FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1995 Commission File No. 0-147
HICKOK INCORPORATED
Incorporated in the State of Ohio I.R.S. No. 34-0288470
10514 Dupont Avenue Cleveland, Ohio 44108
Telephone Number (216) 541-8060
Indicated below are the number of shares outstanding of each of the issuer's
classes of Common Stock as of the close of the period covered by this report.
Class A Common 737,484
Class B Common 454,866
Company or Group of Companies for which report is filed:
HICKOK INCORPORATED
SUPREME ELECTRONICS CORP.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _____X____ No __________
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
HICKOK INCORPORATED
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
Three months ended Six months ended
March 31 March 31
----------------------- -----------------------
1995 1994 1995 1994
---------- ---------- ----------- ----------
Net Sales $9,361,145 $5,750,888 $14,041,209 $9,764,954
Costs and Expenses:
Cost of Goods Sold 6,384,186 3,948,386 9,479,889 6,542,252
Product Development 860,966 624,605 1,406,088 1,095,689
Operating Expenses 968,014 875,866 1,757,700 1,495,200
Interest Charges 19,515 4,675 29,022 6,055
Other Income (31,937) (29,661) (64,617) (67,310)
---------- ---------- ----------- ----------
8,200,744 5,423,871 12,608,082 9,071,886
---------- ---------- ----------- ----------
Income before
Income Taxes 1,160,401 327,017 1,433,127 693,068
Income Taxes 452,600 134,600 559,000 282,300
---------- ---------- ----------- ----------
Net Income $ 707,801 $ 192,417 $ 874,127 $ 410,768
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
EARNINGS PER COMMON SHARE:
Net Income $ .59 $ .16 $ .73 $ .34
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Weighted Average Shares
of Common Stock Out-
standing 1,196,621 1,191,210 1,196,512 1,191,210
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Dividends per Share $ .175 $ .15 $ .175 $ .15
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
See Notes to Consolidated Financial Statements.
(2)
HICKOK INCORPORATED
CONSOLIDATED BALANCE SHEETS
March 31, September 30, March 31,
1995 1994 1994
----------- ------------ ----------
(Unaudited) (Note) (Unaudited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 442,337 $ 401,291 $ 437,810
Trade Accounts Receivable - Net 5,264,770 6,041,626 3,230,635
Inventories 5,244,439 3,844,402 3,429,620
Prepaid and Deferred Expenses 185,688 128,169 174,949
----------- ----------- ----------
TOTAL CURRENT ASSETS 11,137,234 10,415,488 7,273,014
----------- ----------- ----------
PROPERTY, PLANT AND EQUIPMENT
Land 139,192 139,192 132,692
Buildings 1,092,595 1,092,595 968,764
Machinery and Equipment 3,297,597 2,829,416 2,749,427
----------- ----------- ----------
4,529,384 4,061,203 3,850,883
Less: Allowance for Depreciation 2,467,590 2,161,662 2,026,697
----------- ----------- ----------
TOTAL PROPERTY - NET 2,061,794 1,899,541 1,824,186
----------- ----------- ----------
OTHER ASSETS
Goodwill - Net of Amortization 166,000 172,000 178,000
Deposits 13,444 13,444 18,462
----------- ----------- ----------
TOTAL OTHER ASSETS 179,444 185,444 196,462
----------- ----------- ----------
TOTAL ASSETS $13,378,472 $12,500,473 $9,293,662
----------- ----------- ----------
----------- ----------- ----------
<FN>
NOTE: Amounts derived from audited financial statements previously filed with the Securities and
Exchange Commission.
See Notes to Consolidated Financial Statements.
