Three months ended August 29, 1997 and 1998 ........... 5
Consolidated statements of cash flows - Three months ended August 29, 1997 and 1998 .... 6
Notes to consolidated financial statements - August 29, 1998 ........................... 7
Item 2. Management's discussion and analysis of financial condition and results of operations 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K .................................................... 12
</TABLE>
2
<PAGE> 3
HASKEL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
May 30, August 29,
1998 1998
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,710,000 $ 11,134,000
Accounts receivable, net 15,333,000 11,400,000
Inventories 10,450,000 10,013,000
Prepaid expenses and other current assets 630,000 767,000
Deferred income taxes 1,004,000 1,002,000
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TOTAL CURRENT ASSETS 37,127,000 34,316,000
PROPERTY, PLANT & EQUIPMENT, Net 5,315,000 5,160,000
GOODWILL, Net 1,474,000 1,232,000
DEFERRED INCOME TAXES 2,167,000 2,138,000
OTHER ASSETS 209,000 404,000
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TOTAL $ 46,292,000 $ 43,250,000
============= =============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
HASKEL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
May 30, August 29,
1998 1998
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<S> <C> <C>
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 960,000 $ 954,000
Accounts payable 7,007,000 3,457,000
Dividends payable 331,000 336,000
Accrued liabilities 2,785,000 2,223,000
Income taxes payable 584,000 1,097,000
------------- -------------
TOTAL CURRENT LIABILITIES 11,667,000 8,067,000
LONG-TERM DEBT 466,000 242,000
OTHER ACCRUED LIABILITIES 2,278,000 2,311,000
COMMITMENTS & CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred Stock: 2,000,000 shares authorized;
none issued and outstanding
Common Stock:
Class A, without par value; 20,000,000 shares
authorized; 4,759,205 issued and outstanding
at May 30, 1998 and August 29, 1998 13,922,000 13,922,000
Class B, without par value; 40,000 shares
authorized, issued and outstanding at
May 30, 1998 and August 29, 1998 19,000 19,000
Retained Earnings 18,144,000 18,722,000
Cumulative foreign currency translation adjustment (204,000) (33,000)
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TOTAL SHAREHOLDERS' EQUITY 31,881,000 32,630,000
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TOTAL $ 46,292,000 $ 43,250,000
============= =============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
HASKEL INTERNATIONAL, INC.
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
August 29, August 29,
1997 1998
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<S> <C> <C>
SALES $ 12,518,000 $ 12,084,000
COST OF SALES 6,547,000 6,373,000
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GROSS PROFIT 5,971,000 5,711,000
EXPENSES:
Selling 1,952,000 2,063,000
General and administrative 1,936,000 1,897,000
Engineering design, research and development 278,000 335,000
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Total 4,166,000 4,295,000
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OPERATING INCOME 1,805,000 1,416,000
OTHER INCOME 87,000 116,000
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INCOME BEFORE INCOME TAXES 1,892,000 1,532,000
PROVISION FOR INCOME TAXES 777,000 613,000
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NET INCOME $ 1,115,000 $ 919,000
============= =============
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
HASKEL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
August 29, August 29,
1997 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by continuing operations $ 264,000 $ 1,965,000
Net cash used in discontinued operations (160,000)
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Net cash provided by operating activities 104,000 1,965,000
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (603,000) (165,000)
Proceeds from sale of property 27,000
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Net cash used in investing activities (603,000) (138,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (217,000) (230,000)
Proceeds from issuance of common stock 48,000
Dividends declared (333,000) (341,000)
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Net cash used in financing activities (502,000) (571,000)
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EFFECT OF EXCHANGE RATE ON
CASH AND CASH EQUIVALENTS (364,000) 168,000
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NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (1,365,000) 1,424,000
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 8,490,000 9,710,000
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CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 7,125,000 $ 11,134,000
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 46,000 $ 29,000
============= =============
Income taxes $ 73,000 $ 15,000
============= =============
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 7
PART I. FINANCIAL INFORMATION
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (which
comprise only normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the period ended August
29, 1998 are not necessarily indicative of the results that may be expected for
the year ending May 29, 1999. For further information, refer to the consolidated
financial statements and notes thereto for the year ended May 30, 1998.
NOTE B - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
May 30, August 29,
1998 1998
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<S> <C> <C>
Raw Materials $ 3,154,000 $ 2,879,000
Work in Process 1,128,000 1,176,000
Finished Products 6,168,000 5,958,000
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$ 10,450,000 $ 10,013,000
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</TABLE>
NOTE C - EARNINGS PER SHARE
The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
128, Earnings Per Share, which replaces the presentation of "primary" earnings
per share with "basic" earnings per share and the presentation of "fully
diluted" earnings per share with "diluted" earnings per share. All previously
reported earnings per share amounts have been restated based on the provisions
of the new standard. Basic earnings per share are based upon the weighted
average number of common shares outstanding. Diluted earnings per share amounts
are based upon the weighted average number of common and common equivalent
shares for each period presented. Common equivalent shares include stock options
assuming conversion under the treasury stock method.
