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UNITED
STATES WASHINGTON,
D.C. 20549 FORM 10-QSB X
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT Commission
File No. 0-147 HICKOK INCORPORATED
Ohio 34-0288470 (State or
other jurisdiction of incorporation or organization) (IRS Employer Identification No.) 10514 Dupont
Avenue, Cleveland, Ohio 44108 (Address of
principal executive offices) (Zip Code) Registrant's
telephone number including area code (216) 541-8060 Check whether the
issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during
the past 12 months (or for such shorter period that
the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past
90 days.
Yes X No___
PART I. FINANCIAL
INFORMATION HICKOK INCORPORATED Three months ended Net Sales Product
Sales Service
Sales
Total Net Sales Cost
of Product Sold Cost
of Service Sold Product
Development Marketing
and Administrative Interest
Charges Other
Income Income
<Loss> before Provision for Income Taxes Provision
for <Recovery of> Income Taxes Earnings per
Common Share: Net Income
<Loss> Earnings per
Common Share Assuming Dilution: Net Income
<Loss> Dividends
per Common Share See Notes to Consolidated Financial
Statements December 31, September 30, December 31, Assets Current
Assets Cash and Cash
Equivalents Trade Accounts
Receivable-Net Inventories Deferred Income
Taxes Prepaid Expenses Total Current Assets Property,
Plant and Equipment Land Buildings Machinery
and Equipment Total Property - Net Other Assets Deferred Income
Taxes Deposits Total Other Assets Total Assets December 31, September 30, December 31, Liabilities
and Stockholders' Equity Current
Liabilities Trade Accounts
Payable Accrued Payroll
& Related Expenses Accrued Expenses Accrued Taxes
Other Than Income Accrued Income
Taxes Total Current Liabilities Stockholders'
Equity Class A, $1.00 par value; Class B, $1.00
par value; Contributed
Capital Retained Earnings Total Stockholders' Equity Total Liabilities
and HICKOK INCORPORATED Cash Flows
from Operating Activities: Cash
received from customers Cash
paid to suppliers and employees Interest
paid Interest
received Income
taxes <paid> refunded
Net Cash Provided By <Used In> Operating Cash Flows
from Investing Activities: Capital
expenditures
Net Cash Provided By <Used in> Investing Cash Flows
from Financing Activities: Purchase
of Class A Shares
Net Cash Provided By <Used In> Financing Net increase
<decrease> in cash and cash equivalents Cash and cash
equivalents at beginning of year Cash and cash
equivalents at end of first quarter See Notes
to Consolidated Financial Statements Reconciliation
of Net Income <Loss> to Net Cash Provided
By <Used In> Operating Activities: Net
Income <Loss> Adjustments
to reconcile net Income <loss> to
Depreciation and amortization
Changes in assets and liabilities:
Decrease <Increase>
in accounts
Decrease <Increase>
in inventories
Decrease <Increase>
in prepaid expenses
Increase <Decrease>
in accounts payable
Increase <Decrease>
in accrued payroll
Increase <Decrease>
in accrued expenses
Increase <Decrease>
in accrued income
Total Adjustments
Net Cash Provided
By <Used In> HICKOK
INCORPORATED 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-QSB 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
month period ended December 31, 2004 are not necessarily indicative
of the results that may be expected for the year ended September
30, 2005. For further information, refer to the consolidated
financial statements and footnotes thereto included in the
Company's annual report on Form 10-KSB for the year ended September
30, 2004. 2. Short-term
Investments Investments
are comprised of marketable securities in the form of mutual
funds or short-term corporate notes. Marketable securities
are classified as available-for-sale and are recorded at their
fair market value. Unrealized gains or losses resulting from changes
in fair value are recorded as a component of comprehensive income
(loss). Short-term corporate debt securities are considered as held-to-maturity
with the cost approximating the market value and a maturity
date of less than one year from the date of purchase.
