-----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, IOqzwzCWzatNJ0px4tBWHtH2uv9pOMvi2YMGCrXe1WnHen+xbjd+N80EcbKcbGVc fe61Pmm4/1s5CxamludGYw== 0000950152-98-004543.txt : 19980518 0000950152-98-004543.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950152-98-004543 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NONE 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: 98622135 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, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period Ended March 31, 1998 Commission File No. 0-147 HICKOK INCORPORATED INCORPORATED IN THE STATE OF OHIO I.R.S. NO. 34-0288470 10514 DUPONT AVENUE CLEVELAND, OHIO 44108 TELEPHONE NUMBER (216) 541-8060 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 12, 1998, 741,384 Class A Common Shares and 454,866 Class B Common Shares of Hickok Incorporated 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 ---------------------------- ---------------------------- 1998 1997 1998 1997 ------------ ------------ ------------ ------------ Net Sales Product Sales $ 5,640,522 $ 3,812,530 $ 10,213,332 $ 7,393,003 Service Sales 363,983 1,031,101 596,189 2,101,637 Total Net Sales 6,004,505 4,843,631 10,809,521 9,494,640 Costs and Expenses: Cost of Product Sold 3,156,124 2,320,680 5,701,122 4,656,869 Cost of Service Sold 189,893 891,121 377,946 1,862,158 Product Development 756,138 875,051 1,509,653 1,675,770 Operating Expenses 1,075,675 896,436 1,973,947 1,762,318 Interest Charges 10,882 2,047 19,350 4,375 Other Income (42,227) (27,035) (86,952) (43,540) ------------ ------------ ------------ ------------ 5,146,485 4,958,300 9,495,066 9,917,950 ------------ ------------ ------------ ------------ Income (Loss) before Income Taxes 858,020 (114,669) 1,314,455 (423,310) Income (Recovery of) Income Taxes 317,400 (42,400) 486,400 (156,600) ------------ ------------ ------------ ------------ Net Income (Loss) $ 540,620 $ (72,269) $ 828,055 $ (266,710) ============ ============ ============ ============ Earnings per Common Share: - -------------------------- Net Income (Loss) $ .45 $ (.06) $ .69 $ (.22) ============ ============ ============ ============ Earnings per Common Share Assuming Dilution: ------------------ Net Income (Loss) $ .44 $ (.06) $ .68 $ (.22) ============ ============ ============ ============ Dividends per Share $ .10 $ .20 $ .10 $ .20 ============ ============ ============ ============
See Notes to Consolidated Financial Statements. (2) 3 HICKOK INCORPORATED CONSOLIDATED BALANCE SHEETS
March 31, September 30, March 31, 1998 1997 1997 (Unaudited) (Note) (Unaudited) ----------- ----------- ----------- Assets Current Assets Cash and Cash Equivalents $ 330,135 $ 2,668,345 $ 827,600 Trade Accounts Receivable - Net 4,241,175 3,312,988 3,400,372 Inventories 5,383,775 4,884,401 4,480,742 Prepaid and Deferred Expenses 303,202 231,121 174,598 Refundable Income Taxes -- -- 436,199 ----------- ----------- ----------- Total Current Assets 10,258,287 11,096,855 9,319,511 -------------------- ----------- ----------- ----------- Property, Plant and Equipment - ----------------------------- Land 199,611 199,611 215,495 Buildings 1,520,940 1,410,141 1,472,050 Machinery and Equipment 4,288,026 3,813,873 3,666,176 ----------- ----------- ----------- 6,008,577 5,423,625 5,353,721 Less: Allowance for Depreciation 3,480,478 3,129,290 3,002,619 ----------- ----------- ----------- Total Property - Net 2,528,099 2,294,335 2,351,102 -------------------- ----------- ----------- ----------- Other Assets - ------------ Goodwill - Net of Amortization 1,956,462 224,889 234,196 Deferred Charges - Net of Amortization 119,892 115,988 151,244 Deposits 1,850 4,350 13,344 ----------- ----------- ----------- Total Other Assets 2,078,204 345,227 398,784 ------------------ ----------- ----------- ----------- Total Assets $14,864,590 $13,736,417 $12,069,397 ============ =========== =========== ===========
