-----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, G66PG2+q0Vecf9hlNXhtQjxrC4OjtDKrOTfbTh7dNR7zCrFbikB59tESsUyyd9n1 kcAHnsk6ORXKMaCtqb+SWw== 0000950152-00-004029.txt : 20000516 0000950152-00-004029.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950152-00-004029 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HICKOK INC CENTRAL INDEX KEY: 0000047307 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 340288470 STATE OF INCORPORATION: OH FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-00147 FILM NUMBER: 630538 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-Q 1 HICKOK INCORPORATED 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _____ to _____ . Commission File No. 0-147 HICKOK INCORPORATED - ------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Ohio 34-0288470 - ---------------------------------- ---------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 10514 Dupont Avenue; Cleveland, Ohio 44108 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code (216) 541-8060 - ------------------------------------------------------------------------------- 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 the filing requirements for the past 90 days. Yes [ X ] No [ ] As of MAY 15, 2000, 744,884 Hickok Incorporated Class A Common Shares and 454,866 Class B Common Shares were outstanding. 2 FORM 10-Q PART I. FINANCIAL INFORMATION - ------------------------------ ITEM 1. FINANCIAL STATEMENTS: HICKOK INCORPORATED CONSOLIDATED INCOME STATEMENTS (Unaudited)
Three months ended Six months ended March 31, March 31, ----------------------------- --------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Net Sales Product Sales $ 4,013,571 $ 4,229,911 $ 9,137,963 $ 7,752,478 Service Sales 382,212 350,762 638,439 642,621 ----------- ----------- ----------- ----------- Total Net Sales 4,395,783 4,580,673 9,776,402 8,395,099 Costs and Expenses: Cost of Product Sold 2,210,939 2,662,524 5,038,208 4,776,185 Cost of Service Sold 234,692 254,135 444,065 435,453 Product Development 753,172 682,594 1,461,805 1,358,531 Operating Expenses 1,428,945 1,338,261 2,716,583 2,577,836 Interest Charges 9,485 15,397 24,432 33,310 Other (Income) Expense 27,097 (13,730) 11,465 (35,634) ----------- ----------- ----------- ----------- 4,664,330 4,939,181 9,696,558 9,145,681 ----------- ----------- ----------- ----------- Income (Loss) before Income Taxes (268,547) (358,508) 79,844 (750,582) Income (Recovery of) Income Taxes (94,100) (132,700) 27,900 (277,700) ----------- ----------- ----------- ----------- Net Income (Loss) $ (174,447) $ (225,808) $ 51,944 $ (472,882) =========== =========== =========== =========== Earnings per Common Share: - -------------------------- Net Income (Loss) $ (.15) $ (.18) $ .04 $ (.39) =========== =========== =========== =========== Earnings per Common Share Assuming Dilution: - ------------------------- Net Income (Loss) $ (.15) $ (.18) $ .04 $ (.39) =========== =========== =========== =========== Dividends per Share $ .10 $ .15 $ .10 $ .15 =========== =========== =========== ===========
See Notes to Consolidated Financial Statements. (2) 3 HICKOK INCORPORATED CONSOLIDATED BALANCE SHEETS
March 31, September 30, March 31, 2000 1999 1999 ----------- ----------- ----------- (Unaudited) (Note) (Unaudited) Assets - ------ Current Assets - -------------- Cash and Cash Equivalents $ 438,411 $ 533,579 $ 562,607 Trade Accounts Receivable - Net 3,098,711 3,377,291 2,679,770 Inventories 5,886,646 5,708,098 5,790,256 Deferred Income Taxes 315,900 315,900 196,000 Prepaid Expenses 95,793 51,569 72,752 Refundable Income Taxes 199,624 199,624 171,663 ----------- ----------- ----------- Total Current Assets 10,035,085 10,186,061 9,473,048 -------------------- ----------- ----------- ----------- Property, Plant and Equipment - ----------------------------- Land 229,089 229,089 226,738 Buildings 1,565,021 1,565,021 1,541,245 Machinery and Equipment 4,317,051 3,973,241 4,170,802 ----------- ----------- ----------- 6,111,161 5,767,351 5,938,785 Less: Allowance for Depreciation 3,816,127 3,542,098 3,638,611 ----------- ----------- ----------- Total Property - Net 2,295,034 2,225,253 2,300,174 -------------------- ----------- ----------- ----------- Other Assets - ------------ Goodwill - Net of Amortization 1,856,058 1,833,324 1,887,430 Deferred Charges - Net of Amortization 23,152 35,752 43,194 Deposits 1,750 1,750 3,226 ----------- ----------- ----------- Total Other Assets 1,880,960 1,870,826 1,933,850 ------------------ ----------- ----------- ----------- Total Assets $14,211,079 $14,282,140 $13,707,072 ============ =========== =========== ===========
NOTE: Amounts derived from audited financial statements previously filed with the Securities and Exchange Commission. See Notes to Consolidated Financial Statements. (3) 4 FORM 10-Q
