<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 FEBRUARY 27, 1999
-----------------
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.
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-4107640
(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
----------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
--------------
(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 APRIL 7, 1999 THE REGISTRANT HAD 4,793,705 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> <C>
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets - May 30, 1998 and February 27, 1999 .................... 3
Consolidated income statements - Three months ended February 28, 1998 and
February 27, 1999; Nine months ended February 28, 1998 and February 27, 1999 ....... 5
Consolidated statements of cash flows - Nine months ended February 28, 1998 and
February 27, 1999 ................................................................. 6
Notes to consolidated financial statements - February 27, 1999 ..................... 7
Item 2. Management's discussion and analysis of financial condition and
results of operations ................................................................. 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk ......................... 14
PART II. OTHER INFORMATION
Item 5. Other Matters ...................................................................... 15
Item 6. Exhibits and Reports on Form 8-K ................................................... 15
</TABLE>
2
<PAGE> 3
HASKEL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
May 30, February 27,
1998 1999
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,710,000 $11,830,000
Accounts receivable, net 15,333,000 10,097,000
Inventories 10,450,000 9,420,000
Prepaid expenses and other current assets 630,000 624,000
Deferred income taxes 1,004,000 1,001,000
----------- -----------
TOTAL CURRENT ASSETS 37,127,000 32,972,000
PROPERTY, PLANT & EQUIPMENT, Net 5,315,000 5,202,000
GOODWILL, Net 1,474,000 1,282,000
DEFERRED INCOME TAXES 2,167,000 2,145,000
OTHER ASSETS 209,000 376,000
----------- -----------
TOTAL $46,292,000 $41,977,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
HASKEL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
May 30, February 27,
1998 1999
------------ ------------
<S> <C> <C>
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 960,000 $ 176,000
Accounts payable 7,007,000 3,462,000
Dividends payable 331,000 --
Accrued liabilities 2,785,000 2,756,000
Income taxes payable 584,000 154,000
------------ ------------
TOTAL CURRENT LIABILITIES 11,667,000 6,548,000
LONG-TERM DEBT 466,000 --
OTHER ACCRUED LIABILITIES 2,278,000 2,304,000
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 and
4,772,205 issued and outstanding at May 30, 1998 and
February 27, 1999 13,922,000 14,019,000
Class B, without par value; 40,000 shares
authorized, issued and outstanding at
May 30, 1998 and February 27, 1999 19,000 19,000
Retained Earnings 18,144,000 19,472,000
Cumulative foreign currency translation adjustment (204,000) (385,000)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 31,881,000 33,125,000
------------ ------------
TOTAL $ 46,292,000 $ 41,977,000
============ ============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
HASKEL INTERNATIONAL, INC.
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
February 28, February 27, February 28, February 27,
1998 1999 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
SALES $ 14,175,000 $ 11,358,000 $ 39,025,000 $ 36,338,000
COST OF SALES 8,086,000 6,168,000 20,838,000 19,409,000
------------ ------------ ------------ ------------
GROSS PROFIT 6,089,000 5,190,000 18,187,000 16,929,000
EXPENSES:
Selling 1,927,000 2,010,000 6,063,000 6,296,000
General and administrative 1,961,000 1,823,000 5,625,000 5,695,000
Engineering design, research and development 309,000 181,000 936,000 790,000
Restructuring costs 1,269,000 1,269,000
------------ ------------ ------------ ------------
Total 4,197,000 5,284,000 12,624,000 14,050,000
------------ ------------ ------------ ------------
OPERATING INCOME/(LOSS) 1,892,000 (94,000) 5,563,000 2,879,000
OTHER INCOME 73,000 191,000 204,000 496,000
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 1,965,000 97,000 5,767,000 3,375,000
PROVISION FOR INCOME TAXES 776,000 69,000 2,233,000 1,371,000
------------ ------------ ------------ ------------
INCOME FROM CONTINUING OPERATIONS 1,189,000 28,000 3,534,000 2,004,000
DISCONTINUED OPERATIONS:
Gain on disposal of segment 346,000
------------ ------------ ------------ ------------
NET INCOME $ 1,189,000 $ 28,000 $ 3,880,000 $ 2,004,000
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
HASKEL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
February 28, February 27,
1998 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by continuing operations $ 2,479,000 $ 4,840,000
Net cash used in discontinued operations (348,000)
------------ ------------
Net cash provided by operating activities 2,131,000 4,840,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,167,000) (823,000)
Proceeds from sale of property 279,000 69,000
Purchase of subsidiary (net of cash acquired) (13,000) --
------------ ------------
Net cash used in investing activities (901,000) (754,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 97,000
Principal payments on long-term debt (750,000) (1,347,000)
Proceeds from issuance of common stock 188,000 97,000
Dividends declared (1,001,000) (676,000)
------------ ------------
Net cash used in financing activities (1,563,000) (1,829,000)
------------ ------------
EFFECT OF EXCHANGE RATE ON
CASH AND CASH EQUIVALENTS (159,000) (137,000)
------------ ------------
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (492,000) 2,120,000
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 8,490,000 9,710,000
------------ ------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 7,998,000 $ 11,830,000
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 119,000 $ 44,000
============ ============
Income taxes $ 1,750,000 $ 1,724,000
============ ============
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
In September 1997, the Company sold its electronic products business in
exchange for 35,000 shares of the Company's stock (valued at $534,000) and
a note receivable in the amount of $159,000.