Short-term investments
are as follows: 3. Inventories Inventories are valued
at the lower of cost or market and consist of the following: December 31,
September
30, December 31, Components $2,549,219 $2,734,901 $2,289,943 Work-in-Process Finished Product 674,909 689,808 $3,701,165 $3,860,225 $3,825,764 The above amounts
are net of reserve for obsolete inventory in the
amount of $169,867, $106,000 and $141,265 for the
periods ended December 31, 2004, September 30, 2004
and December 31, 2003 respectively. 4. Capital Stock,
Treasury Stock, Contributed Capital and Stock Options Under the Company's
Key Employees Stock Option Plans (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 125,000
Class A shares were outstanding at December 31, 2004 (125,000
shares at September 30, 2004 and 129,900 shares at December
31, 2003) at prices ranging from $3.125 to $17.25 per share.
No options
were granted, exercised or canceled during the three month periods
presented under the Employee Plans. All options granted under
the Employee Plans are exercisable at December 31, 2004. The Company's Outside
Directors Stock Option Plans (collectively the "Directors
Plans"), provide for the automatic grant of options
to purchase up to 45,000 shares (less 33,000 options
which were either canceled, expired or unissued) 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 45,000 Class A shares were outstanding
at December 31, 2004 (45,000 shares at September 30, 2004 and
39,000 shares at December 31, 2003) at prices ranging from $3.55
to $18.00 per share. All outstanding options under the Directors
Plans become fully exercisable on February 19, 2007. The following is a summary
of the range of exercise prices for stock options outstanding
and exercisable under the Employee Plans and the Directors Plans
at December 31, 2004:
SECURITIES AND EXCHANGE COMMISSION
_________________________________________________________________
(Exact
name of small business issuer as specified in its charter)
Transitional Small Business Disclosure Format
(Check one): Yes___No X
ITEM 1. FINANCIAL
STATEMENTS:
CONSOLIDATED
INCOME STATEMENTS
(Unaudited)
December 31,
2004
2003
$1,821,359
$3,176,314
243,532
394,095
2,064,891
3,570,409
Cost and Expenses
1,159,799
1,631,486
188,016
216,644
532,188
507,349
Expenses993,209
969,875
516
504
<75,979>
<16,159>
Total Costs and Expenses
2,797,749
3,309,699
<732,858>
260,710
<249,100>
88,700
Net Income <Loss>
$<483,758>
$172,010
$<.40>
$.14
$<.40>
$.14
$.10
$-0-
CONSOLIDATED BALANCE
SHEETS
Note: Amounts derived from
audited financial statements previously filed with the
2004
(Unaudited)
2004
(Note)
2003
(Unaudited)
$232,990
$1,739,719
$2,123,844
Short-term
Investments
2,823,027
2,051,863
-
1,015,760
1,448,444
1,986,559
3,701,165
3,860,225
3,825,764
44,700
116,000
131,400
132,577
46,337
161,707
7,950,219
9,262,588
8,229,274
229,089
229,089
229,089
1,478,629
1,478,629
1,478,629
2,578,992
2,558,603
2,623,163
4,286,710
4,266,321
4,330,881
Less: Allowance for Depreciation
3,267,509
3,191,894
3,117,794
1,019,201
1,074,427
1,213,087
1,625,100
1,376,000
1,578,700
1,750
1,750
1,750
1,626,850
1,377,750
1,580,450
$10,596,270
$11,714,765
$11,022,811
Securities and Exchange
Commission.