March 31, September 30, March 31, 2000 1999 1999 (Unaudited) (Note) (Unaudited) ----------- ----------- --------- Liabilities - ----------- Current Liabilities - ------------------- Short-term Financing $ 650,000 $ 100,000 $ -- Current Portion of Long-Term Debt 102,071 132,616 134,729 Trade Accounts Payable 414,365 682,950 463,519 Accrued Payroll & Related Expenses 506,021 440,107 457,606 Accrued Expenses 191,161 180,481 132,783 Accrued Income Taxes 204,371 176,757 -- ----------- ----------- ----------- Total Current Liabilities 2,067,989 1,712,911 1,188,637 ------------------------- ----------- ----------- ----------- Deferred Income Taxes 41,500 41,500 165,000 - --------------------- ----------- ----------- ----------- Long-term Debt 59,820 417,928 448,345 - --------------------- ----------- ----------- ----------- Stockholders' Equity - -------------------- Class A, $1.00 par value; authorized 3,750,000 shares; 744,884 shares outstanding excluding 9,586 shares in treasury 744,884 744,884 744,884 Class B, $1.00 par value; authorized 1,000,000 shares; 454,866 shares outstanding excluding 20,667 shares in treasury 454,866 454,866 454,866 Contributed Capital 948,803 943,803 948,803 Retained Earnings 9,893,217 9,961,248 9,756,537 ----------- ----------- ----------- Total Stockholders' Equity 12,041,770 12,109,801 11,905,090 -------------------------- ----------- ----------- ----------- Total Liabilities and Stockholders' Equity $14,211,079 $14,282,140 $13,707,072 ===================== =========== =========== ===========
(4) 5 HICKOK INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED MARCH 31 (Unaudited)
2000 1999 ------------ ------------ Cash Flows from Operating Activities: Cash received from customers $ 10,054,982 $ 8,413,341 Cash paid to suppliers and employees (9,723,098) (9,013,364) Interest paid (9,202) (58,781) Interest received 9,751 21,548 Income taxes (paid) refunded (286) 124,962 ------------ ------------ Net Cash Provided by (Used In) Operating Activities 332,147 (512,294) Cash Flows from Investing Activities: Capital expenditures (394,395) (217,261) Decrease in deposits -- 1,124 Payments for business purchased (Net) (78,192) -- Proceeds on sale of assets 3,900 -- ------------ ------------ Net Cash Used in Investing Activities (468,687) (216,137) Cash Flows from Financing Activities: Change in short-term borrowing 519,455 (27,033) Decrease in long-term financing (358,108) (101,130) Sale of Class A shares under option -- 5,850 Dividends paid (119,975) (179,963) ------------ ------------ Net Cash Provided By (Used in) Financing Activities 41,372 (302,276) ------------ ------------ Net increase (decrease) in cash and cash equivalents (95,168) (1,030,707) Cash and cash equivalents at beginning of year 533,579 1,593,314 ------------ ------------ Cash and cash equivalents at end of second quarter $ 438,411 $ 562,607 ============ ============
See Notes to Consolidated Financial Statements. (5) 6 FORM 10-Q
2000 1999 --------- --------- Reconciliation of Net Income (Loss) to Net Cash Provided by Operating Activities: Net Income (Loss) $ 51,944 $(472,882) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 353,826 429,388 Non-cash compensation charge related to stock options -- 1,150 Loss of disposal of assets 34,946 -- Changes in assets and liabilities: Decrease (Increase) in accounts receivable 278,580 18,242 Decrease (Increase) in inventories (178,548) 101,833 Decrease (Increase) in prepaid expenses (44,224) (33,950) Decrease in refundable income taxes -- 10,149 Increase (Decrease) in trade accounts payable (268,585) (192,783) Increase (Decrease) in accrued payroll and related expenses 65,914 (147,033) Increase (Decrease) in accrued expenses 10,680 (64,120) Increase (Decrease) in accrued income taxes 27,614 (162,288) --------- --------- Total Adjustments 280,203 (39,412) --------- --------- Net Cash Provided by (Used In) Operating Activities $ 332,147 $(512,294) ========= =========
(6) 7 FORM 10-Q HICKOK INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) March 31, 2000 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six-month periods ended March 31, 2000 are not necessarily indicative of the results that may be expected for the year ended September 30, 2000. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended September 30, 1999. 2. INVENTORIES Inventories are valued at the lower of cost or market and consist of the following:
March 31, Sept. 30, March 31, 2000 1999 1999 ----------- ----------- ---------- Components $ 2,780,306 $ 3,336,853 $ 3,287,010 Work-in-Process 1,806,584 1,408,952 1,325,117 Finished Product 1,299,756 962,293 1,178,129 ----------- ----------- ----------- $ 5,886,646 $ 5,708,098 $ 5,790,256 =========== =========== ===========
3. CAPITAL STOCK, TREASURY STOCK, CONTRIBUTED CAPITAL AND STOCK OPTIONS Under the Company's Key Employees Stock Option Plans (collectively the "Employee Plans"), incentive stock options, in general, are exercisable for up to ten years, at an exercise price of not less than the market price on the date the option is granted. Non-qualified stock options may be granted at such exercise price and such other terms and conditions as the Compensation Committee of the Board of Directors may determine. No options may be granted at a price less than $2.925. Options for 134,300 Class A shares were outstanding at March 31, 2000 (106,500 shares at September 30, 1999 and 113,600 shares at March 31, 1999) at prices ranging from $2.925 to $17.25 per share. Options for 27,800 shares and 23,000 shares were granted during the three month periods ended December 31, 1999 and December 31, 1998 respectively, at a price of $5.00 and $7.125 per share respectively, and all options are exercisable. (7) 8 FORM 10-Q NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED Options for 2,000 Class A shares were exercised at $2.925 per share during the first quarter period ended December 31, 1998 and resulted in non-cash compensation to the optionee of $1,150. Options for 1,000 shares and 4,000 shares were cancelled during the three month periods ended March 31, 1999 and December 31, 1998 respectively. No other options were granted, exercised or cancelled during the three or six month periods presented under the Employee Plans. The Company's Outside Directors Stock Option Plans (collectively the "Directors Plans"), provide