(3)
March 31, September 30, March 31,
1995 1994 1994
----------- ----------- ----------
(Unaudited) (Note) (Unaudited)
LIABILITIES
CURRENT LIABILITIES
Notes Payable $ 1,800,000 $ 1,230,000 $ -
Trade Accounts Payable 1,019,385 542,023 490,877
Accrued Payroll & Related Expenses 619,916 1,165,008 545,217
Accrued Expenses 188,858 235,081 452,006
Accrued Income Taxes 54,745 252,164 -
----------- ----------- ----------
TOTAL CURRENT LIABILITIES 3,682,904 3,424,276 1,488,100
----------- ----------- ----------
DEFERRED INCOME TAXES 106,000 106,000 -
----------- ----------- ----------
REDEEMABLE COMMON STOCK
9,800 Class B Shares at September
30, 1994(10,400 shares at March
31, 1994) - 235,000 235,000
----------- ----------- ----------
STOCKHOLDERS' EQUITY
Class A, $1.00 par value;
authorized 3,750,000 shares;
737,484 shares outstanding(368,492
shares at September 30, 1994 and
365,892 shares at March 31, 1994)
excluding 19,172 shares in treasury
at March 31, 1995(9,586 shares at
September 30, 1994 and March 31, 1994) 737,484 368,492 365,892
Class B, $1.00 par value;
authorized 1,000,000 shares;
454,866 shares outstanding
(229,713 shares at September 30,
1994 and March 31, 1994 of which
9,800 shares were classified as
redeemable at September 30, 1994
and 10,400 shares at March 31, 1994)
excluding 36,774 shares in treasury
at March 31, 1995(16,107 shares at
September 30, 1994 and March 31, 1994) 454,866 219,913 219,313
Contributed Capital 910,816 726,690 710,790
Retained Earnings 7,486,402 7,420,102 6,274,567
----------- ----------- ----------
TOTAL STOCKHOLDERS' EQUITY 9,589,568 8,735,197 7,570,562
----------- ----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $13,378,472 $12,500,473 $9,293,662
----------- ----------- ----------
----------- ----------- ----------
(4)
HICKOK INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31
(Unaudited)
1995 1994
------------ ------------
Cash Flows from Operating Activities:
Cash received from customers $ 14,818,065 $ 12,375,982
Cash paid to suppliers and employees (13,811,462) (9,284,221)
Interest paid (29,125) (5,305)
Interest received 1,834 5,369
Income taxes paid (756,421) (658,480)
------------ ------------
Net Cash Provided by
Operating Activities 222,891 2,433,345
Cash Flows from Investing Activities:
Capital expenditures (468,181) (387,433)
Purchase of Fastening Systems assets - (692,000)
------------ ------------
Net Cash Used in Investing
Activities (468,181) (1,079,433)
Cash Flows from Financing Activities:
Change in short-term borrowing 570,000 (1,250,000)
Purchase of Class B shares (77,752) -
Sale of Class A shares under option 3,460 -
Dividends paid (209,372) (178,682)
------------ ------------
Net Cash Provided by (Used in)
Financing Activities 286,336 (1,428,682)
------------ ------------
Net increase (decrease) in cash and
cash equivalents 41,046 (74,770)
Cash and cash equivalents at beginning
of year 401,291 512,580
------------ ------------
Cash and cash equivalents at end
of second quarter $ 442,337 $ 437,810
------------ ------------
------------ ------------
See Notes to Consolidated Financial Statements.
(5)
1995 1994
------------ -----------
Reconciliation of Net Income to Net
Cash Provided by Operating Activities:
Net Income $ 874,127 $ 410,768
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 311,928 248,984
Non-cash compensation charge
related to stock options 28,908 -
Changes in assets and liabilities:
Decrease (Increase) in accounts
receivable 776,856 2,611,028
Decrease (Increase) in inventories (1,400,037) 219,472
Decrease (Increase) in prepaid
expenses (57,519) (71,764)
Decrease (Increase) in prepaid
rents and deposits - -
Increase (Decrease) in trade
accounts payable 477,362 157,207
Increase (Decrease) in accrued
payroll and related expenses (545,092) (599,199)
Increase (Decrease) in accrued
expenses (46,223) (207,229)
Increase (Decrease) in accrued
income taxes (197,419) (335,922)
------------ ------------
Total Adjustments (651,236) 2,022,577
------------ ------------
Net Cash Provided by
Operating Activities $ 222,891 $ 2,433,345
------------ ------------
------------ ------------
(6)
HICKOK INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 1995
1. 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 (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three and six-month periods ended March 31, 1995 are not necessarily
indicative of the results that may be expected for the year ended September
30, 1995. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on
Form 10-K for the year ended September 30, 1994.