See Notes to Consolidated
Financial Statement
2004
(Unaudited)
2004
(Note)
2003
(Unaudited)
$189,461
$416,186
$706,237
302,000
726,192
253,257
Dividends Payable
121,125
-
-
152,056
216,735
88,555
Accrued Stock Repurchase
-
33,300
-
94,054
82,713
99,544
128,934
133,934
245,634
987,630
1,609,060
1,393,227
authorized 3,750,000 shares;
756,399 shares outstanding
(762,588, September 30, 2004
and 764,884, December 31,
2003)excluding 15,775 shares
in treasury (12,916, September
30, 2004 and 9,586, December
31, 2003)
756,399
762,588
764,884
authorized
1,000,000 shares;
454,866
shares outstanding
excluding 20,667 shares in
treasury
454,866
454,866
454,866
Accumulated Comprehensive
Income
(net of tax)
171,271
34,863
-
931,446
953,847
998,053
7,294,658
7,899,541
7,411,781
9,608,640
10,105,705
9,629,584
Stockholders' Equity
$10,596,270
$11,714,765
$11,022,811
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE THREE MONTHS ENDED DECEMBER 31,
(Unaudited)
2004
2003
$2,497,575
$3,281,399
<3,422,530>
<3,515,455>
<516>
<504>
6,021
15,152
<5,000>
-
Activities
<924,450>
<219,408>
<20,389>
<22,719>
Purchase of short-term investments
<500,000>
-
Sale of short-term
investments
-
1,018,000
Activities
<520,389>
995,281
<61,890>
-
Activities<61,890>
-
<1,506,729>
775,873
1,739,719
1,347,971
$232,990
$2,123,844
2004
2003
$<483,758>
$172,010
net cash provided by operating activities:
75,615
75,616
Dividends reinvested
<63,456>
-
Deferred income taxes
<249,100>
-
receivable
432,684
<289,010>
159,060
<534,436>
<86,240>
<114,326>
<226,725>
412,021
and related expenses
<424,192>
4,206
and
accrued taxes other than income
<53,338>
<34,189>
taxes
<5,000>
88,700
<440,692>
<391,418>
Operating
Activities
$<924,450>
$<219,408>
Non-cash disclosures:
Dividends payable
$121,125
$
-
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
DECEMBER
31, 2004
1. Basis of
Presentation
December 31,
December 31,
2004
2003
COST
MARKET
COST
MARKET
Short-term corporate
debt securities
$
-
$
-
$
-
$
-
Mutual funds
$2,500,000
$2,823,027
Less Cost
2,500,000
Less Dividends reinvested
63,456
Gross unrealized gains
(losses) on short-term investments
259,571
Deferred income taxes
88,300
Accumulated comprehensive
income (net of tax)
$171,271
2004
2004
2003
477,037
435,516
914,840
620,981
Employee Plans
Outstanding Stock
Options Exercisable
Share Price
Range
of exercise prices:
$3.13
- 5.00
$7.13
- 10.75
$17.25
Directors
Plans |
|
Share Price |
Weighted Average
Remaining Life
|
Number of Stock Options Exercisable |
Weighted Average Share
Price |
Range of exercise prices: | |||||
$3.55 - 4.25 |
16,000
|
$3.81
|
7.7
|
10,333 |
$3.91 |
$7.13 - 8.50 |
17,000
|
$7.82
|
4.9
|
11,000 |
$8.13 |
$12.25 - 18.00 |
12,000
|
$15.63
|
2.0
|
12,000 |
$15.63 |
|
|
||||
45,000
|
$8.48
|
|
33,333 |
$9.52 |
|
|
|
The Company has adopted the disclosure only provisions of SFAS 123, which allows a company to continue to measure compensation costs for those plans using the intrinsic value-based method of accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees". The Company has elected to follow APB Opinion No. 25 and related interpretations in accounting for its stock options for both employees and non-employee Directors. Compensation costs for stock based awards is measured by the excess, if any, of the fair market value price at the grant date of the underlying stock over the amount the individual is required to pay for exercising the stock based award. Compensation cost for fixed based awards are measured at the grant date, and the Company uses the Black-Scholes option pricing model to determine the fair value estimates for disclosure purposes. The Black-Scholes option pricing model requires the use of subjective assumptions which can materially affect the fair value estimates. As a result, management believes that the Black-Scholes model may not necessarily provide a reliable single measure of the fair value of the Company's stock options. The following weighted-average assumptions were used in the option pricing model for the three month periods ended December 31, 2004 and 2003 respectively: a risk free interest rate of 4.0% and 3.0%; an expected life of 6 and 6 years; an expected dividend yield of 0.0% and 0.0%; and a volatility factor of .44 and .60.