for the automatic grant of options to purchase up to 45,000 shares of Class A Common Stock to members of the Board of Directors who are not employees of the Company, at the fair market value on the date of grant. Options for 42,000 Class A shares were outstanding at March 31, 2000 (36,000 shares at September 30, 1999 and March 31, 1999) at prices ranging from $7.125 to $18.00 per share. Options for 6,000 shares were granted under the Directors Plans during each of the three month periods ended March 31, 2000 and March 31, 1999, at a price of $8.50 and $7.125 per share respectively. Options for 6,000 Class A shares expired during the three month period ended March 31, 1999. All outstanding options under the Directors Plans become fully exercisable on February 25, 2003. Unissued shares of Class A common stock (631,166 shares) are reserved for the share-for-share conversion rights of the Class B common stock and stock options under the Employee Plans and the Directors Plans. The Company declared a $.10 per share special dividend on its Class A and Class B common shares on February 23, 2000 payable March 31, 2000 to shareholders of record March 15, 2000. A special dividend of $.15 per share on Class A and Class B common shares, payable January 22, 1999 to shareholders of record January 4, 1999, was declared on December 9, 1998. (8) 9 FORM 10-Q NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED 4. EARNINGS PER COMMON SHARE Earnings per common share are based on the provisions of FAS Statement No. 128, "Earnings per Share." Accordingly, the adoption of this statement did not affect the Company's results of operations, financial position or liquidity. The effects of applying FAS No. 128 on earnings per share and required reconciliations are as follows:
Three Months Ended Six Months Ended MARCH 31, MARCH 31, ----------------------------- ------------------------------ 2000 1999 2000 1999 ----------- ----------- ----------- ----------- BASIC EARNINGS PER SHARE Income (Loss) available to common stockholders $ (174,447) $ (225,808) $ 51,994 $ (472,882) Shares denominator 1,199,750 1,199,750 1,199,750 1,199,080 Per share amount $ (.15) $ (.18) $ .04 $ (.39) =========== =========== =========== =========== EFFECT OF DILUTIVE SECURITIES Average shares outstanding 1,199,750 1,199,750 1,199,750 1,199,080 Stock options -- -- 6,929 -- ----------- ----------- ----------- ----------- 1,199,750 1,199,750 1,206,679 1,199,080 DILUTED EARNINGS PER SHARE Income (Loss) available to common stockholders $ (174,447) $ (225,808) $ 51,944 $ (472,882) Per share amount $ (.15) $ (.18) $ .04 $ (.39) =========== =========== =========== ===========
Options to purchase 176,300 and 149,600 shares of common stock during the second quarter of fiscal 2000 and the second quarter of fiscal 1999, respectively, at prices ranging from $2.925 to $18.00 per share were outstanding but were not included in the computation of diluted earnings per share because the option's effect was antidilutive or the exercise price was greater than the average market price of the common share. During the six month period of fiscal 2000 and the six month period of fiscal 1999 options to purchase 130,500 and 149,600 shares of common stock, respectively, at prices ranging from $2.925 to $18.00 per share were outstanding but were not included in the computation of diluted earnings per share because the option's effect was antidilutive or the exercise price was greater than the average market price of the common shares. (9) 10 FORM 10-Q NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED 5. PURCHASE On February 17, 1998, the Company purchased certain assets of Waekon Industries, Inc. which has been accounted for under the purchase method of accounting. The Company initially paid $2,221,302 for the assets consisting of accounts receivable ($504,282), inventory ($719,244), prepaid and other assets ($42,786), machinery and equipment ($380,100), assumption of current liabilities ($425,895), and goodwill ($1,000,785). The Company also recorded as goodwill closing costs related to the purchase ($205,216) and the present value of an earn out contract ($585,892). In December 1999 the Company renegotiated and accelerated the terms of the future earn out contract incurring an additional amount due of $78,192 deemed to be additional purchase price and recorded as an increase in goodwill. The revised earn out balance ($61,943) has been classified as a current liability at March 31, 2000. Goodwill is being amortized over 20 years. 6. SEGMENT AND RELATED INFORMATION The Company has adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, which changes the way the Company reports the information about its operating segments. The information for 1999 has been restated from the prior year's presentation in order to conform to the current-year presentation. The Company's four business units have separate management teams and infrastructures that offer different products and services. The business units have been aggregated into two reportable segments: 1.) indicators and gauges and 2.) automotive related diagnostic tools and equipment. INDICATORS AND GAUGES This segment consists of products manufactured and sold primarily to companies in the aircraft and locomotive industry. Within the aircraft market, the primary customers are those companies that manufacture business and pleasure aircraft. Within the locomotive market, indicators and gauges are sold to both original equipment manufacturers and to operators of railroad equipment. AUTOMOTIVE DIAGNOSTIC TOOLS AND EQUIPMENT This segment consists primarily of products designed and manufactured to support the servicing of automotive electronic systems. These products are sold to the aftermarket using a variety of distribution methods. The acquisition of Waekon Industries in 1998 added significant new products and distribution sources for the aftermarket. Included in this segment are fastening control products used by a large automobile manufacturer to monitor and control the nut running process in an assembly plant. This equipment provides high quality threading applications. The product was added in fiscal 1994 when the Company acquired the fastening systems business from Allen-Bradley Company. (10) 11 FORM 10-Q NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED INFORMATION BY INDUSTRY SEGMENT IS SET FORTH BELOW:
Three Months Ended Six Months Ended March 31, March 31, -------------------------------- ------------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ NET REVENUE Indicators and Gauges $ 657,015 $ 683,720 $ 1,188,977 $ 1,292,018 Automotive Diagnostic Tools and Equipment 3,738,768 3,896,953 8,587,425 7,103,081 ------------ ------------ ------------ ------------ $ 4,395,783 $ 4,580,673 $ 9,776,402 $ 8,395,099 ============ ============ ============ ============ INCOME (LOSS) FROM OPERATIONS Indicators and Gauges $ 176,733 $ 167,403 $ 272,486 $ 282,225 Automotive Diagnostic Tools and Equipment 298,036 289,440 1,235,912 575,363 General Corporate Expenses (743,316) (815,351) (1,428,554) (1,608,170) ------------ ------------ ------------ ------------ $ (268,547) $ (358,508) $ 79,844 $ (750,582) ============ ============ ============ ============ ASSET INFORMATION Indicators and Gauges $ 1,287,980 $ 1,413,370 Automotive Diagnostic Tools and Equipment 9,734,094 9,270,096 Corporate 3,189,005 3,023,606 ------------ ------------- $ 14,211,079 $ 13,707,072 ============ ============= GEOGRAPHICAL INFORMATION Included in the consolidated financial statements are the following amounts related to geographical locations: REVENUE: United States $ 3,967,784 $ 4,383,397 $ 9,212,770 $ 7,871,049 Canada 82,942 142,855 163,636 347,669 Other foreign countries 345,057 54,421 399,996 176,381 ------------ ------------ ------------ ------------- $ 4,395,783 $ 4,580,673 $ 9,776,402 $ 8,395,099 ============ ============ ============ =============
(11) 12 FORM 10-Q ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations, Second Quarter (January 1, 2000 through March 31, 2000 Fiscal 2000 Compared to Second Quarter Fiscal 1999 - ------------------------------------------------------------------------------- REPORTABLE SEGMENT INFORMATION The Company has determined that it has two reportable segments: 1) indicators and gauges and 2) automotive related diagnostic tools and equipment. The indicators and gauges segment consists of products manufactured and sold primarily to companies in the aircraft and locomotive industry. Within the aircraft market, the primary customers are those companies that manufacture business and pleasure aircraft. Within the locomotive market, indicators and gauges are sold to both original equipment manufacturers and to operators of railroad equipment. Revenue in this segment was $657,015 and $683,720 for the second quarter of fiscal 2000 and fiscal 1999, respectively and $1,188,977 and $1,292,018 for the first six months of fiscal 2000 and fiscal 1999, respectively. The automotive diagnostic tools and equipment segment consists primarily of products designed and manufactured to support the servicing of automotive electronic systems. These products are sold both directly to the end user and to the aftermarket using a variety of distribution methods. Included in this segment are fastening control products used primarily by a large automobile manufacturer to monitor and control the nut running process in an assembly plant. Revenue in this segment was $3,738,768 and $3,896,953 for the second quarter of fiscal 2000 and fiscal 1999, respectively and $8,587,425 and $7,103,081 for the first six months of fiscal 2000 and fiscal 1999, respectively. RESULTS OF OPERATIONS Product sales for the quarter ended March 31, 2000 were $4,013,571 versus $4,229,911 for the quarter ended March 31, 1999. The 5.1% decrease in product sales in the current quarter was volume related and due primarily to a decrease in automotive diagnostic sales to the aftermarket. The company anticipates that the level of product sales experienced in the second quarter is expected to increase modestly in the third and fourth quarters of the fiscal year based on current quote and order levels within the company's automotive product segment. Service sales for the quarter ended March 31, 2000 were $382,212 versus $350,762 for the quarter ended March 31, 1999. The current level of service sales is expected to continue for the balance of the fiscal year. Cost of product sold in the second quarter of fiscal 2000 was $2,210,939 or 55.1% of product sales as compared to $2,662,524 or 62.9% of product sales in the second quarter of 1999. This decrease in the cost of product sold percentage was due primarily to a change in product mix. The current cost of product sold percentage is anticipated to increase slightly during the balance of the fiscal year due to a change in product mix. (12) 13 FORM 10-Q Cost of service sold for the quarter ended March 31, 2000 was $234,692 or 61.4% of service sales as compared to $254,135 or 72.4% of service sales in the quarter ended March 31, 1999. The dollar decrease was due to improved pricing related to a change in product mix. Product development