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, 1998 1997 1997 (Unaudited) (Note) (Unaudited) ----------- ----------- ------------ Liabilities - ----------- Current Liabilities - ------------------- Short-term Financing $ 300,000 $ -- $ -- Current Portion of Long-Term Debt 161,762 63,550 -- Trade Accounts Payable 538,851 657,285 213,474 Accrued Payroll & Related Expenses 429,759 422,772 685,181 Accrued Expenses 80,740 131,662 256,996 Customer Deposits 83,249 237,587 -- Accrued Income Taxes 187,143 305,400 ----------- ----------- ------------ Total Current Liabilities 1,781,504 1,818,256 1,155,651 ------------------------- ----------- ----------- ------------ Deferred Income Taxes 174,000 174,000 176,000 - --------------------- ----------- ----------- ------------ Long-term Debt 579,746 127,101 -- - -------------- ----------- ----------- ------------ Stockholders' Equity - -------------------- Class A, $1.00 par value; authorized 3,750,000 shares; 741,384 shares outstanding (740,984 shares at September 30, 1997 and 738,984 shares at March 31, 1997) excluding 9,586 shares in treasury 741,384 740,984 738,984 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 930,053 926,603 921,316 Retained Earnings 10,203,037 9,494,607 8,622,580 ----------- ----------- ------------ Total Stockholders' Equity 12,329,340 11,617,060 10,737,746 -------------------------- ----------- ----------- ------------ Total Liabilities and Stockholders' Equity $14,864,590 $13,736,417 $12,069,397 ==================== =========== =========== ===========
(4) 5 HICKOK INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED MARCH 31 (Unaudited)
1998 1997 ------------ ------------ Cash Flows from Operating Activities: Cash received from customers $ 10,385,616 $ 11,451,902 Cash paid to suppliers and employees (9,730,570) (9,164,725) Interest paid (13,810) (12,785) Interest received 62,034 26,245 Income taxes paid (604,657) (12,000) ------------ ------------ Net Cash Provided by Operating Activities 98,613 2,288,637 Cash Flows from Investing Activities: Capital expenditures (204,852) (261,349) Deferred charges -- (80,250) Decrease in deposits 2,600 400 Payments for business purchased (Net) (2,382,957) -- ------------ ------------ Net Cash Used in Investing Activities (2,585,209) (341,199) Cash Flows from Financing Activities: Change in short-term borrowing 300,000 (1,375,000) Decrease in long-term financing (35,035) -- Sale of Class A shares under option 3,046 6,920 Dividends paid (119,625) (238,570) ------------ ------------ Net Cash Provided By (Used in) Financing Activities 148,386 (1,606,650) Net increase (decrease) in cash and cash equivalents (2,338,210) 340,788 Cash and cash equivalents at beginning of year 2,668,345 486,812 ------------ ------------ Cash and cash equivalents at end of second quarter $ 330,135 $ 827,600 ============ ============
See Notes to Consolidated Financial Statements. (5) 6 FORM 10-Q
1998 1997 ----------- ----------- Reconciliation of Net Income (Loss) to Net Cash Provided by Operating Activities: Net Income (Loss) $ 828,055 $ (266,710) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 403,881 377,586 Non-cash compensation charge related to stock options 804 1,080 Changes in assets and liabilities: Decrease (Increase) in accounts receivable (423,905) 1,957,262 Decrease (Increase) in inventories 219,870 432,116 Decrease (Increase) in prepaid expenses (69,233) (4,973) Increase in refundable income taxes -- (168,600) Increase (Decrease) in trade accounts payable (487,524) (146,669) Increase (Decrease) in accrued payroll and related expenses (29,818) (84,419) Increase (Decrease) in accrued expenses (225,260) 191,964 Increase (Decrease) in accrued income taxes (118,257) -- ----------- ----------- Total Adjustments (729,442) 2,555,347 ----------- ----------- Net Cash Provided by Operating Activities $ 98,613 $ 2,288,637 =========== =========== Non-Cash Financing Activity: ---------------------------- Earn Out Payable $ 585,892 $ -- =========== ===========
(6) 7 FORM 10-Q HICKOK INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) March 31, 1998 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, 1998 are not necessarily indicative of the results that may be expected for the year ended September 30, 1998. 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, 1997. 2. Inventories ----------- Inventories are valued at the lower of cost or market and consist of the following:
March 31, Sept. 30, March 31, 1998 1997 1997 ----------- ----------- ----------- Components $ 3,222,469 $ 2,482,194 $ 2,283,980 Work-in-Process 1,236,267 1,268,995 848,043 Finished Product 925,039 1,133,212 1,348,719 ----------- ----------- ----------- $ 5,383,775 $ 4,884,401 $ 4,480,742 =========== =========== ===========