The adoption of this statement
did not affect the Company's results of operations,
financial position or liquidity. The Company's pro
forma net income (loss) and earnings (loss) per share
would have been as follows:
Three months ended
December 31,
|
2004 |
2003 |
|
Net Income <Loss> as reported |
$<483,758> |
$172,010 |
Deduct: Total stock-based employee and
Director compensation expense determined under fair value
based method for all awards, net of related tax effects
|
2,723 |
2,348 |
|
|
|
Pro forma Net Income <Loss> |
$<486,481> |
$169,662 |
Basic and diluted Income <Loss>
per share as reported |
$<.40> |
$.14 |
Pro forma basic and diluted Income <Loss>
per share |
$<.40> |
$.14 |
Unissued shares
of Class A common stock (624,866 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 Plans.
5. Recently Issued Accounting Pronouncements
In connection with
the adoption of the Financial Accounting Standards
Board SFAS No. 142, "Goodwill and Other Intangible
Assets", the Company discontinued the amortization of
goodwill as of October 1, 2002. In lieu of amortization,
the new standard requires that goodwill be tested for impairment
as of the date of adoption and at least annually thereafter.
The Company has
adopted the disclosure only provisions of SFAS 123 and 148
(see note 4).
6. Earnings per Common Share
Earnings per common share
are based on the provisions of FAS Statement
No. 128, "Earnings per Share." Accordingly, the
adoption of this statement did not affect the Company's
results of operations, financial position or liquidity.
The effects of applying FAS No. 128 on earnings per share
and required reconciliations are as follows:
Three Months ended December 31, |
||
2004 |
2003 |
|
Basic Income <Loss> per Share |
|
|
Income <Loss>
available |
$<483,758> |
$172,010 |
|
|
|
Shares denominator |
1,213,073 |
1,219,750 |
|
|
|
Per share amount |
$<.40> |
$.14 |
|
|
|
Effect of Dilutive Securities |
|
|
Average shares outstanding |
1,213,073 |
1,219,750 |
Stock options |
- |
18,472 |
|
|
|
|
1,213,073 |
1,238,222 |
|
||
Diluted Income <Loss> per Share |
|
|
Income <Loss> available to common stockholders |
$<483,758> |
$172,010 |
|
|
|
Per share amount |
$<.40> |
$.14 |
|
|
Options to purchase 170,000 and 92,650
shares of common stock during the first quarter of
fiscal 2005 and the first quarter of fiscal 2004, respectively,
at prices ranging from $3.125 to $18.00 per share were outstanding
but were not included in the computation of diluted
earnings per share because the option's effect was antidilutive
or the exercise price was greater than the average
market price of the common share.
7. Segment and Related Information
The Company has adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, which changes the way the Company reports the information about its operating segments.
The Company's four business units have a common management team and infrastructure that offer different products and services. The business units have been aggregated into two reportable segments: 1.)indicators and gauges and 2.)automotive related diagnostic tools and equipment.
Indicators and
Gauges
This
segment consists of products manufactured and sold
primarily to companies in the aircraft and locomotive
industry. Within the aircraft market, the primary
customers are those companies that manufacture or service
business and pleasure aircraft. Within the locomotive
market, indicators and gauges are sold to both original
equipment manufacturers and to operators of railroad equipment.
Automotive Diagnostic
Tools and Equipment
This
segment consists primarily of products designed and
manufactured to support the testing or servicing of
automotive systems using electronic means to measure vehicle parameters.
These products are sold to OEM's and to the aftermarket
using several brand names and a variety of distribution
methods. Included in this segment are products used for state
required testing of vehicle emissions. Also included in this segment
are fastening control products used primarily
by large manufacturers to monitor and control the "nut
running process" (the controlled tightening of threaded fasteners)in assembly plants. This equipment provides
high quality joint control and documentation.