expenses were $753,172 in the second quarter of fiscal 2000 or 18.8% of product sales as compared to $682,594 or 16.1% of product sales in the second quarter of fiscal 1999. The percentage increase is due to a 5% decrease in product sales and to a 10% increase in product development expenditures related to higher expenses on several products in the final stages of development. The level of expenditures incurred during the second quarter of fiscal 2000 is expected to decrease slightly in the last two quarters of fiscal 2000. Operating expenses in the most recent quarter were $1,428,945 or 32.5% of total sales versus $1,338,261 or 29.2% of total sales for the same period a year ago. Most of the dollar increase represents higher marketing expenses applicable to automotive product sales to the aftermarket. The current level of operating expenses is anticipated to decrease slightly in the third and fourth quarters of the fiscal year due to cost containment. Interest expense was $9,485 in the second quarter of fiscal 2000, as compared to $15,397 in the second quarter of fiscal 1999. This decrease was due primarily to a reduction in long term debt associated with the Waekon acquisition in February 1998. The current level of interest expense will continue for the remainder of fiscal 2000. Other expense of $27,097 compares with other income of $13,730 in the same quarter last year. The difference is due to a $34,946 loss on the disposal of equipment in the second quarter of fiscal 2000. The net loss in the second quarter of fiscal 2000 was $174,447 as compared with a net loss of $225,808 in fiscal 1999. This change was primarily due to an improvement in gross product margin due to a change in product mix, offset, in part, by increases in product development and operating expense. Unshipped customer orders as of March 31, 2000 were $5,734,000 versus $3,861,000 at March 31, 1999. The primary reason for the increase reflects higher orders for automotive diagnostic sub assemblies from a Tier 1 supplier to a large automotive OEM. The company anticipates that most of the increase in backlog will be shipped in the second half of fiscal 2000. RESULTS OF OPERATIONS, SIX MONTHS ENDED MARCH 31, 2000 COMPARED TO SIX MONTHS ENDED MARCH 31, 1999 Product sales for the six months ended March 31, 2000 were $9,137,963 versus $7,752,478 for the same period in fiscal 1999. The increase is volume related and due entirely to higher sales of automotive diagnostic products in the first three months of fiscal 2000. (13) 14 FORM 10-Q The current level of product sales is anticipated to increase modestly over the last six months of the fiscal year based on current quote and order levels within the Company's automotive product segment. Service sales for the six months ended March 31, 2000 were $638,439 compared with $642,621 for the same period in fiscal 1999. The current level of service sales is expected to continue for the balance of the fiscal year. Cost of product sold was $5,038,208 or 55.1% of product sales as compared to $4,776,185 or 61.6% of product sales for the six months ended March 31, 1999. This decrease in the cost of product sold percentage was due to a change in product mix and to operating efficiencies realized at the manufacturing level due to a 18% increase in product sales. The cost of product sold percentage should increase slightly in the second half of the fiscal year due to a change in product mix. Cost of service sold was $444,065 or 69.6% of service sales compared with $435,453 or 67.8% of service sales for the six months ended March 31, 1999. Product development expenses were $1,461,805 or 16.0% of product sales as compared to $1,358,531 or 17.5% of product sales for the six months ended March 31, 1999. The percentage decrease is due to a 18% increase in product sales. The current level of product development expenditures is expected to decrease slightly in the second half of the fiscal year. Operating expenses were $2,716,583 for the six months ended March 31, 2000 or 27.8% of total sales versus $2,577,836 or 30.7% of total sales for the six months ended March 31, 1999. Most of the dollar increase represents higher marketing expenses applicable to automotive product sales to the aftermarket. Interest expense was $24,432 for the six months ended March 31, 2000, and $33,310 for the same period in 1999. This decrease was due to a reduction in long term debt associated with the Waekon acquisition in February 1998. The current level of interest expense will continue for the remainder of fiscal 2000. Other expense of $11,465 compares with other income of $35,634 in the same period last year. The difference is due to a reduction in interest income on short term investments and to a $34,946 loss on the disposal of equipment in the second quarter of fiscal 2000. Net income for the six months ended March 31, 2000 was $51,944 compared with a net loss of $472,882 for the six months ended March 31, 1999. The change was due primarily to an increase in automotive diagnostic product sales and to an improvement in gross product margin due to a change in product mix and to operating efficiencies at the manufacturing level. (14) 15 FORM 10-Q LIQUIDITY AND CAPITAL RESOURCES Total current assets were $10,035,085, $10,186,061 and $9,473,048 at March 31, 2000, September 30, 1999 and March 31, 1999, respectively. The increase from March to March was due primarily to a $418,941 increase in accounts receivable and, to a lesser extent, to a $96,390 increase in inventory. The increase in receivables was due to lower than normal payments from