-----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, Jbqe1TdO8UZN4eawKluOhmsHTVKWQxf7dOuESLQ6E8dWTSSplkM10QEuP+1zaVQA imm/Ves/CLJx1Si49bpyEQ== 0000912057-95-011478.txt : 19951226 0000912057-95-011478.hdr.sgml : 19951226 ACCESSION NUMBER: 0000912057-95-011478 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951222 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HICKOK INC CENTRAL INDEX KEY: 0000047307 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 340288470 STATE OF INCORPORATION: OH FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-00147 FILM NUMBER: 95603822 BUSINESS ADDRESS: STREET 1: 10514 DUPONT AVE CITY: CLEVELAND STATE: OH ZIP: 44108 BUSINESS PHONE: 2165418060 MAIL ADDRESS: STREET 1: 10514 DUPONT AVE CITY: CLEVELAND STATE: OH ZIP: 44108 FORMER COMPANY: FORMER CONFORMED NAME: HICKOK ELECTRICAL INSTRUMENT CO DATE OF NAME CHANGE: 19920703 10-K405 1 FORM 10K-405 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 [FEE REQUIRED] For the fiscal year ended September 30, 1995 -------------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from Not Applicable to Not Applicable -------------------- --------------------- Commission file number 0-147 ----------------------------------------------------- HICKOK INCORPORATED - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 34-0288470 - ------------------------------- ---------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) 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 ----------------------- Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: Class A Common Shares, $1.00 par value - -------------------------------------------------------------------------------- (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of December 14, 1995, the Registrant had 737,984 voting shares of Class A Common Stock outstanding and 454,866 voting shares of Class B Common Stock outstanding. As of such date, non-affiliates held 643,882 shares of Class A Common Stock and 233,098 shares of Class B Common Stock. As of December 14, 1995, based on the mean ($17.25 per share) between the bid and asked prices in the over-the-counter market (most recent bid and asked prices being as of December 14, 1995), the aggregate market value of the Class A Common Stock held by such non-affiliates was approximately $12,730,224. There is no trading market in the shares of Class B Common Stock. 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. /X/ Documents Incorporated by Reference: Document Incorporated by Part of Form 10-K Reference ----------------- ------------------------- Part III (Items 10, Portions of the Registrant's Definitive 11, 12 and 13) Proxy Statement to be used in connection with its Annual Meeting of Shareholders to be held on February 21, 1996. Except as otherwise stated, the information contained in this Form 10- K is as of September 30, 1995. PART I ITEM 1. BUSINESS GENERAL DEVELOPMENT OF BUSINESS Hickok Incorporated was organized in 1915 as an Ohio corporation, and first offered its securities to the public in 1959. Except as otherwise stated, the terms "Company" or "Hickok" as used herein mean Hickok Incorporated and its subsidiary. Previously inactive subsidiaries were dissolved during fiscal 1993. In February 1995 the shareholders approved a change in the Company's name to Hickok Incorporated from The Hickok Electrical Instrument Company, which was not representative of the Company's current products and markets and may have conveyed an inaccurate image of the Company to customers, prospects and investors. For those reasons the name change was made. The Company is primarily involved in providing products and services to original equipment manufacturers within the transportation industry. The major market served is automotive. Other markets with which the Company is involved include aircraft, locomotive and marine markets. Regarding the products the Company supplies to the transportation industry, the Company for many years has developed and produced precision indicating instruments for aircraft, locomotive and general industrial applications. In recent years the Company has adapted this expertise to become a leader in the development of electronic diagnostic equipment for the automotive market. Production of diagnostic test equipment is now one of the Company's largest product classes. In fiscal 1994 the Company added a new product for the automotive market as part of a strategic program to expand both its customer base and its product line using its existing expertise. In February, 1994 the Company acquired the fastening systems business from Allen-Bradley Company, Inc. The new business provides computerized equipment to control tools that tighten threaded fasteners in an automotive assembly plant to provide high quality threading applications. General Motors is the major customer for fastening systems products. The fastening systems business was fully integrated into Hickok's operations by June, 1994. This product has become a major part of -2- the Company's total business. In addition to its products, the Company also provides various services to the transportation industry generally and to the automotive market in particular. These services have become a very important component of the Company's business and were developed because of the Company's close working relationship with Ford Motor Company in the development of diagnostic tools to service engines and other electronic systems in Ford automobiles. The Company develops software for its own diagnostic tools used by Ford and assists in supporting the overall Ford diagnostic system. This support is primarily in the areas of software specifications and technical writing for the engine, body chassis and electrical systems. In addition, the Company supports the development of data bases used to track information generated from Ford's diagnostic system. Finally, the Company provides telephone hotline information to assist technicians who diagnose Ford vehicles in the dealership. The Company also provides technical training to automotive technicians and engineers relating to the use of diagnostic equipment on automobiles and to the various components themselves. This training is provided both in the Company's classroom facility and at customer sites and was implemented largely as a result of the Company's involvement with Ford Motor Company. Finally, in the service area, the Company is using its in-house expertise to provide publishing services to its automotive customers. Documents such as training manuals, sales and product brochures and other items are designed and produced. This service was first offered three years ago and its growth has been modest to date. The Company's operations are currently concentrated in the United States. Sales are primarily to domestic customers although the Company also makes sales to international customers on a world-wide basis. Because its international presence is growing, the Company has established international representation in the sales and service area in fiscal 1995. DESCRIPTION OF BUSINESS PRODUCTS The Company operates in one major industry segment: instrumentation and controls products for the transportation industry. The Company designs, manufactures and markets instruments used to diagnose problems and to support the servicing of automotive electronic systems. These products are sold primarily to original equipment manufacturers but also to the aftermarket using jobbers and wholesalers. The Company has increased its marketing efforts in order to expand the aftermarket business. Currently the aftermarket accounts for less than 5% of automotive diagnostic tool sales. As a result of the acquisition of the fastening systems business in February, 1994, the Company designs and manufactures instrumentation used to monitor and control pneumatic and electric tools that tighten threaded fasteners so as to provide high quality threading applications. The -3- equipment is sold to original equipment manufacturers in the automotive market. The Company develops software and designs systems that are used to develop diagnostic strategies involving automotive electronic systems. The Company also provides automotive service and engineering technicians with training in servicing electronic systems. Leased facilities in Lincoln Park, Michigan are the headquarters for the training activities. Publishing services provided to automotive customers are also performed in Lincoln Park. In addition, the Company specializes in the development, manufacture and marketing of precision indicating instruments used in aircraft, locomotives and other original equipment applications. Within the aircraft market, the Company sells its instruments primarily to manufacturers of business and pleasure aircraft. Revenue by class of product/service is shown in the table below.
1995 1994 1993 ---- ---- ---- Automotive Diagnostic Instruments $ 10,476,000 $ 10,789,000 $ 11,024,000 Automotive Diagnostic Service/ Training 5,749,000 6,337,000 7,690,000 Fastening Systems 10,968,000 2,652,000 - Other product classes 2,191,000 2,493,000 2,162,000 ------------ ------------ ------------ $ 29,384,000 $ 22,491,000 $ 20,876,000
New Products/Services A major new development in fiscal 1995 was the growth of the fastening systems product which was added by way of acquisition in mid-fiscal 1994. The acquisition was a strategic move to diversify both the customer base and the product line using existing engineering and manufacturing expertise. Fastening systems accounted for $10,968,000 in revenue in fiscal 1995 due to the sale of several large networked systems to General Motors Corporation. However, a larger portion of the market for fastening controls is based on the use of independent single tool controls. Hickok began developing a new line of controls for this market in fiscal 1995 and expects to introduce its single tool control product called ProSpec 1000 in mid-fiscal 1996. There were several new market and product developments in fiscal 1995 within the diagnostic instrument area. The New Generation STAR tool (NGS) was introduced for the first time to Ford dealers in Australia, South America and South Africa. In fiscal 1996 the NGS unit is expected to be introduced to several countries in Europe, Asia and the Far East. A new product, the End-of- Line (EOL) unit was installed at a Ford and Mazda assembly plant in Mexico and Michigan respectively. The EOL unit performs the final test of an automobile's various electronic systems as the vehicle exits the assembly line. A similar unit is being developed for at least one other vehicle manufacturer. Another new product under development is an electrical vehicle controller to be used by an OEM currently involved in building several thousand electric vehicles for fleet use. These controllers are expected to be available in fiscal 1996. Finally, a secondary ignition analyzer for large, non-automotive internal combustion engine users was -4- introduced in late fiscal 1995. Orders for the Watchdog 2000 Secondary Ignition Monitor are expected in fiscal 1996. A smaller, portable version will be developed in fiscal 1996 for use as a periodic maintenance tool for similar though smaller engines. Development of the analog/digital indicator for the aircraft market continued in fiscal 1995 and orders for the product are expected in early fiscal 1996. Acceptance of this product in the industry should allow for significant market expansion of the indicator product class. Another new indicator under development is the solid state indicator which uses an electronic liquid crystal device to display data. The product's long life and light weight make it attractive. This product should be available in about a year. New product developments in fiscal 1994 included the addition to the NGS unit of communication capability with the electronic systems contained in General Motors vehicles. In addition, direct GM capability was added to the Transmission Tester. This was done to enhance these products in the aftermarket. Other product enhancements include developing anti-lock brake and traction control cables to allow for diagnosis of those systems and adding printer capability to the Fuel Injection Regular System Tester (FIRST). Preliminary development continued on diagnostic tools for use on electric vehicles and initial development began on secondary ignition analyzer for large non-automotive, internal combustion engine users. New product development efforts during fiscal 1993 included establishment of the Advanced Training Group whose focus is on training of engineering personnel on Ford Electronic Engine Controls (EEC) Systems and on Ford's Service Bay Diagnostic System. The Advanced Training Group operates out of a leased 20,000 sq. ft. facility in Lincoln Park, Michigan. In May 1993 Hickok Creative Services was established, offering a technical publications capability to automotive customers. It had no revenue in fiscal 1993. Continuing development on the Company's New Generation STAR (NGS) resulted in the issuance of two additional software upgrades for Ford vehicles and several cable adapters. In addition, as part of the original plans for NGS, all units were updated by installation of circuitry enabling the unit to communicate with the newly mandated On-Board Diagnostics (OBD) II communications link to all manufacturers' engine control computers. A tester for automatic diagnosis of both distributor and distributorless ignition systems, which was partially developed in fiscal 1992, was completed in fiscal 1993 and sold to Ford dealerships. SOURCES AND AVAILABILITY OF RAW MATERIALS Raw materials essential to the business are acquired primarily from a large number of U. S. manufacturers within the electronic components industry. Materials include transistors, integrated circuits, resistors, capacitors, switches, potentiometers and fabricated metal or plastic parts. In general, the required materials are available, if ordered with sufficient lead times, from multiple sources at current prices. -5- IMPORTANCE OF PATENTS, LICENSES, FRANCHISES, TRADEMARKS AND CONCESSIONS The Company presently owns certain patents and patent applications which relate to certain of its products. It does not consider that any one patent or group of patents is material to the conduct of its business as a whole and believes that its position in the industry is dependent upon its present level of engineering skill, research, production techniques and service rather than upon its ownership of patents. The Company does not have any material licenses, trademarks, franchises or concessions. SEASONALITY The Company does not believe there is any significant seasonality to its business, except to the extent that shipments of certain products are dependent upon customer release dates. The Company's operating results often fluctuate widely from quarter to quarter. The primary reason for such quarterly fluctuations is the effect of the Company's automotive diagnostic test equipment business, since orders for such equipment frequently are relatively large and subject to customer release. In recent years, the fourth quarter of each fiscal year has accounted for a large portion of the Company's net sales. However, the Company does not believe that the importance of the fourth quarter is due to