Information by industry
segment is set forth below:
Three Months Ended |
|
2004 |
2003 |
|
Net Sales |
|
|
Indicators and Gauges |
$424,273 |
$311,144 |
Automotive
Diagnostic Tools and Equipment |
1,640,618 |
3,259,265
|
|
|
|
|
$2,064,891 |
$3,570,409 |
|
|
|
Income <Loss> before Provision for Income Taxes |
||
Indicators and Gauges |
$<42,606> |
$7,346 |
Automotive
Diagnostic Tools and Equipment |
<373,771> |
609,473 |
General Corporate Expenses |
<316,481> |
<356,109> |
|
|
|
|
$<732,858> |
$260,710 |
|
|
|
Asset Information |
|
|
Indicators and Gauges |
$701,639 |
$705,300 |
Automotive
Diagnostic Tools and Equipment |
4,012,901 |
5,080,066
|
Corporate |
5,881,730 |
5,237,445
|
|
|
|
|
$10,596,270 |
$11,022,811 |
|
|
|
Geographical Information |
|
|
Included in the consolidated
financial statements are the following amounts
related to geographical locations: |
||
|
|
|
Revenue: |
|
|
United States |
$2,010,487 |
$3,496,703 |
Canada |
42,189 |
37,418 |
Other foreign countries |
12,215 |
36,288 |
|
|
|
$2,064,891 |
$3,570,409 |
|
|
|
All export sales
to Canada and other foreign countries
are made in United States of America Dollars.
8. Comprehensive Income
Three Months Ended December 31,
|
||
2004 |
2003 |
|
Net Income <Loss> |
$<483,758> |
$172,010 |
Unrealized
Gain <Loss> on |
136,408 |
- |
|
|
|
Comprehensive Income <Loss> |
$<347,350> |
$172,010 |
|
|
9. Tender Offer
On August 11, 2004, the Company filed a Schedule 13E-3 with the Securities and Exchange Commission in connection with a Tender Offer to purchase for cash all Class A common shares, $1 par value, held by holders of 99 or fewer shares as of the close of business on August 2, 2004. The purpose of the tender offer was generally to reduce the Company's number of shareholders of record to fewer than 300 to allow the Company to terminate its' reporting obligation under the Securities Exchange Act of 1934. The Company paid $10 per Class A common share properly tendered by eligible shareholders. The offer expired on December 15, 2004.
The Board of Directors and management pursued this offer
under the belief that the Company derives little benefit from
the status of being a public company. In addition, the costs
associated with certain provisions of the Sarbanes-Oxley Act, which
are required to be in place in fiscal 2005 become even more significant
given our size and the relative benefits we can derive from being
public. Although well intended, Sarbanes-Oxley compliance
could mean significant increases for the Company in annual accounting,
legal and insurance costs for remaining public and could significantly
affect the size of the Board of Directors and the time management
will be able to devote to operating the business.
During the tender offer a number of brokerage firms transferred nominees from "street name" to individual registered shareholders of Hickok Class A common stock thereby creating additional shareholders of record. As a result these transfers prevented the outcome sought by the Company. At the close of the tender offer on December 15, 2004 the Company purchased 6,189 shares from 147 shareholders of record and several brokerage firms for $61,890 ($33,300 was accrued as of September 30, 2004). Following the completion of the tender offer the number of shareholders of record of the Company was approximately 400.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results
of Operations, First Quarter (October 1, 2004
through December 31, 2004)
Fiscal
2005 Compared to First Quarter Fiscal 2004
-----------------------------------------------------------------------------------------
Reportable Segment Information
The Company has determined that it has two reportable segments: 1)indicators and gauges and 2)automotive related diagnostic tools and equipment. The indicators and gauges segment consists of products manufactured and sold primarily to companies in the aircraft and locomotive industry. Within the aircraft market, the primary customers are those companies that manufacture or service business and pleasure aircraft. Within the locomotive market, indicators and gauges are sold to both original equipment manufacturers and to operators of railroad equipment. Revenue in this segment was $424,273 and $311,144 for the first quarter of fiscal 2005 and fiscal 2004, respectively. The automotive diagnostic tools and equipment segment consists primarily of products designed and manufactured to support the testing or servicing of automotive systems using electronic means to measure vehicle parameters. These products are sold to OEM's and to the aftermarket using several brand names and a variety of distribution methods. Included in this segment are products used for state required testing of vehicle emissions. Also included in this segment are fastening control products used primarily by large manufacturers to monitor and control the "nut running process" (the controlled tightening of threaded fasteners)in assembly plants. This equipment provides high quality joint control and documentation. Revenue in this segment was $1,640,618 and $3,259,265 for the first quarter of fiscal 2005 and fiscal 2004, respectively.