7
<PAGE> 8
PART I. FINANCIAL INFORMATION
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
NOTE C - EARNINGS PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------
August 29, August 29,
1997 1998
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<S> <C> <C>
BASIC AND DILUTED EARNINGS
Net income $ 1,115,000 $ 919,000
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COMPUTATION OF BASIC AND DILUTED SHARES
Basic Shares
Weighted Average Shares 4,791,023 4,799,205
Effect of Dilutive Options 319,758 130,113
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Diluted Shares
Weighted average shares plus assumed conversion
of dilutive securities 5,110,781 4,929,318
============= =============
EARNINGS PER SHARE
Basic EPS
Net income $ 0.23 $ 0.19
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Diluted EPS
Net income $ 0.22 $ 0.19
============= =============
</TABLE>
NOTE D - BUSINESS SEGMENTS
Haskel International, Inc. operates predominantly in one industry segment. The
Company designs and manufactures pneumatically and hydraulically driven,
high-pressure, low-flow, fixed displacement, reciprocating, liquid pumps, gas
boosters, chemical injection pumps and air pressure amplifiers. The Company also
manufactures high-pressure valves, metering valves, regulators, air operated
ventilation equipment and accessories, much of which complement the primary
products. In addition, the Company designs and manufactures integrated, or value
added systems that include the Company's products, as well as those of
third-parties. The Company sells its products through a network of industrial
distributors, direct salespersons and manufacturer's representatives. The
principal markets for the Company's products are North and South America,
Europe, and Asia-Pacific.
Geographic information for the three months ended August 29, 1998 and 1997 is
presented in the following tables. Transfers between geographic areas are
accounted for at cost plus a profit margin. Income and expenses not allocated to
geographic areas include investment income, interest expense, and corporate
administrative costs.
Identifiable assets are those assets used exclusively in the operations in each
geographic area. Corporate assets are principally cash, cash equivalents and
deferred tax assets.
8
<PAGE> 9
PART I. FINANCIAL INFORMATION
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
NOTE D - BUSINESS SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
Transfers
between Sales to
Net geographic unaffiliated
sales areas customers
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<S> <C> <C> <C>
Three Months Ended August 29, 1998
North and South America $ 6,866,000 $ 2,225,000 $ 4,641,000
Europe 6,080,000 -- 6,080,000
Asia-Pacific 1,363,000 1,363,000
Corporate
Eliminations (2,225,000) (2,225,000)
------------- ------------- -------------
$ 12,084,000 $ -- $ 12,084,000
============= ============= =============
Three Months Ended August 29, 1997
North and South America $ 8,086,000 $ 2,696,000 $ 5,390,000
Europe 5,876,000 129,000 5,747,000
Asia-Pacific 1,381,000 1,381,000
Corporate
Eliminations (2,825,000) (2,825,000)
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$ 12,518,000 $ -- $ 12,518,000
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Operating Identifiable
income assets
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<S> <C> <C>
Three Months Ended August 29, 1998
North and South America $ 829,000 $ 27,142,000
Europe 798,000 20,776,000
Asia-Pacific 276,000 732,000
Corporate (487,000) 8,248,000
Eliminations (13,648,000)
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$ 1,416,000 $ 43,250,000
============= =============
Three Months Ended August 29, 1997
North and South America $ 1,325,000 $ 23,323,000
Europe 834,000 16,559,000
Asia-Pacific 236,000 176,000
Corporate (590,000) 11,228,000
Eliminations (11,146,000)
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$ 1,805,000 $ 40,140,000
============= =============
</TABLE>
9
<PAGE> 10
HASKEL INTERNATIONAL, INC.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Report may contain forward-looking statements that involve risks and
uncertainties. The Company's actual results and timing of certain events could
differ materially from those discussed in any forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, the integration of acquired operations, management of growth and
other factors.
RESULTS OF OPERATIONS
Sales for the quarter ended August 29, 1998 decreased $434,000, or 3.5%, to
$12,084,000, as compared with sales of $12,518,000 for the same period in the
prior year. Sales for the quarter ended August 29, 1997 included $678,000 in
third-party distribution sales in the United States. Distribution of these
products was eliminated in the beginning of fiscal year 1998 in order to better
concentrate sales and marketing efforts in this region on the Company's core
business products and systems. Excluding sales related to these third-party
products, sales increased $244,000, or 2%, in the first quarter of fiscal year
1999 as compared to the first quarter of fiscal year 1998. This increase was the
result of acquisitions made during fiscal year 1998 in Europe and Australia
partially offset by a decrease in sales in Asia due to slower economic
conditions in that region. The slowdown in the Asian economies continues to
affect the Company's order levels, and this trend is anticipated to continue
over an undetermined period of time.