seasonal factors, but instead to the timing of customer release of orders. PRACTICES RELATIVE TO WORKING CAPITAL ITEMS The nature of the Company's business requires it to maintain sufficient levels of inventory to meet rapid delivery requirements of customers. The Company provides its customers with payment terms prevalent in the industry. DEPENDENCE UPON SINGLE OR FEW CUSTOMERS During the fiscal year ended September 30, 1995, sales to Ford and General Motors Corporation accounted for approximately 50% and 37% respectively of the consolidated sales of the Company. This compares with 64% and 12% respectively during the prior fiscal year. The Company has no long-term contractual relationships with either Ford or General Motors, and the loss of business from either one without a corresponding increase in business from new or existing customers would have a material adverse effect on the Company. BACKLOG At September 30, 1995, the unshipped customer order backlog totaled $4,337,000 in contrast to $9,385,000 at September 30, 1994 and $4,271,000 at September 30, 1993. The decrease in fiscal 1995 relative to fiscal 1994 is largely due to orders for fastening systems products. This business was acquired in mid-fiscal 1994 and an extraordinarily large order for $5.5 million was booked late in the year. At the end of fiscal 1995 backlog for fastening products was $1.1 million, a more typical backlog level for this product class. -6- GOVERNMENT CONTRACT RENEGOTIATION No major portion of the business is open to renegotiation of profits or termination of contracts or subcontracts at the election of the Government. COMPETITIVE CONDITIONS The Company is engaged in a highly competitive industry and faces competition from domestic and international firms. Several of the companies with which the Company competes have greater financial resources and larger sales organizations than the Company. Competition with respect to the Company's diagnostic tool business arises from the existence of a number of other significant manufacturers in the field, such as SPX Corporation, Hewlett-Packard and Vetronix which dominate the total available market in terms of total sales. With regard to fastening systems products, competition comes from both companies that make the equipment to control fastening tools and from the tool makers themselves. Specific names include Beta Tech, Atlas Copco, and Stanley. Hickok is a major supplier in the high end market consisting of multi-spindle fastening system control systems. The instrumentation industry is composed primarily of companies which specialize in the production of particular items as opposed to a full line of instruments. The Company believes that its competitive position in this field should be gauged in the area of smaller specialized products, an area in which the Company has operated since 1915 and in which the Company has established itself competitively by offering high-quality, high-performance products in comparison to high-volume, mass-produced items. RESEARCH AND DEVELOPMENT ACTIVITIES The Company expensed when incurred product research and development costs of $3,550,450 in 1995, $2,145,073 in 1994 and $2,018,892 in 1993. These expenditures included engineering product support, support for development of diagnostic system manuals and research and development for fastening systems products. COMPLIANCE WITH ENVIRONMENTAL PROVISIONS The Company's capital expenditures, earnings and competitive position are not materially affected by compliance with federal, state and local environmental provisions which have been enacted or adopted to regulate the distribution of materials into the environment. NUMBER OF PERSONS EMPLOYED Total employment by the Company at September 30, 1995 was 354 employees. None of the employees are represented by a union. The Company considers its relations with its employees to be good. FINANCIAL INFORMATION CONCERNING FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES During the fiscal year ended September 30, 1995, all manufacturing, research and development and administrative operations were conducted in the United States. Revenues derived from export sales approximated $887,000 in -7- 1995, $538,000 in 1994, and $586,000 in 1993. Shipments to Canada make up the majority of export sales. ITEM 2. PROPERTIES During fiscal 1995, the Company had facilities in the United States as shown below: Owned or Location Feet Description Leased - -------- ------ ----------- -------- Cleveland, 37,000 Two-story brick construction; Owned Ohio used for corporate administra- tive headquarters, marketing and product development with limited manufacturing. Greenwood, 63,000 One-story modern concrete Leased, with Mississippi block construction; used annual renewal for manufacturing instru- options extending ments, test equipment, and through 2061. fastening systems products. Lincoln Park, 20,000 One-story modern concrete Leased, with a Michigan block construction. used renewal option for training and publishing. extending through 1999. Management believes that the Mississippi and Michigan facilities are adequate to provide for current and anticipated business. In fiscal 1996 the Company plans for modest expansion of the Cleveland facility to improve operating efficiencies. This expansion was anticipated to occur in fiscal 1995 but zoning changes delayed the project for almost a year. ITEM 3. LEGAL PROCEEDINGS The Company is not a party to any material legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable. ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANT* The following is a list of the executive officers of the Company as of September 30, 1995. The executive officers are elected each year and serve at the pleasure of the Board of Directors. Mr. Bauman was elected Chairman by the Board of Directors in July 1993. He has been President since 1991. For at least five years prior to 1991 he held the office of Vice President. Mr. Nowakowski was elected Vice President, Finance and Chief Financial Officer by the Board of Directors in December, 1993. He joined the Company in July, 1993 and, for at least five years prior to 1993, was a Vice President with Huntington National Bank in Cleveland, Ohio. -8- Office Officer Age ------ ------- --- Chairman, President and Robert L. Bauman 55 Chief Executive Officer Vice President, Finance Eugene T. Nowakowski 52 and Chief Financial Officer * The description of Executive Officers called for in this Item is included pursuant to Instruction 3 to Section (b) of Item 401 of Regulation S-K. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS a) MARKET INFORMATION The Registrant's Class A Common Shares are traded in the over-the- counter market (NASDAQ Symbol: HICKA). There is no market for the Registrant's Class B Common Shares. The following table sets forth the range of high and low bid prices for the Registrant's Class A Common Shares for the periods indicated, which prices reflect inter-dealer prices without retail mark-up, mark-down or commissions and may not represent actual transactions: BID PRICES FOR THE YEARS ENDED:
September 30, 1995 September 30,1994 ------------------ ----------------- High Low High Low ---- --- ---- --- First Quarter 17 11 1/4 9 1/2 8 Second Quarter 17 13 1/2 12 3/4 9 Third Quarter 20 1/2 17 12 1/2 10 3/4 Fourth Quarter 22 18 12 1/2 10
Source of quotations: NASDAQ. Data adjusted for a 2 for 1 stock split in April, 1995. b) HOLDERS As of December 14, 1995, there were approximately 630 holders of record of the Company's outstanding Class A Common Shares and approximately 5 holders of record of the Company's outstanding Class B Common Shares. c) DIVIDENDS On July 10, 1995 the Company paid a special dividend of $.10 per share to the holders of its Class A and Class B Common Shares. On January 25, 1995 the Company paid a special dividend of $.175 per share to the holders of its Class A and Class B Common Shares. On January 25, 1994 the Company paid a special dividend of $.15 per share to the holders of its Class -9- A and Class B Common Shares. On December 6, 1995, the Company declared a special dividend of $.10 per share payable on January 25, 1996 to the holders of record of its Class A and Class B Common Shares on January 3, 1996. The declaration and payment of future dividends is restricted, under certain circumstances, by the provisions of the Company's bank loan agreement. Such restriction is not expected to materially limit the Company's ability to pay dividends in the future, if declared. -10- ITEM 6. SELECTED FINANCIAL DATA
For the years ended September 30 -------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- (In Thousands of Dollars, except per share amounts) Net Sales $29,384 $22,491 $20,876 $18,406 $11,706 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Net Income $ 1,794 $ 1,556 $ 1,524 $ 1,241 $ 578 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Working Capital $ 8,120 $ 6,991 $ 6,062 $ 5,181 $ 4,198 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Total Assets $16,629 $12,500 $11,149 $10,341 $ 7,733 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Long-term Debt - - - - - ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Total Stockholders' Equity $10,394 $ 8,735 $ 7,338 $ 6,552 $ 5,366 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Net Income Per Share $ 1.50 $ 1.31 $ 1.27 $ 1.02 $ .48 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Dividends Declared Per Share: Class A $ .275 $ .15 $ .125 $ .075 $ .075 Class B $ .275 $ .15 $ .125 $ - $ - Stockholders' Equity Per Share: $ 8.71 $ 7.43 $ 6.32 $ 5.38 $ 4.40 Return on Assets 12.3% 13.2% 14.2% 13.7% 8.0% Return on Equity 18.8% 19.4% 21.9% 20.8% 11.3% Closing Stock Price (ask) $ 23.00 $ 12.75 $ 9.50 $ 8.75 $ 5.00
Note: Share data adjusted for a 2 for 1 stock split in April 1995. -11- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION For many years Hickok has had a long established reputation as a leader in the development and manufacture of high technology precision indicating instruments for aircraft, locomotive and general industrial applications. For example, aircraft cockpit instruments represent important products for the Company. Over the years, Hickok has also been recognized as an authority in the design and implementation of electronics circuitry. In addition, the Company has considerable experience in technical training and vocational education, developing training courses and manuals for instruction of technical skills. In recent years these areas of expertise have combined to make the Company one of the leaders in automotive electronics diagnostic technology. Hickok designs and manufactures diagnostic tools which enable automotive service technicians to identify problems in the rapidly increasing number of electronics systems in automobiles. Hickok develops instructional programs and trains automotive technicians and engineers in the use of electronic diagnostic tools and systems. The Company now has three operating units based in the Detroit, Michigan area. One unit, housed in a Ford Motor Company facility in Allen Park, develops diagnostic strategies and provides other services for Ford. The other two groups are housed in Lincoln Park in a facility leased by Hickok and provide training and technical publication services. In February, 1994 the Company added a new product for the automotive market by acquiring the fastening systems business from Allen-Bradley Company, Inc. This was part of a strategic program to expand both the Company's customer base and its product line using existing expertise. The new business provides computerized equipment to control tools that tighten threaded fasteners in an automotive assembly plant to provide high quality threading applications. The fastening systems business was fully integrated into Hickok's operations by June, 1994 and made a positive contribution to the Company's operations in the last two fiscal years. This product class has become a major part of the Company's total business. The timing of order releases in the Company's automotive diagnostic test equipment business often creates wide fluctuations in the Company's operating results, particularly on a quarter-to-quarter basis. The same situation applies to the Company's newly acquired fastening systems products. Orders for such equipment frequently are relatively large and subject to customer release. The result can be substantial variations in quarterly sales and earnings. For example, fiscal 1995 fourth quarter net income of $529,082, or $.44 per share, represented 29.5% of the year's total net income. More dramatic results occurred in fiscal 1994 when fourth quarter net income of $813,819, or $.68 per share, represented 52.3% of the year's total net income. The Company's contracts are subject to customer release, and although historically the fourth quarter has accounted for a larger portion of sales and net income, there can be no assurance that the Company's customers will continue to authorize release of contracts during the fourth quarter of future fiscal years. The Company is not aware of any seasonal factors which lead to its customers' release of orders. -12- Short-term earnings also can be affected by increases in expenditures for product development, which has become increasingly significant in the Company's operations. The Company's order backlog as of September 30, 1995 totaled $4,337,000 as compared to $9,385,000 as of September 30, 1994 and $4,271,000 as of September 30, 1993. The decrease in fiscal 1995 relative to fiscal 1994 is largely due to orders for fastening systems products. This business was acquired in mid-fiscal 1994 and an extraordinarily large order for $5.5 million was booked late in the year. At the end of fiscal 1995 backlog for fastening products was $1.1 million which is a more typical backlog level for this product class. RESULTS OF OPERATIONS Sales for the fiscal year ended September 30, 1995 rose to $29,384,191, an increase of approximately 31% from fiscal 1994 sales. This increase in sales is almost totally volume-driven and is attributable to significantly higher sales of fastening systems products. Sales of fastening systems products increased $8,316,000 which more than offset both a 5% volume decrease in product sales other than fastening product and an 11% decrease in service sales, almost all of which was volume related. Sales for the fiscal year ended September 30, 1994 of $22,491,278 were up approximately 8% from fiscal 1993 sales. The increase between fiscal 1994 and fiscal 1993 was primarily due to the addition of the fastening systems business which offset modest volume decreases in automotive diagnostic equipment and price-related decreases in service sales. The high level of fastening systems sales realized in fiscal 1995 will not continue in fiscal 1996 due to lower backlog at the end of fiscal 1995. Even though sales of automotive diagnostic equipment have experienced a slight decline the past three years, continuing development of existing and new products and the opening of new international markets provide opportunities for reversing that trend in fiscal 1996. For example, sales of approximately 4,000 NGS units to Mazda dealers outside of North America, previously expected to occur in late fiscal 1995, are now planned for early in fiscal 1996. In