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 February
27, 1999 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, February 27,
1998 1999
----------- -----------
<S> <C> <C>
Raw Materials $ 3,154,000 $ 2,631,000
Work in Process 1,128,000 1,570,000
Finished Products 6,168,000 5,219,000
=========== ===========
$10,450,000 $ 9,420,000
=========== ===========
</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 Nine Months Ended
------------------------------ ----------------------------
February 28, February 27, February 28, February 27,
1998 1999 1998 1999
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
BASIC AND DILUTED EARNINGS
Income from continuing operations $1,189,000 $ 28,000 $3,534,000 $2,004,000
Income from disposal of segment -- 346,000
---------- ------------- ---------- ----------
Net income $1,189,000 $ 28,000 $3,880,000 $2,004,000
========== ============= ========== ==========
COMPUTATION OF BASIC AND DILUTED SHARES
Basic Shares
Weighted Average Shares 4,734,277 4,802,260 4,737,817 4,800,223
Effect of Dilutive Options 245,781 186,176 298,577 147,300
---------- ------------- ---------- ----------
Diluted Shares
Weighted average shares plus assumed conversion
of dilutive securities 4,980,058 4,988,436 5,036,394 4,947,523
========== ============= ========== ==========
EARNINGS PER SHARE
Basic EPS
Income from continuing operations $ 0.25 $ 0.01 $ 0.74 $ 0.42
Income from disposal of segment -- 0.07
---------- ------------- ---------- ----------
Net income $ 0.25 $ 0.01 $ 0.81 $ 0.42
========== ============= ========== ==========
Diluted EPS
Income from continuing operations $ 0.24 $ 0.01 $ 0.70 $ 0.41
Income from disposal of segment -- 0.07
---------- ------------- ---------- ----------
Net income $ 0.24 $ 0.01 $ 0.77 $ 0.41
========== ============= ========== ==========
</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 and nine months ended February 27, 1999 and
February 28, 1998 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.
8
<PAGE> 9
PART I. FINANCIAL INFORMATION
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
NOTE D - BUSINESS SEGMENTS (CONTINUED)
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.
<TABLE>
<CAPTION>
Transfers
between Sales to
Net geographic unaffiliated Operating Identifiable
sales areas customers income assets
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Nine Months Ended February 27, 1999
North and South America $ 19,294,000 $ 6,438,000 $ 12,856,000 $ 2,131,000 $ 27,464,000
Europe 19,201,000 351,000 18,850,000 1,134,000 20,668,000
Asia-Pacific 4,648,000 16,000 4,632,000 1,041,000 1,082,000
Corporate (1,427,000) 9,491,000
Eliminations (6,805,000) (6,805,000) (16,728,000)
------------ ------------ ------------ ------------ ------------
$ 36,338,000 $ $ 36,338,000 $ 2,879,000 $ 41,977,000
============ ============ ============ ============ ============
Nine Months Ended February 28, 1998
North and South America $ 23,447,000 $ 7,932,000 $ 15,515,000 $ 3,543,000 $ 25,211,000
Europe 18,845,000 272,000 18,573,000 2,631,000 18,386,000
Asia-Pacific 4,937,000 4,937,000 950,000 160,000
Corporate (1,561,000) 10,964,000
Eliminations (8,204,000) (8,204,000) (13,195,000)
============ ============ ============ ============ ============
$ 39,025,000 $ $ 39,025,000 $ 5,563,000 $ 41,526,000
============ ============ ============ ============ ============
Quarter Ended February 27, 1999
North and South America $ 6,139,000 $ 2,098,000 $ 4,041,000 $ 723,000 $ 27,464,000
Europe 5,808,000 16,000 5,792,000 $ (692,000) 20,668,000
Asia-Pacific 1,541,000 16,000 1,525,000 $ 328,000 1,082,000
Corporate $ (453,000) 9,491,000
Eliminations (2,130,000) (2,130,000) (16,728,000)
============ ============ ============ ============ ============
$ 11,358,000 $ $ 11,358,000 $ (94,000) $ 41,977,000
============ ============ ============ ============ ============
Quarter Ended February 28, 1998
North and South America $ 7,380,000 $ 2,721,000 $ 4,659,000 $ 918,000 $ 25,211,000