2. INVENTORIES
Inventories are valued at the lower of cost or market and consist of the
following:
March 31, Sept. 30, March 31,
1995 1994 1994
----------- ----------- -----------
Components $ 1,886,900 $ 1,347,496 $ 1,412,518
Work-in-Process 1,958,824 1,617,218 1,148,837
Finished Product 1,398,715 879,688 868,265
----------- ----------- -----------
$ 5,244,439 $ 3,844,402 $ 3,429,620
----------- ----------- -----------
----------- ----------- -----------
3. CAPITAL STOCK, TREASURY STOCK, CONTRIBUTED CAPITAL AND STOCK OPTIONS
On February 23, 1995 the number of authorized shares of Class A common
stock and Class B common stock were increased to 3,750,000 from 1,000,000
and 1,000,000 from 295,980, respectively. On April 10, 1995, the Company
distributed to stockholders of record on March 10, 1995 a 2 for 1 stock
split in the form of a 100% share dividend of Class A and Class B common
stock. One share of Class A common stock was issued for each share of
Class A outstanding and one share of Class B common stock was issued for
each share of Class B outstanding(including shares in treasury).
All per share amounts on the consolidated income statement have been
retroactively adjusted for the stock dividend. Additionally, $598,455,
an amount equal to the $1.00 par value of the combined Class A and Class
B common stock, has been transferred from retained earnings to common
stock ($368,742 to Class A common stock and $229,713 to Class B common
stock).
(7)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
The Company purchased 16,107 shares of Class B Common Stock from the
Estate of Robert D. Hickok (the "Estate") in January, 1993 and 4,560
shares in March, 1995 pursuant to a Section 303 Stock Redemption
Agreement (the "Agreement"). No future redemption requests are
anticipated from the Estate. The Company has reclassified the remaining
shares of Class B Common Stock, approximately $157,248, previously listed
as Redeemable Common Stock. Excess of market value over par value of
redeemable shares has been added to contributed capital.
Under the Company's Key Employees Stock Option Plan and the 1995 Key
Employees Stock Option Plan (collectively the "Employee Plans"),
incentive stock options, in general, are exercisable for up to ten years,
at an exercise price of not less than the market price on the date the
option is granted. Non-qualified stock options may be granted at such
exercise price and such other terms and conditions as the Stock Option
Committee of the Board of Directors may determine. No options may be
granted at a price less than $2.925. On February 23, 1995 the Board of
Directors adopted the 1995 Outside Directors Stock Option Plan (the
"Directors Plan"), subject to approval by the Company's shareholders.
The Director's Plan provides for the automatic grant of options to
purchase shares of Class A Common Stock to members of the Board of
Directors who are not employees of the Company, at the fair market value
on the date of grant. Options for 40,300 Class A shares were outstanding
and exercisable under the Employees Plan at March 31, 1995 (33,600 shares
at September 30, 1994 and 38,800 shares at March 31, 1994) at prices
ranging from $2.925 to $11.75. Options for 7,200 shares and 7,800 shares
were granted under the Employee Plans during the three month period ended
December 31, 1994 and December 31, 1993 respectively at a price of $8.31
and $6.92 per share respectively. Options for 4,000 shares under the
Employee Plans were granted during the three month period ended March 31,
1994 at a price of $11.75 per share. Options for 12,000 shares at an
exercise price of $16.125 were granted under the Director's Plan during
the three month period ended March 31, 1995 subject to shareholders
approval. During the second quarter period ended March 31, 1995, options
for 500 Class A shares were exercised at a price of $6.92 per share
resulting in non-cash compensation to the optionee of $540. No other
options were exercised during the three or six month periods ended March
31, 1995 and 1994.