addition, approximately 1,000 NGS units are expected to be sold in fiscal 1996 to Ford dealers throughout the world, exclusive of Europe. Initial sales occurred in fiscal 1995 to Ford dealers in South America, Australia and South Africa. The sales decrease of precision indicating instruments, both aircraft and locomotive, experienced in fiscal 1995 is expected to reverse itself in fiscal 1996 due to stabilizing existing volume, introduction of new products and selective price increases. Cost of products sold during fiscal 1995 amounted to $13,975,800 or 60.0% of net product sales. For fiscal 1994 the cost of products sold amounted to $9,050,256 or approximately 58.0% of net product sales and for fiscal 1993 the cost of products sold amounted to $7,400,468 or approximately 57.6% of net product sales. The increase in cost of products sold as a percentage of net product sales between fiscal 1995 and fiscal 1994 was due to higher costs of fastening product sales relative to other product sales. The slight increase in the percentage of cost of products sold relative to product sales between fiscal 1994 and fiscal 1993 was due to product mix. -13- Cost of services sold during fiscal 1995 amounted to $4,909,962 or 80.6% of net service sales. In fiscal 1994 the figure was $5,148,767 or 74.8% and in fiscal 1993 the figure was $5,503,973 or 68.6%. The increase in cost of services sold as a percentage of net service sales between fiscal 1995 and fiscal 1994 was caused primarily by the inability to reduce costs of services sold to the same extent as service sales volume decreased. The increase in cost of services sold as a percentage of net service sales between fiscal 1994 and fiscal 1993 resulted primarily from a significant amount of large quantity contracts involving significant price competition. The percentage of cost of both products sold and services sold relative to net sales in fiscal 1996 is expected to stabilize at the figures experienced in fiscal 1995 based on cost control measures already implemented and on projected product mix. Fiscal 1995 net income amounted to $1,794,230, or $1.50 per share, an increase of $237,927, or 15.3% from fiscal 1994 net income of $1,556,303, or $1.31 per share. The increase in net income was due primarily to an increase in sales and, to a lesser extent, to a reduction in the effective tax rate compared to the prior year. Fiscal 1994 net income increased by $32,017 or 2.1% over fiscal 1993 net income of $1,524,286, or $1.27 per share, due to an increase in sales and cost control measures. During fiscal 1995 new product development expenditures amounted to $3,550,450 which represented a 66% increase over fiscal 1994 expenditures of $2,145,073. Approximately 60% of the increase was attributable to engineering and development of existing fastening systems products. The balance was spent on final development of the secondary ignition analyzer, ongoing development of existing automotive products and development of next generation technologies relative to automotive product. It is anticipated that the amount spent on product development in fiscal 1995 will remain at that level in fiscal 1996. Product development expenditures in fiscal 1994 of $2,145,073 were slightly higher than the $2,018,892 spent in fiscal 1993 due to the addition of the fastening systems business. Marketing and administrative expense amounted to $4,189,263, or approximately 14.3% of net sales in fiscal 1995; $3,656,136, or approximately 16.3% of net sales in fiscal 1994; $3,510,279, or approximately 16.8% of net sales in fiscal 1993. Expenditures in fiscal 1995 represented a 14.6% increase from fiscal 1994, as compared with a 4.2% increase in fiscal 1994 over the prior fiscal year. The absolute increase in the amount of marketing and administrative expenses between 1995 and 1994 was entirely related to the higher sales in the fastening systems product class. The absolute increase between fiscal 1994 and 1993 was due to the addition of the fastening systems business in the second quarter of fiscal 1994. In fiscal 1995 income taxes were $976,000 and represented an effective tax rate of 35.2%. Fiscal 1994 income taxes were $1,018,000 and represented an effective tax rate of 39.5%. The decrease in the effective tax rate in fiscal 1995 was caused by research and development tax credits related to higher new product development expenditures during the year. In fiscal 1993 income taxes were $910,000 and represented an effective tax rate of 37.4%. The increase in the effective tax rate in fiscal 1994 related to differences in the recognition of revenue and expense for tax and financial reporting purposes. It is anticipated that the effective tax rate in fiscal -14- 1996 will be about two percentage points higher than fiscal 1995 due to lower available research and development tax credits. Interest charges were $134,713 in fiscal 1995, compared with $26,116 in fiscal 1994 and $65,494 in fiscal 1993. The increase in interest charges in fiscal 1995 compared to fiscal 1994 was caused primarily by higher borrowing by the Company under its revolving line of credit to finance increased working capital levels resulting from a 31% increase in sales. The decrease in interest charges in fiscal 1994 compared to fiscal 1993 resulted primarily from decreased borrowing by the Company under its revolving line of credit to finance working capital levels. Fiscal 1995 and 1994 results include other income of $146,227 and $109,373 respectively coming primarily from rental income of excess space at the Company's Lincoln Park, Michigan location. Fiscal 1995 other income also includes approximately $60,000 of purchased discounts. Fiscal 1993 results include a gain of $57,390 resulting from proceeds from insurance policies held on the life of Robert L. Purcell, the former Chairman. LIQUIDITY AND CAPITAL RESOURCES The Company's business requires relatively large inventories of both work-in-process and finished goods in order to met anticipated delivery schedules. At the end of fiscal 1995 inventory was up $3,076,790 over the prior year in anticipation of significant orders for automotive product in the first quarter of fiscal 1996. This increase had a temporary negative impact on liquidity relative to the prior year since additional short-term borrowing was required to finance 75% of the increase. The Company believes the impact on liquidity is temporary; however, even though liquidity declined compared with last year it remains strong. Furthermore, the Company believes that internal funds and a $5,000,000 revolving line of credit provide sufficient liquidity to meet ongoing working capital requirements. Current assets of $14,194,925 at September 30, 1995 were 2.3 times current liabilities and the total of cash and receivables was 1.1 times current liabilities. These ratios compare to 3.0 and 1.9 respectively at the end of fiscal 1994. Total current assets increased $3,779,437 from the previous year- end primarily as a result of the above-mentioned $3,076,790 increase in inventory. Total current liabilities increased $2,651,060 from the previous year due primarily to an increase in short-term financing which was used to finance the inventory increase. Working capital at September 30, 1995 was $8,119,589 as compared to $6,991,212 a year earlier. The increase between the two years was due to retention of earnings and the proceeds were used to finance the increase in inventory. Internally generated funds in fiscal 1995 were a negative $646,322 and were not adequate to fund the Company's primary non-operating cash requirement consisting of capital expenditures which amounted to $943,605. The primary reason for the negative cash flow from operations was a $3,076,790 increase in inventory. The shortfall was made up by a $2,280,000 increase in short-term borrowing. The Company does not anticipate the need to increase inventory in fiscal 1996 to the same extent as occurred in fiscal 1995 and therefore expects internally generated funds in fiscal 1996 to be -15- adequate to fund approximately $1,100,000 of capital expenditures in fiscal 1996. Included in the $1,100,000 is approximately $450,000 to be spent on the expansion of the Company's Cleveland, Ohio administrative headquarters to accommodate further growth. The balance will be spent to upgrade engineering and laboratory equipment. In fiscal 1994 and fiscal 1993 internally generated funds paid for capital expenditures. In January, 1995 the Company amended an existing credit agreement with its financial lender. The agreement continues to provide for interest at the prime commercial rate and is unsecured. This agreement was amended to provide for a revolving credit facility of $5,000,000. At September 30, 1995, the Company had an outstanding balance of $3,510,000 under this loan facility. The revolving credit facility is subject to annual review by the Company's financial lender. Although no determination has been made to seek renewal of the credit agreement, the Company believes that, given its current financial condition, renewal at the existing amount may be obtained on acceptable terms. In August, 1988 the Company entered into a Section 303 Stock Redemption Agreement (the "Stock Redemption Agreement") with Robert D. Hickok. The Stock Redemption Agreement provided that, upon Mr. Hickok's death, his estate will have the right to require the Company to purchase from the estate Class A shares and Class B shares having a value equal to the estate, inheritance, legacy and succession taxes (including any interest collected as part of such taxes) imposed because of the death of Mr. Hickok, plus the amount of funeral and administrative expenses allowable as deductions to the estate of Mr. Hickok under Section 2053 of the Internal Revenue Code. The Stock Redemption Agreement provided that the per share price payable by the company for the shares purchased from Mr. Hickok's estate will be the then market value of such shares. The Estate of Robert D. Hickok sold to the Company 16,107 Class B shares on January 11, 1993 and 4,560 Class B shares on March 31, 1995. No future redemption requests are anticipated from the Estate. IMPACT OF INFLATION In recent years, inflation has had a minimal effect on the Company because of low rates of inflation and the Company's policy prohibiting the acceptance of long-term fixed rate contracts without provisions permitting adjustment for inflation. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following pages contain the Financial Statements and Supplementary Data as specified for Item 8 of Part II of Annual Report on Form 10-K. -16- ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item 10 as to the Directors of the Company is incorporated herein by reference to the information set forth under the caption "Information Concerning Nominees for Directors" in the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on February 21, 1996, since such Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the end of the Company's fiscal year pursuant to Regulation 14A. Information required by this Item 10 as to the Executive Officers of the Company is included in Part I of this Annual Report on Form 10-K. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item 11 is incorporated by reference to the information set forth under the caption "Executive Compensation" in the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on February 21, 1996, since such Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the end of the Company's fiscal year pursuant to Regulation 14A. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item 12 is incorporated by reference to the information set forth under the captions "Principal Shareholders" and "Share Ownership of Directors and Officers" in the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on February 21, 1996, since such Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the end of the Company's fiscal year pursuant to Regulation 14A. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item 13 is incorporated by reference to the information set forth under the caption "Transactions with Management" in the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on February 21, 1996, since such Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the end of the Company's fiscal year pursuant to Regulation 14A. PART III ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON REPORT 8-K (a) (1) FINANCIAL STATEMENTS The following Consolidated Financial Statements of the Registrant and its subsidiaries are included in Part II, Item 8: -17- Page ---- Report of Independent Auditors F-1 Consolidated Balance Sheet - As of September 30, 1995 and 1994 F-2 Consolidated Statement of Income - Years Ended September 30, 1995, 1994 and 1993 F-4 Consolidated Statement of Stockholders' Equity - Years Ended September 30, 1995, 1994 and 1993 F-5 Consolidated Statement of Cash Flows - Years Ended September 30, 1995, 1994 and 1993 F-7 Notes to the Consolidated Financial Statements F-9 (a) (2) FINANCIAL STATEMENT SCHEDULES The following Consolidated Financial Statement Schedules of the Registrant and its subsidiaries are included in Item 14 hereof. Sequential Page --------------- Report of Independent Auditors as to Schedules 33 Schedule VIII-Valuation and Qualifying Accounts 34 Schedule IX-Short-term Borrowings 35 All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. (a) (3) EXHIBITS Reference is made to the Exhibit Index set forth herein. (b) There were no reports filed on Form 8-K during the quarter ended September 30, 1995. -18- - -------------------------------------------------------------------------------- INDEPENDENT AUDITORS' REPORT SHAREHOLDERS AND BOARD OF DIRECTORS HICKOK INCORPORATED CLEVELAND, OHIO We have audited the accompanying consolidated balance sheets of HICKOK INCORPORATED as of September 30, 1995 and 1994, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended September 30, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these 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 that the financial statements are free from 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Hickok Incorporated as of September 30, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended September 30, 1995 in conformity with generally accepted accounting principles. MEADEN & MOORE, INC. CERTIFIED PUBLIC ACCOUNTANTS NOVEMBER 17, 1995 CLEVELAND, OHIO - ------------------------------------------------------------------------------- F-1 - -------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEET KICKOK INCORPORATED SEPTEMBER 30 ASSETS
1995 1994 -------------------------------- CURRENT ASSETS: Cash and cash equivalents $ 696,425 $ 401,291 Accounts receivable - less allowance for doubtful accounts of $15,000 (1995 and 1994) 6,271,195 6,041,626 Inventories-less allowance for obsolete inventory of $60,200 (1995) 6,921,192 3,844,402 Prepaid and deferred expenses 306,113 128,169 -------------------------------- Total Current Assets 14,194,925 10,415,488 PROPERTY, PLANT AND EQUIPMENT: Land 139,192 139,192 Buildings 1,456,390 1,092,595 Machinery and equipment 3,138,077 2,829,416 -------------------------------- 4,733,659 4,061,203 Less accumulated depreciation 2,473,556 2,161,662 -------------------------------- 2,260,103 1,899,541 OTHER ASSETS: Goodwill-less accumulated amortization of $20,000 ($8,000, 1994) 160,000 172,000 Deposits 13,744 13,444 -------------------------------- 173,744 185,444 -------------------------------- Total Assets $16,628,772 $12,500,473 -------------------------------- --------------------------------
