-----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, DxyopCddg4bMane23H+hMB+F4HtSeEOi5gUINGT4cdAez30pgvTj9XBWDV0VB8b/ sjtOn56mdoXVQgGwZn1JCg== 0000897069-96-000064.txt : 19960327 0000897069-96-000064.hdr.sgml : 19960327 ACCESSION NUMBER: 0000897069-96-000064 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960326 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEIN WERNER CORP CENTRAL INDEX KEY: 0000046613 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 390340430 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-02725 FILM NUMBER: 96538755 BUSINESS ADDRESS: STREET 1: 2120 N PEWAUKEE RD STREET 2: PO BOX 1606 CITY: WAUKESHA STATE: WI ZIP: 53188-2404 BUSINESS PHONE: 4145426611 MAIL ADDRESS: STREET 1: 2120 N PEWWAUKEE ROAD STREET 2: PO BOX 1606 CITY: WAUKESHA STATE: WI ZIP: 53188-2404 10-K 1 HEIN-WERNER CORPORATION FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 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 1-2725 HEIN-WERNER CORPORATION (Exact name of registrant as specified in its charter) Wisconsin 39-0340430 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2120 Pewaukee Road 53188 Waukesha, Wisconsin (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (414) 542-6611 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Stock, $1 par value American Stock Exchange Common Share Purchase Rights American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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 such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K [ ] Aggregate market value of the voting stock held by non-affiliates of the registrant as of March 7, 1996: $15,447,255 The number of shares outstanding of each registrant's classes of common stock as of March 7, 1996: Common Stock, $1 par value -- 2,629,320 shares DOCUMENTS INCORPORATED BY REFERENCE: Definitive Proxy Statement dated March 13, 1996 relating to the annual meeting of shareholders to be held on April 25, 1996 (Part III of Form 10-K). PART I ITEM 1. BUSINESS GENERAL. Hein-Werner Corporation was incorporated under the laws of the State of Wisconsin on April 16, 1921 and is headquartered in Waukesha, Wisconsin. Throughout the remainder of this Form 10-K, Hein- Werner Corporation and its subsidiaries will be referred to as the "Company" or the "Registrant" except where the context otherwise requires. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS. Industry segment information is part of the Notes to Consolidated Financial Statements, Segment Information which can be found in FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA, Item 8 of this report. DESCRIPTION OF THE BUSINESS. The Company has three functional industry segments: collision repair equipment, engine rebuilding equipment and fluid power components. COLLISION REPAIR EQUIPMENT The Company serves the collision repair equipment market worldwide, with operations centered in North America and in Europe. This business segment represents approximately 56.7%, 54.6% and 55.6% of the Company's net sales for 1995, 1994 and 1993, respectively. Collision repair equipment is comprised of vehicle correction equipment for straightening collision damaged cars, vehicle alignment equipment for measuring cars as they are straightened and heavy duty collision repair equipment for the truck market. The collision repair market is made up of autobody shops and other collision repair facilities owned by automotive dealers, franchisees and independents. The Company's collision repair equipment is designed to straighten collision damaged cars and trucks to original manufacturers' specifications. Using computer aided design and patented measuring systems, the Company measures each new model of automobile soon after its introduction and provides to its customers books or magnetic media that detail measurement data covering every model of car over the preceding three model years. When a damaged automobile is to undergo collision repair, an autobody repair technician applies controlled pressure to designated points on the body using chains and hydraulic pumps to restore the body to its designated size and shape utilizing the measurement equipment and specification data published by the Company. The majority of cars are now made with a unibody shell compared to older vehicles built with frames. Unibody vehicles are designed to better absorb the impact of a collision which necessitates more vehicle straightening and a higher degree of accuracy in measuring vehicles as they are straightened. The closer tolerances needed in repairing unibody vehicles requires the use of sophisticated straightening and measurement systems such as those designed, manufactured and marketed by the Company. The insurance industry and automobile manufacturers encourage the use of such systems. In North America, the Company services the market with its Kansas Jack,/R/ Blackhawk,/R/ Hein-Werner Heavy Duty,/R/ and Hein-Werner SHARK/R/ brands. The Company's strategy is to offer the most complete line of collision repair equipment available in the marketplace at a range of price levels. The product offering is a full range of frame straightening and vehicle alignment equipment for both trucks and automobiles including floor-pull correction systems, rack and bench repair systems and universal and dedicated vehicle alignment systems employing the state of the art technology for laser, mechanical and ultrasonic measurement of collision damaged vehicles. From North America, the Company services the markets in North and South America, the Caribbean and certain Pacific Rim countries. The Company serves the rest of the international market through wholly-owned subsidiaries in Europe. European operating units accounted for approximately 62% of the Company's 1995 collision repair sales. International operations are headquartered in Geneva, Switzerland. The Company maintains manufacturing and sales facilities in the United Kingdom and Italy; distribution and training facilities in France; and sales offices in France, Germany and Switzerland. In the international market served from Europe, the Company principally sells collision repair equipment under the Blackhawk and Hein- Werner trade names. All collision repair manufacturing facilities provide product to markets worldwide. U.S. manufactured products are modified for international markets at the Company's plant in Italy. European manufactured products are modified for the North American market at the Company's facilities in the United States. The Company markets its collision repair products through sales representatives, equipment distributors, automotive jobbers, and a direct sales force, depending upon the country and local market. The Company also participates in the equipment programs of all major U.S. and foreign automotive manufacturers including Ford, General Motors, Chrysler, Nissan, Toyota, Hyundai, Peugeot and Volvo, and national tool marketing programs of the companies. The Company's products have been approved by all major European automobile manufacturers. The Company has also been selected as the sole source of collision repair equipment by several manufacturers. Such approvals provide the Company with a significant competitive advantage. ENGINE REBUILDING EQUIPMENT Engine rebuilding equipment is used by jobber machine shops where professional and home mechanics bring engine parts to be rebuilt, and by production engine rebuilders. This industry segment represented approximately 15.0%, 17.0% and 16.9% of the Company's net sales in 1995, 1994 and 1993, respectively. Growth in this market is influenced by the size and age of the vehicle population and overall economic growth. Sales generally lag new car sales by approximately three to five years. A full line of engine rebuilding equipment is manufactured and sold under the Winona Van Norman and Van Norman trade names. The products manufactured and sold include cleaning, grinding, boring, honing, inspection and brake equipment. The Company is the exclusive distributor in North America, Mexico and the Far East for Az di Alvise Zanrosso, Rovimpex Novaledo Zona Industriale, and the Carin Equipment Group of Italy, all leading manufacturers of complementary equipment. The Company's engine rebuilding equipment is sold through manufacturers' representatives. The devaluation of the Mexican peso will have the short-term effect of delaying purchases of Mexican customers until the peso stabilizes and regains at best a portion of its value compared to the U.S. dollar. There are no domestic competitors in Mexico for the Company's engine rebuilding equipment. As a result, the Company does not expect the demand for this type of equipment to be met by other sources immune to the devaluation during the period of currency stabilization. FLUID POWER COMPONENTS The Company serves the fluid power component market through its Great Bend Industries Division. The fluid power market represents approximately 28.3%, 28.4% and 27.5% of the Company's net sales for 1995, 1994 and 1993, respectively. The Company specializes in the production of single acting, double acting and telescopic hydraulic cylinders and related hydraulic components for the Original Equipment Manufacturer (OEM) market. These products are incorporated into equipment used in road repair, construction, transportation, solid waste disposal, utility vehicles and oil rigs. The demand for the Company's fluid power components is determined by the demand for the capital goods produced by the OEM manufacturers it serves. The Company's fluid power components are sold through manufacturers' representatives, with some in-house accounts. RAW MATERIALS. The Company's principal raw materials are steel products, castings and forgings. The Company customarily procures its castings and forgings from unaffiliated foundries. Steel products are purchased by the Company from a number of steel mills and steel service centers. The principal materials and supplies used by the Company can ordinarily be procured in the general market. Raw materials, parts and components are purchased from many different sources, generally on a purchase order basis. MANUFACTURING/PRODUCT SOURCING. The Company has supply arrangements with manufacturers in Brazil, Italy, Taiwan and the People's Republic of China for engine rebuilding and collision repair equipment manufactured exclusively to the Company's standards and specifications. Such equipment is shipped to the Company's facilities in Wisconsin, Minnesota and France for packaging and shipment to the Company's customers. The Company has the ability to switch sources of manufacturing to take advantage of wage rates, foreign exchange rates, foreign trade developments and other factors. The Company can manufacture products domestically as well. PATENTS AND TRADEMARKS. The Company owns certain patents and trademarks which are considered to be important to the success of the Company's collision repair equipment business. The Company also owns other patents, none of which are considered to be critical to the success of its other business operations. The remaining term on the Company's patents is one to seventeen years. SEASONALITY. The Collision Repair equipment market experiences a significant decline in order demand during July and August. To a lesser extent, the same is true for the engine rebuilding equipment market. CUSTOMERS. The Fluid Power segment has two customers whose aggregate business represents approximately 34% of the segment's revenues. The other segments and the overall business of the Company are not dependent upon a single customer or on a few customers, the loss of which would have a material adverse effect on any such segment or on the Company taken as a whole. BACKLOG. The estimated amount of backlog at December 31, 1995 was approximately $18.3 million; the comparable figure for December 31, 1994 was approximately $10.3 million. 