OLGR Oilgear

The Oilgear Company (NASDAQ:OLGR) today reported record sales and earnings for the second quarter ended June 30, 2006. The record earnings were buoyed by the gain on the previously announced sale of the company's property in Leeds, England. Net sales were a record $28,338,000 for the second quarter of 2006, an 11.1% increase from sales of $25,497,000 for the same period in 2005. Net earnings were $5,803,000 or $2.84 per diluted share for the second quarter of 2006, compared to net earnings of $664,000 or $0.33 per diluted share for the comparable prior period. During the quarter, the company completed the sale of its Leeds, UK, facility, relocated its operations and made the strategic decision to discontinue certain product lines previously manufactured in Leeds that will be replaced with more efficient products produced at other facilities. The combined impact of these events and decisions, net of all taxes and costs, was approximately $5.1 million or $2.49 per diluted share, comprised of: net gain on sale $7.2 million, expenses related to the move $1.0 million, an inventory impairment charge of approximately $0.8 million for the discontinued products, and taxes of $0.3 million. A significant portion of the proceeds, $5.8 million, was used to pay down debt. For the first half of 2006, net sales were a record $53,411,000, a 3.7% increase from sales of $51,523,000 for the first half of 2005. Net earnings were $6,317,000 or $3.10 per diluted share for the first six months of 2006 including the gain on the sale of the Leeds property, compared to net earnings of $1,225,000 or $0.61 per diluted share for the same period in the prior year. Orders increased 3.0% to a record $27.5 million in the second quarter of 2006 and 10.8% to a record $62.6 million for the first half, compared to the same periods in 2005. The backlog increased 34% from the beginning of 2006 to $36.1 million at June 30, 2006. For the first six months, domestic and European segment orders were up 11.7% and 19.9% respectively, when compared to the first half of last year. The international segment was down 8.2% when compared to a very strong first half in 2005. "Business conditions in the fluid power industry remain strong and our orders in July continued to surpass the prior year," said David A. Zuege, president and chief executive officer. "The rate of growth in orders in our industry, however, has slowed from the very rapid pace of the past 12 months." "The successful completion of the Leeds relocation is a major achievement for Oilgear. Not only has it significantly reduced our debt and increased our book value, but the relocation, combined with the capital expenditures and the streamlining of the product portfolio, will also improve our operational efficiency and allow us to better serve our European customer base. The team in Leeds did an excellent job in executing this important project," said Zuege. A leader in the fluid power industry, The Oilgear Company provides advanced technology in the design and production of unique fluid power components and electronic controls. The company serves customers in the primary metals, machine tool, automobile, petroleum, construction equipment, chemical, plastic, glass, lumber, rubber and food industries. Its products are sold as individual components or integrated into high performance applications. Certain matters discussed in this press release are "forward-looking statements" intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such because the context of the statement will include words such as the Company "believes," "anticipates," "expects" or words of similar import. Similarly, statements that describe the Company's future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated. In addition to the assumptions and other factors referenced specifically in connection with such statements, the following could impact the business and financial prospects of the Company: factors affecting the economy generally, including the financial and business conditions of the Company's customers, the demand for customers' products and services that utilize the Company's products, and national and international events; factors affecting the Company's financial performance or condition, including restrictions or conditions imposed by current or prospective lenders, tax legislation, and changes in accounting principles; factors affecting percentage of completion contracts, including the accuracy of estimates and assumptions regarding the timing and levels of costs to complete those contracts; factors affecting the Company's international operations, including fluctuations in currencies, changes in laws and political or financial insecurity of foreign governments; factors affecting the Company's ability to complete the move from its Leeds, England, facility; hire and retain competent employees, including unionization of non-union employees and strikes or work stoppages; any further decrease in stock price as a result of market conditions; changes in the law or standards applicable to the Company, including environmental laws and accounting pronouncements; availability of raw materials; unanticipated technological developments that result in competitive disadvantages and may impair existing assets; and factors set forth in the Company's periodic reports filed with the SEC in accordance with the Securities Exchange Act. Shareholders, potential investors and other readers are urged to consider these factors and those set forth in the Company's filings with the SEC carefully in evaluating the forward-looking statements. The forward-looking statements made herein are only made as of the date of this press release and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. -0- *T The Oilgear Company Consolidated Condensed Operating Statement (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 ------------ ------------ ------------ ------------ Net sales $28,338,000 $25,497,000 $53,411,000 $51,523,000 Cost of sales 21,897,000 18,484,000 40,118,000 37,579,000 ------------ ------------ ------------ ------------ Gross profit 6,441,000 7,013,000 13,293,000 13,944,000 Selling, general and administrative expenses 5,772,000 5,530,000 11,367,000 11,209,000 Expenses related to Leeds, UK move 979,000 - 979,000 - Gain on sale of Leeds, UK facility 7,216,000 - 7,216,000 - ------------ ------------ ------------ ------------ Operating income $6,906,000 $1,483,000 $8,163,000 $2,735,000 ------------ ------------ ------------ ------------ Interest expense 631,000 603,000 1,266,000 1,213,000 Other non- operating income (loss), net (5,000) 66,000 75,000 132,000 ------------ ------------ ------------ ------------ Earnings before income taxes 6,270,000 946,000 6,972,000 1,654,000 Income tax expense 454,000 214,000 619,000 343,000 ------------ ------------ ------------ ------------ Net earnings before minority interest 5,816,000 732,000 6,353,000 1,311,000 Minority interest 13,000 68,000 36,000 86,000 ------------ ------------ ------------ ------------ Net earnings $5,803,000 $664,000 $6,317,000 $1,225,000 ============ ============ ============ ============ Basic earnings per share of common stock $2.88 $0.33 $3.14 $0.62 ============ ============ ============ ============ Diluted earnings per share of common stock $2.84 $0.33 $3.10 $0.61 ============ ============ ============ ============ Basic weighted average outstanding shares 2,016,000 1,992,000 2,014,000 1,987,000 Diluted weighted average outstanding shares 2,041,000 2,022,000 2,038,000 2,018,000 The Oilgear Company Consolidated Condensed Balance Sheet (Unaudited) June 30, 2006 December 31, 2005 ----------------- ----------------- ASSETS Current Assets Cash and cash equivalents $5,832,000 $4,370,000 Accounts receivable 17,556,000 18,849,000 Inventories 24,302,000 25,365,000 Other current assets 6,432,000 3,785,000 ----------------- ----------------- Total current assets $54,122,000 $52,369,000 ----------------- ----------------- Net property plant and equipment 16,365,000 15,881,000 Other assets 2,735,000 2,893,000 ----------------- ----------------- $73,222,000 $71,143,000 ================= ================= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Current debt $10,578,000 $16,612,000 Accounts payable 10,356,000 9,215,000 Other current liabilities 10,296,000 9,820,000 ----------------- ----------------- Total current liabilities $31,230,000 $35,647,000 ----------------- ----------------- Long-term debt 7,133,000 7,724,000 Unfunded employee benefit costs 18,950,000 18,764,000 Other non-current liabilities 843,000 850,000 ----------------- ----------------- Total liabilities $58,156,000 $62,985,000 ----------------- ----------------- Minority interest in consolidated subsidiary 1,122,000 1,091,000 Shareholders' equity 13,944,000 7,067,000 ----------------- ----------------- $73,222,000 $71,143,000 ================= ================= *T