3. Capital Stock, Treasury Stock, Contributed Capital and Stock Options -------------------------------------------------------------------- On December 11, 1997 the Board of Directors adopted and shareholders subsequently approved at the Company's Annual Meeting held on February 25, 1998, the 1997 Key Employees Stock Option Plan. Under the Company's Key Employees Stock Option Plan, the 1995 Key Employees Stock Option Plan and the 1997 Key Employees Stock Option Plan (collectively the "Employee Plans"), incentive stock options, in general, are exercisable for up to ten years, at an exercise price of not less than the market price on the date the option is granted. Non-qualified stock options may be granted at such exercise price and such other terms and conditions as the Compensation Committee of the Board of Directors may determine. No options may be granted at a price less than $2.925. Options for 99,900 Class A shares were outstanding at March 31, 1998 (78,400 shares at September 30, 1997 and 80,400 shares at March 31, 1997) at prices ranging from $2.925 to $17.25 per share. Options for 24,000 shares and 27,550 shares were granted during the three month period ended December 31, 1997 and December 31, 1996 respectively, at a price of $10.50 and $10.75 per share respectively, all options are exercisable. (7) 8 FORM 10-Q NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED During the second quarter period ended March 31, 1998, options for 400 Class A shares were exercised at prices ranging from $6.92 to $8.31 per share resulting in non-cash compensation to the optionee of $804. During the second quarter period ended March 31, 1997, options for 1,000 Class A shares were exercised at a price of $6.92 per share resulting in non-cash compensation to the optionee of $1,080. Options for 2,100 shares of Class A shares were cancelled during the three month period ended March 31, 1998. No other options were granted, exercised or cancelled during the three or six month periods presented under the Employee Plans. On December 11, 1997 the Board of Directors adopted, and shareholders subsequently approved at the Company's Annual Meeting held on February 25, 1998, the 1997 Outside Directors Stock Option Plan. The Company's 1995 Outside Directors Stock Option Plan and the 1997 Outside Directors Stock Option Plan (collectively the "Directors Plans"), provide for the automatic grant of options to purchase up to 51,000 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 30,000 Class A shares were outstanding at March 31, 1998 (24,000 shares at September 30, 1997 and March 31, 1997) at prices ranging from $8.50 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, 1998 and March 31, 1997, at a price of $12.25 and $18.00 per share respectively. All outstanding options under the 1995 Outside Directors Stock Option Plan become fully exercisable on February 23, 2000. All outstanding options under the 1997 Outside Directors Stock Option Plan become fully exercisable on February 25, 2001. Unissued shares of Class A common stock (584,766 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 December 11, 1997 payable January 23, 1998 to shareholders of record January 5, 1998. A special dividend of $.20 per share on Class A and Class B common shares, payable January 24, 1997 to shareholders of record January 3, 1997, was declared on December 13, 1996. 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: (8) 9 FORM 10-Q NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
Three Months Ended Six Months Ended March 31, March 31, ------------------------- ------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- BASIC EARNINGS PER SHARE Income (Loss) available to common stockholders $ 540,620 $ (72,269) $ 828,055 $ (266,710) Shares denominator 1,196,108 1,193,017 1,195,978 1,192,932 Per share amount $ .45 $ (.06) $ .69 $ (.22) =========== =========== =========== =========== EFFECT OF DILUTIVE SECURITIES Average shares outstanding 1,196,108 1,193,017 1,195,978 1,192,932 Stock options 29,621 19,407 25,636 19,928 ----------- ----------- ----------- ----------- 1,225,729 1,212,424 1,221,614 1,212,860 DILUTED EARNINGS PER SHARE Income (Loss) available to common stockholders $ 540,620 $ (72,269) $ 828,055 $ (266,710) Per share amount $ .44 $ (.06) $ .68 $ (.22) =========== =========== =========== ===========