17.5%, 2.4% and 80.1% of the 1995 year end backlog is attributable to the collision repair, engine rebuilding and fluid power segments, respectively. The Company anticipates that all orders on hand as of December 31, 1995 will be filled during 1996. Most collision repair segment orders are filled within three months. COMPETITION. The Company experiences intense competition with numerous domestic and foreign producers. Some of the Company's competitors in each industry segment are significantly larger than the Company and have substantially greater resources. The Company expects that it will continue to encounter highly competitive conditions. The Company believes that its collision repair equipment and engine rebuilding equipment compete favorably primarily on the basis of the Company's recognized brand names, reputation for product innovation and engineering of high quality products and the Company's distribution channels. The Company believes that its fluid power components compete favorably based primarily on the ability of the Company to meet customers' quality, reliability and service needs. RESEARCH AND DEVELOPMENT. The Company has 30 engineering employees who devote all or a portion of their time to the development and improvement of its products, and many of the features of the Company's products are the result of its own development work. The Company spent approximately $1.7 million, $1.5 million and $1.5 million in the years ended December 31, 1995, 1994 and 1993, respectively, on engineering and research activities for continuing operations relating to product development and improvement, all of which were Company sponsored. IMPACT OF ENVIRONMENTAL LEGISLATION. The Company did not during 1995, nor does it expect to during 1996, experience any material capital expenditures as a result of federal, state or local environmental legislation. FOREIGN AND EXPORT SALES. Information concerning foreign and export sales is part of the Notes to Consolidated Financial Statements, segment information which can be found in FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA, Item 8 of this report. EMPLOYEES. The Company had about 592 and 584 employees at the end of 1995 and 1994, respectively. Approximately 75% and 72% of the production employees in 1995 and 1994, respectively, were represented by labor unions. The Company's labor agreements with labor unions were renewed in 1995 and extend to April, 1998 at its Winona, Minnesota location and June, 1998 at its Great Bend, Kansas plant. The Company considers its employee relations to be satisfactory. MISCELLANEOUS. On September 29, 1989, the Company consummated a private placement of its $8,500,000 8% Convertible Subordinated Notes due September 1, 1999 (the "Notes"). The Note Agreement, dated as of September 1, 1989 ("Note Agreement"), was amended by the parties thereto effective November 12, 1990, April 26, 1991, February 3, 1992, December 18, 1992 and February 21, 1994. The amendments, among other things, revised certain financial covenants, reduced the conversion price per share, provided for the repurchase of the Notes held by one noteholder and provided noteholders with options to purchase shares of the Company's Common Stock in the event of prepayments of the Notes. On January 16, 1991, the Company repurchased $4,000,000 principal amount of Notes from one noteholder. On January 26, 1996, the Company paid a 5% stock dividend to shareholders of record on January 5, 1996. ITEM 2. PROPERTIES The following table sets forth certain information with respect to the principal manufacturing facilities (20,000 square feet or more) which the Company uses in its operations: Expiration Owned Date of Square Location or Leased Lease Footage Baraboo, WI Leased 12/05 73,000 Winona, MN Leased 01/98 63,000 Great Bend, KS Leased (1) 112,000 Ashford, Kent, England Leased 09/02 20,000 Verona, Italy Leased 04/98 43,000 _______________ (1) This property is leased under a long-term lease. The Company has an option to purchase the property at a nominal amount upon the expiration of the lease. This lease has been capitalized for financial statement purposes. Sales, marketing, administrative and distribution and training facilities are leased in Wisconsin, France, Germany and Switzerland. Fluid power products are produced at the Great Bend, Kansas plant; engine rebuilding equipment is produced at the plant in Winona, Minnesota; and collision repair equipment is produced at the facilities in Ashford, England, Verona, Italy and Baraboo, Wisconsin. The properties above are considered to be adequate for present and planned future business. ITEM 3. LEGAL PROCEEDINGS The Company is involved in various legal proceedings, claims and administrative actions arising in the normal course of business. For additional information, see the footnote "Commitments and Contingencies" in Notes to Consolidated Audited Financial Statements (Item 8 of this report). ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company did not submit any matters to a vote of its security holders during the fourth quarter of 1995. EXECUTIVE OFFICERS OF REGISTRANT Set forth below is certain information concerning the executive officers of the Registrant as of March 7, 1996: Name, Age and Position Business Experience During Past 5 Years Joseph L. Dindorf, 55 President and Chief Executive Officer, President and Chief Hein-Werner Corporation (elected in Executive Officer 1976). Reinald D. Liegel, 53 Senior Vice President-Technology, Hein- Senior Vice President- Werner Corporation (elected June, 1988). Technology Jean-Paul Barthelme, 58 Vice President, and President of European Vice President, and Operations, Hein-Werner Corporation President-European (elected September, 1988). Operations Michael J. Koons, 56 Vice President-Industrial Relations and Vice President-Industrial Personnel, Hein-Werner Corporation Relations and Personnel (elected in 1979). James R. Queenan, 53 Elected June, 1990; prior thereto, self Vice President, and employed as a marketing consultant and President-Collision prior to January, 1988, President of the Equipment Group Kansas Jack Division. Maurice J. McSweeney, 57 Elected March, 1983; partner, Foley & Secretary Lardner, attorneys, Milwaukee, Wisconsin. The officers of Registrant are elected annually by the Board of Directors following the Annual Meeting of Shareholders and each officer holds office until his successor has been duly elected and qualified or until his prior death, resignation or removal. The next Annual Meeting of Shareholders is currently scheduled for April 25, 1996. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS The Company's Common Stock is listed on the American Stock Exchange under the symbol "HNW." The following table sets forth the range of high and low closing sales prices per share as reported on the American Stock Exchange for the Company's Common Stock and the cash dividends declared per share of Common Stock thereon during the periods indicated. The Company paid a 5% stock dividend on (i) January 27, 1995 to shareholders of record on January 6, 1995 and (ii) January 26, 1996 to shareholders of record on January 5, 1996. Cash Closing sale price dividends High Low declared 1994 4th quarter . . . . . . 3rd quarter . . . . . . $5.500 $4.625 -- 2nd quarter . . . . . . 6.125 5.000 -- 1st quarter . . . . . . 7.375 5.125 -- 8.000 3.875 -- 1995 4th quarter . . . . . . $5.250 $4.375 -- 3rd quarter . . . . . . 5.875 4.250 -- 2nd quarter . . . . . . 5.875 4.750 -- 1st quarter . . . . . . 5.375 4.500 -- As of March 7, 1996, the closing sales price of the Company's Common Stock, as reported on the American Stock Exchange was $5.875 per share. As of that date there were 666 holders of record of the Company's Common Stock. Holders of Common Stock are entitled to receive such dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available therefor. The Company's ability to pay dividends is restricted by the terms of the Note Agreement and the Company's 8% Convertible Subordinated Notes due September 1, 1999 issued thereunder and by the Company's credit facility with Firstar Bank Milwaukee, N.A. and Continental Bank N.A. (succeeded by BankAmerica N.A.'s Security Pacific Business Credit Inc.) ("Credit Facility"). Under the terms of the Credit Facility, the Company is prohibited from paying dividends. In addition to the restrictions set forth in the Credit Facility, the Note Agreement prohibits the payment of any dividends if after giving effect thereto (together with certain other payments or distributions in respect of Company capital stock), the aggregate amount of all Restricted Payments (as defined in the Note Agreement) during the period from and after December 31, 1988 to and including the date of making the Restricted Payment (exclusive of the dividend paid on January 13, 1989) would exceed 25% of Consolidated Net Income (as defined in the Note Agreement) for such period. ITEM 6. SELECTED FINANCIAL DATA (Dollars in thousands, except per share data) 1995 1994 1993 1992 1991 Net sales . . . . . $73,693 $67,100 $60,328 $60,258 $54,708 Income (loss) from continuing operations . . . . 1,013 827 (1,580) (1,880) (3,217) Income (loss) from continuing operations per common share . $ 0.39 $ 0.32 ($ 0.61) ($ 0.72) ($ 1.23) Total assets . . . 49,657 46,101 45,345 47,321 66,604 Long-term obligations . . . 