Results of Operations
Product sales for the quarter ended December 31, 2004 were $1,821,359 versus $3,176,314 for the quarter ended December 31, 2003. The decrease in product sales during the current quarter of approximately $1,355,000 was volume related due primarily to lower sales of automotive diagnostic products, primarily, aftermarket products which include emissions products. Fiscal 2004 sales included approximately $1,372,000 that resulted from the rollout of the Pennsylvania emissions program. No equivalent program occurred in Fiscal 2005. Sales of indicator products and fastening systems products increased by approximately $117,000 and $19,000, respectively while other automotive diagnostic products sales declined by approximately $119,000. Product sales are expected to increase moderately during the remainder of the fiscal year.
Service sales for the quarter ended December 31, 2004 were $243,532 versus $394,095 for the quarter ended December 31, 2003. The decrease was volume related and due primarily to a lower sales volume for chargeable repairs. The current level of service sales related to both product repair sales and training related programs is expected to increase slightly for the balance of the fiscal year.
Cost of product sold in the first quarter of fiscal 2005 was $1,159,799 (63.7% of product sales) as compared to $1,631,486 (51.4% of product sales) in the first quarter of fiscal 2004. The increase in the cost of product sold percentage was due primarily to a lower sales volume, lower plant utilization and a change in product mix. The current cost of product sold percentage is anticipated to decrease moderately during the balance of the fiscal year.
Cost of service sold in the first quarter of fiscal 2005 was $188,016 (77.2% of service sales) as compared to $216,644 (55.0% of service sales) in the first quarter of fiscal 2004. The increase in the cost of services sold percentage was primarily due to lower sales volume, lower plant untilization and somewhat higher warranty costs. The current cost of services sold percentage is anticipated to decrease moderately for the balance of the fiscal year.
Product development expenses were $532,188 in the first quarter of fiscal 2005 (29.2% of product sales) as compared to $507,349 (16.0% of product sales) in the first quarter of fiscal 2004. The dollar increase was due primarily to increased labor costs while the percentage increase was due to lower product sales. The current level of product development expenses is expected to increase slightly for the balance of the fiscal year.
Marketing and administrative expenses were $993,209 (48.1% of total net sales) in the first quarter of 2005 versus $969,875 (27.2% of total net sales) for the same period a year ago. The percentage increase was due to the decrease in the level of total sales for the current quarter. Marketing expenses were approximately $601,000 in the first quarter of fiscal 2005 versus $598,000 for the same period a year ago. Within marketing expenses, increases were in sales promotion of $10,000, travel expenses of $16,000 and other fixed and variable marketing expenses of approximately $25,000, offset in part by a decrease in other variable sales expenses such as royalties of $26,000 and advertising of $19,000. Administrative expenses were approximately $392,000 in the first quarter of fiscal 2005 versus $372,000 for the same period a year ago. The dollar increase during the current fiscal quarter was due primarily to higher communication equipment rental of approximately $8,000. Also contributing to the dollar increase were higher professional fees and insurance of approximately $5,000 and $3,000, respectively. The current level of marketing and administrative expenses is expected to increase slightly for the remainder of the fiscal year.
Interest expense was $516 in the first quarter of fiscal 2005 which compares with $504 in the first quarter of fiscal 2004. The current level of interest expense is expected to continue for the remainder of fiscal 2005.
Other income was $75,979 in the first quarter of fiscal 2005 which compares with $16,159 in the first quarter of fiscal 2004. Other income consists primarily of dividend income on short-term investments, interest income on cash and cash equivalents invested and the proceeds from the sale of scrap metal shavings associated with emissions product. The increase is due primarily to dividend income reinvested during the current quarter.
The net loss in the first quarter of fiscal 2005 was $483,758. The net loss for the current quarter is primarily the result of lower sales volume. This compares with net income in the first quarter of fiscal 2004 of $172,010.
Management believes
the first quarter results were due to the seasonality of the markets
in which the Company participates. In fiscal 2004 this seasonality was
largely masked by the rollout of a large emissions testing program in
the state of Pennsylvania in which the Company participated. The first
and second calendar quarters are typically much stronger than the fourth
calendar quarter. In addition, the Company continues to invest in two possible
opportunities that, if they go forward, could result in substantial future
revenues. These two large opportunities are more fully discussed in the Company’s
2004 fiscal year Form 10-KSB filing and the Company's 2004 Annual Report
to Shareholders. With the projected continuing growth in the Company’s core
businesses, management projects increased sales or future cost cutting measures
will generate sufficient taxable income during the carryforward period
to fully realize deferred tax benefits and credits to be earned in the future.