Unissued shares of Class A common stock (495,166 shares) are reserved for
the share-for-share conversion rights of the Class B common stock and the
Company's stock options outstanding.
The Company declared a $.175 per share special dividend on its Class A
and Class B common shares on December 7, 1994 payable January 25, 1995 to
shareholders of record January 3, 1995. A special dividend of $.15 per
share on Class A and Class B common shares, payable January 25, 1994 to
shareholders of record January 3, 1994, was declared on December 14, 1993.
(8)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
4. EARNINGS PER COMMON SHARE
Earnings per common share are based on the weighted average number of
shares outstanding during each period. All per share amounts on the
consolidated income statement have been adjusted to reflect the 100%
share dividend on a retroactive basis.
5. PURCHASE
On February 4, 1994, the Company purchased for $692,000 and subsequently
adjusted on April 6, 1994 to $730,675, certain assets and assumed certain
liabilities from Allen-Bradley Company, Inc. related to their fastening
systems business. The purchase consisted of inventory ($461,092),
machinery and equipment ($239,974) and accrued expenses ($150,391).
Goodwill of $180,000 was recorded in conjunction with this purchase and
will be amortized evenly over a 15 year period.
6. NAME CHANGE
The Board of Directors recommended and on February 23, 1995 the
shareholders approved changing the name of the Company to Hickok
Incorporated.
(9)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS, SECOND QUARTER (JANUARY 1, 1995 THROUGH MARCH 31, 1995)
FISCAL 1995 COMPARED TO SECOND QUARTER FISCAL 1994
Sales for the quarter ended March 31, 1995 were $9,361,145 versus $5,750,888
for the quarter ended March 31, 1994. The 62.8% current quarter increase in
sales is primarily the result of the addition of the fastening systems
product class acquired in February, 1994.
Cost of goods sold in the second quarter of fiscal 1995 was $6,384,186 or
68.2% of the sales dollar as compared to $3,948,386 or 68.6% of the sales
dollar in the second quarter of 1994. This change in the cost of goods sold
percentage was due to the addition of the fastening systems line and a change
in product mix.
Product development expenses were $860,966 in the second quarter 1995 or 9.2%
of the sales dollar as compared to $624,605 or 10.9% of the sales dollar in
the second quarter 1994. The absolute dollar increase in the second quarter
of 1995 is due primarily to an increase in new product development costs, and
costs incurred to enhance the Company's existing products, both of which are
expensed when incurred.
Operating expenses were $968,014 or 10.3% of the sales dollar versus $875,866
or 15.2% of the sales dollar for the same period a year ago. The percentage
change is the result of increased shipments in the current year which covered
more of the Company's fixed expenses.
Interest expense was $19,515 in the second quarter of fiscal 1995, which
compares with $4,675 in the second quarter of fiscal 1994. This was due to
increased borrowing and an increase in the prime lending rate in the current
quarter versus the same period a year ago.
Other income includes $20,618 of rental income from a sub-lease of excess
space during the current and prior quarter.
Net income of $707,801 earned in the second quarter of fiscal 1995 compares
with $192,417 in 1994. This increase was due primarily to an increase in
fastening systems business in the current quarter.
Unshipped customer orders as of March 31, 1995 were $10,663,000 versus
$7,849,000 at March 31, 1994. The increase was primarily due to the addition
of the fastening systems customer orders.