Options to purchase 37,350 and 63,600 shares of common stock during the second quarter of fiscal 1998 and the second quarter of fiscal 1997, respectively, at prices ranging from $10.75 to $18.00 per share were outstanding but were not included in the computation of diluted earnings per share because the option's exercise price was greater than the average market price of the common share. During the six month period of fiscal 1998 and the six month period ended fiscal 1997 options to purchase 68,100 and 63,600 shares of common stock, respectively, at prices ranging from $10.75 to $18.00 per share were outstanding but were not included in the computation of diluted earnings per share because the option's exercise price was greater than the average market price of the common shares. 5. Purchase -------- On February 17, 1998, the Company purchased certain assets of Waekon Industries, Inc. for $2,221,302 which has been accounted for under the purchase method of accounting. The purchase consisted 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 of ($1,000,785). In addition to the purchased goodwill, the Company has incurred and recorded closing costs related to the purchase ($161,655) and the present value of a five year earn out contract ($585,892) as goodwill. Goodwill will be amortized over 20 years. (9) 10 FORM 10-Q NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED Pro forma effects of the Waekon Industries, Inc. purchase on prior years operations and the first quarter of fiscal 1998 were reported in Unaudited Consolidated Pro Forma Condensed Financial Statements included with Form 8-K/A filed March 30, 1998. The Company's current quarter and year to date operations were not significantly impacted from this business. (10) 11 FORM 10-Q ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations, Second Quarter (January 1, 1998 through March 31,1998) Fiscal 1998 Compared to Second Quarter Fiscal 1997 - -------------------------------------------------------------------------------- Product sales for the quarter ended March 31, 1998 were $5,640,522 versus $3,812,530 for the quarter ended March 31, 1997. The 47.9% increase in product sales in the current quarter is volume related and due primarily to a $1,624,000 increase in automotive diagnostic sales of which $565,000 represents sales of products produced by Waekon Industries which was acquired on February 17, 1998. The Company anticipates that the current amount of product sales experienced in the second quarter will remain at that level in the third and fourth quarter. Service sales for the quarter ended March 31, 1998 were $363,983 versus $1,031,101 for the quarter ended March 31, 1997. The reduction was entirely volume related due to the absence of diagnostic service revenue caused by the termination of a contract in late fiscal 1997 to provide such services to Ford Motor Company. The contract was not renewed because Ford consolidated suppliers in this business segment. 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 1998 was $3,156,124 or 56.0% of product sales as compared to $2,320,680 or 60.9% of product sales in the second quarter of 1997. This decrease in the cost of product sold percentage was due primarily to a change in product mix. The current cost of products sold percentage is anticipated to increase slightly during the balance of the fiscal year due to a change in product mix. Cost of service sold for the quarter ended March 31, 1998 was $189,893 or 52.2% of service sales as compared to $891,121 or 86.4% of service sales in the quarter ended March 31, 1997. This improvement in the cost of services sold percentage is entirely due to the elimination of costs associated with the termination of a contract in late fiscal 1997 to provide diagnostic services to Ford Motor Company. Product development expenses were $756,138 in the second quarter of fiscal 1998 or 13.4% of product sales as compared to $875,051 or 23.0% of product sales in the second quarter of fiscal 1997. The percentage decrease is due to an 14% decrease in product development expenses combined with a 48% increase in product sales. The level of expenditures incurred during the second quarter of fiscal 1998 is expected to continue in the last two quarters of fiscal 1998. Operating expenses in the most recent quarter were $1,075,675 or 17.9% of total sales versus $896,436 or 18.5% of total sales for the same period a year ago. Most of the dollar increase represents marketing and administrative expenses for Waekon Industries which was acquired on February 17, 1998. The current level of operating expenses is anticipated to increase approximately $150,000 in the third quarter of the fiscal year due to the inclusion of Waekon for an entire quarter. (11) 12 FORM 10-Q Interest expense was $10,882 in the second quarter of fiscal 1998, as compared to $2,047 in the second quarter of fiscal 1997. This increase was due primarily to an increase in long term debt associated with the Waekon acquisition on February 17, 1998. The current level of interest expense will increase to approximately $20,000 per quarter for the remainder of fiscal 1998. Other income of $42,227 increased $15,192 compared with the same quarter last year due primarily