See notes to consolidated financial statements - -------------------------------------------------------------------------------- F-2 - ------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS EQUITY
1995 1994 ----------------------------- CURRENT LIABILITIES: Short-term financing $ 3,510,000 $ 1,230,000 Trade accounts payable 855,218 542,023 Accrued payroll and related expenses 1,320,611 1,165,008 Accrued expenses 353,763 235,081 Accrued income taxes 35,744 252,164 ----------------------------- Total Current Liabilities 6,075,336 3,424,276 DEFERRED INCOME TAXES 159,000 106,000 REDEEMABLE STOCK - 9,800 Class B shares, 1994 - 235,000 STOCKHOLDERS' EQUITY: Common shares - par value $1.00: Class A 3,750,000 shares authorized, 747,570 shares issued (1,000,000 shares authorized, 378,078 shares issued, 1994) 737,984 368,492 Class B 1,000,000 convertible shares authorized, 475,533 shares issued (295,980 convertible shares authorized, 245,820 shares issued less 9,800 shares classified as redeemable, 1994) 454,866 219,913 Contributed capital 1,520,111 1,259,293 Treasury shares - 9,586 Class A shares and 20,667 Class B shares (16,107, 1994) (605,795) (532,603) Retained earnings 8,287,270 7,420,102 ----------------------------- Total Stockholders Equity 10,394,436 8,735,197 ----------------------------- Total Liabilities and Stockholders Equity $16,628,772 $12,500,473 ----------------------------- -----------------------------
See notes to consolidated financial statements - -------------------------------------------------------------------------------- F-3 CONSOLIDATED STATEMENT OF INCOME HICKOK INCORPORATED FOR THE YEARS ENDED SEPTEMBER 30 - --------------------------------------------------------------------------------
1995 1994 1993 --------------------------------------------- NET SALES Product sales $23,294,950 $15,612,101 $12,852,524 Service sales 6,089,241 6,879,177 8,023,478 --------------------------------------------- Total net sales 29,384,191 22,491,278 20,876,002 --------------------------------------------- COSTS AND EXPENSES: Cost of products sold 13,975,800 9,050,256 7,400,468 Cost of services sold 4,909,962 5,148,767 5,503,973 Product development 3,550,450 2,145,073 2,018,892 Marketing and administrative expenses 4,189,263 3,656,136 3,510,279 Interest charges 134,713 26,116 65,494 Other income (146,227) (109,373) (57,390) --------------------------------------------- 26,613,961 19,916,975 18,441,716 --------------------------------------------- Income before Provision for Income Taxes 2,770,230 2,574,303 2,434,286 PROVISION FOR INCOME TAXES: Current 1,087,000 933,000 985,000 Deferred (111,000) 85,000 (75,000) --------------------------------------------- 976,000 1,018,000 910,000 --------------------------------------------- NET INCOME $ 1,794,230 $ 1,556,303 $ 1,524,286 --------------------------------------------- --------------------------------------------- NET INCOME PER COMMON SHARE $ 1.50 $ 1.31 $ 1.27 --------------------------------------------- --------------------------------------------- WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING 1,194,500 1,192,304 1,197,994 --------------------------------------------- ---------------------------------------------
See notes to consolidated financial statements - -------------------------------------------------------------------------------- F-4 - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY HICKOK INCORPORATED FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
COMMON STOCK - $1.00 PAR VALUE ----------------- RETAINED EARNINGS CLASS A CLASS B ----------------------------------------------- Balance at September 30, 1992 $ 4,670,623 $ 363,892 $ 245,820 Dividend of $.25 per Class A and B shares (152,428) - - Redemption of Class B shares - - (16,107) Sale of Class A shares under option - 2,000 - Reclassification of Class B shares to redeemable - - (14,700) Net income 1,524,286 - - ----------------------------------------------- Balance at September 30, 1993 6,042,481 365,892 215,013 Dividend of $.30 per Class A and B shares (178,682) - - Sale of Class A shares under option - 2,600 - Adjustment of redeemable Class B shares based on market value - - 4,900 Net income 1,556,303 - - ----------------------------------------------- Balance at September 30, 1994 7,420,102 368,492 219,913 100% share dividend Class A and B shares (598,455) 368,742 229,713 Dividend of $.275 per Class A and B shares (328,607) - - Sale of Class A shares under option - 750 - Redemption of Class B shares - - (4,560) Reclassification of redeemable Class B shares after redemption completed - - 9,800 Compensation expense related to stock option plans - - - Net income 1,794,230 - - ----------------------------------------------- Balance at September 30, 1995 $ 8,287,270 $ 737,984 $ 454,866 ----------------------------------------------- -----------------------------------------------
See notes to consolidated financial statements - -------------------------------------------------------------------------------- F-5 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY HICKOK INCORPORATED FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
Contributed Treasury Capital Shares Total --------------------------------------------- Balance at September 30, 1992 $ 1,455,993 $ (183,842) $ 6,552,486 Dividend of $.25 per Class A and B shares - - (152,428) Redemption of Class B shares - (348,761) (364,868) Sale of Class A shares under option 12,000 - 14,000 Reclassification of Class B shares to redeemable (220,300) - (235,000) Net income - - 1,524,286 --------------------------------------------- Balance at September 30, 1993 1,247,693 (532,603) 7,338,476 Dividend of $.30 per Class A and B shares 16,500 - 19,100 - - (178,682) Sale of Class A shares under option Adjustment of redeemable Class B shares based on market value (4,900) - - Net income - - 1,556,303 --------------------------------------------- Balance at September 30, 1994 1,259,293 (532,603) 8,735,197 100% share dividend Class A and B shares - - - Dividend of $.275 per Class A and B shares - - (328,607) Sale of Class A shares under option 7,250 - 8,000 Redemption of Class B shares - (73,192) (77,752) Reclassification of redeemable Class B shares after redemption completed 225,200 - 235,000 Compensation expense related to stock option plans 28,368 - 28,368 Net income - - 1,794,230 --------------------------------------------- Balance at September 30, 1995 $ 1,520,111 $ (605,795) $ 10,394,436 --------------------------------------------- ---------------------------------------------
See notes to consolidated financial statements - -------------------------------------------------------------------------------- F-6 - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF CASH FLOWS HICKOK INCORPORATED FOR THE YEARS ENDED SEPTEMBER 30
1995 1994 1993 ----------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers $ 29,154,622 $ 22,394,353 $ 19,778,525 Cash paid to suppliers and employees (28,382,805) (19,875,787) (16,963,626) Interest paid (117,606) (26,844) (61,440) Interest received 2,887 6,335 5,398 Income taxes paid (1,303,420) (1,016,758) (752,888) ----------------------------------------------------- Net Cash Provided by (Used in) Operating Activities (646,322) 1,481,299 2,005,969 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (943,605) (684,258) (560,641) Decrease (Increase) in deposits (300) 5,018 (1,067) Net proceeds from life insurance policies - - 85,297 Proceeds on sale of assets 4,800 - 4,525 Purchase of Fastening Systems assets - (730,675) - ----------------------------------------------------- Net Cash Used in Investing Activities (939,105) (1,409,915) (471,886) CASH FLOWS FROM FINANCING ACTIVITIES: Changes in short-term borrowings 2,280,000 (20,000) (800,000) Purchase of Class B shares (77,752) - (364,868) Sale of Class A shares under option 6,920 16,009 11,700 Dividends paid (328,607) (178,682) (152,428) ----------------------------------------------------- Net Cash Provided by (Used in) Financing Activities 1,880,561 (182,673) (1,305,596) ----------------------------------------------------- Increase (Decrease) in Cash and Cash Equivalents 295,134 (111,289) 228,487 Cash and Cash Equivalents at Beginning of Year 401,291 512,580 284,093 ----------------------------------------------------- Cash and Cash Equivalents at End of Year $ 696,425 $ 401,291 $ 512,580 ----------------------------------------------------- -----------------------------------------------------
See notes to consolidated financial statements - -------------------------------------------------------------------------------- F-7 - --------------------------------------------------------------------------------
1995 1994 1993 ---------------------------------------------------- RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income $ 1,794,230 $ 1,556,303 $ 1,524,286 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Depreciation and amortization 587,213 512,011 402,056 Non-cash compensation charge related to stock options 29,448 3,091 2,300 Gain on life insurance death benefits - - (57,390) Loss (Gain) on disposal of assets 3,030 13,417 (2,407) Deferred income taxes (111,000) 85,000 (75,000) CHANGES IN ASSETS AND LIABILITIES: Increase in accounts receivable (229,569) (199,963) (1,094,266) Decrease (Increase) in inventories (3,076,790) (203,218) 726,249 Increase in prepaid and deferred expenses (13,944) (3,984) (6,881) Increase (Decrease) in trade accounts payable 313,195 208,353 (104,838) Increase in accrued payroll and related expenses 155,603 20,592 228,453 Increase (Decrease) in other accrued expenses 118,682 (426,545) 231,295 Increase (Decrease) in accrued income taxes (216,420) (83,758) 232,112 ---------------------------------------------------- Total Adjustments (2,440,552) (75,004) 481,683 ---------------------------------------------------- Net Cash Provided by (Used in) Operating Activities $ (646,322) $ 1,481,299 $ 2,005,969 ---------------------------------------------------- ---------------------------------------------------- Non-cash Disclosure: Proceeds from life insurance policies were reduced to satisfy outstanding policy loans of $17,143 (1993).
See notes to consolidated financial statements - -------------------------------------------------------------------------------- F-8 - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HICKOK INCORPORATED SEPTEMBER 30, 1995, 1994 AND 1993 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION AND LINE OF BUSINESS: The Board of Directors recommended and on February 23, 1995 the shareholders approved the change of the name of the Company to Hickok Incorporated. The consolidated financial statements include the accounts of Hickok Incorporated and its wholly-owned domestic subsidiary ("Company"). Significant intercompany transactions and balances have been eliminated in the financial statements. Previously inactive subsidiaries were dissolved during 1993. The Company operates in one major industry segment. The Company develops and manufactures measuring, indicating, instrumentation and controls products, fastening systems and related engineering services for the transportation industry. As an extension of the sales of automotive electronic test equipment, the Company also provides technical training programs for its automotive technician customers in the proper use of the equipment. Sales in the Company's principal product classes, as a percent of consolidated sales, are as follows: PRODUCT CLASSES 1995 1994 1993 --------------- -------------------------- Automotive Test Equipment 35.7% 48.1% 52.7% Diagnostic/Training 19.6 29.2 36.9 Fastening Systems 37.3 11.8 - Other Product Classes 7.4 10.9 10.4 -------------------------- Total 100.0% 100.0% 100.0% -------------------------- -------------------------- The Company extends normal credit terms to its customers. Customers in the automotive industry (primarily original equipment manufacturers) comprise approximately 91% of outstanding receivables at September 30, 1995, (84% in 1994). Sales to individual customers in excess of 10% of total sales approximated $14,600,000 and $10,900,000 (1995), $14,500,000 and $2,700,000 (1994) and $16,500,000 (1993). REVENUE RECOGNITION: The Company records sales as manufactured items are shipped to customers. Revenue from development contracts is recognized as earned under terms of the contracts. The Company warrants certain products against defects for periods ranging from 12 to 36 months. Charges against income for warranty expense and sales returns and allowances were immaterial during each of the three years in the period ending September 30, 1995. PRODUCT DEVELOPMENT: Research and product development costs, which include engineering production support for development of diagnostic systems, are expensed as incurred. Research and development performed for customers represents no more than 1% of sales in each year; the arrangements do not include a repayment obligation by the Company. INVENTORIES: Inventories are valued at the lower of cost (first-in, first-out) or market and consist of:
1995 1994 --------------------------------- Raw materials and component parts $ 2,488,711 $ 1,347,496 Work-in-process 2,651,577 1,617,218 Finished products 1,780,904 879,688 --------------------------------- $ 6,921,192 $ 3,844,402 --------------------------------- ---------------------------------
- -------------------------------------------------------------------------------- F-9 - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are carried at cost. Maintenance and repair costs are expensed as incurred. Additions and betterments are capitalized. The depreciation policy of the Company is generally as follows: Class Method Rate ------------------------------------------------------------- Buildings Straight-line 2-1/2 to 4% Machinery and equipment Straight-line 8 to 33-1/3% Tools and dies Straight-line 33-1/3% Depreciation amounted to $575,213 (1995), $504,011 (1994) and $402,056 (1993). INCOME TAXES: Effective October 1, 1993, the Company adopted the provisions of Financial Accounting Standards Board Statement No. 109, "Accounting for Income Taxes." The cumulative effect of the adoption was immaterial and is included in the 1994 deferred income tax provision. Prior to 1994, the Company accounted for deferred income taxes under the provisions of Financial Accounting Standards Board Statement No. 96. INCOME PER COMMON SHARE: Income per common share information is computed on the weighted average number of shares outstanding during each period. All per share amounts on the consolidated income statement have been retroactively adjusted to reflect the 100% share dividend. For the years presented, stock options have an immaterial dilutive effect. CASH EQUIVALENTS: For purposes of the Statement of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. RECLASSIFICATIONS: Certain prior year amounts have been reclassified to conform with current year presentation. 2. SHORT-TERM FINANCING The Company has an unsecured credit agreement with maximum available borrowings of $5,000,000 with interest at the prime rate. The agreement includes covenants with which the Company has complied. The weighted average interest rate on short-term financing was 8.84% (7.00%, 1994). 3. LEASES The Company leases a facility and certain equipment under operating leases expiring through September 1996 with a three-year renewal option on the facility. A portion of the facility has been sub-leased through September 1996. The Company's future minimum commitments under operating leases are as follows: 1996 $ 261,396 1997 54,881 1998 17,634 1999 6,238 --------- Total $ 340,149 --------- ---------
