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 June 30, 1996 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 737,984
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
----- -----
FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
HICKOK INCORPORATED
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
Three months ended Nine months ended
June 30, June 30,
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
Net Sales
Product Sales $ 4,897,367 $ 5,369,386 $15,943,879 $16,448,824
Service Sales 1,209,266 1,588,740 3,976,531 4,550,511
----------- ----------- ----------- -----------
Total Net Sales 6,106,633 6,958,126 19,920,410 20,999,335
Costs and Expenses:
Cost of Product Sold 3,104,840 3,118,230 9,608,886 10,128,765
Cost of Service Sold 974,577 1,233,171 3,457,385 3,702,525
Product Development 893,467 828,443 2,794,264 2,234,531
Operating Expenses 950,050 1,114,728 2,792,100 2,872,428
Interest Charges 22,889 51,917 123,359 80,939
Other Income (33,958) (29,284) (118,538) (93,901)
----------- ----------- ----------- -----------
5,911,865 6,317,205 18,657,456 18,925,287
----------- ----------- ----------- -----------
Income before
Income Taxes 194,768 640,921 1,262,954 2,074,048
Income Taxes 72,300 249,900 467,300 808,900
----------- ----------- ----------- -----------
Net Income $ 122,468 $ 391,021 $ 795,654 $ 1,265,148
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
EARNINGS PER COMMON SHARE:
Net Income $ .11 $ .33 $ .67 $ 1.06
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted Average Shares
of Common Stock Out-
standing 1,192,850 1,192,350 1,192,850 1,195,128
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Dividends per Share $ -0- $ .10 $ .10 $ .275
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
See Notes to Consolidated Financial Statements.
(2)
HICKOK INCORPORATED
CONSOLIDATED BALANCE SHEETS
June 30, September 30, June 30,
1996 1995 1995
----------- ------------ -----------
(Unaudited) (Note) (Unaudited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 386,275 $ 696,425 $ 276,689
Trade Accounts Receivable - Net 4,030,917 6,271,195 4,925,471
Inventories 5,413,988 6,921,192 6,270,966
Prepaid and Deferred Expenses 398,690 306,113 312,791
------------ ------------ ------------
TOTAL CURRENT ASSETS 10,229,870 14,194,925 11,785,917
------------ ------------ ------------
PROPERTY, PLANT AND EQUIPMENT
Land 139,192 139,192 139,192
Buildings 1,456,390 1,456,390 1,092,595
Machinery and Equipment 3,677,923 3,138,077 3,552,017
------------ ------------ ------------
5,273,505 4,733,659 4,783,804
Less: Allowance for Depreciation 2,950,602 2,473,556 2,584,150
------------ ------------ ------------
TOTAL PROPERTY - NET 2,322,903 2,260,103 2,199,654
------------ ------------ ------------
OTHER ASSETS
Goodwill - Net of Amortization 151,000 160,000 163,000
Deposits 13,744 13,744 13,444
------------ ------------ ------------
TOTAL OTHER ASSETS 164,744 173,744 176,444
------------ ------------ ------------
TOTAL ASSETS $ 12,717,517 $ 16,628,772 $ 14,162,015
------------ ------------ ------------
------------ ------------ ------------
NOTE: Amounts derived from audited financial statements previously filed with
the Securities and Exchange Commission.
See Notes to Consolidated Financial Statements.