to an increase in interest income caused by a higher level of short-term cash investments. Net income in the second quarter of fiscal 1998 was $540,620 which compared with a net loss of $72,269 in fiscal 1997. This improvement was due to an increase in product sales and to an increase in gross product margin. Unshipped customer orders as of March 31, 1998 were $3,252,000 versus $5,800,000 at March 31, 1997. A substantial portion of the decrease was due to the termination of a contract in late fiscal 1997 to provide diagnostic services to Ford Motor Company. The contract was not renewed because Ford consolidated suppliers in this area. There was also a $400,000 decrease in backlog relating to lower orders for fastening systems products. This was offset by a similar increase in backlog for automotive aftermarket products as a result of the acquisition of Waekon Industries in February, 1998. The shortfall in fastening orders will not be made up in the second half of the fiscal year. Results of Operations, Six Months Ended March 31, 1998 Compared to Six Months Ended March 31, 1997 ------------------------------------------------------ Product sales for the six months ended March 31, 1998 were $10,213,332 versus $7,393,003 for the same period in fiscal 1997. The increase is volume related due primarily to a $2,193,000 increase in sales of automotive diagnostic products of which $565,000 represents sales of products produced by Waekon Industries which was acquired on February 17, 1998. The current level of product sales is anticipated to continue for the last six months of the fiscal year. Service sales for the six months ended March 31, 1998 were $596,189 compared with $2,101,637 for the same period in fiscal 1997. The reduction was entirely volume related due to the absence of diagnostic service revenue caused by the termination of a contract in late fiscal 1997 to provide such services to Ford Motor Company. The contract was not renewed because Ford consolidated suppliers in this area. The current level of service sales is expected to continue for the balance of the fiscal year. Cost of product sold was $5,701,122 or 55.8% of product sales as compared to $4,656,869 or 63.0% of product sales for the six months ended March 31, 1997. This decrease in the cost of product sold percentage was due to a change in product mix in both the first quarter and, to a lesser extent, in the second quarter of the fiscal year. (12) 13 FORM 10-Q Cost of service sold was $377,946 or 63.4% of service sales compared with $1,862,158 or 88.6% of service sales for the six months ended March 31, 1997. This improvement in the cost of services sold percentage is entirely due to the elimination of costs associated with the termination of a contract in late fiscal 1997 to provide diagnostic services to the Ford Motor Company. Product development expenses were $1,509,653 or 14.8% of product sales as compared to $1,675,770 or 22.7% of product sales for the six months ended March 31, 1997. The percentage decrease is due to a 10% decrease in product development expenses combined with a 38% increase in product sales. The current level of product development expenditures is expected to continue in the second half of the fiscal year. Operating expenses were $1,973,947 for the six months ended March 31, 1998 or 18.3% of total sales versus $1,762,318 or 18.6% of total sales for the six months ended March 31, 1997. Most of the dollar increase represents marketing and administration expenses for Waekon Industries which was acquired on February 17, 1998. Interest expense was $19,350 for the six months ended March 31, 1998, and $4,375 for the same period in 1997. This increase was due to an increase in long term debt associated with the Waekon acquisition on February 17, 1998. The current level of interest expense will increase to approximately $20,000 per quarter for the remainder of fiscal 1998. Other income of $86,952 increased $43,412 compared with the same period last year due primarily to an increase in interest income caused by a higher level of short-term cash investments. Net income for the six months ended March 31, 1998 was $828,055 or 7.7% of total sales compared with a net loss of $266,710 for the six months ended March 31, 1997. The improvement was due primarily to an increase in product sales and to an improvement in the cost of product sold percentage. Liquidity and Capital Resources ------------------------------- Total current assets were $10,258,287, $11,096,855 and $9,319,511 at March 31, 1998, September 30, 1997 and March 