Rental expense under these commitments was $266,106 (1995), $230,297 (1994) and $142,827 (1993). A facility held under a capital lease has a net book value of $50,000 at September 30, 1995. Future minimum lease payments which extend through 2061 are immaterial. - -------------------------------------------------------------------------------- F-10 - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED 4. CAPITAL STOCK, TREASURY STOCK, CONTRIBUTED CAPITAL AND STOCK OPTIONS On February 23, 1995, the number of authorized shares of Class A and Class B common stock was increased to 3,750,000 from 1,000,000 and 1,000,000 from 295,980, respectively. On April 10, 1995, the Company distributed to stockholders of record on March 10, 1995, a 2-for-1 stock split in the form of a 100% share dividend of Class A and Class B common stock. One share of Class A common stock was issued for each share of Class A outstanding and one share of Class B common stock was issued for each share of Class B outstanding. All per share amounts on the consolidated income statement have been retroactively adjusted for the stock dividend. Additionally, an amount equal to the $1.00 par value of the combined Class A and Class B common stock ($598,455) has been transferred from retained earnings to common stock ($368,742 to Class A common stock and $229,713 to Class B common stock). The Company's Key Employees Stock Option Plan and the 1995 Key Employees Stock Option Plan (collectively the "Employee Plans") provide the authority to the Compensation Committee of the Board of Directors to grant options to Key Employees to purchase up to 120,000 Class A shares. The options are exercisable for up to 10 years. Incentive stock options are available at an exercise price of not less than market price on the date the option is granted. However, options available to an individual owning more than 10% of the Company's Class A shares at the time of grant must be made at a price of not less than 110% of the market price. Nonqualified stock options may be issued at such exercise price and on such other terms and conditions as the Compensation Committee may determine. No options may be granted at a price less than $2.925. Non-cash compensation expense related to stock option plans was $29,448 (1995), $3,091 (1994), and $2,300 (1993). All options granted under the Employee Plans are exercisable at September 30, 1995. On February 23, 1995, the Board of Directors adopted the 1995 Outside Directors Stock Option Plan (the "Directors Plan"), subject to future approval by the Company's shareholders. The Directors Plan provides for the automatic grant of options to purchase up to 30,000 shares of Class A common stock to members of the Board of Directors who are not employees of the Company, at the fair market value on the date of grant. All options granted under the Directors Plan become exercisable on February 23, 1998. A summary of stock option activity is as follows:
NUMBER OF SHARES ---------------------- OPTION PRICE EMPLOYEE PLANS: PER SHARE 1995 1994 -------------------------------------------------------- Outstanding at beginning of year $ 2.925 to $ 11.75 33,600 27,000 Granted $ 6.92 to $ 11.75 7,200 11,800 Exercised $ 2.925 to $ 6.92 (1,000) (5,200) ---------------------- Outstanding at end of year $ 2.925 to $ 11.75 39,800 33,600 ---------------------- ---------------------- DIRECTORS PLAN: Outstanding at beginning of year $ - - - Granted $ 16.125 12,000 - Exercised $ - - - ---------------------- Outstanding at end of year $ 16.125 12,000 - ---------------------- ----------------------
- -------------------------------------------------------------------------------- F-11 - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Unissued shares of Class A common stock (506,666 and 246,513 shares in 1995 and 1994, respectively) are reserved for the share-for-share conversion rights of the Class B common stock and stock options under the Employee Plans and the Directors Plan. The Class A shares have one vote per share and the Class B shares have three votes per share, except under certain circumstances such as voting on voluntary liquidation, sale of substantially all the assets, etc. Dividends up to $.10 per year, noncumulative, must be paid on Class A shares before any dividends are paid on Class B shares. The Company purchased 16,107 shares of Class B common stock for Treasury for approximately $365,000 from the Estate of Robert D. Hickok (the "Estate") in January 1993 pursuant to a Section 303 Stock Redemption Agreement (the "Agreement"). The Agreement required the Company to purchase a sufficient number of Class B common stock from the Estate, proceeds of which to be used by the Estate for payment of taxes and expenses in connection with probating the Estate. During 1994, the Company classified approximately $235,000 as redeemable stock to allow for future possible redemption pursuant to the Agreement. The Company purchased an additional 4,560 shares of Class B common stock from the Estate on March 31, 1995 for approximately $78,000, completing the obligation. The Company has reclassified the remaining shares of Class B common stock (approximately $157,000) previously listed as Redeemable Common Stock. Excess of market value over par value of redeemable shares has been added to contributed capital. 5. INCOME TAXES A reconciliation of the provision for income taxes to the statutory Federal income tax rate is as follows:
1995 1994 1993 ----------------------------------------------------- Income before income taxes $ 2,770,230 $ 2,574,303 $ 2,434,286 Statutory rate 34% 34% 34% ----------------------------------------------------- 941,878 875,263 827,657 State and local taxes, net of federal tax 141,900 115,500 116,820 Non-deductible expenses 26,530 7,970 5,530 Income not subject to tax (3,230) (15,606) (39,600) Research and development credit (132,000) - - Other 922 34,873 (407) ----------------------------------------------------- $ 976,000 $ 1,018,000 $ 910,000 ----------------------------------------------------- -----------------------------------------------------
Changes in deferred income taxes which relate to temporary differences in the recognition of revenue and expenses for tax and financial reporting purposes are as follows:
1995 1994 1993 ----------------------------------------------------- Inventory costing $ (85,700) $ 16,000 $ (78,300) Other (25,300) 69,000 3,300 ----------------------------------------------------- $ (111,000) $ 85,000 $ (75,000) ----------------------------------------------------- -----------------------------------------------------
- -------------------------------------------------------------------------------- F-12 - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Deferred tax assets (liabilities) consist of the following:
1995 1994 -------------------------- Current: Inventories $ 97,000 $ 11,000 Warranty reserves 49,000 49,000 Accrued liabilities 132,000 54,000 -------------------------- 278,000 114,000 Noncurrent: Depreciation (159,000) (134,000) Other - 28,000 -------------------------- (159,000) (106,000) -------------------------- Total $ 119,000 $ 8,000 -------------------------- --------------------------
Deferred tax asset balances are included in "prepaid and deferred expenses". 6. EMPLOYEE BENEFIT PLANS The Company has a formula based profit sharing bonus plan for officers and key employees. The bonus is distributed by the Compensation Committee of the Board of Directors after considering such factors as salary, length of service and merit. The maximum individual distribution is 50% of the distributee's salary. For fiscal years ended September 30, 1995, 1994 and 1993, approximately $456,000, $447,200 and $444,800, respectively, were expensed. During 1994, the Company started a 401(K) Savings and Retirement Plan covering all full-time employees. Company contributions to the plan, including matching of employee contributions, are at the Company's discretion. Contributions to the plan were approximately $27,300 in 1995 and $26,000 in 1994. The Company does not provide any other post retirement benefits to its employees. During 1995, the Company established a deferred compensation plan for selected management and highly compensated employees to make tax deferred contributions in the form of a salary reduction instead of or in addition to contributions made by them under the 401(K) Savings and Retirement Plan. 7. ACQUISITION On February 4, 1994, the Company purchased certain assets of Allen-Bradley Company, Inc.'s Fastening Systems Line for $730,675 which has been accounted for under the purchase method of accounting. The purchase consisted of inventory ($461,092), machinery and equipment ($239,974), goodwill ($180,000) and assumption of liabilities ($150,391). Goodwill will be amortized over 15 years. Operations of the Fastening Systems Line have been included in the statement of income from the date of acquisition. The pro forma effects of the Fastening Systems Line on prior years operations are not determinable. - -------------------------------------------------------------------------------- F-13 The following pages contain the Consolidated Financial Statement Schedules as specified for Item 14(a)(2) of Part IV of Form 10-K. REPORT OF INDEPENDENT AUDITORS AS TO CONSOLIDATED SCHEDULES To the Shareholders and Board of Directors Hickok Incorporated Cleveland, Ohio We have audited the consolidated financial statements of HICKOK INCORPORATED (the "Company") as of September 30, 1995 and 1994, and for each of the three years in the period ended September 30, 1995, and have issued our report thereon dated November 17, 1995; such consolidated financial statements and report are included in Part II, Item 8 of this Form 10-K. Our audits also included the consolidated financial statement schedules ("schedules") of the Company listed in Item 14 (a)(2). These schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. MEADEN & MOORE, INC. Certified Public Accountants December 18, 1995 Cleveland, Ohio HICKOK INCORPORATED SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
Col. A Col. B Col. C Col. D Col. E - ---------------------------------- ----------- --------------------------------- -------------- ------------ Additions -------------------------------- Balance at Charged to Charged to Balance Beginning Costs and Other at End Description of Period Expenses Accounts Deductions of Period - ---------------------------------- ----------- -------------- -------------- -------------- ------------ Deducted from Asset Accounts: Year Ended September 30, 1993 ------------------------------ Reserve for doubtful accounts $ 15,000 $ (5,188) (1) $ 1,394 (2) $ 6,582 (3) $ 15,000 Reserve for inventory obsolescence $ 15,305 $ 89,375 $ - $ 104,685 (5) $ - Reserve for warranty claim (4) $ 142,995 $ - $ - $ 142,995 (4) $ - Year Ended September 30, 1994 ------------------------------ Reserve for doubtful accounts $ 15,000 $ 1,519 (1) $ 72 (2) $ 1,591 (3) $ 15,000 Reserve for inventory obsolescence $ - $ 36,729 $ - $ 36,729 (5) $ - Reserve for warranty claim (4) $ - $ - $ - $ - $ - Year Ended September 30, 1995 ------------------------------ Reserve for doubtful accounts $ 15,000 $ 361 (1) $ 463 (2) $ 824 (3) $ 15,000 Reserve for inventory obsolescence $ - $ 142,783 $ - $ 82,583 (5) $ 60,200 Reserve for warranty claim (4) $ - $ - $ - $ - $ -
(1) Classified as bad debt expense. (2) Recoveries on accounts charged off in prior years. (3) Accounts charged off during year as uncollectible. (4) Reserve classified as an offset to a certificate of deposit of $142,995 in current assets which collateralized a related bank guaranteed letter of credit. The certificate was cashed in during fiscal 1993. (5) Inventory charged off during the year as obsolete. HICKOK INCORPORATED SCHEDULE IX - SHORT-TERM BORROWINGS
Col. A Col. B Col. C Col. D Col. E Col. F - ---------------------------- ----------- -------- -------------- -------------- -------------------- Weighted Maximum Amount Average Amount Weighted Average Balance at Average Outstanding Outstanding Interest Rate During Category of Aggregate End of Interest During the During the the Period (3) Short-term Borrowings Period Rate Period Period -------------------- - ---------------------------- ----------- -------- -------------- -------------- Year Ended September 30, 1993 ------------------------------ Note Payable to Bank (1) $ 1,250,000 6.00% $ 2,650,000 $1,076,986 (2) 5.99% Year Ended September 30, 1994 ------------------------------ Note Payable to Bank (1) $ 1,230,000 7.00% $ 1,550,000 $ 365,836 (2) 7.26% Year Ended September 30, 1995 ------------------------------ Note Payable to Bank (1) $ 3,510,000 8.84% $ 3,510,000 $1,353,000 (2) 9.92%