(3)
FORM 10-Q
June 30, September 30, June 30,
1996 1995 1995
------------ ------------- -----------
(Unaudited) (Note) (Unaudited)
LIABILITIES
CURRENT LIABILITIES
Notes Payable $ 375,000 $ 3,510,000 $ 2,465,000
Trade Accounts Payable 303,924 855,218 546,517
Accrued Payroll & Related Expenses 573,940 1,320,611 868,322
Dividends Declared - - 119,235
Accrued Expenses 234,848 353,763 195,587
Accrued Income Taxes - 35,744 -
------------ ------------ ------------
TOTAL CURRENT LIABILITIES 1,487,712 6,075,336 4,194,661
------------ ------------ ------------
DEFERRED INCOME TAXES 159,000 159,000 106,000
------------ ------------ ------------
STOCKHOLDERS' EQUITY
Class A, $1.00 par value;
authorized 3,750,000 shares;
737,984 shares outstanding (737,984
shares at September 30, 1995 and
737,484 shares at June 30, 1995)
excluding 9,586 shares in treasury 737,984 737,984 737,484
Class B, $1.00 par value;
authorized 1,000,000 shares;
454,866 shares outstanding
excluding 20,667 shares in treasury 454,866 454,866 454,866
Contributed Capital 914,316 914,316 910,816
Retained Earnings 8,963,639 8,287,270 7,758,188
------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY 11,070,805 10,394,436 9,861,354
------------ ------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 12,717,517 $ 16,628,772 $ 14,162,015
------------ ------------ ------------
------------ ------------ ------------
(4)
HICKOK INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30,
(Unaudited)
1996 1995
------------ ------------
Cash Flows from Operating Activities:
Cash received from customers $ 22,160,688 $ 22,115,490
Cash paid to suppliers and employees (17,621,500) (21,204,955)
Interest paid (141,344) (68,082)
Interest received 3,584 2,630
Income taxes paid (530,344) (1,198,420)
------------ ------------
Net Cash Provided by (Used in)
Operating Activities 3,871,084 (353,337)
Cash Flows from Investing Activities:
Capital expenditures (279,846) (722,601)
Purchase of Beacon Gage assets (647,103) -
------------ ------------
Net Cash Used in Investing
Activities (926,949) (722,601)
Cash Flows from Financing Activities:
Change in short-term borrowing (3,135,000) 1,235,000
Purchase of Class B shares - (77,752)
Sale of Class A shares under option - 3,460
Dividends paid (119,285) (209,372)
------------ ------------
Net Cash (Used in) Provided by
Financing Activities (3,254,285) 951,336
------------ ------------
Net (decrease) in cash and
cash equivalents (310,150) (124,602)
Cash and cash equivalents at beginning
of year 696,425 401,291
------------ ------------
Cash and cash equivalents at end
of third quarter $ 386,275 $ 276,689
------------ ------------
------------ ------------
See Notes to Consolidated Financial Statements.
(5)
FORM 10-Q
1996 1995
------------ -----------
Reconciliation of Net Income to Net
Cash Provided by Operating Activities:
Net Income $ 795,654 $ 1,265,148
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 486,046 431,488
Non-cash compensation charge
related to stock options - 28,908
Changes in assets and liabilities:
Decrease (Increase) in accounts
receivable 2,240,278 1,116,155
Decrease (Increase) in inventories 1,894,307 (2,426,564)
Decrease (Increase) in prepaid
expenses (92,577) (184,622)
Increase (Decrease) in trade
accounts payable (551,294) 4,494
Increase (Decrease) in accrued
payroll and related expenses (746,671) (296,686)
Increase (Decrease) in accrued
expenses (118,915) (39,494)
Increase (Decrease) in accrued
income taxes (35,744) (252,164)
------------ -----------
Total Adjustments 3,075,430 (1,618,485)
------------ -----------
Net Cash Provided by (Used in)
Operating Activities $ 3,871,084 $ (353,337)
------------ -----------
------------ -----------
NON-CASH FINANCING ACTIVITY:
Dividends declared $ - $ 119,235
------------ -----------
------------ -----------
(6)
FORM 10-Q
HICKOK INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
JUNE 30, 1996
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 nine-month periods ended June 30, 1996 are not
necessarily indicative of the results that may be expected for the year
ended September 30, 1996. 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, 1995.
