-----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, Qz3gX5tHX3G/EfjdM//n/GbYZLUjcdVwusleXN/EJdoSoFQ7G0Nw9mqVTcIdKUEZ 9nlE1VpbDAb8SHAU/Y05KA== 0000950152-98-006674.txt : 19980814 0000950152-98-006674.hdr.sgml : 19980814 ACCESSION NUMBER: 0000950152-98-006674 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 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: 98684645 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 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 June 30, 1998 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 AUGUST 13, 1998, 742,884 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 Nine months ended June 30, June 30, ------------------------------- -------------------------------- 1998 1997 1998 1997 ------------ ------------ ----------- ------------- Net Sales Product Sales $ 4,644,415 $ 3,257,499 $ 14,857,747 $ 10,650,502 Service Sales 279,378 1,092,001 875,567 3,193,638 ------------ ------------ ------------ -------------- Total Net Sales 4,923,793 4,349,500 15,733,314 13,844,140 Costs and Expenses: Cost of Product Sold 2,383,197 2,083,002 8,084,319 6,739,871 Cost of Service Sold 266,146 907,927 644,092 2,770,085 Product Development 795,307 848,340 2,304,960 2,524,110 Operating Expenses 1,390,677 917,604 3,364,624 2,679,922 Interest Charges 20,382 2,171 39,732 6,546 Other Income (22,956) (34,454) (109,908) (77,994) ------------ ------------ ------------ ------------ 4,832,753 4,724,590 14,327,819 14,642,540 ------------ ------------ ------------ ------------ Income (Loss) before Income Taxes 91,040 (375,090) 1,405,495 (798,400) Income (Recovery of) Taxes 33,600 (138,800) 520,000 (295,400) ------------ ------------ ------------ ------------ Net Income (Loss) $ 57,440 $ (236,290) $ 885,495 $ (503,000) ============ ============ ============ ============ Earnings per Common Share: Net Income (Loss) $ .05 $ (.20) $ .74 $ (.42) ============ ============ ============ ============ Earning per Common Share Assuming Dilution: Net Income (Loss) $ .05 $ (.19) $ .73 $ (.41) ============ ============ ============ ============== Dividends per Share $ .10 $ .20 $ .10 $ .20 ============ ============ ============ ==============
See Notes to Consolidated Financial Statements. (2) 3
HICKOK INCORPORATED CONSOLIDATED BALANCE SHEETS June 30, September 30, June 30, 1998 1997 1997 ---------- ---------- --------- (Unaudited) (Note) (Unaudited) Assets - ------ Current Assets - -------------- Cash and Cash Equivalents $ 1,819,806 $ 2,668,345 $ 1,422,214 Trade Accounts Receivable - Net 2,210,565 3,312,988 2,309,478 Inventories 5,748,631 4,884,401 4,579,093 Prepaid and Deferred Expenses 270,476 231,121 166,965 Refundable Income Taxes -- -- 575,001 ---------- ---------- --------- Total Current Assets 10,049,478 11,096,855 9,052,751 -------------------- ---------- ---------- --------- Property, Plant and Equipment - ----------------------------- Land 199,611 199,611 196,611 Buildings 1,516,940 1,410,141 1,472,050 Machinery and Equipment 3,915,168 3,813,873 3,755,190 ---------- ---------- --------- 5,631,719 5,423,625 5,423,851 Less: Allowance for Depreciation 3,240,463 3,129,290 3,174,734 ---------- ---------- --------- Total Property - Net 2,391,256 2,294,335 2,249,117 -------------------- ---------- ---------- --------- Other Assets - ------------ Goodwill - Net of Amortization 1,973,143 224,889 229,515 Deferred Charges - Net of Amortization 101,388 115,988 135,635 Deposits 1,936 4,350 8,844 ---------- ---------- --------- Total Other Assets 2,076,467 345,227 373,994 ------------------ ---------- ---------- --------- Total Assets $14,517,201 $13,736,417 $11,675,862 ============ =========== =========== ===========
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
June 30, September 30, June 30, 1998 1997 1997 ----------- ------------ ----------- (Unaudited) (Note) (Unaudited) Liabilities - ----------- Current Liabilities - ------------------- Short-term Financing $ -- $ -- $ -- Current Portion of Long-term Debt 161,762 63,550 -- Trade Accounts Payable 458,902 657,285 242,019 Accrued Payroll & Related Expenses 423,291 422,772 450,415 Accrued Expenses 174,615 131,662 305,972 Customer Deposits 55,110 237,587 -- Accrued Income Taxes 102,744 305,400 -- ----------- ----------- ----------- Total Current Liabilities 1,376,424 1,818,256 998,406 ------------------------- ----------- ----------- ----------- Deferred Income Taxes 174,000 174,000 176,000 - --------------------- ----------- ----------- ----------- Long-term Debt 564,747 127,101 -- - -------------- ----------- ----------- ----------- Stockholders' Equity - -------------------- Class A, $1.00 par value; authorized 3,750,000 shares; 742,884 shares outstanding(740,984 shares at September 30, 1997 and 738,984 shares at June 30, 1997) excluding 9,586 shares in treasury 742,884 740,984 738,984 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 943,803 926,603 921,316 Retained Earnings 10,260,477 9,494,607 8,386,290 ----------- ----------- ----------- Total Stockholders' Equity 12,402,030 11,617,060 10,501,456 -------------------------- ----------- ----------- ----------- Total Liabilities and Stockholders' Equity $14,517,201 $13,736,417 $11,675,862 ==================== =========== =========== ===========