(10)
RESULTS OF OPERATIONS, SIX MONTHS ENDED MARCH 31, 1995
COMPARED TO SIX MONTHS ENDED MARCH 31, 1994
Sales for the six months ended March 31, 1995 were $14,041,209 versus
$9,764,954 for the same period in 1994. The 43.8% increase is due primarily
to increased shipments of fastening systems related products and services.
Cost of goods sold was $9,479,889 or 67.5% of the sales dollar as compared to
$6,542,252 or 67.0% of the sales dollar for the six months ended March 31,
1994.
Product development expenses were $1,406,088 or 10.0% of the sales dollar as
compared to $1,095,689 or 11.2% of the sales dollar for the six months ended
March 31, 1994. Costs associated with the planned introduction of new
products and costs incurred to enhance the Company's existing products are
the primary reasons for the absolute dollar increase during the current
fiscal year.
Operating expenses were $1,757,700 for the six months ended March 31, 1995 or
12.5% of the sales dollar versus $1,495,200 or 15.3% of the sales dollar for
the six months ended March 31, 1994. This dollar increase is due primarily
to increased marketing and administrative expenditures associated with the
addition of the fastening systems product line. The percentage change is the
result of increased shipments in the current year which covered more of the
Company's fixed expenses necessary to support this period's higher sales
volume.
Interest expense was $29,022 for the six months ended March 31, 1995, and
$6,055 for the same period in 1994. This was due to increased borrowing and
an increase in the prime lending rate in the current period.
Other income includes $41,237 of rental income from a sub-lease of excess
space during the first six months of fiscal 1995. In the first six months of
fiscal 1994, other income includes $48,109 of rental income from this lease.
Net income of $874,127 or 6.2% of sales for the six months ended March 31,
1995 compares with net income of $410,768 or 4.2% of sales for the six months
ended March 31, 1994. This was due primarily to the increase in sales volume
in the current six months and the acquisition of fastening systems related
products and services.
(11)
LIQUIDITY AND CAPITAL RESOURCES
Total current assets were $11,137,234, $10,415,488 and $7,273,014 at March
31, 1995, September 30, 1994 and March 31, 1994, respectively. The increase
from March to March is split almost equally between accounts receivable and
inventory. The increase in accounts receivable is due to higher sales in the
current quarter versus a year ago. The increase in inventory is necessary to
support anticipated higher sales during the last half of fiscal 1995. These
increases were financed by earnings retention and by an increase in
short-term financing and higher payables. As a result, there was an increase
in current liabilities from $1,488,100 at March 31, 1994 to $3,424,276 at
September 30, 1994. At March 31, 1995 current liabilities amounted to
$3,682,904.
Working capital as of March 31, 1995 amounted to $7,454,330. This compares
to $5,784,914 a year earlier. Current assets were 3.0 times current
liabilities and total cash and receivables were 1.5 times current
liabilities. These ratios compare to 4.9 and 2.5, respectively, at March 31,
1994.
Shareholders' equity during the six months ended March 31, 1995 increased by
$854,371 ($.72 per share) resulting from $874,127 of net income, $28,368
stock options granted, $4,000 sale of common stock, $235,000 from the
reclassification of redeemable common stock, less $209,372 payment of
special dividends and $77,752 purchase of Class B shares.
In January, 1995, the Company amended its credit agreement with its financial
lender. The agreement provides for a revolving credit facility of $5,000,000
with interest at the bank's prime commercial rate and is unsecured.
Management of the Company believes that cash and cash equivalents, together
with funds generated by operations and funds available under the Company's
credit agreement, will provide the liquidity necessary to support its current
and anticipated capital expenditures through the end of fiscal 1995.
(12)
PART II. OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K:
The following exhibits are included herein: (11) Statement re: Computation
of earnings per share.
The Company did not file any reports on Form 8-K during the three months
ended March 31, 1995
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date ------------------- HICKOK INCORPORATED
(Registrant)
-----------------------------------------
E. T. Nowakowski, Chief Financial Officer
(13)