2. INVENTORIES
Inventories are valued at the lower of cost or market and consist of the
following:
June 30, Sept. 30, June 30,
1996 1995 1995
----------- ----------- -----------
Components $ 2,195,844 $ 2,488,711 $ 1,804,452
Work-in-Process 1,380,424 2,651,577 2,912,014
Finished Product 1,837,720 1,780,904 1,554,500
----------- ----------- -----------
$ 5,413,988 $ 6,921,192 $ 6,270,966
----------- ----------- -----------
----------- ----------- -----------
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.
The Company purchased 16,107 shares of Class B common stock for Treasury
for approximately $365,000 from the Estate of Robert D. Hickok (the
"Estate") in January, 1993 pursuant to a Section 303 Stock Redemption
Agreement. The Company purchased an additional 4,560 shares of Class B
stock from the Estate on March 31, 1995 for approximately $78,000,
completing the obligation.
(7)
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
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 Compensation Committee of
the Board of Directors may determine. No options may be granted at a price
less than $2.925. Options for 53,850 Class A shares were outstanding at
June 30, 1996 (39,800 shares at September 30, 1995 and 40,300 shares at
June 30, 1995) at prices ranging from $2.925 to $17.25 per share. Options
for 14,050 shares and 7,200 shares were granted during the three month
period ended December 31, 1995 and December 31, 1994 respectively, at a
price of $17.25 and $6.92 per share respectively, all options are
exercisable. 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 granted or exercised during the three or nine month periods
presented under the Employee Plans.
On February 23, 1995 the Board of Directors adopted, and shareholders
subsequently approved at the Company's Annual Meeting held on February 21,
1996, the 1995 Outside Directors Stock Option Plan (the "Directors Plan").
The Director's Plan provides for the automatic grant of options to purchase
up to 30,000 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 18,000 Class A shares were outstanding at
June 30, 1996 (12,000 shares at September 30, 1995 and June 30, 1995) at
prices ranging from $16.125 to $18.00 per share. Options for 6,000 shares
and 12,000 shares were granted under the Director's Plan during the three
month period ended March 31, 1996 and March 31, 1995 respectively, at a
price of $16.125 and $18.00 per share respectively. All options under the
Directors Plan become fully exercisable on February 23, 1999.
Unissued shares of Class A common stock (526,716 shares) are reserved for
the share-for-share conversion rights of the Class B common stock and stock
options under the Employee Plans and the Directors Plan.
The Company paid a $.10 per share special dividend on its Class A and Class
B common shares on January 25, 1996 to shareholders of record January 3,
1996. The Company paid a $.10 per share special dividend on its Class A
and Class B common shares on July 10, 1995 to shareholders of record June
19, 1995. A special dividend of $.175 per share on Class A and Class B
common shares was paid on January 25, 1995 to shareholders of record
January 3, 1995.
(8)
FORM 10-Q
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.
5. PURCHASE
On January 31, 1996, the Company purchased certain assets of Maradyne
Corporation's Beacon Gage Division for $647,103 which has been accounted
for under the purchase method of accounting. The purchase consisted of
inventory ($387,103), machinery and equipment ($260,000).
Pro forma effects of the Beacon Gage Division on prior years operations are
not determinable. The Company's current quarter and year to date
operations were not significantly impacted from this business.
(9)
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations, Third Quarter (April 1, 1996 through June 30, 1996)
Fiscal 1996 Compared to Third Quarter Fiscal 1995
--------------------------------------------------------------------------
Product sales for the quarter ended June 30, 1996 were $4,897,367 versus
$5,369,386 for the quarter ended June 30, 1995. The 8.8% decrease in product
sales in the current quarter is volume related and due primarily to a $596,000
drop in fastening systems sales. Fastening systems sales in last year's third
quarter were a record.
Service sales for the quarter ended June 30, 1996 were $1,209,266 versus
$1,588,740 for the quarter ended June 30, 1995. The 23.9% decrease during the
current quarter was volume related and due equally to a reduction in diagnostic
service revenue and a drop in technical training revenue. This loss of training
revenue will continue for the remainder of the fiscal year.