customers as of the end of the current quarter and was entirely made up within the first two weeks of April 2000. Inventory was up due to an anticipated increase in shipments in the third fiscal quarter. Between September 1999 and March 2000 current assets decreased by $150,976 due to a reduction in cash and accounts receivable, proceeds of which were used, in part, to reduce trade payables. Working capital as of March 31, 2000 amounted to $7,967,096. This compares to $8,284,411 a year earlier. Current assets were 4.9 times current liabilities and total cash and receivables were 1.7 times current liabilities. These ratios compare to 8.0 and 2.7, respectively, at March 31, 1999 Internally generated funds were $332,147 during the six months ended March 31, 2000 and were not adequate to fund the Company's primary non-operating cash requirements consisting of capital expenditures of $394,395 and long-term debt payments of $358,108. The shortfall was made up primarily by an increase in short term financing. Management of the Company believes that cash and cash equivalents, together with funds anticipated to be generated by operations and funds available under the Company's credit agreement, will provide the liquidity necessary to support its current and anticipated capital expenditures through the end of fiscal 2000. Shareholders' equity during the six months ended March 31, 2000 decreased by $68,031 ($.06 per share) resulting from net income of $51,944 less a $119,975 payment of dividends. In February 2000 the Company renewed its credit agreement with its financial lender. The agreement expires in February 2001 and provides for a revolving credit facility of $5,000,000 with interest at the bank's prime commercial rate with a LIBOR option and is unsecured. The Company remains in compliance with its loan covenants. YEAR 2000 READINESS DISCLOSURE In late fiscal 1997 the Company began its review of Year 2000 issues with emphasis placed on information technology systems software and hardware. During fiscal 1998 the Company expanded its review to include non-information technology systems and the readiness of key third parties, primarily suppliers and customers. The Company used internal resources to make its assessment. The Company determined that its primary information systems software and hardware were not Year 2000 compliant and decided to replace non-compliant equipment and software. Training and testing occurred throughout all of fiscal 1998. (15) 16 FORM 10-Q Installation began in early fiscal 1999 and has been completed. The system is functioning properly. The Company's review of non-information technology systems and the readiness of key third parties is complete. Based on assessment efforts to date, the Company has yet to experience any significant problems internally or with suppliers and customers in connection with Year 2000 compliance. Nevertheless, additional dates in the future exist which could potentially cause computer system failures. Failure of our internal computer systems or software, or of systems maintained by third parties such as suppliers, customers, public utilities and the government, to operate properly with regard to the Year 2000 and thereafter could result in a material adverse effect on the Company's business and operating results. The Company's most likely worst case scenario would be a short-term slowdown or cessation of manufacturing operations at one or more of its facilities and a short-term inability on the part of the Company to process orders and to deliver product to customers in a timely manner. Though the Company does not expect a material adverse impact on operations, contingency plans are completed. Such plans primarily involve the use of alternative suppliers and transportation vendors. Costs associated with the Company's assessment and remediation of Year 2000 issues are not expected to be material in fiscal 2000. The Company has used cash and cash equivalents to fund such costs. FORWARD-LOOKING STATEMENTS The foregoing discussion includes forward-looking statements relating to the business of the Company. These forward-looking statements, or other statements made by the Company, are made based on management's expectations and beliefs concerning future events impacting the Company and are subject to uncertainties and factors (including, but not limited to, those specified below) which are difficult to predict and, in many instances, are beyond the control of the Company. As a result, actual results of the Company could differ materially from those expressed in or implied by any such forward-looking statements. These uncertainties and factors include (a) the Company's dependence upon a limited number of customers, including Ford and General Motors, (b) the highly competitive industry in which the company operates, which includes several competitors with greater financial resources and larger sales organizations, and (c) the acceptance in the marketplace of new products and/or services developed or under development by the Company including automotive diagnostic products, fastening systems products and indicating instrument products, and (d) the ability of significant third parties with whom the Company does business to provide products and services in the Year 2000 and beyond. ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - ------------------------------------------------------------------ The Company is exposed to certain market risks from transactions that are entered into during the normal course of business. The Company has not entered into derivative financial instruments for trading purposes. The Company's primary market risk exposure relates to interest rate risk. There were no material changes in the Company's exposure to market risk from September 30, 1999. (16) 17 FORM 10-Q PART II. OTHER INFORMATION - --------------------------- ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- At the Company's Annual Meeting of Shareholders held on February 23, 2000, the following individuals were elected to the Board of Directors:
VOTES FOR VOTES WITHHELD Robert L. Bauman 1,681,511 4,398 Harry J. Fallon 1,681,911 3,998 T. Harold Hudson 1,681,511 4,398 James T. Martin 1,681,471 4,438 Michael L. Miller 1,681,511 4,398 James Moreland 1,681,971 3,938 Janet H. Slade 1,681,511 4,398
For information on how the votes have been tabulated for the above matter, see the Company's definitive Proxy Statement used in connection with the Annual Meeting of Shareholders held on February 23, 2000. ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K: -------------------------------- a) The following exhibits are included herein: (10) Third Amendment to Loan Agreement, dated February 15, 2000 by and between the Company and Huntington National Bank. (11) Statement re: Computation of earnings per share. (27) Financial Data Schedule b) The Company did not file any reports on Form 8-K during the three months ended March 31, 2000. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date May 15, 2000 HICKOK INCORPORATED (Registrant) /s/ E. T. Nowakowski E. T. Nowakowski, Chief Financial Officer (17) EX-10 2 EXHIBIT 10 1 Exhibit 10 THIRD AMENDMENT TO LOAN AGREEMENT THIS THIRD AMENDMENT TO LOAN AGREEMENT (the "Third Amendment") is made this 15th day of February, 2000, at Cleveland, Ohio, by and among THE HUNTINGTON NATIONAL BANK ("Bank"), whose principal office is located at 917 Euclid Avenue, Cleveland, Ohio 44115, HICKOK INCORPORATED, whose address is 10514 Dupont Avenue, Cleveland, Ohio 44108 ("Borrower"), and SUPREME ELECTRONICS CORP., whose address is 10514 Dupont Avenue, Cleveland, Ohio 44108 ("Guarantor"). RECITALS -------- A. The Borrower and Bank entered into a Restated Loan Agreement dated as of February 28, 1977 (the "Loan Agreement") and a First Amendment to Loan Agreement dated as of February 18, 1998 (the "First Amendment) and a Second Amendment to Loan Agreement dated as of February 26, 1999 (the "Second Amendment"), pursuant to which Bank agreed to make available to the Borrower a loan of up to $5,000,000.00. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Loan Agreement. B. The Borrower has requested certain amendments to the Loan Agreements. C. As a material inducement to Bank and to make the amendments to the loan herein contemplated, Guarantor for good and valuable consideration is willing to deliver to Bank an acknowledgement of the continuing Guaranty Unlimited. D. Bank is willing to make the amendments and modifications to the loan herein described, upon the terms, covenants and conditions herein set forth, and in reliance upon the representations and warranties of Borrower herein contained. NOW, THEREFORE, in consideration of the foregoing Recitals, the terms, covenants and conditions hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1 AMENDMENTS, The third sentence of Section 2.1 is hereby further modified and amended to extend the maturity date of the Loan and the Revolving Note to February 28, 2001. 2 BORROWER'S REPRESENTATIONS, WARRANTIES AND EVENTS OF DEFAULT. 2.1 REPRESENTATIONS AND WARRANTIES 2.1.1. Except as amended hereby, the terms, provisions, conditions and agreements of the Loan Agreement and the First and Second Amendments to Loan Agreement are hereby ratified and confirmed and shall remain in full force and effect. Borrower expressly acknowledges that this Third Amendment shall not constitute a novation or waiver. Each and every representation and warranty of the Borrower set forth in the Loan Agreement and the First and Second Amendments to Loan Agreement is hereby confirmed and ratified in all material respects and such representations and warranties shall be deemed to have been made and undertaken as of the date of this Third Amendment as well as at the time they were made and undertaken. 2 Exhibit 10 2.1.2. The Borrower further represents and warrants that: 2.1.2.1 No Event of Default now exists or will exist immediately following the execution hereof or after giving effect to the transactions contemplated hereby. 2.1.2.2 All necessary corporate or shareholder actions on the part of the Borrower to authorize the execution, delivery and performance of this Third Amendment, the Third Modification and Amendment to the Revolving Credit Note and all other documents or instruments required pursuant hereto or thereto have been taken; this Third Amendment, the Third Modification and Amendment to the Revolving Credit Note and each such other document or instrument have been duly and validly executed and delivered and are legally binding and binding upon the parties thereto and enforceable in accordance with their respective terms, except to the extent that the enforceability thereof may be limited by bankruptcy, insolvency or like laws or by general equitable principals. 