10,902 13,256 14,071 12,873 25,188 Cash dividends declared per common share . . . $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Per share data has been restated to give effect to stock dividends paid through January 26, 1996. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS NET SALES Consolidated net sales for 1995 and 1994 have increased by 9.8% and 11.2%, respectively, over previous years' levels. (Amounts in thousands) 1995 1994 1993 North America $ 47,651 $ 44,657 $ 38,012 Europe 26,042 22,443 22,316 ------- ------- -------- Total net sales $ 73,693 $67,100 $ 60,328 ======= ====== ======= The Company's North American operations posted a 6.7% increase in net sales in 1995 over 1994, following a 17.5% increase in 1994 over 1993. Improved economic conditions and increased demand for innovative products introduced in 1992 contributed significantly to these increases. International operations based in Europe achieved a 16.0% increase in 1995 over 1994 net sales levels due primarily to recovery from recessionary conditions in some European countries, an increase in demand for certain products and the results of new distribution channels established in the Eastern European and Pacific Rim countries. In 1994, the recessionary pressures were mainly responsible for an increase of only 0.6% in net sales over 1993. Net Sales by Segment* 1995 1994 1993 Collision Repair 56.7% 54.6% 55.6% Engine Rebuilding 15.0 17.0 16.9 Fluid Power 28.3 28.4 27.5 ----- ----- ----- Total net sales 100.0% 100.0% 100.0% ====== ====== ====== * Refer to the Segment Information in the Notes to Consolidated Financial Statements for more information. In 1995, net sales for the Collision Repair segment increased by 14.2% over 1994. The fourth quarter was particularly strong as major national accounts committed to purchase new high technological products. The German collision repair subsidiary went through changes which included the redeployment of resources to ensure profitability in 1996 at reduced volume levels consistent with the German economy. In 1994, net sales increased by 7.6% from 1993 levels due primarily to the Company's participation in the Ford Focus Partner program and other national account programs that contributed to improved market penetration in the United States. The agreement with Nissan Altia of Japan expanded channels of distribution for the Company in the Far East. These programs, along with the outstanding success of the SHARK/R/ computerized sonar measuring system and the BlackoSpace/R/ workbay concept system, helped offset weak economic conditions in Germany and Italy. The Engine Rebuilding segment experienced a decline in net sales of 3.9% from 1994 amounts due in large part to a softening of the market in the United States and a significant reduction in shipments to Mexico due to that country's currency problems. In 1994, net sales increased by 11.9% from 1993 primarily from the improved economy in the United States and renewed focus on the export sales business. The Fluid Power segment improved net sales by 9.6% over 1994. Increasing capacity by 20% and making shipments at a record pace, as well as continuing to produce quality products and meet customers' delivery requirements which were offset by pricing pressures in the marketplace, are contributing factors to this segment's continuous improvement in net sales. In 1994, net sales increased by 14.8% over 1993 levels. The increase is attributable to increased volume and the production of quality products. COSTS AND PROFIT MARGINS Gross profits improved by 10.4% from $24.3 million in 1994 to $26.8 million in 1995. The increase in 1994 gross profit was 13.0% from $21.5 million in 1993. Gross Profit as a % of Net Sales 1995 1994 1993 Collision Repair 48.1% 47.3% 45.2% Engine Rebuilding 24.2 26.3 28.5 Fluid Power 19.5 21.2 20.4 ----- ----- ----- Consolidated 36.4% 36.2% 35.7% ==== ==== ==== The positive trend in gross profit margins in the Collision Repair segment is a result of both increased efficiencies in the utilization of productive capacity and higher margins on newly introduced products. As economic conditions improved in the United States, the Company was able to spread fixed manufacturing costs over a larger sales volume, thus utilizing productive capacity more efficiently. Products introduced since 1992 were able to command higher margins because of their technological superiority due to the investment made in research and development. In North America, these products are sold directly to the end user resulting in higher margins for the Company. Part of this benefit is offset by commissions paid to distributors. The changes to the distribution methods have provided the Company with better control of the distribution channel and improved market research information regarding the equipment users. The Company has continued to incur increases in the cost of materials since 1994. By seeking alternative sources of supply and by re-engineering products to reduce their material cost content (value engineering), the Company was able to absorb these increases without materially affecting gross profit. The Engine Rebuilding segment's decline in gross profit margins is primarily due to the continued competitiveness of the domestic market and the Company not being able to pass the increases in material and labor costs to the equipment purchasers in 1995 and 1994. The gross profit margins for the Fluid Power segment are down slightly from 1994. Even though there are continuous increases in sales volume, pricing pressures are affecting the gross profit margins realized by the Company. OPERATING EXPENSES AND PROFIT The rise in 1995 and 1994 operating expenses is primarily due to higher commission expenses incurred in the Collision Repair segment from increased sales volume. As a percentage of net sales, however, consolidated operating expenses were down in 1995 and 1994, despite the rising commission expenses. (Amounts in thousands) 1995 1994 1993 Operating expenses $ 23,918 $ 22,414 $ 21,599 ======= ======= ======= Operating profit (loss) $ 2,908 $ 1,889 $ (91) ======= ======= ======= For the most part, operating expenses have been well controlled in all business segments with an overall positive trend. The higher percentage figure in 1995 for the Collision Repair segment is due to an increase in net sales to end users, on which a commission is paid. In 1994, the decrease in the percentage of operating expenses to net sales was primarily due to a decrease in bad debt expense compared to 1993. The changes in the percentage figures for the Engine Rebuilding segment in 1995 and 1994 are a direct result of the fluctuations of net sales levels in those years. The Company expects the positive trend in operating expenses, as a percentage of net sales, to continue as net sales increase. Operating Expenses as a % of Net Sales 1995 1994 1993 Collision Repair 46.0% 39.0% 41.8% Engine Rebuilding 26.2 22.6 26.2 Fluid Power 8.6 9.6 10.8 ---- ---- ---- Consolidated 32.5% 33.4% 35.8% ==== ==== ==== NONOPERATING INCOME AND EXPENSE Interest expense is the largest component of nonoperating expense. It is interest paid to banks, leasing companies and other lenders for borrowed money or for capitalized leases. The overall borrowing level has remained consistent with 1994, however, higher interest rates in the first half of 1995 increased overall interest expense by $148,000. In 1994, declining levels of borrowing offset by rising interest rates resulted in a $93,000 increase in interest expense from 1993 levels. (Amounts in thousands) 1995 1994 1993 Interest expenses $ (1,838) $ (1,690) $ (1,597) Gain (loss) on foreign exchange (135) (28) 146 Miscellaneous, net 42 339 125 ------- ------- ------ Total nonoperating expense, net $ (1,931) $ (1,379) $ (1,326) ======= ======== ======= The foreign exchange gains and losses are primarily attributed to European operations where a considerable amount of buying and selling is done in nonlocal currencies. Receivables and payables denominated in nonlocal currencies give rise to foreign exchange gains and losses on a regular basis. Normally, foreign exchange risk in this category is managed by a review of the balance of receivables and payables and, where warranted, the purchase of foreign exchange contracts to minimize risk. In 1993, the Company recorded a $267,000 foreign exchange gain as a result of closing the Spanish operation and consolidating the remaining accounts in the Company's Swiss subsidiary. INCOME TAX EXPENSE The income tax benefit recorded for in 1995 and 1994 was the result of recoverable income taxes from net operating loss carrybacks and the favorable resolution of audits of prior year returns. Income tax expense in 1995, 1994 and 1993 is from European operations. DISCONTINUED OPERATIONS The Company sold its North American Automotive Service Equipment business in 1992. The Company's intent in selling this business was to focus its assets and efforts on its higher margin products where quality rather than price and volume is the important factor to profitability. Proceeds from the sale of the business were $10.1 million and the Company recorded a net gain of $155,000 in 1992. Through the first six months of 1992, the Automotive Service Equipment business generated $13.2 million in net sales, a 15% decline from $15.5 million for the same period the year earlier. Sales for 1991 were $30.3 million. Gross margins for the six months of 1992 were 18% of net sales, compared to 19% for the year ended December 31, 1991. The Company retains its rights to sell automotive service equipment through its other businesses in the markets of Europe, the Middle East and the Orient. These markets do not display the same negative characteristics. The additional loss on the discontinued business of $756,000 was recorded in 1993 as the result of revaluation of pension liability for current interest rates, an adjustment to the product liability self-insurance reserves and the recording of a loss on the disposition of assets held for sale. EXTRAORDINARY GAIN In July 1993, the Company's Baraboo, Wisconsin manufacturing facility sustained considerable damage due to flooding. The insurance protecting the property replaced any equipment damaged beyond repair with new equipment. As a result, a gain was recorded for the market value of the new equipment and an offsetting loss was recorded for the book value of the equipment destroyed. In addition, certain unreimbursed expenses related to the flooding were also charged against the gain. FINANCIAL CONDITION LIQUIDITY Net income adjusted for noncash items has increased consistently during the past three years. 