Europe 7,751,000 3,000 7,748,000 1,104,000 18,386,000
Asia-Pacific 1,768,000 1,768,000 330,000 160,000
Corporate (460,000) 10,964,000
Eliminations (2,724,000) (2,724,000) (13,195,000)
============ ============ ============ ============ ============
$ 14,175,000 $ $ 14,175,000 $ 1,892,000 $ 41,526,000
============ ============ ============ ============ ============
</TABLE>
9
<PAGE> 10
PART I. FINANCIAL INFORMATION
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
NOTE E - RESTRUCTURING COSTS
During the quarter ended February 27, 1999, the Company implemented a plan to
consolidate the operations of its Manchester, England and Sunderland, England
facilities and to restructure its outside domestic sales force, resulting in a
charge of $1,269,000 for restructuring. The anticipated result of such plan is
to utilize excess capacity at the Sunderland facility and to reduce overhead
costs. The restructuring costs consist of approximately $350,000 in severance
payments for 33 employees; $408,000 in facility closing costs; $455,000 for the
write-off of impaired assets; and $56,000 in other costs.
As of February 27, 1999, approximately $1,169,000 in restructuring costs have
been included in accrued liabilities; of which $925,000 is expected to be paid
or incurred within the next six months, with the remaining $244,000 relating to
lease payments to be made over the next 8 years.
10
<PAGE> 11
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, economic conditions, the integration of acquired operations,
management of growth and other factors.
RESULTS OF OPERATIONS
Sales for the nine months ended February 27, 1999 were $36,338,000 as compared
with sales of $39,025,000 for the same period in the prior year. Sales for the
quarter ended February 27, 1999 were $11,358,000, as compared with sales of
$14,175,000 for the quarter ended February 28, 1998. Sales for the nine months
ended February 28, 1998 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.
Additionally, sales for the three and nine months ended February 28, 1998
included $2,200,000 relating to revenues recognized on long-term contracts
acquired, which were not repeated in fiscal year 1999. Excluding sales related
to these third-party products and revenues recognized on long-term contracts
acquired, sales for the nine months ended February 27, 1999 increased $191,000,
or 0.5%, while sales for the three months ended February 27, 1999 decreased by
$617,000, or 5.2%, as compared to the comparable periods in the prior year.
These fluctuations were the result of strong sales in continental Europe and
acquisitions made during fiscal year 1998 in Europe and Australia, offset by a
decrease in sales due to weak economic conditions in Asia and South America and
a general weakness in the worldwide oil and gas industry. The slowdown in the
Asian and South American economies and the oil and gas sector continues to
affect the Company's order levels, and this trend is anticipated to continue
over an undetermined period of time.
Gross profit for the third quarter ended February 27, 1999 was $5,190,000, or
45.7% of sales, as compared to $6,089,000, or 43.0% of sales, for the same
period in fiscal year 1998. For the nine months ended February 27, 1999, gross
profit was $16,929,000 (46.6% of sales) as compared to $18,187,000 (46.6% of
sales) for the same period in the prior year. The gross profit as a percentage
of sales for the three months ended February 27, 1999 increased compared to the
prior year principally as a result of the lower-margin associated with the
long-term contract system sales recognized during the quarter ended February 28,
1998. This long-term contract, which was completed during fiscal year 1998, was
acquired in November 1997 with the acquisition of the Palpro business, and is
not representative of the on-going systems and product margins from this
acquisition beyond this contract.