Cost of products sold in the third quarter of fiscal 1996 was $3,104,840 or
63.4% of product sales as compared to $3,118,230 or 58.1% of product sales in
the third quarter of 1995. This change in the cost of products sold percentage
was due primarily to a change in product mix. The cost of products sold is
expected to improve in the last quarter of fiscal 1996 due to a change in
product mix.
Cost of services sold for the quarter ended June 30, 1996 was $974,577 or 80.6%
of service sales as compared to $1,233,171 or 77.6% of service sales in the
quarter ended June 30, 1995. The change in the cost of services sold percentage
was due to an increase in labor costs relative to a large service contract
involving significant price competition.
Product development expenses were $893,467 in the third quarter of fiscal 1996
or 18.2% of product sales as compared to $828,443 or 15.4% of product sales in
the third quarter of fiscal 1995. The absolute dollar increase in the second
quarter of fiscal 1996 is due primarily to a budgeted increase in new product
development costs, and costs incurred to enhance the Company's existing
products, both of which are expensed when incurred. The level of expenditures
incurred during the third quarter of fiscal 1996 is expected to continue for the
last quarter of fiscal 1996.
Operating expenses were $950,050 or 15.6% of total sales versus $1,114,728 or
16.0% of total sales for the same period a year ago. The absolute dollar
decrease is due primarily to a reduction in profit sharing bonus expense.
Interest expense was $22,889 in the third quarter of fiscal 1996, which compares
with $51,917 in the third quarter of fiscal 1995. This was caused by lower
short-term borrowing in the third quarter versus the same period a year ago due
to lower working capital requirements. The level of interest expense incurred
during the current quarter is expected to continue for the last quarter of the
fiscal year.
Other income includes $20,619 of rental income from a sublease of excess space
during the current and prior year third quarter.
(10)
FORM 10-Q
Net income of $122,468 earned in the third quarter of fiscal 1996 compares with
$391,021 in 1995. This decrease was due primarily to a decrease in product
sales and to an increase in cost of products sold.
Unshipped customer orders as of June 30, 1996 were $6,022,000 versus $9,053,000
at June 30, 1995. The decrease was primarily due to $1,495,000 of lower
fastening systems customer orders during the current quarter and to $1,616,000
of lower orders for automotive diagnostic equipment. The reduction in fastening
systems orders mirrors what has occurred in each of the last two quarters and is
indicative of the fact that fastening systems orders in the first nine months of
fiscal 1995 were at record levels. It is expected that the quarter-to-quarter
comparison of fastening systems backlog will stabilize in the fourth quarter of
the current fiscal year. The reduction in automotive diagnostic equipment
orders is due primarily to timing differences.
Results of Operations, Nine Months Ended June 30, 1996
Compared to Nine Months Ended June 30, 1995
------------------------------------------------------
Product sales for the nine months ended June 30, 1996 were $15,943,879 versus
$16,448,824 for the same period in fiscal 1995. The decrease is due primarily
to a $4.8 million reduction in fastening systems product sales, which was
partially offset by a $3.9 million increase in sales of automotive diagnostic
instruments.
Service sales for the nine months ended June 30, 1996 were $3,976,531 compared
with $4,550,511 for the same period in fiscal 1995. The 12.6% decrease during
the current nine-month period was volume related and due primarily to a $400,000
drop in technical training revenue. This loss of training revenue will continue
for the remainder of the fiscal year.
Cost of products sold was $9,608,886 or 60.3% of product sales as compared to
$10,128,765 or 61.6% of product sales for the nine months ended June 30, 1995.
This change in the cost of products sold percentage was due primarily to a
change in product mix of automotive diagnostic products.
Cost of services sold was $3,457,385 or 86.9% of service sales compared with
$3,702,525 or 81.4% of service sales for the nine months ended June 30, 1995.