1995 produced $3.2 million; 1994 produced $2.8 million; and 1993 produced $1.8 million. (Amounts in thousands) 1995 1994 1993 Net income (loss) $ 1,013 $ 827 $ (1,576) Adjustments for noncash items 2,202 2,001 3,458 ------ ----- ------ 3,215 2,828 1,882 Changes in cash from certain assets & liabilities (2,676) (1,689) 963 ------- ------ ------- Cash provided by operating activities $ 539 $ 1,139 $ 2,845 ====== ====== ====== Cash provided by operating activities continues to supply the Company with sufficient cash to satisfy debt service requirements and the investment in capital assets. In 1995 and 1994, the build-up in working capital was necessary to support the growing sales volume. The increase, primarily inventory and receivables, reduced overall cash flows from operations. The Company expects to reverse this build-up in 1996, providing additional cash from operating activities to reduce debt. (Amounts in thousands) 1995 1994 1993 Current assets $ 41,525 $ 37,353 $ 35,584 Current liabilities 20,749 16,491 16,341 ------- ------- ------- Working capital $ 20,776 $ 20,862 $ 19,243 ======= ======= ======= Current ratio 2.0 to 1 2.3 to 1 2.2 to 1 Credit arrangements in Europe are short-term in nature and designed to satisfy seasonal fluctuations in liquidity requirements. Those arrangements are renewed annually and are sufficient to support the needs of the Company's European operations. FINANCING ACTIVITIES The Company extended its current credit agreement with domestic banks during the year. Actual amounts available under the $12 million credit line are dependent upon the balances of the underlying collateral. At December 31, 1995, $9.8 million of the line of credit was available and $6.3 million was utilized. This line of credit, along with cash provided by operating activities, is considered adequate to satisfy the cash needs of the Company. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index Report of Management Independent Auditors' Report Consolidated Statements of Operations Consolidated Balance Sheets Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements REPORT OF MANAGEMENT The management of Hein-Werner Corporation is responsible for the preparation and presentation of financial statements. Management believes the established policies, internal accounting controls and review procedures provide reasonable assurance that the consolidated financial statements included herein are prepared in accordance with generally accepted accounting principles. This preparation has been based upon the best estimates and judgments and giving due consideration to materiality. The Company maintains internal accounting control systems and related policies and procedures. These systems are designed to provide reasonable assurance that assets are safeguarded, transactions are executed in accordance with management's authorization and properly recorded, and accounting records may be relied upon for the preparation of financial statements and other financial information. The design, monitoring and revision of internal accounting control systems involve, among other things, management's judgment with respect to the relative cost and expected benefits of specific control measures. The independent auditors are responsible for expressing their opinion as to whether the financial statements present fairly the financial position, operating results and cash flows of the Company. In this process, they obtain a sufficient understanding of the internal accounting systems to establish the audit scope, review selected transactions and carry out other audit procedures. The Audit Committee of the Board of Directors is composed of two nonemployee directors who meet periodically with the independent auditors and the Company's management. This Committee considers the audit scope, discusses financial and reporting subjects and reviews management actions on these matters. The independent auditors have full and free access to the Audit Committee. /s/ Joseph L. Dindorf Joseph L. Dindorf President and Chief Executive Officer Waukesha, Wisconsin February 20, 1996 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders of Hein-Werner Corporation: We have audited the accompanying consolidated balance sheets of Hein-Werner Corporation and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations and cash flows for each of the years in the three-year period ended December 31, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hein-Werner Corporation and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Milwaukee, Wisconsin February 20, 1996 Consolidated Statements of Operations Years Ended December 31, 1995, 1994, and 1993 (Amounts in thousands, except per share amounts) 1995 1994 1993 Net Sales $ 73,693 $ 67,100 $ 60,328 Cost of Sales 46,867 42,797 38,820 ------ ------ ------ Gross Profit 26,826 24,303 21,508 Selling, Engineering and Administrative Expenses 22,948 21,711 19,848 Bad Debt Expense 970 703 1,751 ------- ------- ------- 23,918 22,414 21,599 ------- ------- ------- Operating Profit (Loss) 2,908 1,889 (91) Nonoperating Income (Expense) Interest (1,838) (1,690) (1,597) Other (93) 311 271 ------- ------- ------- (1,931) (1,379) (1,326) ------- -------- ------- Income (Loss) From Continuing Operations, Before Income Tax 977 510 (1,417) Income Tax Expense (Benefit) (36) (317) 163 ------- -------- ------- Net Income (Loss) From Continuing Operations 1,013 827 (1,580) Discontinued Business Loss from the sale of a business, net of related income tax -- -- (756) Extraordinary Item Gain from the involuntary conversion of assets, net of related income tax -- -- 760 ------ ------- ------- Net Income (Loss) $ 1,013 $ 827 $ (1,576) ====== ======= ======= Earnings (Loss) Per Common Share From Continuing Operations $ 0.39 $ 0.32 $ (0.61) ======= ======= ====== Earnings (Loss) Per Common Share $ 0.39 $ 0.32 $ (0.60) ======= ======== ====== See accompanying notes to consolidated financial statements. Consolidated Balance Sheets As of December 31, 1995 and 1994 (Amounts in thousands, except share amounts) 1995 1994 Assets Current Assets: Cash $ 396 $ 466 Accounts receivables, net 23,277 19,875 Inventories 17,271 16,154 Prepaid expenses and other 581 858 ------ ------ Total Current Assets 41,525 37,353 Property, Plant and Equipment, Net 5,354 5,265 Other Assets 2,778 3,483 ------- ------- $ 49,657 $ 46,101 ======= ======= Liabilities and Stockholders' Equity Current Liabilities: Notes payable $ 4,209 $ 3,189 Current installments of long-term debt 1,470 316 Accounts payable 9,231 7,302 Other current liabilities 5,839 5,684 ------- ------- Total Current Liabilities 20,749 16,491 Long-Term Debt, Excluding Current Installments 10,902 13,256 Other Long-Term Liabilities 1,861 2,032 Commitments and Contingencies ------ ------ Total Liabilities 33,512 31,779 ------ ------ Stockholders' Equity: Common stock of $1 par value per share Authorized: 20,000,000 shares; Issued: 2,504,421 and 2,386,477 shares at December 31, 1995 and 1994, respectively 2,504 2,386 Capital in excess of par value 11,558 11,377 Retained earnings 1,308 827 Cumulative translation adjustments 827 110 ------ ------ 16,197 14,700 Less cost of common shares in treasury - 2,957 and 21,707 shares at December 31, 1995 and 1994, respectively 52 378 ------- ------- Total Stockholders' Equity 16,145 14,322 ------- ------- $ 49,657 $ 46,101 ======= ======= See accompanying notes to consolidated financial statements. Consolidated Statements of Cash Flows Years Ended December 31, 1995, 1994, and 1993 (Amounts in thousands) 1995 1994 1993 Cash From Operating Activities: Net income (loss) $ 1,013 $ 827 $(1,576) Adjustments to reconcile net income (loss) to cash provided by operating activities: Adjustments to net income (loss) for items not using or providing cash: Depreciation and amortization 1,234 1,301 1,175 Bad debt expense 970 703 1,751 Deferred tax expense -- -- 523 (Gain) loss on sale property, plant and equipment (2) (3) 13 Gain from the involuntary conversion of assets -- -- (760) Loss from the sale of a business -- -- 756 Increase (decrease), net of the effects of the disposed business, due to changes in: Accounts receivable (4,372) (1,621) (1,882) Inventories (1,117) (1,530) 1,033 Prepaid expenses and other assets 806 1,259 1,701 Accounts payable 1,929 (320) 1,246 Accrued expenses and other liabilities 78 523 (1,135) ----- ------ ------ Cash provided by operating activities 539 1,139 2,845 ----- ------ ------ Cash From Investing Activities: Capital expenditures (1,174) (737) (1,148) Proceeds from sale of property, plant and equipment 28 13 44 ------ ------ ------ Cash used in investing activities (1,146) (724) (1,104) ------ ------ ------ Cash From Financing Activities: Increase (decrease) in notes payable 1,020 235 (1,316) Proceeds from long-term debt 163 1,461 2,006 Deferred debt issuance costs -- (15) (70) Repayment of long-term debt (1,363) (2,749) (1,408) ------ ------ ------ Cash used in financing activities (180) (1,068) (788) ------ ------ ------ Cumulative Translation Adjustments 717 780 (728) ------ ------ ------ Total Cash Provided (Used) (70) 127 225 Cash - Beginning of Year 466 339 114 ----- ------ ------ Cash - End of Year $ 396 $ 466 $ 339 ===== ====== ====== See accompanying notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (A) Nature of Operations The Company is a multinational manufacturer of collision repair, engine rebuilding, and fluid power equipment. The collision repair and engine rebuilding equipment are sold to end users and distributors in North and South America, Europe and Asia. The fluid power equipment is primarily sold to original equipment manufacturers in North America. (B) Financial Statement Presentation The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany balances and transactions have been eliminated in consolidation. Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosures of contingent assets and liabilities to prepare these consolidated financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. (C) Cash Equivalents For purposes of the statements of cash flows, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. (D) Inventories Inventories are stated at the lower of cost or market. Cost is determined on the first-in, first-out basis. Inventory which is repossessed is recorded at the lesser of its original fifo cost, the amount receivable from the customer, or its fair market value. (E) Property, Plant and Equipment The cost of plant and equipment is depreciated over the estimated useful lives of the respective assets using the straight-line method. Major replacements and betterments are capitalized while maintenance and repairs are expensed as incurred. (F) Intangibles Patents are amortized over their estimated useful lives but not exceeding seventeen years. The excess cost over net assets of acquired companies is amortized on the straight-line basis over a forty-year period. Deferred debt issuance costs are amortized over the term of the underlying debt agreements. The Company periodically evaluates the carrying value and remaining amortization periods of intangible assets for impairment. (G) Noncurrent Receivables Certain accounts receivable from distributors in the Collision Repair segment were renegotiated during 1993 to notes with payment schedules which extend beyond one year. These notes, which bear an interest rate of 8%, have been collateralized with personal guarantees of the owners, partners and principals of the distributors and are presented as noncurrent assets. The allowance for uncollectible notes is management's estimate of uncollectible amounts based upon a review of the outstanding balances. (H) Revenue Recognition and Concentration of Credit Risk Sales are recognized upon shipment of products to equipment distributors, automotive jobbers, warehouse distributors and retail dealers for resale; and on shipments directly to original equipment manufacturers and end-users. Estimated losses on accounts receivable and guaranteed notes are provided for in allowance for losses. The Company extends customary industry credit terms to customers in North America and in Europe. Sales outside these regions are generally supported by letters of credit. Accounts receivable from resellers of equipment are generally collateralized by the products sold and the Company also obtains guarantees from some owners, partners, or principals. When product is repossessed for which the Company has obtained a guarantee, the guarantor takes possession of the product and the Company records a receivable from the guarantor. If there is no third party guarantor, the Company takes possession of the equipment and reverses any previously recognized revenue or charges any recognizable loss to an allowance account established for that purpose. (I) Income Taxes The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (J) Translation of Foreign Financial Statements Assets and liabilities of foreign subsidiaries are translated at year-end exchange rates and the statements of operations are translated at the average exchange rates for the year. Gains or losses resulting from translating foreign currency financial statements are accumulated as a separate component of stockholders' equity until the entity is sold or substantially liquidated, at which time any gain or loss is included in net earnings. Gains or losses from foreign currency transactions (transactions denominated in a currency other than the entity's functional currency) are included in net earnings. (K) Research and Development Expenses The Company incurred research and development costs in continuing operations of approximately $1,719,000 in 1995, $1,475,000 in 1994, and $1,450,000 in 1993. Research and development costs are expensed as incurred. (L) Earnings per Common Share Earnings per share data and weighted average shares outstanding have been restated for all years presented to give effect to the 5% stock dividends paid January 26, 1996 and all previous stock dividends. Earnings per share are based on the weighted average number of shares outstanding during each year and the assumed exercise of dilutive employees' stock options (less the number of treasury shares assumed to be purchased from the proceeds). Primary earnings per share are based on 2,620,000 shares in 1995 and 2,607,000 shares in 1994 and 1993, as adjusted for stock dividends. Fully diluted earnings per share based on the assumed conversion of the 8% convertible subordinated notes issued September 29, 1989 were not dilutive in any of the years presented. (M) Pending Accounting Changes Statement of Financial Accounting Standards (FASB) No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", was issued in March 1995. This statement requires that long-lived assets and identifiable intangibles held and used by an entity be reviewed for impairment in certain circumstances. The statement also requires that these assets expected to be disposed of be reported at the lower of the carrying amount or fair value less costs to sell. This statement will be adopted in the first quarter of 1996 and it has not yet been determined what the effect will be on the Company's financial position or results of operations. FASB No. 123 "Accounting for Stock-Based Compensation" was issued in October 1995. This statement requires accounting for employee stock compensation plans using either the fair value method or the intrinsic value based method. This statement will be adopted in the first quarter of 1996 and the Company anticipates retaining the intrinsic value based method of accounting for stock options, which is in use in 1995. (N) Reclassifications Certain amounts in 1994 and 1993 have been reclassified to conform to the 1995 presentation. ACCOUNTS RECEIVABLE (Amounts in thousands) 1995 1994 Accounts Receivable $25,019 $21,545 Allowance for losses 1,742 1,670 ------ ------- Total $23,277 $19,875 ====== ====== INVENTORIES (Amounts in thousands) 1995 1994 Raw material $ 5,837 $ 5,902 Work-in-process 1,125 1,481 Finished goods 10,309 8,771 ------ ------ Total $17,271 $16,154 ====== ====== PREPAID EXPENSES AND OTHER ASSETS (Amounts in thousands) 1995 1994 Prepaid expenses and other $ 316 $ 350 Recoverable income tax 265 508 ---- ---- Total $581 $858 ==== ==== PROPERTY, PLANT AND EQUIPMENT, NET (Amounts in thousands) 1995 1994 Land $ 90 $ 90 Buildings 3,023 2,839 Machinery & equipment 13,404 13,101 ------ ------ 16,517 16,030 Accumulated depreciation 11,163 10,765 ------ ------ Total $ 5,354 $ 5,265 ====== ====== OTHER ASSETS (Amounts in thousands) 1995 1994 Patents $ 563 $ 563 Goodwill 2,282 2,282 ----- ----- 2,845 2,845 Accumulated amortization 1,338 1,259 ----- ----- Net Intangibles 1,507 1,586 Deferred debt issuance costs, net -- 97 Noncurrent notes receivable 1,654 2,407 Less allowance for uncollectible notes 727 955 ----- ----- Net receivables 927 1,452 Other 344 348 ----- ------ $2,778 $3,483 ===== ===== The fair value of noncurrent notes receivable is estimated using discounted cash flows on expected payments to be received based on the terms of the notes and current interest rates. The fair value of the noncurrent notes receivable are estimated to be approximately $595,000 at December 31, 1995. SHORT-TERM BORROWINGS AND LINES OF CREDIT The Company has various unsecured lines of credit with foreign banks aggregating $8,053,000. The amount of unused available borrowings under these various lines of credit was $3,844,000 at December 31, 1995. The weighted average interest rate on outstanding amounts was 7.4% and 8.0% at December 31, 1995 and 1994, respectively. In addition, the Company has the ability to borrow funds outside of these lines of credit at foreign banks by using local currency receivables as collateral. The Company was not utilizing this facility as of December 31, 1995. OTHER CURRENT LIABILITIES (Amounts in thousands) 1995 1994 Accrued payroll and related expenses $ 1,769 $ 1,599 Accrued commissions 1,088 1,106 Accrued expenses related to a disposed business 182 354 Other accrued expenses 2,800 2,625 ----- ----- Total $5,839 $5,684 ===== ===== LONG-TERM DEBT (Amounts in thousands) 1995 1994 Revolving credit agreement $ 5,885 $ 7,024 8% Convertible subordinated notes due 1996 to 1999 4,500 4,500 11.5% Financing due to 2000 945 1,082 8.75% Financing due to 2004 295 318 5.0% Financing due to 2002 163 -- Capitalized leases due to 2005 512 576 Other 72 72 ------- ------ 12,372 13,572 Less current installments of long-term debt 1,470 316 ------- ------- Total long-term debt, excluding current installments $ 10,902 $ 13,256 ======= ======= Aggregate required annual principal payments, including capital leases, for the next five years are: (Amounts in thousands) 1996 $ 1,470 1997 7,569 1998 1,407 1999 1,345 2000 368 In 1995, the Company entered into a 5% financing arrangement with a county in the state of Kansas allowing borrowings up to $195,000. The borrowings are collateralized by a second mortgage on buildings and fixtures with a net book value of $976,000. The revolving credit agreement provides for borrowings not to exceed $12 million based on the availability of collateral assets, primarily inventory and accounts receivable, and matures May 31, 1997. At year end, the borrowing base approximated $9.8 million. At December 31, 1995, the net book value of such eligible collateral was approximately $17.3 million. Unused letters of credit issued on behalf of the Company totalled $394,000 at December 31, 1995. A commitment fee of 1/2 of 1% per annum is payable monthly on the average daily amount of the unused borrowing availability. The Company can borrow at the prime rate of interest plus 1.75% The prime rate in effect at December 31, 1995 was 8.5%. The 11.5% financing is collateralized by machinery and equipment with a net book value of $1.3 million and a standby letter of credit in the amount of $114,000. The 8.75% financing is collateralized by buildings and fixtures with a net book value of $608,000. The 8% convertible subordinated notes are convertible into common stock at a price of approximately $6.28 per share after giving effect to the 5% stock dividend paid January 26, 1996. The various underlying agreements contain certain restrictive covenants principally relating to additional debt, long-term leases, working capital levels, net worth, the ratio of debt to net worth and interest charge coverage. In addition, the Company is restricted from paying cash dividends and from purchasing or redeeming its own stock. The convertible subordinated note agreement restricts the Company's cash dividend payments, on a cumulative basis, to not more than 25% of the cumulative net income from December 31, 1988 to the date of the payment. At December 31, 1995, the Company is in compliance with all covenants. The fair value of the Company's long-term debt is estimated using discounted cash flow analyses based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. The carrying amounts of long-term debt approximates fair value at December 31, 1995. Interest paid during 1995, 1994, and 1993 was $1,842,000, $1,649,000, and $1,681,000, respectively. OTHER LONG-TERM LIABILITIES (Amounts in thousands) 1995 1994 Accrued expenses related to a disposed business $ 491 $ 689 Other 1,370 1,343 ----- ----- Total $1,861 $2,032 ===== ===== COMMITMENTS AND CONTINGENCIES A) Financial Instruments with Off-Balance-Sheet Risk To meet the financing needs of consumers of its collision repair and engine rebuilding products the Company is, in the normal course of business, a party to financial instruments with off-balance-sheet risk. The instruments are guarantees of notes payable to financing institutions arranged by the Company. The Company performs credit reviews on all such guarantees. These guarantees extend for periods up to five years and expire in decreasing amounts through 2000. The amount guaranteed to each institution is contractually limited to a portion of the amount financed in a given year. The notes are collateralized by the equipment financed. Proceeds from the resale of recovered equipment have generally approximated 90% of repurchased notes. The maximum credit risk to the Company at December 31, 1995 and 1994 was approximately $3,022,000 and $3,400,000, respectively. Proceeds from guaranteed notes totalled approximately $1,307,000 in 1995, $2,100,000 in 1994, and $1,600,000 in 1993. B) Litigation The Company is involved in legal proceedings, claims and administrative actions arising in the normal course of business. In the opinion of management, the Company's liability, if any, under any pending litigation or administrative proceeding would not materially affect its financial condition or operations. C) Environmental Claims From time to time the Company is identified as a potentially responsible party in environmental matters, primarily related to waste disposal sites which contain residuals from the manufacturing process which were previously disposed of by the Company in accordance with applicable regulations in effect at the time of disposal. Materials generated by the Company in these sites have been small and claims against the Company have been handled on a diminimus basis. In addition, the Company has indemnified purchasers of property previously sold by the Company, against any environmental damage which may have existed at the time of the sale. In the opinion of management, the Company's liability, if any, under any pending administrative proceeding or claim, would not materially affect its financial condition or operations. D) Leases At December 31, 1995, future minimum lease payments under capital leases and under noncancelable operating leases with initial terms greater than one year are as follows: Capitalized Operating (Amounts in thousands) Leases Leases 1996 $210 $1,693 1997 263 1,446 1998 33 991 1999 16 833 2000 16 823 2001-2005 69 892 --- ----- Total minimum lease payments 607 $6,678 Less amount representing interest 95 --- ----- Present value of minimum lease payments $512 === Current portion of capitalized lease obligations $168 === Property, plant and equipment includes the following amount relating to leases which have been capitalized: (Amounts in thousands) 1995 1994 Machinery and equipment $1,041 $951 Less: accumulated depreciation 416 319 ----- ---- $ 625 $632 ===== ==== Operating leases are for buildings, warehouses and equipment. Rental expense for operating leases was $1,955,000 in 1995, $1,765,000 in 1994, and $1,841,000 in 1993. CHANGES IN STOCKHOLDERS' EQUITY
Total Capital in Cumulative stock- Common excess of Retained translation Treasury holders' (Amounts in thousands) stock par value earnings adjustments stock equity Balance at December 31, 1992 $2,386 $12,023 $ 4,742 $ 58 $(4,188) $15,021 Net loss -- -- (1,576) -- -- (1,576) Translation adjustments -- -- -- (728) -- (728) 5% Stock dividend paid January 2, 1993, 106,952 shares issued -- -- (1,859) -- 1,859 -- 5% Stock dividend, fractional shares -- -- (1) -- -- (1) ----- ------ ----- ----- ----- ------ Balance at December 31, 1993 2,386 12,023 1,306 (670) (2,329) 12,716 Net Income -- -- 827 -- -- 827 Translation adjustments -- -- -- 780 -- 780 5% Stock dividend paid January 21, 1994, 112,271 shares -- (646) (1,305) -- 1,951 -- 5% Stock dividend, fractional shares -- -- (1) -- -- (1) ----- ------ ------ ---- ------ ------ Balance at December 31, 1994 2,386 11,377 827 110 (378) 14,322 Net Income -- -- 1,013 -- -- 1,013 Translation adjustments -- -- -- 717 -- 717 5% Stock dividend paid January 27, 1995, 117,944 shares issued 118 413 (531) -- -- -- 5% Stock dividend, fractional shares -- -- (1) -- -- (1) Shares contributed to employee benefit plan -- (232) -- -- 326 94 ----- ----- ------ ----- ----- ----- Balance at December 31, 1995 $2,504 $11,558 $ 1,308 $ 827 $ (52) $16,145 ===== ====== ====== ====== ====== ======
STOCK PLANS Under the 1987 Stock Option and Incentive Plan, the Company is authorized to grant 140,392 stock options. The options are subject to the following conditions and limitations: no option may be exercised until three (3) years after the date of grant when 50% of the options granted become exercisable; five (5) years after the date of grant 100% of the options granted are exercisable. Options expire ten (10) years after the date of grant. Under provisions defined in the Plan, all options become exercisable in the event of a public tender offer or if an exchange offer is made for the Company's stock. Stock option activity for each of the three years in the period ended December 31, 1995 follows: Option Price* Shares Per Share December 31, 1992 102,551 $5.08 - $5.29 Granted via stock dividend 5,128 ------- December 31, 1993 107,679 $5.08 - $5.29 Expired (579) Granted via stock dividend 5,355 ------- December 31, 1994 112,455 $5.08 Cancelled (5,788) Granted via stock dividend 5,623 ------- December 31, 1995 112,290 $5.08 ======= At December 31, 1995: Exercisable 56,145 $5.08 ======= Available for future grants 28,102 ======= * Option share and price are adjusted to give effect to the stock dividend paid January 27, 1995. Each outstanding share of common stock is entitled to one common share purchase right. Under certain circumstances, each right entitles the holder to purchase one share of common stock at $65, subject to adjustment. The rights are not exercisable until ten days after a public announcement that a person or group has acquired at least 20% of the outstanding common stock or ten business days (or later date determined by the Board of Directors) after a person or group announces an intention to make or commences a tender or exchange offer that would result in ownership of 20% or more of the Company's common stock. Subject to certain limitations, the Company's Board of Directors may reduce the thresholds applicable to the rights to not less than 10%. If a person or group acquires 20% or more of the outstanding common stock, or certain other events occur, each right not owned by a 20% or greater stockholder will become exercisable for that number of shares of common stock having a market value of twice the exercise price of the right. If the Company is acquired in a merger or other business combination or 50% or more of its consolidated assets or earning power is sold at any time after the rights become exercisable, the rights will entitle the holder thereof to purchase common stock of the acquiring company having a market value equal to two times the exercise price of the rights. The rights, which do not have voting privileges, may be redeemed by the Company at a price of $.03 per right at any time prior to public announcement that a person or group has acquired 20% or more of the Company's common stock. In addition, under certain circumstances the rights may be redeemed by stockholder action in connection with an acquisition proposal. Further, at any time after a person or group acquires 20% or more of the Company's common stock and prior to that person or group acquiring 50% or more of the common stock, the Company may exchange the rights (other than rights owned by such 20% or greater stockholder) in whole or in part for one share of common stock per right. The rights expire on May 23, 1999. EMPLOYEE BENEFIT PLANS A profit sharing and retirement plan is in effect for all domestic employees of the Company. The Company can contribute between 5% and 16% of its earnings before income taxes in excess of varying levels, ranging from $250,000 to $4,500,000. In 1995 and 1994, the Company's expense under the terms of the plan was $96,600 and $21,250, respectively. In 1995, an additional special contribution of $93,750 was made in the form of 18,750 shares of the Company's common stock valued at the 1994 year end closing price of $5.00 per share. No contribution was made for 1993. The Company does not provide post-retirement benefits under current benefit programs. Obligations under previous programs are not material. INCOME TAXES Income (loss) from continuing operations, before income taxes, consists of the following: (Amounts in 1995 1994 1993 thousands) Domestic $ (551) $ (798) $(2,712) Foreign 1,528 1,308 1,295 ------ ------ ------- $ 977 $ 510 $ (1,417) ====== ====== ======== Income tax expense (benefit) attributable to income (loss) from continuing operations consists of the following: (Amounts in thousands) 1995 1994 1993 CURRENT: U.S. Federal $ (306) $ (668) $ (557) Foreign 270 351 197 ---- ----- ----- (36) (317) (360) ---- ----- ----- DEFERRED: U.S. Federal -- -- 557 Foreign -- -- (34) ---- ----- ----- -- -- 523 ---- ----- ----- $ (36) $ (317) $ 163 The significant components of deferred income tax expense (benefit) attributable to income (loss) from continuing operations are as follows: (Amounts in thousands) 1995 1994 1993 Deferred income tax expense (benefit) (exclusive of the effects of other components listed below) $ 32 $(159) $ (34) Increase (decreases) in the valuation allowance for deferred tax assets (32) 159 557 --- ---- ---- $ -- $ -- $ 523 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows: (Amounts in thousands) 1995 1994 Inventory valuation $ 170 $ 145 Accounts receivable valuation 58 30 Vacation accrual 172 158 Self-insurance accrual 311 288 Sale of business 247 383 Net operating loss carryforwards 2,458 2,799 Other, including undistributed earnings of foreign subsidiaries 474 208 ------ ------- Gross deferred tax assets 3,890 4,011 Less valuation allowance (2,975) (3,007) ------ ------- Deferred tax assets $ 915 $ 1,004 ====== ======= Depreciation (913) (964) Other, including undistributed earnings of foreign subsidiaries (2) (40) ------ ------- Deferred tax liabilities (915) (1,004) ------ ------- Net deferred tax assets $ -- $ -- ====== ======= A reconciliation of actual income tax expense (benefit) attributable to income (loss) from continuing operations to the "expected" income tax expense (benefit) computed by applying the