Selling, general and administrative, and engineering expenses ("operating
expenses") decreased $182,000, or 4.3%, for the third quarter ended February 27,
1999 compared to
11
<PAGE> 12
HASKEL INTERNATIONAL, INC.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
the same period in prior year. For the first nine months of fiscal year 1999,
these expenses increased $157,000, or 1.2%, compared to the same period in the
prior year. The decrease in operating expenses for the quarter ended February
27, 1999 is attributable to cost reduction efforts throughout the Company. The
increase in operating expenses for the nine months ended February 27, 1999 is
attributable to new businesses acquired and opened as the Company continues to
expand its operations globally, partially offset by the Company's cost
containment efforts. Excluding the third-party U.S. sales and revenues from
long-term contracts acquired in fiscal year 1998, as described above, operating
expenses as a percentage of sales have remained constant at approximately 35% of
sales for all periods presented.
During the third quarter ended February 27, 1999, the Company recognized
$1,269,000 in restructuring costs relating to its implementation of a plan to
consolidate the operations of its Manchester, England and Sunderland, England
facilities and to restructure its outside domestic sales force. The anticipated
result of such plan is to utilize excess capacity at the Sunderland facility and
to reduce overhead costs. The restructuring costs consist of approximately
$350,000 in severance payments for 33 employees; $408,000 in facility closing
costs; $455,000 for the write-off of impaired assets; and $56,000 in other
costs.
Excluding $825,000 (after-tax) of restructuring charges, income from continuing
operations decreased to $853,000 for the quarter ended February 27, 1999
compared to $1,189,000 for the same period in the prior year. For the nine
months ended February 27, 1999, income from continuing operations decreased to
$2,829,000 compared to $3,534,000 for the same period in fiscal year 1998. This
decrease in earnings is directly related to reduced gross revenues for the
period and increased costs related to newly acquired or opened operations.
LIQUIDITY AND SOURCES OF CAPITAL
For the nine months ended February 27, 1999, net cash provided by operating
activities included $4,840,000 from continuing operations as compared to
$2,479,000 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 and reduction in inventories in the first nine months of fiscal year
1999. Net cash of $348,000 was used in discontinued operations in the first nine
months of fiscal year 1998.
During the nine months ended February 28, 1998 and February 27, 1999, cash used
for investing activities consisted mainly of capital expenditures. Cash used in
financing activities for the nine months ended February 28, 1998 and February
27, 1999 consisted 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; and a $10,000,000 line of credit available
for acquisitions or capital
12
<PAGE> 13
HASKEL INTERNATIONAL, INC.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
expenditures. At February 27, 1999, the Company had no outstanding balances
under the revolving credit or acquisition lines.
As of February 27, 1999, the Company had $11,830,000 in cash and cash
equivalents, and working capital of $26,424,000, with a ratio of current assets
to current liabilities of approximately 5.0 : 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.
YEAR 2000 COMPLIANCE
The Company is continuing the process of assessing Year 2000 issues as they
relate to its systems, business and operations. The Year 2000 issue is the
result of computer systems designed and developed using two digits rather than
four to define the applicable year. Any programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than 2000. This
could result in a major system failure or miscalculations unless corrective
measures are taken.
The Company has developed a Year 2000 Readiness Plan to address the Year 2000
issues, particularly with respect to its critical systems. Critical systems are
those whose failure poses a risk of disruption to the Company's ability to
provide product to its customers. The Company's plan includes four core phases:
(1) establishing and initiating a master plan and schedule with key staff
members being notified of their responsibilities; (2) assessing the impact of
mission-critical system failures on core business processes by performing a
complete inventory of software on both information technology and
non-information technology systems, such as computer hardware containing
embedded technology; implementing quality assurance checks on clients and
vendors; and defining failure scenarios; (3) modification, upgrade or
replacement of hardware and software in order to meet compliance standards to be
completed by June 30, 1999; and (4) identify and document contingency plans and
establish resumption procedures for each core business process. The Company has
completed phase 1, is currently working on phases 2 and 3, and has yet to
commence phase 4.
The Company is not currently aware of any material costs or operational issues
associated with Year 2000 issues. The Company does not believe that it will
incur significant operating expenses or be required to invest heavily in
improvements to computer systems to be Year 2000 compliant. However, the Company
may experience significant unanticipated problems and costs caused by undetected
errors or defects in internal systems or Year 2000 issues with its customers or
vendors. The worst-case scenario if such problems occur would be the Company's
inability to deliver product to its customers and record revenue. If any of the
13
<PAGE> 14
HASKEL INTERNATIONAL, INC.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Company's customers or vendors experience Year 2000 problems with respect to
their relationship to the Company, such customers or vendors could assert claims
for damages against the Company. While the Company is not aware of any
significant Year 2000 issues for which it will not be adequately prepared, there
can be no assurance that the Company's business, operating results, or financial
condition will not be adversely affected by issues with respect to Year 2000
compliance have not been material. The Company anticipates that the majority of
costs associated with Year 2000 issues will be related to ongoing, scheduled
software and hardware maintenance upgrades and licensing of phone systems, PC
operating systems, and business applications. Future anticipated costs are
difficult to estimate at the present stage of the project; however, the Company
does not currently anticipate that such costs will exceed $200,000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
14
<PAGE> 15
HASKEL INTERNATIONAL, INC.