(1) Note payable to bank represents borrowings under a line-of-credit which has no termination date but is reviewed annually for renewal. (2) The average amount outstanding during the period was computed by dividing the total of daily outstanding principal balances by 365. (3) The weighted average interest rate during the period was computed by dividing the actual interest by the average short-term debt outstanding. 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 at Cleveland, Ohio this 20th day of December, 1995. THE HICKOK ELECTRICAL INSTRUMENT COMPANY By:/s/ Robert L. Bauman ------------------------------------- Robert L. Bauman, Chairman, 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 indicated and on the 20th day of December, 1995: Signature: Title - ---------- ----- /s/ Robert L. Bauman Chairman, President and Chief Executive - ------------------------------ Officer (Principal Executive Officer) Robert L. Bauman /s/ Eugene T. Nowakowski Chief Financial Officer - ------------------------------ (Principal Financial and Accounting Eugene T. Nowakowski Officer) /s/ Thomas H. Barton Director - ------------------------------ Thomas H. Barton /s/ Harry J. Fallon Director - ------------------------------ Harry J. Fallon /s/ T. Harold Hudson Director - ------------------------------ T. Harold Hudson /s/ George S. Lockwood, Jr. Director - ------------------------------ George S. Lockwood, Jr. /s/ Michael L. Miller Director - ------------------------------ Michael L. Miller /s/ Janet H. Slade Director - ------------------------------ Janet H. Slade EXHIBIT INDEX Exhibit No.: Document - ------------ ------------ 3(a) Articles of Incorporation and Code of Regulations 3(b) Amendment to Articles of Incorporation 10(a) Form of Section 303 Stock Redemption Agreement by and between the Company and Robert D. Hickok (incorporated herein by reference to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1988) 10(b) Loan Agreement dated as of May 20, 1991+wy and between the Company and Huntington National Bank. (Incorporated herein by reference to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1991.) 10(c) First Amendment to Credit and Security Agreement, dated as of February 28, 1992, by and between the Company and Huntington National Bank. (Incorporated herein by reference to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1992). 10(d) Second Amendment to Credit and Security Agreement, dated as of February 28, 1993, by and between the Company and Huntington National Bank. (Incorporated herein by reference to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1993.) 10(e) Third Amendment to Credit and Security Agreement, dated as of February 28, 1994 by and between the Company and The Huntington National Bank. (Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1994.) 10(f) Fourth Amendment to Credit and Security Agreement, dated as of January 13, 1995, by and between the Company and Huntington National Bank. 11 Computation of Net Income Per Common Share E-1 22 Subsidiaries of the Registrant (Incorporated herein by reference to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1993.) 23 Consent of Independent Auditors. 27 Financial Data Schedule E-2 EX-3.A 2 EXHIBIT 3-A These Articles of Incorporation of The Hickok Electrical Instrument Company, WITNESSETH. THAT WE, THE UNDERSIGNED(1), ALL OF WHOM ARE CITIZENS OF THE STATE OF OHIO, DESIRING TO FORM A CORPORATION FOR PROFIT, UNDER THE GENERAL CORPORATION LAWS OF SAID STATE, DO HEREBY CERTIFY: FIRST. THE NAME OF SAID CORPORATION SHALL BE THE HICKOK ELECTRICAL INSTRUMENT COMPANY. SECOND. SAID CORPORATION IS TO BE LOCATED AT CLEVELAND IN CUYAHOGA COUNTY, OHIO, AND ITS PRINCIPAL BUSINESS THERE TRANSACTED. THIRD. SAID CORPORATION IS FORMED FOR THE PURPOSE OF manufacturing, repairing, buying, selling, importing and exporting, or otherwise dealing in, either directly or indirectly, through the medium of agents or otherwise, mechanical and electrical devices, appliances and machinery of all sorts and descriptions; with full power and authority to purchase, lease or otherwise acquire lands and buildings in this State or elsewhere, for the erection and establishment of a manufactory or manufactories and workshops with suitable plants, engines and machinery; to acquire the land and buildings, plants and other properties of any persons or companies engaged in a like business; to purchase or otherwise acquire patents, patent rights and privileges, improvements or secret processes for or in any way relating to all or any of the objects aforesaid, and to grant licenses for the use of, or to sell or otherwise deal with any patents, patent rights and privileges, improvements or secret processes acquired by the company; to sell, mortgage, lease or otherwise deal with real and personal property of the company, and such other and further things as are necessary or incidental thereto. FOURTH. THE CAPITAL STOCK OF SAID CORPORATION SHALL BE Ten Thousand DOLLARS ($10,000.00) DIVIDED INTO One Hundred (100) SHARES OF One Hundred DOLLARS ($100) EACH. IN WITNESS WHEREOF, WE HAVE HEREUNTO SET OUR HANDS, THIS 10th DAY OF September, A.D. 1915. Malvern E. Schultz Carl D. Bechberger L. M. Diehl Lee E. Skiel Carlton F. Schultz - --------------- (1) "all" or "majority" 1 CERTIFICATE OF INCREASE OF CAPITAL STOCK R. D. Hickok, President, and W. E. Eberle, secretary of The Hickok Electrical Instrument Company, duly authorized in the premises, and acting on behalf of said Company, do hereby certify that on the 9th day of May, 1921, the capital stock of said Company was fully subscribed for, and an installment of ten percent on each share of stock had been paid; that on said day, by a vote of the holders of a majority of the stock of said Company, at a meeting called by a majority of its directors, and held at the office of the Company in the city of Cleveland, Cuyahoga County, Ohio, and at which meeting all the holders of the capital stock of said Company were present in person or by proxy, and waived in writing the notice by publication and by letter, of the time, place and object of such meeting required by law, and also agreed in writing to the increase of capital stock hereinafter set forth, it was, on motion, "Resolved, that the capital stock of said The Hickok Electrical Instrument Company, be increased from Ten Thousand Dollars ($10,000.00) its present capital stock, to Fifteen Thousand Dollars ($15,000.00), divided into one hundred and fifty (150) shares of One Hundred Dollars ($100.00) each; and further, that the president and secretary of said Company be instructed to file a certificate of such increase with the secretary of state;" which is done accordingly. In witness whereof, the aforesaid R. D. Hickok, president, and W. H. Eberle, secretary of The Hickok Electrical Instrument Company, acting for and on behalf of said Company, have hereunto set their hands this 9th day of May, A.D. 1921. THE HICKOK ELECTRICAL INSTRUMENT COMPANY, By R. D. Hickok President By W. E. Eberle Secretary 2 ANNUAL REPORTS MADE BY ALL CORPORATIONS ORGANIZED PRIOR TO JULY 23, 1929, MUST BE ACCOMPANIED BY FOLLOWING DESIGNATION OF AGENT. Appointment of Agent Ohio Corporation, Section 8623-129, General Code KNOW ALL MEN BY THESE PRESENTS, That Robert D. Hickok of 354 East 105th Street, in Cleveland, Cuyahoga County, Ohio, a natural person and resident of said county, being the county in which the principal office of The Hickok Electrical Instrument Company is located, is hereby appointed as the person on whom process, tax notices and demands against said The Hickok Electrical Instrument Company may be served as authorized by resolution of Board of Directors. The Hickok Electrical Instrument Company Name of Corporation R. D. Hickok President L.McCann Assistant Secretary Cleveland, Ohio, , A. D. 19 The Hickok Electrical Instrument Company Name of Corporation Gentlemen: I hereby accept the appointment as the representative of your company upon whom process, tax notices, or demands may be served. /s/ Robert D. Hickok State of Ohio, County of Cuyahoga, as: Personally appeared before me, the undersigned, a Notary Public in and for said County, this 17th day of March, A. D. 1930, the above named R. D. Hickok who acknowledged the signing of the foregoing to be his free act and deed for the uses and purposes therein mentioned. WITNESS my hand and official seal on the day and year last aforesaid. Lloyd W. Hill Notary Public in and for Cuyahoga County, Ohio. 3 Certificate of Amendment To Articles Of THE HICKOK ELECTRICAL INSTRUMENT COMPANY, R. D. Hickok, President, and W. H. Eberle Secretary, of The Hickok Electrical Instrument Company, an Ohio corporation, with its principal office located at Cleveland, Ohio, do hereby certify that a meeting of the holders of the shares of said corporation entitling them to vote on the proposal to amend the articles of incorporation thereof, as contained in the following resolution, was duly called and held on the Second day of January, 1936, at which meeting a quorum of such shareholders(2) (and each class thereof) was present in person or by proxy, and that by affirmative vote of the holders of shares entitling them to exercise(3), 3/4 of the voting power of the corporation on such proposal* the following resolution of amendment was adopted: "That the capital stock of the Hickok Electrical Instrument Company, having been fully subscribed and paid for that the same by increased from $15,000.00 as at present, to $50,000.00, divided into 500 shares of $100.00 each instead of 150 shares of $100.00 each and that the President and Secretary of said Company be instructed to file a certificate of such increase with the Secretary of State." IN WITNESS WHEREOF, said R. D. Hickok, President, and W. H. Eberle, Secretary, of The Hickok Electrical Instrument Company, acting for and on behalf of said corporation, have hereunto subscribed their names and caused the seal of said corporations to be hereunto affixed this Second day of January, 1936. By R. D. Hickok President By W. H. Eberle Secretary - -------------- (2) Strike out matter in parenthesis if not necessary. (See Sec. 8623-15, G. C.) (3) Two-thirds, or such other proportion, not less than a majority, or vote by classes, as the articles may permit or require. (See Sec. 8623-15, paragraph b, G. C.) 4 CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION OF THE HICKOK ELECTRICAL INSTRUMENT COMPANY R. D. Hickok, Sr., President-Treasurer and W. H. Eberle, Secretary of the Hickok Electrical Instrument Company, an Ohio corporation, with its principal office located at Cleveland, Ohio, do hereby certify that a meeting of the holders of shares of said company entitling them to vote on the proposal to amend the Articles of Incorporation thereof, as contained in the following resolutions, was duly called and held on the 5th day of October, 1944 at which meeting a quorum of such stockholders was present in person or by proxy, and that by the affirmative vote of the shareholders entitled under the Articles of Incorporation to exercise all of the voting power of the corporation on such proposals, the following resolutions were adopted: RESOLVED, that the Articles of Incorporation of the Hickok Electrical Instrument Company (Article Fourth) as amended, be and the same hereby are, amended so that the same shall henceforth read as follows: The maximum number of shares which the corporation is authorized to have outstanding is as follows: 2000 Class A shares of common capital stock without par value, 15,000 Class B shares of common capital stock without par value, The aforesaid Class A shares shall be issued subject to the following provision which shall be incorporated into each certificate issued to the holder of such shares: "For each of the five fiscal years of the Hickok Electrical Instrument Company subsequent to June 30, 1944 each share of Class A common capital stock of the said company shall be entitled, out of dividends voted by the Board of Directors, to the payment of a dividend of 5 $2.50 per share before any dividends are paid upon any other class of shares of the company; but such dividends shall not be cumulative from one fiscal year to another. After payment of said dividend for any one fiscal year, any further dividends declared and paid for that fiscal year shall then be applied to the payment of dividends not exceeding $2.50 per share on each of the issued and outstanding shares of Class B stock. After there shall have been paid upon each issued and outstanding Class B share said dividend of $2.50 during any such fiscal year, all further dividends declared and paid for such fiscal year shall be applied and paid equally to all issued and outstanding shares regardless of class. After the expiration of said five year period, all shares of all classes shall participate equally in all dividends." All of the shares of the common capital stock of the company having a par value of $100.00 each whether issued or unissued, shall be and they hereby are changed into 15,000 Class B shares of common capital stock without par value, on the basis of 30 Class B shares for 1 share of said $100.00 par value common capital stock. Class B shares shall be issued subject to the above-quoted provisions to be incorporated into the Class A shares. Each of the said Class A and Class B shares shall have equal voting rights one with the other in all corporate matters, except with respect to any proposed change affecting the aforesaid prior dividend right of said Class A shares. With respect to such prior dividend right, no change or amendment shall be made to these Articles prior to July 1, 1949, except upon the consent of the holders of two-thirds or more of said Class A shares. And, be it further RESOLVED, that the Articles of Incorporation of the Hickok Electrical Instrument Company as amended, be and the same hereby are amended, to provide that the Board of 6 Directors of this company be and they hereby are authorized and empowered to redeem, repurchase, buy, sell, trade, resell or otherwise deal in all shares of the common capital stock of the company, at such prices, upon such terms and under such conditions as said Board of Directors shall in its discretion deem advisable and for the best interests of this company. IN WITNESS WHEREOF, said R. D. Hickok, Sr., President-Treasurer and W. H. Eberle, Secretary, of the Hickok Electrical Instrument Company, acting for and on behalf of said corporation have hereunto subscribed their names and caused the seal of said corporation to be hereunto affixed this 22nd day of November, 1944. R. D. Hickok, Sr., President-Treasurer W. H. Eberle, Secretary 7 CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION OF THE HICKOK ELECTRICAL INSTRUMENT COMPANY Robert D. Hickok, President, and Einar G. Carlson, Secretary of the Hickok Electrical Instrument Company, an Ohio corporation, with its principal office located at Cleveland, Ohio, do hereby certify that a meeting of the holders of shares of said Company entitling them to vote on the proposal to amend the Amended Articles of Incorporation thereof, as contained in the following resolutions, was duly called and held on the 24th day of August, 1959, at which meeting a quorum of such shareholders was present in person, and that by the affirmative vote of the shareholders entitled under the Amended Articles of Incorporation to exercise all of the voting power of the corporation on such proposals, the following resolutions of amendment were adopted: That the Articles of Incorporation of The Hickok Electrical Instrument Company (Articles Third and Fourth) as amended, be and the same hereby are further amended and changed so that the same shall henceforth read as follows: THIRD: The Corporation is formed for the following purposes, and any of them: To manufacture, in whole or in part, repair, treat, service, buy purchase or otherwise acquire, invest in, own, mortgage, pledge, exchange, sell, assign and transfer or otherwise dispose of, trade, deal in and deal with, import and export, in every manner, goods, wares, merchandise, personal property, products, materials, and articles of every kind, class and description, for any commercial, industrial, military, scientific or other purpose. To carry on and perform research, development, evaluation, investigation, planning, design, testing, technical studies, invention and consulting or other service, for any commercial, industrial, military, scientific or other purpose, and in any field or fields. To maintain and operate manufacturing, testing and related equipment, chemical, physical and other laboratories, training schools and such other facilities as may be appropriate for the foregoing purposes and to carry on such activities. To buy, purchase, or otherwise acquire, invest in, own, mortgage, pledge, exchange, sell, assign and transfer, or otherwise dispose of, trade, deal in and deal with real property of any description and any shares of capital stock or voting trust certificates in respect of shares of capital stock, scrip, warrants, bonds, debentures, notes, trust receipts and other securities, obligations, choses in action and evidences of indebtedness or interest, issued or created by this corporation or by any other corporation, joint stock company, syndicate, association, firm, trust, government or person, public or private, and as owner thereof to possess and exercise all the rights, powers and privileges of ownership, and to do any and all acts and things necessary and advisable for the preservation, protection, improvement and enhancement in value thereof. To enter into, make and perform contracts of every kind and description, including contracts of joint venture, with any firm, association, corporation, government or person, public or private. 