U.S. Federal corporate tax rate to income (loss) from continuing operations, before income taxes, follows: (Percent of pretax earnings) 1995 1994 1993 Statutory rate 34.0% 34.0% (34.0%) Amortization of excess cost over net assets of acquired companies 2.0 4.0 1.4 Effect of foreign operations 20.6 (23.4) (16.3) Net operating losses carried forward (utilized) -- (9.4) 24.9 Resolution of income tax examinations (31.4) (88.6) -- Purchase accounting adjustments from tax basis differences at acquisition -- (1.6) (0.6) Change in the valuation allowance for deferred tax assets allocated to income tax expense (30.3) 25.5 39.3 Other items, net 1.4 (2.7) (3.2) ----- ----- ------ (3.7)% (62.2)% 11.5% Deferred income taxes have been provided on that portion of the undistributed earnings of foreign subsidiaries which the Company expects to recover in a taxable manner, such as through the receipt of dividends. Provision has not been made for U.S. or additional foreign taxes on foreign earnings which have been and will continue to be reinvested. It is not practicable to estimate the amount of additional tax that might be payable on these foreign earnings. At December 31, 1995, the undistributed earnings of these foreign subsidiaries on which taxes have not been provided were approximately $5,200,000. Approximate net operating loss carryforwards available at December 31, 1995 to offset future taxable earnings of the Company are as follows: (Amounts in thousands) Amount Year of Expiration U.S. Federal $ 2,500 2008 through 2009 State 13,000 1998 through 2010 Foreign 1,200 1996 through 2000 Foreign 100 Indefinite A valuation allowance has been provided for the future benefit of the above net operating loss carryforwards. The Company received net income tax refunds of $306,000, $191,000, and $528,000 during 1995, 1994, and 1993, respectively. DISCONTINUED OPERATIONS In 1992, the Company sold certain assets relating to Hein-Werner's manufacture and North American distribution of jacks and other automotive lifting equipment, automotive battery service equipment, and automotive welding equipment and accounted for the sale as discontinued operations. As a result of the disposal, certain related plant and property was sold by the Company during 1993. At December 31, 1992, these assets had been written down to their estimated net realizable value and reclassified as other current assets. Included in liabilities at December 31, 1992 were accruals for expenses and costs to be incurred and satisfied at future dates. During 1993, an additional expense of $756,000 was accrued for future pension costs (primarily as a result of using a 7% discount rate), for the reserve for product liability insurance retroactive premium adjustments, and for losses on the sale of excess plant and property. Loss per common share from the loss on the sale was $0.28 in 1993 which has been adjusted for the 5% stock dividend paid January 26, 1996. EXTRAORDINARY ITEM In 1993, a Company manufacturing facility sustained damage from flooding. Insurance coverage replaced damaged equipment with new. As a result, the Company recorded a gain for the value of the replacement equipment of $1,194,000 and a loss for the net book value of the equipment destroyed of $141,000. In addition, costs of $293,000 related to the flooding which were not reimbursed by insurance coverage were also charged against the gain. Accordingly, an extraordinary gain of $760,000, or $0.29 per share, (there was no related income tax expense) was included in 1993. Earnings per share data for 1993 have been adjusted for the 5% stock dividend paid January 26, 1996. SEGMENT INFORMATION The Company's operations are principally in the Collision Repair, Engine Rebuilding and Fluid Power industry segments. The Collision Repair segment includes frame straightening and vehicle measurement equipment, as well as various tools and accessories. Engine Rebuilding products include hones, lathes, grinders, and the like, along with various accessories. Products for the Fluid Power segment include single-acting, double-acting and telescoping hydraulic cylinders. Affiliated inter-segment sales and geographic sales are nominal in amount. Data by industry segment with a reconciliation to the consolidated financial statements are presented below:
(Amounts in thousands) Earnings before Net sales income Capital 1995: unaffiliated taxes Assets Depreciation Expenditures Collision Repair $41,819 $2,520 $37,624 $ 518 $ 663 Engine Rebuilding 10,986 (946) 7,448 167 55 Fluid Power 20,888 1,548 8,529 178 438 ------ ----- ------ ---- ----- Business segments 73,693 3,122 53,601 863 1,156 Corporate and eliminations -- (2,145) (4,032) 195 18 ------ ----- ------ ------ ------ Consolidated $73,693 $ 977 $49,569 $ 1,058 $ 1,174 ====== ===== ====== ====== ====== 1994: Collision Repair $36,615 $1,444 $33,194 $ 501 $ 438 Engine Rebuilding 11,436 (458) 7,407 197 75 Fluid Power 19,049 1,530 7,815 166 122 ------ ------ ------ ----- ----- Business Segments 67,100 2,516 48,416 864 635 Corporate and eliminations -- (2,006) (2,315) 256 102 ------ ------ ------ ------ ------ Consolidated $67,100 $ 510 $46,101 $ 1,120 $ 737 ====== ===== ====== ====== ====== 1993: Collision Repair $33,515 $ (334) $36,351 $ 439 $ 406 Engine Rebuilding 10,219 (682) 7,704 186 321 Fluid Power 16,594 946 14,302 189 98 ------ ------ ------ ------ ------ Business Segments 60,328 70 58,357 814 825 Discontinued operation & extraordinary gain -- 4 -- -- -- Corporate and eliminations -- (1,347) (13,012) 218 323 ------ ------ ------ ------ ------ Consolidated $60,328 $(1,413) $45,345 $ 1,032 $ 1,148 ====== ===== ====== ====== ======
Data for geographic regions, excluding Corporate and eliminations, for 1995, 1994, and 1993 is presented below:
(Amounts in thousands) Earnings before Net sales income Capital 1995: unaffiliated taxes Assets Depreciation Expenditures North America $47,651 $ 1,594 $27,666 $ 521 $588 Europe 26,042 1,528 25,935 342 568 ------ ------ ------ ---- ------ $73,693 $ 3,122 $53,601 $ 863 $ 1,156 ====== ===== ====== ==== ====== 1994: North America $44,657 $ 1,208 $27,420 $ 575 $ 320 Europe 22,443 1,308 20,996 289 315 ------ ------ ------ ---- ------ $67,100 $2,516 $48,416 $ 864 $ 635 ====== ===== ====== ==== ====== 1993: North America $38,012 $(1,365) $39,503 $ 555 $ 478 Europe 22,316 1,295 18,854 259 347 ------ ------ ------ ---- ------ $60,328 $ (70) $58,357 $ 814 $ 825 ====== ===== ====== ==== ======
Export sales of United States operations, made to unaffiliated customers located in foreign countries aggregated $4,438,000, $3,622,000, and $4,216,000 in 1995, 1994, and 1993, respectively. SUPPLEMENTAL QUARTERLY DATA The following table contains certain selected unaudited quarterly consolidated financial data for the last two years which includes all adjustments which the Company considers necessary to a fair presentation thereof: (Amounts in thousands except per share data) 1995 Quarter 1st 2nd 3rd 4th Net Sales $18,512 $17,555 $16,377 $21,249 Gross profit 6,726 6,310 5,827 7,963 Net income (loss) $ 422 $ 292 $ (382) $ 681 ------ ------- -------- ------ Earnings (loss) per share $ 0.16 $ 0.11 $ (0.14) $ 0.26 ------ ------- -------- ------ Stock price high $ 5.375 $ 5.875 $ 5.875 $ 5.250 Stock price low $ 4.500 $ 4.750 $ 4.250 $ 4.375 ------ ------- ------- ------- 1994 Quarter 1st 2nd 3rd 4th Net sales $15,873 $17,321 $14,537 $19,369 Gross profit 5,612 6,198 5,069 7,424 Net income $ 123 $ 255 $ 288 $ 161 ------ ------- ------- ------- Earnings per share $ 0.05 $ 0.10 $ 0.11 $ 0.06 ------ ------- ------- ------- Stock price high $ 8.000 $ 7.375 $ 6.125 $ 5.500 Stock price low $ 3.875 $ 5.125 $ 5.000 $ 4.625 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES The Company did not file a Form 8-K within the 24 months prior to the date of its most recent financial statements that reports a change of accountants and a disagreement on any matter of accounting principles or practices or financial statement disclosure. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item with respect to directors is included under the headings "ELECTION OF DIRECTORS" and "MISCELLANEOUS" in the definitive Proxy Statement, dated March 13, 1996, relating to the annual meeting of shareholders scheduled for April 25, 1996 and is incorporated herein by reference. Information about executive officers appears at the end of Part I of this Form 10-K under the caption "EXECUTIVE OFFICERS OF REGISTRANT." ITEM 11. EXECUTIVE COMPENSATION Information concerning executive compensation is included under the heading "EXECUTIVE COMPENSATION" in the definitive Proxy Statement, dated March 13, 1996, relating to the annual meeting of shareholders scheduled for April 25, 1996 and is incorporated herein by reference; provided, however, that the subsection entitled "Report on Executive Compensation" shall not be deemed to be incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information concerning security ownership is included under the heading "STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" in the definitive Proxy Statement, dated March 13, 1996, relating to the annual meeting of shareholders scheduled for April 25, 1996 and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information concerning relationships and related transactions is included under the heading "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" in the definitive Proxy Statement, dated March 13, 1996, relating to the annual meeting of shareholders scheduled for April 25, 1996 and is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. and 2. Financial Statements and Financial Statement Schedules. Reference is made to the separate index to consolidated financial statements and schedules contained hereinafter. 3. Exhibits. Reference is made to the Exhibit Index contained herein. (b) Form 8-K There were no reports on Form 8-K filed during the fiscal quarter ended December 31, 1995. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Dated March 7, 1996 HEIN-WERNER CORPORATION By: /s/ J. L. Dindorf J. L. Dindorf President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Dated March 7, 1996 By: /s/ J. L. Dindorf J. L. Dindorf President and Chief Executive Officer; Director (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) Dated March 7, 1996 By: /s/ O. A. Friend O. A. Friend Director Dated March 7, 1996 By: /s/ J. S. Jones J. S. Jones Director Dated March 7, 1996 By: /s/ M. J. McSweeney M. J. McSweeney Director Dated March 7, 1996 By: /s/ D. J. Schuetz D. J. Schuetz Director Index to Consolidated Financial Statements and Schedules for Form 10-K The consolidated financial statements of Hein-Werner Corporation and Subsidiaries, together with the opinion thereon of KPMG Peat Marwick LLP dated February 20, 1996, appear in Item 8 of this report. The following additional financial data should be read in conjunction with the financial statements in such 1995 Annual Report to Shareholders. Additional Financial Data Independent Auditors' Report on Financial Statement Schedules Schedule Submitted: II - Valuation and qualifying accounts All other schedules are omitted because they are either not applicable or the required information is shown in the financial statements or the notes thereto. INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Hein-Werner Corporation Under date of February 20, 1996, we reported on the consolidated balance sheets of Hein-Werner Corporation and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations and cash flows for each of the years in the three-year period ended December 31, 1995, as contained in the 1995 Annual Report on Form 10-K. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedule as listed in the accompanying index. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Milwaukee, Wisconsin February 20, 1996 Schedule II VALUATION AND QUALIFYING ACCOUNTS Years ended December 31, 1995, 1994, and 1993 (Dollars in thousands) Allowances for Losses(1) Balance at Charged to Balance beginning cost and Other(2) at end of period expenses Additions Deduction(3) of period 1995 $2,625 $ 970 $ -- $1,126 $2,469 1994 $2,933 $ 850 $ 245 $1,403 $2,625 1993 $2,145 $1,751 $ 139 $1,102 $2,933 Inventory Valuation Reserve Balance at Charged to Balance beginning cost and Other at end of period expenses Additions Deduction(4) of period 1995 $ 588 $ 576 $ -- $ 474 $ 690 1994 $ 417 $ 407 $ -- $ 236 $ 588 1993 $ 437 $ 40 $ -- $ 60 $ 417 _____________ (1) Includes allowances for customer accounts receivable and non-current receivables. (2) Excess fundings from guaranteed consumer notes resulting from an interest rate spread to cover losses. (3) Bad debts written off. (4) Inventory written off. EXHIBIT INDEX Exhibits (3) Articles of Incorporation and By-Laws: (3.1) By-Laws of the Company, as amended through March 8, 1990 (incorporated by reference to Exhibit 3.1 to the Company's Form 10-Q for the quarter ended October 1, 1994) (3.2) Restated Articles of Incorporation, as amended through February 21, 1991 (incorporated by reference to Exhibit 3.2 to the Company's Form 10-K for the year ended December 31, 1993) (4) Instruments defining the rights of security holders, including indentures: (4.1) Revolving Loan and Security Agreement dated October 13, 1993 by and between the Company and Firstar Bank Milwaukee, N.A. and Continental Bank N.A. (incorporated by reference to Exhibit 4.1 to the Company's Form 10-Q for the quarter ended October 2, 1993) (4.2) Letter dated October 27, 1994 by Firstar Bank Milwaukee, N.A., as administrator of the Revolving Loan and Security Agreement dated October 13, 1993 by and between the Registrant and Firstar Bank Milwaukee, N.A. and BankAmerica N.A.'s Pacific Business Credit Inc. (formerly Continental Bank, N.A.), extending the Revolving Loan and Security Agreement to May 31, 1996 (incorporated by reference to Exhibit 4.1 to the Company's Form 10-Q for the quarter ended October 1, 1994) (4.3) Form of Note Agreement dated as of September 1, 1989 regarding the Company's $8,500,000 8% Convertible Subordinated Notes due September 1, 1999 (incorporated by reference to Exhibit 4.2 to the Company's Form 10-K for the year ended December 31, 1993) (4.4) Amendment dated November 12, 1990 to Note Agreement dated as of September 1, 1989 Re: $8,500,000 8% Convertible Subordinated Notes due September 1, 1999 (incorporated by reference to Exhibit 4.3 to the Company's Form 10-K for the year ended December 31, 1993) (4.5) Amendment No. 2 dated April 26, 1991 to Note Agreement dated as of September 1, 1989 Re: $8,500,000 8% Convertible Subordinated Notes due September 1, 1999 (incorporated by reference to Exhibit 4.4 to the Company's Form 10-K for the year ended December 31, 1993) (4.6) Amendment No. 3 dated February 3, 1992 to Note Agreement dated as of September 1, 1989 Re: $8,500,000 8% Convertible Subordinated Notes due September 1, 1999 (incorporated by reference to Exhibit 4.5 to the Company's Form 10-K for the year ended December 31, 1993) (4.7) Amendment No. 4 dated December 18, 1992 to Note Agreement dated as of September 1, 1989 Re: $8,500,000 8% Convertible Subordinated Notes due September 1, 1999 (incorporated by reference to Exhibit 4.6 to the Company's Form 10-K for the year ended December 31, 1993) (4.8) Amendment No. 5 dated February 21, 1994 to Note Agreement dated as of September 1, 1989 Re: $8,500,000 8% Convertible Subordinated Notes due September 1, 1999 (incorporated by reference to Exhibit 4.7 to the Company's Form 10-K for the year ended December 31, 1993) (4.9) Rights Agreement by and between the Company and Firstar Trust Company (formerly First Wisconsin Trust Company) (incorporated by reference to Exhibit 4.8 to the Company's Form 10-K for the year ended December 31, 1993) (10) Material contracts: (10.1)* Change of Control Agreement between the Company and Joseph L. Dindorf dated January 27, 1984 (incorporated by reference to Exhibit 10.1 to the Company's Form 10-K for the year ended December 31, 1993) (10.2)* 1980 Stock Option and Performance Share Plan (incorporated by reference to Exhibit 1 of the Company's Form S-8 Registration Statement (Registration No. 2- 68020)) (10.3) Lease dated January 25, 1983 between the Company and Winvan, Inc. (incorporated by reference to Exhibit 10.3 to the Company's Form 10-K for the year ended December 31, 1993) (10.4)* 1987 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company's Form 10-K for the year ended December 31, 1993) (10.5)* 1988 Corporate Officer Incentive Bonus Schedule (incorporated by reference to Exhibit 10.5 to the Company's Form 10-K for the year ended December 31, 1993) (11) Computation of Earnings Per Share (21) Subsidiaries (23) Consent of KPMG Peat Marwick LLP (27) Financial Data Schedule (99) Definitive Proxy Statement dated March 13, 1996 relating to the Annual Meeting of Shareholders to be held on April 25, 1996 [Except to the extent specifically incorporated by reference, the Company's Proxy Statement dated March 13, 1996 relating to the Annual Meeting of Shareholders to be held on April 25, 1996 is not deemed to be filed with the Commission as part of this Annual Report on Form 10-K] * A management contract or compensatory plan or arrangement. EX-11 2 EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE Exhibit 11 Computation of Earnings Per Share (Thousands, except per share data) Three months ended Twelve months ended December 31, December 31, 1995 1994 1995 1994 Primary: Weighted average common shares outstanding . . . 2,626 2,607 2,620 2,607 Common equivalent shares . . . . . 0 6 0 6 ------ ------ ------ ------ Weighted average common shares and common equivalent shares outstanding 2,626 2,613 2,620 2,613 ===== ===== ====== ===== Net income applicable to common shares . . $ 681 $ 161 $1,013 $ 827 ===== ===== ===== ===== Primary earnings per share . . . . . . $ 0.26 $ 0.06 $ 0.39 $ 0.32 ===== ===== ====== ===== Fully Diluted: Weighted average common shares outstanding . . . 2,626 2,607 2,620 2,607 Common equivalent shares . . . . . 0 0 0 6 Additional shares assuming conversion of subordinated debentures . . . 717 717 717 717 ------ ------ ------ ------ Fully diluted weighted average common shares and common equivalent shares outstanding 3,343 3,324 3,337 3,330 ===== ===== ===== ===== Net income applicable to diluted common . $ 772 $ 250 $1,373 $1,187 ===== ===== ===== ===== Fully diluted earnings per share $ 0.23 $ 0.08 $ 0.41 $ 0.36 ===== ===== ===== ==== Common shares have been adjusted to give effect to the 5% stock dividend paid January 26, 1996. The $4,500,000 8% Convertible Subordinated Notes are convertible at December 31, 1993 to common shares at a price of $6.59 per share after giving effect to the stock dividend paid January 27, 1995. Earnings per common share and common equivalent share were computed by dividing the net income by the weighted average number of shares of common stock and common stock equivalents outstanding during the period. Earnings per common share, assuming full dilution, is determined by assuming that at the beginning of the period convertible notes were converted at the price per share in effect at that time and common share options were exercised. As to the options, incremental shares would be calculated using the treasury stock method, assuming common share purchases at the greater of the average market price of the common shares for the period or the ending price of the common shares. EX-21 3 EXHIBIT 21 LIST OF SUBSIDIARIES Exhibit 21 SIGNIFICANT SUBSIDIARIES OF THE REGISTRANT The Company has seven wholly-owned subsidiaries, each of which is included in the consolidated financial statements of the Company: (a) Blackhawk Collision Repair Inc., a Wisconsin corporation (b) Blackhawk Automotive Ltd., a British corporation (c) Blackhawk GmbH, a German corporation (d) Blackhawk Italia Srl, an Italian corporation (e) Blackhawk S.A., a French corporation (f) Hein-Werner Europe S.A., a Swiss corporation (g) HWC Export Sales Corporation, a Barbados corporation incorporated January 3, 1989, for the purpose of qualifying as a Foreign Sales Corporation (FSC) under applicable Internal Revenue Code provisions. EX-23 4 EXHIBIT 23 CONSENT Exhibit 23 Consent of KPMG Peat Marwick LLP The Board of Directors Hein-Werner Corporation: We consent to incorporation by reference in the registration statement (No. 2-68020) on Form S-8 of Hein-Werner Corporation of our report dated February 20, 1996, relating to the consolidated balance sheets of Hein- Werner Corporation and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations and cash flows for each of the years in the three-year period ended December 31, 1995, and our report dated February 20, 1996, relating to the financial statement schedule for each of the years in the three-year period ended December 31, 1995 which reports appear in the December 31, 1995 Annual Report on Form 10-K of Hein-Werner Corporation. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Milwaukee, Wisconsin March 20, 1996 EX-27 5 EXHIBIT 27 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 396 0 25,019 1,742 17,271 41,525 16,517 11,163 49,657 20,749 0 0 0 2,504 13,641 49,657 73,693 73,693 46,867 69,815 93 970 1,838 977 (36) 1,013 0 0 0 1,013 0.39 0.41
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