-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AuDFjZJiwIV5e3cfJxIZDPHNlD8LvLmfmggd8biJK9jxB1XYaskqfFvrey8pe69d /plyRYLjia2MFVcNRsTkQw== 0000950150-99-000464.txt : 19990414 0000950150-99-000464.hdr.sgml : 19990414 ACCESSION NUMBER: 0000950150-99-000464 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990227 FILED AS OF DATE: 19990413 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HASKEL INTERNATIONAL INC CENTRAL INDEX KEY: 0000918022 STANDARD INDUSTRIAL CLASSIFICATION: MISC INDUSTRIAL & COMMERCIAL MACHINERY & EQUIPMENT [3590] IRS NUMBER: 954107640 STATE OF INCORPORATION: CA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-25068 FILM NUMBER: 99592532 BUSINESS ADDRESS: STREET 1: 100 EAST GRAHAM PL CITY: BURBANK STATE: CA ZIP: 91502 BUSINESS PHONE: 8188434000 MAIL ADDRESS: STREET 1: 100 EAST GRAHAM PLACE CITY: BURBANK STATE: CA ZIP: 91502 10-Q 1 FORM 10-Q 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. 2 INDEX HASKEL INTERNATIONAL, INC.
PART I. FINANCIAL INFORMATION PAGE 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
2 3 HASKEL INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (Unaudited)
May 30, February 27, 1998 1999 ----------- ----------- 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 =========== ===========
See notes to consolidated financial statements. 3 4 HASKEL INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (Continued) (Unaudited)
May 30, February 27, 1998 1999 ------------ ------------ 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 ============ ============
See notes to consolidated financial statements. 4 5 HASKEL INTERNATIONAL, INC. CONSOLIDATED INCOME STATEMENTS (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED February 28, February 27, February 28, February 27, 1998 1999 1998 1999 ------------ ------------ ------------ ------------ 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 ============ ============ ============ ============
See notes to consolidated financial statements. 5 6 HASKEL INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended February 28, February 27, 1998 1999 ------------ ------------ 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 ============ ============
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 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:
May 30, February 27, 1998 1999 ----------- ----------- 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 =========== ===========
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 8 PART I. FINANCIAL INFORMATION HASKEL INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) NOTE C - EARNINGS PER SHARE (CONTINUED)
Three Months Ended Nine Months Ended ------------------------------ ---------------------------- February 28, February 27, February 28, February 27, 1998 1999 1998 1999 ------------ ------------- ------------ ------------ 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 ========== ============= ========== ==========
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 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.
Transfers between Sales to Net geographic unaffiliated Operating Identifiable sales areas customers income assets ------------ ------------ ------------ ------------ ------------ 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 ============ ============ ============ ============ ============
9 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 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 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 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 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 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 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 EX-10.32 2 PRESS RELEASE DATED MARCH 15, 1999 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 EX-27 3 FINANCIAL DATA SCHEDULE
5 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. 9-MOS MAY-29-1999 FEB-27-1999 11,830 0 10,450 353 9,420 32,972 12,119 6,917 41,977 6,548 0 0 0 14,038 (385) 41,977 36,338 36,338 19,409 19,409 14,050 142 35 3,375 1,371 2,004 0 0 0 2,004 .42 .41 OTHER EXPENSES ARE COMPRISED OF SELLING, GENERAL ADMINISTRATIVE, ENGINEERING DESIGN, RESEARCH AND DEVELOPMENT AND RESTRUCTURING CHARGES. FOR THE PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
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