2.1.2.3. The execution, delivery and performance of this Third Amendment, the Third Modification and Amendment to the Revolving Credit Note and all other documents or instruments required pursuant hereto or thereto, and all actions and transactions contemplated hereby and thereby will not (A) violate, be in conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under (1) any provision of the Articles of Incorporation, Code of Regulations or Bylaws of the Borrower, (2) any arbitration award or any order of any court or of any other governmental agency or authority, (3) any license, permit or authorization granted to the Borrower or under which the borrower operates, or (4) any applicable law, rule, order or regulation, indenture, agreement or other instrument to which the Borrower is a party or by which the Borrower or any of its properties is bound and which has not been waived or consented to, or (B) result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever, except as expressly permitted in the Loan Agreement, upon any of the properties of the Borrower. 2.1.2.4. No consent, approval or authorization of, or filing, registration or qualification with, any governmental authority or any other person or entity is required to be obtained by the Borrower in connection with the execution, delivery or performance of this Third Amendment, the Third Modification and Amendment to the Revolving Credit Note or any document or instrument required in connection herewith or therewith which as not already been obtained or completed. 3 AFFIRMATION AND AGREEMENT OF THE BORROWERS AND THE GUARANTOR. The Borrower and the Guarantor have executed this Third Amendment to consent to the Loan Agreement made pursuant hereto. 4 FEES AND EXPENSES. As required under the Loan Agreement, the Borrower shall pay a facility fee of $5,000.00 upon execution hereof, and shall reimburse the Bank upon demand for all 3 Exhibit 10 out-of-pocket costs, charges and expenses of the Bank (including reasonable fees and disbursements of legal counsel to Bank in connection with the preparation, negotiation, execution and delivery of this Third Amendment and the other agreements or documents relating hereto or required hereby). 5. REFERENCE TO LOAN AGREEMENT. Except as amended by the First and Second Amendments to Loan Agreement and hereby, the Loan Agreement shall remain in full force and effect and is hereby ratified and confirmed in all respects. On and after the effectiveness of the Third Amendment to the Loan Agreement accomplished hereby, each reference in the Loan Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like import, and each reference to the Loan Agreement in any Note or other Loan Document, or other agreement, document or instrument executed and delivered pursuant to the Loan Agreement, shall be deemed a reference to the Loan Agreement as previously amended and amended hereby. 6 COUNTERPARTS. This Third Amendment may be executed in as many counterparts as may be convenient, each of which when so executed shall be deemed to be an original for all purposes, and shall become binding when the Borrower, the Guarantor, the Bank have executed at least one counterpart. 7 FURTHER ACTS. The parties agree to perform any further acts and to execute and deliver any additional documents which may be reasonably necessary to carry out the intent and provisions of this Third Amendment. 8 BINDING EFFECT. This Third Amendment shall be binding upon and shall inure to the benefit of the Borrower, the Guarantor, Bank and their respective heirs, personal representatives, successors and assigns. IN WITNESS WHEREOF, the parties have signed this Third Amendment to Loan Agreement, intending to be legally bound thereby as of the Effective Date. BORROWER HICKOK INCORPORATED /s/ Eugene Nowakowski By: /s/ Robert L. Bauman - ----------------------------- -------------------------------- Robert L. Bauman, President /s/ Carmelita Jerome - ----------------------------- THE HUNTINGTON NATIONAL BANK Signed in the presence of: (as to all signatures) By: Terry Correno VP ------------------------------- /s/ Marilyn Leach - ------------------------------ /s/ Donna L. Lanny - ------------------------------ EX-11 3 EXHIBIT 11 1 FORM 10-Q EXHIBIT 11 HICKOK INCORPORATED STATEMENT RE: COMPUTATION OF PER COMMON SHARE EARNINGS
Three Months Ended Six Months Ended March 31, March 31, -------------------------- ---------------------------- 2000 1999 2000 1999 --------- --------- --------- --------- PRIMARY - ------- Average shares outstanding 1,199,750 1,199,750 1,199,750 1,199,080 Net effect of dilutive stock options - based on the treasury stock method using average market price - * - * 6,929 - * --------- --------- --------- --------- Total Shares 1,199,750 1,199,750 1,206,679 1,199,080 --------- --------- --------- --------- Net Income (Loss) $(174,447) $(225,808) $ 51,944 $(472,882) ========= ========= ========= ========= Per Share $ (.15) $ (.18) $ .04 $ (.39) ========= ========= ========= ========= FULLY DILUTED - ------------- Average shares outstanding 1,199,750 1,199,750 1,199,750 1,199,080 Net effect of dilutive stock options - based on the treasury stock method using year-end market price, if higher than average market price - * - * 6,929 - * --------- --------- --------- --------- Total Shares 1,199,750 1,199,750 1,206,679 1,199,080 --------- --------- --------- --------- Net Income (Loss) $(174,447) $(225,808) $ 51,944 $(472,882) ========= ========= ========= ========= Per Share $ (.15) $ (.18) $ .04 $ (.39) ========= ========= ========= =========
*Net effect of stock options was antidilutive for the period. EX-27 4 EXHIBIT 27
5 6-MOS SEP-30-2000 OCT-01-1999 MAR-31-2000 438,411 0 3,098,711 0 5,886,646 10,035,085 6,111,161 3,816,127 14,211,079 2,067,989 59,820 0 0 1,199,750 10,842,020 14,211,079 9,776,402 9,776,402 5,482,273 4,178,388 11,465 0 24,432 79,844 27,900 51,944 0 0 0 51,944 .04 .04
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