PART II. OTHER INFORMATION
ITEM 5. OTHER MATTERS
(a) See Exhibit 10.32.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K):
10.32 Press Release dated March 15, 1999.
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.
15
<PAGE> 16
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 April 13, 1999 /s/ R. MALCOLM GREAVES
--------------- -----------------------------------
R. Malcolm Greaves President &
Chief Executive Officer
DATE April 13, 1999 /s/ PATRICIA A. WEHR
--------------- -----------------------------------
Patricia A. Wehr
Chief Financial Officer
16
<PAGE> 1
EXHIBIT 10.32
HASKEL INTERNATIONAL, INC.
CONTACTS: R. Malcolm Greaves
President and CEO
(818) 843-4000 FOR IMMEDIATE RELEASE
HASKEL INTERNATIONAL, INC. MAKES ANNOUNCEMENT
BURBANK, California - March 15, 1999 - Haskel International, Inc.
announced today that it has entered into a definitive agreement whereby an
entity controlled by Tinicum Capital Partners, L.P., a private investment fund,
and certain related parties will acquire all of Haskel's outstanding shares for
a cash price of $12.90 per share. The transaction is valued at approximately
$72.8 million. The tender offer for all of the shares will commence by Monday,
March 22, 1999 and will be scheduled to expire 20 business days thereafter,
unless extended. Purchase of the shares under the tender offer is subject to
90% of the shares being tendered, the expiration of applicable waiting periods
under applicable antitrust laws, and other customary conditions. Subsequent to
the tender offer, the agreement provides for the merger of Haskel with HI
Merger Subsidiary, a subsidiary of HI Holdings Inc., pursuant to which all
remaining shareholders of Haskel would receive $12.90 per share. If less than
90% of the shares are tendered, the merger would be subject to approval by the
shareholders of Haskel at a meeting to be called and held after regulatory
approvals have been obtained. The deal is expected to be completed in May 1999
if 90% of the shares are tendered or July 1999 if a merger approved by the
shareholders is required.
The Boards of Directors of both companies have approved the transaction,
and the Haskel Board of Directors has recommended that Haskel's shareholders
accept HI Holdings Inc.'s all-cash tender offer and vote in favor of the merger
if a vote is required.
Haskel International, Inc. is one of the world's leading manufacturers of
high-pressure liquid pumps and gas boosters, specializing in pressure
technology and systems integration. Haskel conducts its operations through
facilities in North America, Europe and the Pacific rim, as well as through
distributors and agents worldwide.
100 E. GRAHAM PLACE, BURBANK, CA 91502, U.S.A. TELEPHONE: (818) 843-4000
FAX: (818) 556-2518
<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> 9-MOS
<FISCAL-YEAR-END> MAY-29-1999
<PERIOD-END> FEB-27-1999
<CASH> 11,830
<SECURITIES> 0
<RECEIVABLES> 10,450
<ALLOWANCES> 353
<INVENTORY> 9,420
<CURRENT-ASSETS> 32,972
<PP&E> 12,119
<DEPRECIATION> 6,917
<TOTAL-ASSETS> 41,977
<CURRENT-LIABILITIES> 6,548
<BONDS> 0
0
0
<COMMON> 14,038
<OTHER-SE> (385)
<TOTAL-LIABILITY-AND-EQUITY> 41,977
<SALES> 36,338
<TOTAL-REVENUES> 36,338
<CGS> 19,409
<TOTAL-COSTS> 19,409
<OTHER-EXPENSES> 14,050<F1>
<LOSS-PROVISION> 142
<INTEREST-EXPENSE> 35
<INCOME-PRETAX> 3,375
<INCOME-TAX> 1,371
<INCOME-CONTINUING> 2,004
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,004
<EPS-PRIMARY> .42<F2>
<EPS-DILUTED> .41
<FN>
<F1>OTHER EXPENSES ARE COMPRISED OF SELLING, GENERAL ADMINISTRATIVE, ENGINEERING
DESIGN, RESEARCH AND DEVELOPMENT AND RESTRUCTURING CHARGES.
<F2>FOR THE PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