31, 1997, respectively. The increase from March to March was due primarily to an increase in accounts receivable and inventory, most of which were a result of the acquisition of Waekon Industries in February, 1998 which was structured as an asset purchase. Between September, 1997 and March, 1998 current assets dropped by approximately $800,000 due primarily to a decrease in cash and cash equivalents. The decrease in cash occurred due to the acquisition of Waekon Industries. (13) 14 FORM 10-Q Working capital as of March 31, 1998 amounted to $8,476,783. This compares to $8,163,860 a year earlier. Current assets were 5.8 times current liabilities and total cash and receivables were 2.6 times current liabilities. These ratios compare to 8.1 and 3.7, respectively, at March 31, 1997. Internally generated funds of $98,613 during the six months ended March 31, 1998 were not adequate to fund the Company's primary non-operating cash requirement consisting of capital expenditures which amounted to $204,852. The shortfall was made up by a $300,000 increase in short-term financing. Management of the Company believes that cash and cash equivalents, together with funds generated by operations and funds available under the Company's credit agreement, will provide the liquidity necessary to support its current and anticipated capital expenditures through the end of fiscal 1998. Shareholders' equity during the six months ended March 31, 1998 increased by $712,280 ($.60 per share) resulting primarily from $828,055 of net income less $119,625 payment of dividends. In February 1998, the Company renewed its credit agreement with its financial lender. The agreement expires in February, 1999 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. 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. (14) 15 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 25, 1998, the following individuals were elected to the Board of Directors:
Votes For Votes Withheld --------- -------------- Thomas H. Barton 1,825,059 3,370 Robert L. Bauman 1,825,059 3,370 Harry J. Fallon 1,825,059 3,370 T. Harold Hudson 1,825,059 3,370 George S. Lockwood, Jr. 1,824,459 3,970 Michael L. Miller 1,825,059 3,370 Janet H. Slade 1,825,043 3,386
The following proposals were approved at the Company's Annual Meeting:
Affirmative Negative Votes Votes Votes Withheld ----------- -------- -------- 1. Approval of the adoption of the 1997 Outside Directors Stock Option Plan. 1,623,791 130,061 74,577 2. Approval of the adoption of the 1997 Key Employees Stock Option Plan. 1,616,419 155,549 56,461
For information on how the votes for the above matter have been tabulated, see the Company's definitive Proxy Statement used in connection with the Annual Meeting of Shareholders held on February 25, 1998. (15) 16 FORM 10-Q ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K: The following exhibits are included herein: (10) First Amendment to Loan Agreement, dated February 18, 1998 by and between the Company and Huntington National Bank. (11) Statement re: Computation of earnings per share. (27) Financial Data Schedule. The Company filed a current report on Form 8-K dated February 17, 1998 relative to the acquisition of Waekon Industries, Inc. located in Kirkwood, PA. 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, 1998 HICKOK INCORPORATED ------------ ------------------- (Registrant) /s/ E. T. Nowakowski ----------------------------------------- E. T. Nowakowski, Chief Financial Officer (16) EX-10 2 EXHIBIT 10 1 EXHIBIT 10 FIRST AMENDMENT TO LOAN AGREEMENT --------------------------------- THIS FIRST AMENDMENT TO LOAN AGREEMENT (the "First Amendment") is made this 18th day of February, 1998, 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, 1997 (the "Loan Agreement"), 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 Agreement. C. As a material inducement to Bank to make the amendments to the loan herein contemplated, Guarantor for good and valuable consideration, is willing to deliver to Bank an acknowledgment 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 - ------------ 1.1 The third sentence of Section 2.1 is hereby modified and amended to extend the maturity date of the Loan and the Revolving Note from February 28, 1998 to February 28, 1999. 1.2 Section 5.11 of the Loan Agreement is hereby amended to read in its entirety as follows: 5.11 MAINTENANCE OF KEY FINANCIAL REQUIREMENTS. Borrower shall, at all times, maintain the following financial requirements: 1.1.1 WORKING CAPITAL. Borrower will at all times maintain consolidated Current Assets of Borrower and its Subsidiaries in excess of their consolidated Current Liabilities (including the Revolving Credit Note) of at least Seven Million Dollars ($7,000,000.00). 