8 To do all things necessary or incidental to any of the foregoing, including owning, holding and dealing, in every manner, in all real and personal property. In general, to carry on any other lawful activity or business whatsoever in connection with the foregoing and the business of the Corporation, or which is calculated, directly or indirectly, to promote the interests of the Corporation or to enhance the value of its properties. The foregoing shall be construed as purposes, objectives and powers, and nothing herein shall be deemed to limit or exclude in any manner any power, right or privilege now or hereafter given to the Corporation by law or any authority which it now or hereafter is permitted to exercise under the statutes of Ohio. FOURTH: The Maximum number of shares which the Corporation is authorized to have outstanding is as follows: 1,000,000 Class A shares of common capital stock of $1.00 par value. 275,000 Class B shares of common capital stock of $1.00 par value. All of the shares of Class A or Class B common capital stock without par value of the Company, issued and outstanding on the effective date of these Amended Articles of Incorporation, shall be and they hereby are changed and converted at the option of the holder thereof, into either Class A shares of common capital stock of $1.00 par value or Class B shares of common capital stock of $1.00 par value, on the basis of twenty (20) Class A or Class B shares of $1.00 par value for each one Class A or Class B share without par value. The foregoing option shall expire ten (10) days after said date of these Amended Articles, and in the event said option is not exercised affirmatively by said holder within said period of time, such failure shall be construed as an election by the holder to convert said holder's shares into Class A shares of common capital stock of $1.00 par value. The aforesaid Class A and Class B shares shall be issued subject to the following provisions which shall be incorporated into each certificate issued to the holder of such shares: DIVIDEND RIGHTS Holders of Class A common capital stock are entitled to receive, when and as declared by the Board of Directors of the Company out of any funds legally available therefor, cash dividends of five cents per share for each one-half of the fiscal year ending June 30, 1960 and twenty cents per share for each full fiscal year thereafter, such dividends to be non-cumulative. After any of the said dividends have been declared and paid or set aside, then for the same half or full fiscal year, one or more cash dividends may be paid to the holders of the Class B common capital stock up to the total paid to the holders of Class A common capital stock in the same period. Thereafter, for that half or full fiscal year the holders of Class A and Class B common capital stock shall be entitled to the payment of the same dividend or dividends per share, when and as 9 declared by the Board of Directors. Notwithstanding the foregoing, the holders of Class A common capital stock shall be entitled to no preference with respect to the payment of stock dividends and such stock dividends when and as declared, paid or ordered by the Board of Directors, shall be distributed to the holders of Class A and Class B common capital shares on a share- for-share basis. VOTING RIGHTS Except as hereinafter provided, each share of the Class A common capital stock of the Company shall be entitled to one vote for each share thereof; and except as otherwise hereinafter provided, each share of the Class B common capital stock of the Company shall be entitled to three votes for each share thereof. Except as otherwise expressly provided in the Articles of Incorporation (as amended) or as otherwise required by Ohio law, the holders of Class A and Class B shares of stock shall vote on all matters as though all of said shares were of one class, the voting shall be on the aforesaid basis of one vote for each share of Class A common capital stock and three votes for each share of Class B common capital stock. Notwithstanding the foregoing, the written consent or the affirmative vote of the holders of two-thirds of the Class A common capital stock, at the time outstanding, shall be required to effect or validate any one or more of the following: (a) The issuance of any additional shares of Class B common capital stock; (b) The alteration of any of the powers, preferences or rights of the shares of Class A common capital stock in any manner substantially prejudicial to the holders thereof; (c) The voluntary liquidation of the Company or the sale, lease or conveyance of all or substantially all of the properties and business of the Company; or (d) After there has been a public offering of shares of Class A common capital stock of this Company, the issuance of any additional Class A common capital stock, for cask, for less than the public offering price (except for reasonable commissions or discounts for the underwriting or marketing thereof) received by the Company through the public offering next preceding such proposed issuance; but without such vote or consent of the holders of Class A common capital stock: (i) Class A common capital stock may be sold for a lesser consideration per share if first offered on a pro-rata?? basis to the holders of such shares and thereafter issued for a consideration not less than that at which such shares were so offered to such holders, less reasonable commissions or discounts for the underwriting or marketing thereof; and 10 (ii) Class A common capital stock may be issued to employees under the provisions of Restricted Stock Options in the aggregate number heretofore or hereafter authorized by the shareholders of the Company; and (iii) Such shares may be issued for property other than cash. CONVERSION RIGHTS Each share of Class B common capital stock shall be convertible at the option of the holder and at any time, into Class A common capital stock on a share-for-share basis. In the event each of the outstanding shares of the Class A common capital stock shall be changed into or exchanged for a different number or kind of shares of stock, or other securities of the Company, or of another corporation, whether through reorganization, recapitalization, stock dividend, stock split, combination of shares, merger or consolidation, then For the purposes of the said option there shall be substituted for each share of Class A common capital stock, the number and kind of shares of stock or other securities into which each such share of Class A common capital stock of the Company shall be so changed or increased, or for which each such share shall be so exchanged, and the shares or securities so substituted for each such share of Class A common capital stock shall be subject to the conversion option hereinabove provided. Upon conversion, no adjustments will be made for dividends theretofore declared, and no fractions of shares shall be issued. In lieu of fractions of shares, the Company shall make a cash adjustment on the basis of the market value of the Class A shares of the conversion date. PREEMPTIVE RIGHTS No holder of Class A or Class B shares of this Company shall have any preemptive rights with respect to such shares except as hereinabove expressly authorized. That the said Articles of Incorporation (as amended) be further amended to add the following Article Fifth: FIFTH: The Corporation, by its Directors, is authorized to buy, purchase, or otherwise acquire, invest in, own, mortgage, pledge, exchange, sell, assign and transfer, or otherwise dispose of, trade, deal in and deal with real property of any description and any shares of capital stock or voting trust certificates in respect of shares of capital stock, scrip, warrants, bonds, debentures, notes, trust receipts and other securities, obligations, choses in action and evidences of indebtedness or interest, issued or created by this corporation or by any other corporation, joint stock company, syndicate, association, firm, trust, government or person, public or private, and as owner thereof to possess and exercise all the rights, powers and privileges of ownership, and to do any and all acts and things necessary and advisable for the preservation, protection, improvement and enhancement in value thereof. IN WITNESS WHEREOF, the said Robert D. Hickok, President, and Einar G. Carlson 11 Secretary, of The Hickok Electrical Instrument Company, acting for and on behalf of said Corporation, have hereunto subscribed their names and caused the seal of said Corporation to be hereunto affixed this 2nd day of September, 1959. THE HICKOK ELECTRICAL INSTRUMENT COMPANY By Robert D. Hickok President By Einar G. Carlson Secretary 12 CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION OF THE HICKOK ELECTRICAL INSTRUMENT COMPANY Robert D. Hickok, President, and Einar G. Carlson, Secretary of The Hickok Electrical Instrument Company, an Ohio corporation, with its principal office located at Cleveland, Ohio, do hereby certify that a meeting of the holders of shares of said company entitling them to vote on the proposal to amend the Amended Articles of Incorporation thereof, as contained in the following resolution, was duly called and held on the 25th day of September, 1959, at which meeting a quorum of such shareholders was present in person, and that by the affirmative vote of the shareholders entitled under the Amended Articles of Incorporation to exercise all of the voting power of the corporation on such proposals, the following resolution of amendment was adopted: That the Articles of Incorporation of The Hickok Electrical Instrument Company (Article Fourth) as amended, be and the same hereby are further amended to increase the number of authorized Class B shares of common capital stock of $1.00 par value from 275,000 shares to 295,980 shares; all of such shares to be issued subject to the conditions and provisions set forth in the Certificate of Amendment of The Hickok Electrical Instrument Company dated September 2, 1959, filed with the Secretary of the State of Ohio on September 5, 1959 and recorded on Roll B 119 at Frame 163 of the Records of Incorporation and Miscellaneous Filings. IN WITNESS WHEREOF, the said Robert D. Hickok, President, and Einar G. Carlson, Secretary, of The Hickok Electrical Instrument Company, acting for and on behalf of said Corporation, have hereunto subscribed their names and caused the seal of the said Corporation to be hereunto affixed this 25th day of September, 1959. THE HICKOK ELECTRICAL INSTRUMENT COMPANY By Robert D. Hickok President By Einar G. Carlson Secretary 13 EX-3.B 3 EXHIBIT 3 (B) CERTIFICATE OF AMENDMENT TO AMENDED ARTICLES OF INCORPORATION OF THE HICKOK ELECTRICAL INSTRUMENT COMPANY The undersigned officers of The Hickok Electrical Instrument Company (the "Corporation"), an Ohio corporation, do hereby certify that at a meeting of the Shareholders by a vote greater than the two-thirds majority vote of each class of Common Shares required by the Company's Amended Articles of Incorporation, the following amendments to the Amended Articles of Incorporation of the Corporation were adopted on February 23, 1995: RESOLVED, that Article First of the Amended Articles of Incorporation of the Corporation shall be amended in its entirety to read as follows: FIRST: The name of said corporation shall be Hickok Incorporated. RESOLVED, that Article Fourth of the Amended Articles of Incorporation of the Corporation shall be amended in its entirety to read as follows: FOURTH: The Maximum number of shares which the Corporation is authorized to have outstanding is as follows: 3,750,000 Class A shares of common capital stock of $1.00 par value 1,000,000 Class B shares of common capital stock of $1.00 par value The aforesaid Class A and Class B shares shall be issued subject to the following provisions which shall be incorporated into each certificate issued to the holder of such shares: DIVIDEND RIGHTS Holders of Class A common capital stock are entitled to receive, when and as declared by the Board of Directors of the Company out of any funds legally available therefor, cash dividends of five cents per share fore each one-half of the fiscal year ending June 30, 1960 and twenty cents per share for each full fiscal year thereafter, such dividends to be non-cumulative. After any of the said dividends have been declared and paid or set aside, then for the same half or full fiscal year, one or more cash dividends may be paid to the holders of the Class B common capital stock up to the total paid to the holders of Class A common capital stock in the same period. Thereafter, for that half or full fiscal year the holders of Class A and Class B common capital stock shall be entitled to the payment of the same dividend or dividends per share, when and as declared by the Board of Directors. Notwithstanding the foregoing, the holders of Class A common capital stock shall be entitled to no preference with respect to the payment of stock dividends and such stock dividends when and as declared, paid or ordered by the Board of Directors, shall be distributed to the holders of Class A and Class B common capital shares on a share-for-share basis. VOTING RIGHTS Except as hereinafter provided, each share of the Class A common capital stock of the Company shall be entitled to one vote for each share thereof; and except as otherwise hereinafter provided, each share of the Class B common stock of the Company shall be entitled to three votes for each share thereof. Except as otherwise expressly provided in the Articles of Incorporation (as amended) or as otherwise required by Ohio law, the holders of Class A and Class B shares of stock shall vote on all matters as though all of said shares were of one class; and in any such voting as though all of said shares were of one class, the voting shall be on the aforesaid basis of one vote for each share of Class A common capital stock and three votes for each share of Class B common capital stock. Notwithstanding the foregoing, the written consent or the affirmative vote of the holders of two-thirds of the Class A common capital stock, at the time outstanding, shall be required to effect or validate any one or more of the following: (a) The issuance of any additional shares of Class B common capital stock; (b) The alteration of any of the powers, preferences or rights of the shares of Class A 2 common capital stock in any manner substantially prejudicial to the holders thereof; (c) The voluntary liquidation of the Company or the sale, lease or conveyance of all or substantially all of the properties and business of the Company; or (d) After there has been a public offering of shares of Class A common capital stock of this Company, the issuance of any additional Class