(4) 5
HICKOK INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED JUNE 30, (Unaudited) 1998 1997 ------------ ------------- Cash Flows from Operating Activities: Cash received from customers $ 17,340,019 $ 16,892,296 Cash paid to suppliers and employees (14,695,138) (13,964,704) Interest paid (21,245) (14,956) Interest received 77,081 39,379 Income taxes paid (722,657) (12,000) ------------ ------------ Net Cash Provided by Operating Activities 1,978,060 2,940,015 Cash Flows from Investing Activities: Capital expenditures (277,009) (350,363) Deferred charges -- (82,500) Decrease in deposits 2,514 4,900 Proceeds on sale of assets 29,257 30,000 Psyments for business purchased (Net) (2,426,518) -- Net Cash Used in Investing Activities (2,671,756) (397,963) Cash Flows from Financing Activities: Change in short-term borrowing -- (1,375,000) Decrease in long-term financing (50,034) -- Sale of Class A shares under option 14,816 6,920 Dividends paid (119,625) (238,570) ------------ ------------ Net Cash Used in Financing Activities (154,843) (1,606,650) Net increase (decrease) in cash and cash equivalents (848,539) 935,402 Cash and cash equivalents at beginning of year 2,668,345 486,812 ------------ ------------ Cash and cash equivalents at end of third quarter $ 1,819,806 $ 1,422,214 ============ ============
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) $ 885,495 $ (503,000) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 618,249 572,241 Non-cash compensation charge related to stock options 4,284 1,080 Loss (Gain) on disposal of assets 10,759 (11,116) Changes in assets and liabilities: Decrease (Increase) in accounts receivable 1,606,705 3,048,156 Decrease (Increase) in inventories (144,986) 333,765 Decrease (Increase) in prepaid expenses (36,507) (304,742) Increase (Decrease) in trade accounts payable (567,473) (118,124) Increase (Decrease) in accrued payroll and related expenses (36,286) (319,185) Increase (Decrease) in accrued expenses (159,524) 240,940 Increase (Decrease) in accrued income taxes (202,656) -- Total Adjustments 1,092,565 3,443,015 ----------- ----------- Net Cash Provided by Operating Activities $ 1,978,060 $ 2,940,015 =========== ===========
(6) 7 FORM 10-Q HICKOK INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) JUNE 30, 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 nine-month periods ended June 30, 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:
June 30, Sept. 30, June 30, 1998 1997 1997 ----------- ----------- ----------- Components $ 3,136,971 $ 2,482,194 $ 2,349,524 Work-in-Process 1,336,227 1,268,995 964,386 Finished Product 1,275,433 1,133,212 1,265,183 ----------- ----------- ---------- $ 5,748,631 $ 4,884,401 $ 4,579,093 =========== =========== ===========
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 adopted in 1989, 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 98,300 Class A shares were outstanding at June 30, 1998 (78,400 shares at September 30, 1997 and 80,400 shares at June 30, 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 third quarter period ended June 30, 1998, options for 1,500 Class A shares were exercised at prices ranging from $6.92 to $8.31 per share resulting in non-cash compensation to the optionees of $3,480. During the third quarter period ended June 30, 1997 no options were exercised. Options for 100 shares of Class A shares were cancelled during the three month period ended June 30, 1998. 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 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 June 30, 1998 (24,000 shares at September 30, 1997 and June 30, 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 (583,166 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 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. (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 Nine Months Ended June 30, June 30, ------------------------------- -------------------------------- 1998 1997 1998 1997 ----------- ------------ ----------- ------------ BASIC EARNINGS PER SHARE Income (Loss) available to common stockholders $ 57,440 $ (236,290) $ 885,495 $ (503,000) Shares denominator 1,196,695 1,193,850 1,196,217 1,193,238 Per share amount $ .05 $ (.20) $ .74 $ (.42) =========== =========== =========== =========== EFFECT OF DILUTIVE SECURITIES Average shares outstanding 1,196,695 1,193,850 1,196,217 1,193,238 Stock options 23,064 18,858 23,064 19,407 ----------- ----------- ----------- ----------- 1,219,759 1,212,708 1,219,281 1,212,645 DILUTED EARNINGS PER SHARE Income (Loss) available to common stockholders $ 57,440 $ (236,290) $ 885,495 $ (503,000) Per share amount $ .05 $ (.19) $ .73 $ (.41) =========== =========== =========== ===========