The tax benefits have the effect of reducing future federal income taxes
payable. The contribution, research and development credit and net operating
loss carryforwards will begin to expire in 2019.
Unshipped customer orders as of December 31, 2004 were $1,561,000 versus $3,626,000 at December 31, 2003. The decrease was due primarily to lower orders in automotive diagnostic products of $1,869,000, specifically, $1,799,000 for emission products that were largely associated with a state of Pennsylvania emissions program. Also contributing to the decrease was $206,000 for training programs. The Company anticipates that most of the current backlog will be shipped in fiscal 2005.
Liquidity and Capital Resources
Total current assets were $7,950,219, $9,262,588 and $8,229,274 at December 31, 2004, September 30, 2004 and December 31, 2003, respectively. The decrease of approximately $279,000 from December to December is due primarily to the decrease in cash and cash equivalents, accounts receivable and inventories of $1,891,000, $971,000 and $125,000 respectively, offset in part by an increase in short-term investments of approximately $2,823,000. The decrease from September 30, 2004 and December 31, 2004 is due primarily to the decrease in cash and cash equivalents, accounts receivable and inventories of $1,507,000, $433,000 and $159,000 respectively, offset in part by an increase in short-term investments of approximately $771,000. The decreases are due to decreased sales and inventory purchasing volume during the current quarter.
Working capital as of December 31, 2004 amounted to $6,962,589 as compared with $6,836,047 a year earlier. Current assets were 8.0 times current liabilities and total cash, short-term investments and receivables were 4.1 times current liabilities. These ratios compare to 5.9 and 3.0, respectively, at December 31, 2003.
Internally generated funds during the three months ended December 31, 2004 were a negative $924,450 and were not adequate to fund the Company's primary non-operating cash requirement consisting of capital expenditures of $20,389. The primary reason for the negative cash flow from operations was the net loss. The Company believes that cash and cash equivalents, together with funds anticipated to be generated by operations and funds available under the Company's credit agreement, will provide the liquidity necessary to support its current and anticipated capital expenditures through the end of fiscal 2005.
Shareholders' equity during the three months ended December 31, 2004 decreased by $497,065 which was the net loss during the period of $483,758 plus $121,125 dividends declared plus $28,590 for the purchase of 2,859 Class A shares tendered that were placed in treasury less $136,408 accumulated comprehensive income from investments.
The Company has a credit agreement with its financial lender that provides for a secured revolving credit facility of $1,000,000 with interest at the bank's prime commercial rate. At December 31, 2004, the Company had no outstanding balance under this loan facility. The agreement expires in February 2005 and is secured by the Company's accounts receivable, inventory, equipment and general intangibles. The credit agreement contains affirmative covenant requirements related to tangible net worth minimums of $9,000,000, maintenance of a ratio of debt to tangible net worth of not more than 1.00 to 1.00 and an interest coverage ratio of not less than 1.25 to 1.00. The Company is in compliance with these covenants. Management is currently in negotiation with its financial lender regarding renewal of the facility, and is confident that a facility can be negotiated at acceptable terms.
Critical
Accounting Policies
Forward-Looking Statements
The foregoing discussion
includes forward-looking statements relating to
the business of the Company. These forward-looking
statements, or other statements made by the Company,
are made based on management's expectations and beliefs
concerning future events impacting the Company and are subject
to uncertainties and factors (including, but not limited
to, those specified below) which are difficult to predict and,
in many instances, are beyond the control of the Company.
As a result, actual results of the Company could differ materially
from those expressed in or implied by any such forward-looking
statements. These uncertainties and factors include (a) the
Company's dependence upon a limited number of customers, including Ford Motor
Company, (b) the highly competitive industry in which the company
operates, which includes several competitors with
greater financial resources and larger sales organizations,
(c) the acceptance in the marketplace of new products and/or
services developed or under development by the Company including
automotive diagnostic products, fastening systems products
and indicating instrument products, (d) the ability of the Company
to further establish distribution and a customer base in the
automotive aftermarket, and (e) the Company's ability to capitalize
on market opportunities including state automotive emissions programs.