A common capital stock, for cash, for less than the public offering price (except for reasonable commissions or discounts for the underwriting or marketing thereof) received by the Company through the public offering next preceding such proposed issuance; but without such vote or consent of the holders of Class A common capital stock: (i) Class A common stock may be sold for a lesser consideration per share if first offered on a pro-rata basis to the holders of such shares and thereafter issued for a consideration not less than that at which such shares were so offered to such holders, less reasonable commissions or discounts for the underwriting or marketing thereof; and (ii) Class A common capital stock may be issued to employees under the provisions of Restricted Stock Options in the aggregate number heretofore or hereafter authorized by the shareholders of the Company; and (iii) Such shares may be issued for property other than cash. CONVERSION RIGHTS Each share of Class B common capital stock shall be convertible at the option of the holder and at any time, into Class A common capital stock on a share-for-share basis. In the event each of the outstanding shares of the Class A common capital stock shall be changed into or exchanged for a different number or kind of shares of stock, or other securities of the Company, or of another corporation, whether through reorganization, recapitalization, stock dividend, stock split, 3 combination of shares, merger or consolidation, then for the purposes of the said option there shall be substituted for each share of Class A common capital stock, the number and kind of shares of stock or other securities into which each such share of Class A common capital stock of the Company shall be so changed or increased, or for which each such share shall be so exchanged, and the shares or securities so substituted for each such share of Class A common capital stock shall be subject to the conversion option hereinabove provided. Upon conversion, no adjustments will be made for dividends theretofore declared, and no fractions of shares shall be issued. In lieu of fractions of shares, the Company shall make a cash adjustment on the basis of the market value of the Class A shares of the conversion date. PREEMPTIVE RIGHTS No holder of Class A or class B shares of this Company shall have any preemptive rights with respect to such shares except as hereinabove expressly authorized. OTHER Notwithstanding the foregoing terms of this Article Fourth, the Company may issue shares of Class B common capital stock to give effect to a share dividend, stock split or other non-cash distribution without the written consent or the affirmative vote of the holders of the Company's Class A common capital stock, provided such share dividend, stock split or non-cash distribution is equal for both the Class A common capital stock and the Class B common capital stock, on a per share basis. Notwithstanding the foregoing terms of this Article Fourth, in the event the Company shall pay a dividend or made a distribution on its Class A common capital stock that is paid or made in Class A common capital stock of the Company, an adjustment to the minimum price at which any additional shares of Class A common capital stock of the Company may be issued without the written consent or the affirmative vote of the holders of the Company's Class A common capital stock shall automatically occur such that the product of the share price restriction in effect immediately prior to the authorization of such dividend or distribution multiplied by the number of shares of 4 Class A common capital stock of the Company outstanding immediately prior to the payment of such dividend or distribution shall be the same as the product of the adjusted share price restriction multiplied by the number of shares of Class A common capital stock of the Company outstanding immediately following the payment of such dividend or distribution. Notwithstanding the foregoing terms of this Article Fourth, in the event the Company shall pay a dividend or make a distribution on its Class A common capital stock that is paid or made in Class A common capital stock of the Company, an adjustment to the twenty cents per share of Class A common capital stock dividend amount set forth above shall automatically occur such that the product of twenty cents per share of Class A common capital stock (or the adjusted amount in effect immediately prior to the authorization of such dividend or distribution, if previously adjusted) multiplied by the number of shares of Class A common capital stock outstanding immediately prior to the payment of such dividend or distribution shall be the same as the product of the adjusted per share amount multiplied by the number of shares of Class A common capital stock outstanding immediately following the payment of such dividend or distribution. Any adjustment made pursuant to this Article Fourth shall become effective immediately following the record date relating to such change. RESOLVED, that the Chairman of the Board, the President and Chief Executive Officer or any Vice President and the Secretary of the Corporation are authorized and directed to execute and file in the office of the Secretary of State of Ohio an appropriate Certificate of Amendment to render effective said Amendments to the Amended Articles of Incorporation of the Corporation. IN WITNESS WHEREOF, the undersigned officers of the Corporation have hereunto subscribed their names as of the 23rd day of February, 1995. /s/ Robert L. Bauman /s/ Michael L. Miller - ------------------------- ------------------------- Robert L. Bauman Michael L. Miller Chairman, President and Secretary Chief Executive Officer 5 EX-10.F 4 EXHIBIT 10 (F) FOURTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT THIS FOURTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this "Fourth Amendment") is made and entered into as of the 13th day of January, 1995, and between THE HICKOK ELECTRICAL INSTRUMENT COMPANY, an Ohio corporation (the "Borrower"), and THE HUNTINGTON NATIONAL BANK, a national banking association (the "Bank"). RECITALS: A. The Borrower and the Bank are the parties to that certain Credit Agreement dated May 20, 1991, pursuant to which, INTER ALIA, the Bank made available to the Borrower a Revolving Credit Facility in the maximum amount of $1,500,000, subject to the terms and conditions thereof. Said Credit Agreement was amended by that certain First Amendment to Credit Agreement dated as of February 28, 1992, that certain Second Amendment to Credit Agreement dated as of February 28, 1993, and that Third Amendment to Credit Agreement dated as of February 28, 1994, all of the foregoing Credit Agreements, as so amended, hereinafter collectively referred to as the "Loan Agreement". B. The Borrower has requested that the Bank extend the term of the Revolving Credit Facility, and agree to certain further modifications to the Loan Agreement. C. Subject to the agreements of the Borrower and the satisfaction of conditions herein set forth, the Bank is willing to grant such requests. D. Capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings assigned to them in the Loan Agreement. AGREEMENTS: FOR AND IN CONSIDERATION of the foregoing Recitals, the mutual covenants and agreements hereinafter set forth, the sufficiency of which is hereby acknowledged, the parties agree as follows: 1. AMENDMENTS. (A) Section 2.1 of the Loan Agreement is hereby deleted in its entirety and the following inserted in lieu thereof: "2.1 REVOLVING CREDIT: REVOLVING NOTE. (A) Subject to the terms and conditions of this agreement, Bank will make available to Borrower a revolving credit facility (the "Revolving Credit Facility") under which the Bank shall, from time to time, upon written or oral (confirmed promptly in writing) request of Borrower therefor, advance loans to Borrower (each a "Revolving Loan" and, collectively, the "Revolving Loans") in the maximum aggregate principal amount at any one time outstanding of not more than Five Million Dollars ($5,000,000.00). The Revolving Credit Facility shall have an initial term commencing January 13, 1995 and shall terminate on February 28, 1996; provided, however, that unless Bank or Borrower shall have given written notice of termination to the other not later than 60 days prior to the last date of such term (or renewal term), the Revolving Credit Facility shall be extended automatically for successive (1) year terms (the "Renewal Term(s)"). All advances of Revolving Loans shall be repayable as provided in Section 2.4, and shall be used by Borrower as provided in Section 5.5, below." (B) Section 2.4(C) of the Loan Agreement is hereby deleted in its entirety and the following inserted in lieu thereof: "(C) The entire balance of the principal of the Revolving Credit Facility shall be payable in full on the later of (i) February 28, 1996 or (ii) the date on which any current Renewal Term expires without such term having been renewed for a subsequent additional Renewal Term pursuant to Section 2.1 (A)." 2 (C) Section 5.2(H) is hereby amended by deleting therefrom the numerals "$525,000.00" and inserting the numerals "$1,500,000.00" in lieu thereof. (D) Section 5.2(J) is hereby amended by deleting therefrom the numerals "$4,500,000.00" and inserting the numerals "$6,000,000.00" in lieu thereof. (E) Section 5.2(K) is hereby amended by deleting therefrom the numerals "$5,000,000.00" and inserting the numerals "$8,000,000" in lieu thereof. 2. EFFECTIVE DATE; CONDITIONS PRECEDENT. The modifications to the Loan Agreement set forth in Paragraph 1, above, shall be effective on January 13, 1995, or such later date as is mutually acceptable to the Borrower and the Bank ("the Effective Date"), provided that such effectiveness shall be subject to the satisfaction by the Borrower of each of the following conditions precedent: (a) On the Effective Date, (i) after giving effect to the amendments effected hereby, there shall exist no Possible Default or Event of Default, and the Borrower shall have delivered to the Bank written confirmation thereof as of the Effective Date, and (ii) the representations and warranties of the Borrower under the Loan Agreement shall be reaffirmed in writing on the Effective Date, except for such matters relating thereto as are indicated in such reaffirmation which shall be satisfactory to the Bank. (b) The Borrower shall have executed and delivered to the Bank an Amended and Restated Revolving Note in the form of EXHIBIT A hereto. 3 (c) The Secretary of the Borrower shall have delivered his or her certificate, attaching a true and complete copy of the resolutions of its Board of Directors authorizing its execution and delivery of this Fourth Amendment, and the taking of the actions contemplated hereby. (d) Each of the Existing Subsidiaries shall have executed and delivered a confirmation and acknowledgment of their respective Continuing Guaranties in the form of EXHIBIT B hereto. (e) The Borrower shall have delivered to the Bank such other instruments and taken such other actions as the Bank or its special counsel may reasonably request. 4. OTHER LOAN DOCUMENTS. Any reference in any of the Other Agreements to the Loan Agreement shall, from and after the Effective Date, be deemed to refer to the Loan Agreement, as modified by this Fourth Amendment; and the term "Other Agreements" shall be deemed to include the other documents contemplated to be delivered hereunder. 5. BANK'S EXPENSE. The Borrower agrees to reimburse the Bank promptly for the Bank's costs and expenses incurred in connection with this Fourth Amendment and the transactions contemplated hereby, including, without limitation, the fees and expenses of Bank's special counsel. 6. NO OTHER MODIFICATIONS; SAME INDEBTEDNESS. Except as expressly provided in this Fourth Amendment, all of the terms and conditions of the Loan Agreement and the Other Agreements remain unchanged and in full force and effect. The modifications effected by this Fourth Amendment and by the other instruments 4 contemplated hereby shall not be deemed to provide for or effect a repayment and re-advance of any of the Liabilities now outstanding, it being the intention of both the Borrower and the Bank hereby that the Indebtedness owing under the Loan Agreement, as amended by this Fourth Amendment, be and is the same Indebtedness as that owing under the Loan Agreement immediately prior to the effectiveness hereof. 7. GOVERNING LAW; BINDING EFFECT. This Fourth Amendment shall be governed by and construed in accordance with the laws of the State of Ohio and shall be binding upon the Borrower, the Bank and their respective successors and assigns. IN WITNESS WHEREOF, the Borrower and the Bank have hereunto set their hands as of the date first above written. THE HUNTINGTON NATIONAL BANK THE HICKOK ELECTRICAL INSTRUMENT COMPANY By:/s/ Herbert E. Werner By:/s/ Robert L. Bauman -------------------------- --------------------------- Herbert A. Werner, Robert L. Bauman, President Vice President 5 EX-11 5 EXHIBIT 11 HICKOK INCORPORATED EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Year Ended September 30 -------------------------------------------------------- 1995 1994 1993 ----------- ----------- ----------- PRIMARY Average shares outstanding 1,194,500 1,192,304 1,197,994 Net effect of dilutive stock options - based on the treasury stock method using average market price 27,918 19,422 18,340 ----------- ----------- ----------- Total Shares 1,222,418 1,211,726 1,216,334 ----------- ----------- ----------- ----------- ----------- ----------- Net Income $ 1,794,230 $ 1,556,303 $ 1,524,286 ----------- ----------- ----------- ----------- ----------- ----------- Net Income per Share $ 1.47 $ 1.29 $ 1.26 ----------- ----------- ----------- ----------- ----------- ----------- FULLY DILUTED Average shares outstanding 1,194,500 1,192,304 1,197,994 Net effect of dilutive stock options - based on the treasury stock method using year-end market price if higher than average market price 29,474 19,422* 18,340* ----------- ----------- ----------- Total Shares 1,223,974 1,211,726 1,216,334 ----------- ----------- ----------- ----------- ----------- ----------- Net Income $ 1,794,230 $ 1,556,303 $ 1,524,286 ----------- ----------- ----------- ----------- ----------- ----------- Net Income Per Share $ 1.47 $ 1.29 $ 1.26 ----------- ----------- ----------- ----------- ----------- -----------
* Year-end market price is less than average market price, use same as primary shares. EX-23 6 EXHIBIT 23 EXHIBIT 23 - CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in Registration Statement No. 33- 68196 on Form S-8 dated September 1, 1993 of our report on the consolidated financial statements and report as to schedules included in the Annual Report on Form 10-K of Hickok Incorporated for the year ended September 30, 1995. MEADEN & MOORE, INC. Certified Public Accountants December 18, 1995 Cleveland, Ohio EX-27 7 EXHIBIT 27 - FDS
5 12-MOS SEP-30-1995 SEP-30-1995 696,425 0 6,271,195 0 6,921,192 14,194,925 4,733,659 2,473,556 16,628,772 6,075,336 0 1,192,850 0 0 9,201,586 16,628,772 29,384,191 29,530,418 18,885,762 25,625,475 0 0 134,713 2,770,230 976,000 1,794,230 0 0 0 1,794,230 1.50 1.50
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