Options to purchase 41,250 and 63,600 shares of common stock during the third quarter of fiscal 1998 and the third 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. For the nine month periods ended June 30, 1998 and 1997 options to purchase 41,250 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. (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. 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 ($1,000,785). The Company has also incurred and recorded as goodwill closing costs related to the purchase ($205,216) as well as the present value of a five year earn out contract ($585,892). Goodwill is being amortized over 20 years. Pro forma effects of the Waekon Industries, Inc. purchase on fiscal 1997 operations were reported in Unaudited Consolidated Pro Forma Condensed Financial Statements included with Form 8-K/A dated February 17, 1998. The following pro forma data summarizes the results of operations of the Company for the twelve months ended September 30, 1997 and for the nine months ended June 30, 1998, assuming Waekon was acquired at the beginning of each period presented. In preparing the pro forma data, adjustments have been made to conform Waekon's accounting policies to those of the Company and to reflect purchase accounting adjustments and interest expense.
Twelve Months Nine Months Ended Ended September 30, 1997 June 30, 1998 ------------------ ------------- Net Sales $ 26,032,266 $17,774,612 ============ =========== Net Income $ 709,584 $ 969,701 ============ =========== Net Income per Common Share $ .59 $ .81 ============ ===========
The pro forma information does not purport to be indicative of the results of operations which would have actually been obtained if the acquisition had occurred on the dates indicated or the results of operations which will be reported in the future. (10) 11 FORM 10-Q ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations, Third Quarter (April 1, 1998 through June 30, 1998) Fiscal 1998 Compared to Third Quarter Fiscal 1997 ----------------------------------------------------------------------------- Product sales for the quarter ended June 30, 1998 were $4,644,415 versus $3,257,499 for the quarter ended June 30, 1997. The 42.6% increase in product sales in the current quarter is volume related and due primarily to a $1,487,000 increase in automotive diagnostic sales of which $772,000 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 third quarter will remain at that level in the fourth quarter. Service sales for the quarter ended June 30, 1998 were $279,378 versus $1,092,001 for the quarter ended June 30, 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 third quarter of fiscal 1998 was $2,383,197 or 51.3% of product sales as compared to $2,083,002 or 63.9% of product sales in the third 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 fourth quarter of the fiscal year due to a change in product mix. Cost of service sold for the quarter ended June 30, 1998 was $266,146 or 95.3% of service sales as compared to $907,927 or 83.1% of service sales in the quarter ended June 30, 1997. This increase in the cost of services sold percentage was due to an increase in material costs applicable to repair services billed in the third quarter. The cost of services sold percentage is expected to improve in the fourth quarter of the current fiscal year due to an improvement in product mix. Product development expenses were $795,307 in the third quarter of fiscal 1998 or 17.1% of product sales as compared to $848,340 or 26.0% of product sales in the third quarter of fiscal 1997. The percentage decrease is due to 6% decrease in product development expenses combined with a 43% increase in product sales. The level of expenditures incurred during the third quarter of fiscal 1998 is expected to continue in the fourth quarter. Operating expenses in the most recent quarter were $1,390,677 or 28.2% of total sales versus $917,604 or 21.1% of total sales for the same period a year