The change in the cost of services sold percentage was due to an increase in
labor costs relative to a large service contract involving significant price
competition.
Product development expenses were $2,794,264 or 17.5% of product sales as
compared to $2,234,531 or 13.6% of product sales for the nine months ended June
30, 1995. The higher level of expenditures is expected to continue for the
remainder of fiscal 1996 and represents a budgeted increase in new product
development costs and costs incurred to enhance the Company's existing products.
Both costs are expensed when incurred.
(11)
FORM 10-Q
Operating expenses were $2,792,100 for the nine months ended June 30, 1996 or
14.0% of total sales versus $2,872,428 or 13.7% of total sales for the nine
months ended June 30, 1995. The absolute dollar decrease represents a reduction
in profit sharing bonus expense.
Interest expense was $123,359 for the nine months ended June 30, 1996, and
$80,939 for the same period in 1995. This increase was due to increased
borrowing to support higher working capital levels during the first six months
of fiscal 1996.
Other income includes $61,856 of rental income from a sublease of excess space
during the first nine months of fiscal 1996 and fiscal 1995.
Net income of $795,654 or 4.0% of total sales for the nine months ended June 30,
1996 compares with net income of $1,265,148 or 6.0% of total sales for the nine
months ended June 30, 1995. The decrease was due primarily to higher product
development expenses incurred during the current period and to the $1.1 million
reduction in total sales.
Liquidity and Capital Resources
-------------------------------
Total current assets were $10,229,870, $14,194,925 and $11,785,917 at June 30,
1996, September 30, 1995 and June 30, 1995, respectively. The decrease from
June to June was due to a combined $1.8 million drop in accounts receivable and
inventory. The decrease along with earnings retention was used to reduce notes
payable and trade accounts payable by $2.3 million in total. The decrease in
accounts receivable is due to lower sales in the current quarter versus a year
ago. The decrease in inventory represents a reduction in requirements due to
lower backlog. Between June 1996 and September 1995 current assets dropped by
$4.0 million due primarily to decreases in accounts receivable and inventory.
The decrease in accounts receivable was due to lower sales in the current
quarter versus the quarter ended September 30, 1995. The decrease in inventory
was due to a scheduled large shipment that occurred in the first quarter of
fiscal 1996. The overall decrease in both accounts receivable and inventory
along with earnings retention were used to reduce current liabilities from
$6,075,336 at September 30, 1995 to $1,487,712 at June 30, 1996.
Working capital as of June 30, 1996 amounted to $8,742,158. This compares to
$7,591,256 a year earlier. Current assets were 6.9 times current liabilities
and total cash and receivables were 3.0 times current liabilities. These ratios
compare to 2.8 and 1.2, respectively, at June 30, 1995.
Internally generated funds of $3,871,084 during the nine months ended June 30,
1996 were adequate to fund the Company's primary non-operating cash requirement,
consisting of capital expenditures which amounted to $279,846. In addition,
internally generated funds were also adequate to fund the purchase in January
1996 of $647,103 of assets of the Beacon Gage Division of Maradyne Corporation.
(12)
FORM 10-Q
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 anticipated
capital expenditures through the end of fiscal 1997.
Shareholders' equity during the nine months ended June 30, 1996 increased by
$676,369 ($.57 per share) resulting from $795,654 of net income, less $119,285
payment of dividends.
In February, 1996, 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 with a LIBOR option and is
unsecured. In addition, a supplemental $2,000,000 was provided on the same
terms and conditions, except that the supplemental amount matures in December,
1996.
PART II. OTHER INFORMATION
ITEMS 1 through 5: Not applicable
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
June 30, 1996.
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 August 7, 1996 HICKOK INCORPORATED
---------------------- -------------------
(Registrant)
/s/ E. T. Nowakowski
-----------------------------------------
E. T. Nowakowski, Chief Financial Officer
(13)