ITEM 3: CONTROLS AND PROCEDURES
As of December 31, 2004, an evaluation was performed, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer along with the Company's Senior Vice President, Finance and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based upon that evaluation, the Company's management, including the Chief Executive Officer along with the Company's Senior Vice President, Finance and Chief Financial Officer, concluded that the Company's disclosure controls and procedures were effective as of December 31, 2004 in ensuring that information required to be disclosed by the Company in the reports it files and submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. There were no changes in the Company's internal control or financial reporting during the fiscal quarter ended December 31, 2004 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II. OTHER
INFORMATION
ITEM 6: EXHIBITS
Exhibit No. |
Description |
|
11 |
Statement Regarding Computation of Earnings Per share and Common
Share Equivalents
|
|
31.1 |
Certification by the Chief
Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of
2002 |
|
31.2 |
Certification by the Chief
Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of
2002 |
|
32.1 |
Certification by the Chief
Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
32.2 |
Certification by the Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 |
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: February 10, 2005 |
HICKOK
INCORPORATED |
|
|
||
|
/s/ R. L. Bauman |
|
|
R. L. Bauman,
Chief Executive Officer, |
|
|
||
|
||
|
/s/ G. M. Zoloty |
|
|
G. M. Zoloty, Chief Financial Officer |
FORM 10-QSB
EXHIBIT 11
HICKOK
INCORPORATED
CONSOLIDATED STATEMENT OF COMPUTATION OF EARNINGS
PER COMMON SHARE AND COMMON SHARE EQUIVALENTS
Three Months Ended |
|
|
December 31, |
|
|
2004 |
2003 |
|
NET INCOME
|
$<483,758> |
$172,010 |
|
|
|
Net income (loss)
applicable to common |
$<483,758> |
$172,010 |
|
|
|
SHARES OUTSTANDING
|
1,213,073 |
1,219,750 |
|
|
|
Net effect of dilutive stock options - based on the treasury stock method using year-end market price, if higher than average market price |
-* |
18,472 |
|
|
|
Total shares for diluted earnings per share |
1,213,073 |
1,238,222 |
|
|
|
Basic Earnings Per Common Share |
$<.40> |
$.14 |
|
|
|
Diluted Earnings Per Common Share |
$<.40> |
$.14 |
* Net effect of
stock options was antidilutive for the period.
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
Robert L. Bauman, Chief Executive Officer
I, Robert L. Bauman, Chief Executive Officer, certify that:
I have reviewed this quarterly report on Form 10-QSB of Hickok Incorporated;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether
or not material, that involves management
or other employees who have a significant
role in the registrant's internal control over financial reporting.
Dated:February 10, 2005
/s/ R. L. Bauman
R. L. Bauman
Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
Gregory M. Zoloty, Senior Vice President, Finance and Chief Financial Officer
I, Gregory M. Zoloty, Vice President, Finance and Chief Financial Officer, certify that:
I have reviewed this quarterly report on Form 10-QSB of Hickok Incorporated;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether
or not material, that involves management
or other employees who have a significant
role in the registrant's internal control over financial
reporting.
Dated:February 10, 2005
/s/ G. M. Zoloty
G. M. Zoloty
Senior Vice President,
Finance
and Chief Financial Officer
Form 10-QSB
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Hickok Incorporated (the "Company") on form 10-QSB for the period ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert L. Bauman, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ R. L. Bauman
R. L. Bauman
Chief Executive Officer
February 10, 2005
Form 10-QSB
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly
Report of Hickok Incorporated (the "Company") on Form 10-QSB for the period
ending December 31, 2004 as filed with the Securities and Exchange Commission
on the date hereof (the "Report"), I, Gregory M. Zoloty, Chief Financial
Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906
of the Sarbanes-Oxley Act of 2002, that:
the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ G. M. Zoloty
G. M. Zoloty
Chief Financial Officer
February 10, 2005