ago. Approximately 60% of the dollar increase ($289,000) represents marketing and administrative expenses for Waekon Industries which was acquired on February 17, 1998. An additional 22% of the dollar increase ($102,000) represents a bonus accrual which was absent in last year's third quarter due to losses. The current level of operating expenses is expected to continue for the balance of the fiscal year. Interest expense was $20,382 in the third quarter of fiscal 1998, as compared to $2,171 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 continue for the remainder of fiscal 1998. (11) 12 FORM 10-Q Other income of $22,956 in the current quarter compares with $34,454 in the same quarter last year. The reduction is due to lower interest income on a reduced level of short-term cash investments. Net income in the third quarter of fiscal 1998 was $57,440 which compared with a net loss of $236,290 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 June 30, 1998 were $2,671,000 versus $7,894,000 at June 30, 1997. The decrease was due to timing differences on orders for automotive diagnostic products ($1,400,000) and to lower orders for fastening systems products ($1,700,000). In addition, $2,100,000 of the decrease was due to the termination of a contact in late fiscal 1997 to provide diagnostic services to Ford Motor Company. The contract was not renewed because Ford consolidated suppliers in this business segment. The shortfall in orders for fastening products will not be made up in the last quarter of the fiscal year. The decrease in backlog for automotive products has been offset by a comparable increase in orders received and shipped in the first nine months of fiscal 1998. Results of Operations, Nine Months Ended June 30, 1998 Compared to Nine Months Ended June 30, 1997 --------------------------------------------------------- Product sales for the nine months ended June 30, 1998 were $14,857,747 versus $10,650,052 for the same period in fiscal 1997. The increase is volume related due primarily to a $3,679,000 increase in sales of automotive diagnostic products of which $1,337,000 represents sales of products produced by Waekon Industries which was acquired on February 17, 1998. Service sales for the nine months ended June 30, 1998 were $875,567 compared with $3,193,638 for the same period in fiscal 1997. The reduction was entirely volume related due primarily 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. Cost of product sold was $8,084,319 or 54.4% of product sales as compared to $6,739,871 or 63.3% of product sales for the nine months ended June 30, 1997. This change in the cost of product sold percentage was due to a change in product mix. Cost of service sold was $644,092 or 73.6% of service sales compared with $2,770,085 or 86.7% of service sales for the nine months ended June 30, 1997. This improvement in the cost of services sold percentage is primarily 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 $2,304,960 or 15.5% of product sales as compared to $2,524,110 or 23.7% of product sales for the nine months ended June 30, 1997. The percentage decrease is due to a 9% decrease in product development expenses combined with a 40% increase in product sales. (12) 13 FORM 10-Q Operating expenses were $3,364,624 for the nine months ended June 30, 1998 or 21.4% of total sales versus $2,679,922 or 19.4% of total sales for the nine months ended June 30, 1997. Approximately 64% of the dollar increase ($438,000) represents marketing and administrative expenses for Waekon Industries which was acquired on February 17, 1998. An additional 15% of the dollar increase ($102,000) represents a bonus accrual which was absent in last year's nine month period due to losses. Interest expense was $39,732 for the nine months ended June 30, 1998, and $6,546 for the same period in 1997. This increase was due to additional long-term debt associated with the Waekon acquisition on February 17, 1998. Other income of $109,908 increased $31,914 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 nine months ended June 30, 1998 was $885,495 or 5.6% of total sales compared with a net loss of $503,000 for the nine months ended June 30, 1997. The improvement was due primarily to an increase in product sales and to an improvement in gross product margin. Liquidity and Capital Resources ------------------------------------ Total current assets were $10,049,478, $11,096,855 and $9,052,751 at June 30, 1998, September 30, 1997 and June 30, 1997, respectively. The increase from June to June was due primarily to an increase in inventory to support higher product sales. Approximately 60% of the inventory