Cost of sales decreased $174,000, or 2.7%, in the quarter ended August 29, 1998
as compared to the same period in the prior year. The change in cost of sales
was the direct result of decreased sales volumes. As a percentage of sales, cost
of sales remained relatively constant resulting in gross margins in excess of
47% for both quarters presented.
Selling, general and administrative, and engineering ("operating expenses")
increased $129,000, or 3.1%, for the first quarter ended August 29, 1998
compared to the same period in fiscal year 1998. Operating expenses for the
quarter ended August 29, 1998 included approximately $246,000 attributable to
new business acquired and started as the Company continues to expand its
operations globally. Additionally, there were increased research and development
expenditures in the first quarter of fiscal year 1999 as the Company continues
to focus on increasing new product development efforts.
Net income decreased $196,000, or 17.6%, to $919,000 for the first quarter ended
August 29, 1998 compared to $1,115,000 for the same period in the prior period.
This decrease in earnings is directly related to the sales volume decline for
the period as well as increased costs related to newly acquired or opened
operations and new product development.
10
<PAGE> 11
HASKEL INTERNATIONAL, INC.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
LIQUIDITY AND SOURCES OF CAPITAL
For the three months ended August 29, 1998, net cash provided by operating
activities included $1,965,000 from continuing operations as compared to
$264,000 for the same period in the prior year. The increase in cash provided by
operating activities was principally due to the collection of accounts
receivable balances in the first quarter of fiscal year 1999. Net cash of
$160,000 was used in discontinued operations in the first three months of fiscal
year 1998.
During the quarters ended August 29, 1998 and 1997, cash used for investing
activities consisted mainly of capital expenditures. Cash used in financing
activities for the quarters ended August 29, 1998 and 1997 consists principally
of payments on long-term debt and dividends paid to shareholders.
To insure the availability of funds to meet its various needs, the Company has a
comprehensive credit facility with its bank. The credit facility includes a
$5,000,000 revolving line of credit; a $10,000,000 line of credit available for
acquisitions or capital expenditures; and a $978,000 term loan. At August 29,
1998, the Company had no outstanding balances under the revolving credit or
acquisition lines. As of August 29, 1998, the balance of the term debt was
$978,000, which bears interest at the LIBOR rate plus 1.50 % (7.19% at August
29, 1998.) Subsequent to August 29, 1998, the Company paid down the balance of
the term debt.
As of August 29, 1998, the Company had $11,134,000 in cash and cash equivalents,
and working capital of $26,249,000, with a ratio of current assets to current
liabilities of approximately 4.3 : 1. This compares with cash and cash
equivalents of $9,710,000, and working capital of $25,460,000, with a ratio of
current assets to current liabilities of 3.2 : 1 as of May 30, 1998. The Company
believes it has adequate resources to achieve its operating goals for at least
the next 12 month period.
11
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HASKEL INTERNATIONAL, INC.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K):
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the fiscal quarter covered by this
report on Form 10-Q.
12
<PAGE> 13
HASKEL INTERNATIONAL, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HASKEL INTERNATIONAL, INC.
(REGISTRANT)
DATE 10-5-98 /s/ R. MALCOLM GREAVES
------------------------------- -------------------------------
R. Malcolm Greaves
President & Chief Executive Officer
DATE 10-5-98 /s/ PATRICIA A. WEHR
------------------------------- -------------------------------
Patricia A. Wehr
Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HASKEL
INTERNATIONAL INC'S CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF
INCOME AND CONSOLIDATED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-29-1999
<PERIOD-END> AUG-29-1998
<CASH> 11,134
<SECURITIES> 0
<RECEIVABLES> 11,806
<ALLOWANCES> 406
<INVENTORY> 10,013
<CURRENT-ASSETS> 34,316
<PP&E> 11,729
<DEPRECIATION> 6,569
<TOTAL-ASSETS> 43,250
<CURRENT-LIABILITIES> 8,067
<BONDS> 0
0
0
<COMMON> 13,941
<OTHER-SE> (33)
<TOTAL-LIABILITY-AND-EQUITY> 43,250
<SALES> 12,084
<TOTAL-REVENUES> 12,084
<CGS> 6,373
<TOTAL-COSTS> 6,373
<OTHER-EXPENSES> 4,295<F1>
<LOSS-PROVISION> 49
<INTEREST-EXPENSE> 29
<INCOME-PRETAX> 1,532
<INCOME-TAX> 613
<INCOME-CONTINUING> 919
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 919
<EPS-PRIMARY> .19<F2>
<EPS-DILUTED> .19
<FN>
<F1>OTHER EXPENSES ARE COMPRISED OF SELLING, GENERAL ADMINISTRATIVE, ENGINEERING
DESIGN, RESEARCH AND DEVELOPMENT.
<F2>FOR THE PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