1.1.2 TANGIBLE NET WORTH. Borrower shall at all times maintain its consolidated Tangible Net Worth in an amount not less than Nine Million Dollars ($9,000,000.00). For purposes of this section the Revolving Credit Notes shall be included in total liabilities and deferred expenses of Borrower and its Subsidiaries shall be treated as intangibles. 2 EXHIBIT 10 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 are hereby ratified and confirmed and shall remain in full force and effect. Borrower expressly acknowledges that this First Amendment shall not constitute a novation or waiver. Each and every representation and warranty of the Borrower set forth in the 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 First Amendment as well as at the time they were made and undertaken. 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 First Amendment, the First Modification and Amendment to the Revolving Credit Note and all other documents or instruments required pursuant hereto or thereto have been taken; this First Amendment the First 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 First Amendment, the First 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 (5) 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 First Amendment, the First Modification and Amendment to the Revolving Credit Note or any document or instrument required in connection herewith or therewith which has not already been obtained or completed. 2 3 EXHIBIT 10 3 AFFIRMATION AND AGREEMENT OF THE BORROWERS AND THE GUARANTOR. The Borrower and the Guarantor have executed this First Amendment to consent to the amendments 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 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 First Amendment and the other agreements or documents relating hereto or required hereby). 5 REFERENCE TO LOAN AGREEMENT. Except as amended 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 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 amended hereby. 6 COUNTERPARTS. This First 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, and 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 First Amendment. 8 BINDING EFFECT. This First 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 First Amendment to Loan Agreement, intending to be legally bound thereby as of the Effective Date. BORROWER HICKOK INCORPORATED /s/ Eugene Nowakowski BY: Robert L. Bauman - --------------------------------- ------------------------------- Robert L. Bauman, President /s/ Karen Gaul - --------------------------------- Signed in the presence of: THE HUNTINGTON NATIONAL BANK (as to all signatures) /s/ Terry Correno - --------------------------------- By: /s/ Herbert Werner -------------------------------- 3 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 ------------------------- ------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- PRIMARY Average shares outstanding 1,196,108 1,193,017 1,195,978 1,192,932 Net effect of dilutive stock options - based on the treasury stock method using average market price 25,604 19,407 18,747 19,928 ----------- ----------- ----------- ----------- Total Shares 1,221,712 1,212,424 1,214,725 1,212,860 ----------- ----------- ----------- ----------- Net Income (Loss) $ 540,620 $ (72,269) $ 828,055 $ (266,710) Per Share $ 0.44 $ (0.06) $ 0.68 $ (0.22) =========== =========== =========== =========== FULLY DILUTED Average shares outstanding 1,196,108 1,193,017 1,195,978 1,192,932 Net effect of dilutive stock options - based on the treasury stock method using year-end market price, if higher than average market price 29,621 19,407* 25,636 19,928* ----------- ----------- ----------- ----------- Total Shares 1,225,729 1,212,424 1,221,614 1,212,860 ----------- ----------- ----------- ----------- Net Income (Loss) $ 540,620 $ (72,269) $ 828,055 $ (266,710) =========== =========== =========== =========== Per Share $ 0.44 $ (0.06) $ 0.68 $ (0.22) =========== =========== =========== ===========
*Period-end market price is less than average market price, use same as primary shares. EX-27 4 EXHIBIT 27
5 6-MOS SEP-30-1998 OCT-01-1997 MAR-31-1998 330,135 0 4,241,175 0 5,383,775 10,258,287 6,008,577 3,480,478 14,864,590 1,781,504 579,746 0 0 1,196,250 11,133,090 14,864,590 10,809,521 0 6,079,068 3,396,648 0 0 19,350 1,314,455 486,400 828,055 0 0 0 828,055 .69 .68
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