increase was the result of the acquisition of Waekon Industries in February, 1998 which was structured as an asset purchase. Between September, 1997 and June 1998 current assets dropped by approximately $1.1 million due primarily to a $2 million reduction in cash and receivables offset by a $900,000 increase in inventory. The decrease in cash of approximately $900,000 occurred due to the acquisition of Waekon Industries. Receivables were down approximately $1.1 million due to lower sales in the current quarter. Inventory was up due to the aforementioned Waekon acquisition. Working capital as of June 30, 1998 amounted to $8,673,054. This compares to $8,054,345 a year earlier. Current assets were 7.3 times current liabilities and total cash and receivables were 2.9 times current liabilities. These ratios compare to 9.1 and 3.7, respectively, at June 30, 1997. Internally generated funds of $1,978,060 during the nine months ended June 30, 1998 were adequate to fund the Company's primary non-operating cash requirement consisting of capital expenditures which amounted to $277,009. 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 and into fiscal 1999. Shareholders' equity during the nine months ended June 30, 1998 increased by $784,970 ($.66 per share) resulting primarily from a $885,495 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. (13) 14 FORM 10-Q Year 2000 Compliance -------------------- The Company is in the process of installing computer hardware and software which, among its many features, will recognize and process the year 2000 and beyond. The cost of the new system is not expected to have a material effect on the Company's financial statements in fiscal 1998 or in subsequent fiscal years. The installation is expected to be completed during the first quarter of fiscal 1999. However, if the Company experiences unexpected year 2000 compliance problems, or if its suppliers or customers experience such problems, the consequences could result in a material adverse effect on the Company's business, operating results and financial condition. 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. PART II. OTHER INFORMATION - --------------------------- ITEMS 1 through 5: Not applicable ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K: The following exhibits are included herein: (11) Statement re: Computation of earnings per share. (27) Financial Data Schedule The Company did not file any reports on Form 8-K during the three months ended June 30, 1998. 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 August 13, 1998 HICKOK INCORPORATED --------------- ------------------- (Registrant) /s/ E. T. Nowakowski ----------------------------------------- E. T. Nowakowski, Chief Financial Officer (14) EX-11 2 EXHIBIT 11 1 FORM 10-Q EXHIBIT 11
HICKOK INCORPORATED STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS Three Months Ended Nine Months Ended June 30, June 30, ------------------------------ ----------------------------- 1998 1997 1998 1997 ----------- --------- ---------- ----------- PRIMARY - ------- Average shares outstanding 1,196,695 1,193,850 1,196,217 1,193,238 Net effect of dilutive stock options - based on the treasury stock method using average market price 24,440 18,858 20,122 19,407 ----------- ----------- ----------- ----------- Total Shares 1,221,135 1,212,708 1,216,339 1,212,645 ----------- ----------- ----------- ----------- Net Income (Loss) $ 57,440 $ (236,290) $ 885,495 $ (503,000) =========== =========== =========== =========== Per Share $ .05 $ (.19) $ .73 $ (.41) =========== =========== =========== =========== FULLY DILUTED - ------------- Average shares outstanding 1,196,695 1,193,850 1,196,217 1,193,238 Net effect of dilutive stock options - based on the treasury stock method using period-end market price, if higher than average market price 24,440* 18,858* 23,064 19,407* ----------- ----------- ----------- ----------- Total Shares 1,221,135 1,212,708 1,219,281 1,212,645 ----------- ----------- ----------- ----------- Net Income (Loss) $ 57,440 $ (236,290) $ 885,495 $ (503,000) =========== =========== =========== =========== Per Share $ .05 $ (.19) $ .73 $ (.41) =========== =========== =========== =========== *Period-end market price is less than average market price, use same as primary shares.
(15) EX-27 3 EXHIBIT 27
5 9-MOS SEP-30-1998 OCT-01-1997 JUN-30-1998 1,819,806 0 2,210,565 0 5,748,631 10,049,478 5,631,719 3,240,463 14,517,201 1,376,424 564,747 0 0 1,197,750 11,204,280 14,517,201 15,733,314 15,843,222 8,728,411 5,669,584 0 0 39,732 1,405,495 520,000 885,495 0 0 0 885,495 .74 .73
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