<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
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SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 1995
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OR
--
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
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SECURITIES EXCHANGE ACT OF 1934
-------------------------------
For the transition period from to
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Commission file number
HMI Industries Inc.
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(Exact name of registrant as specified in its charter)
Delaware 36-1202810
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(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
3500 Payne Avenue, Cleveland, Ohio 44114
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(Address of principal executive offices)
( Zip Code)
(216) 432-1990
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
------------------------------------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock - $1 Par Value 5,295,556 Shares
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Outstanding as of May 12, 1995
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<PAGE> 2
HMI INDUSTRIES INC
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INDEX TO FORM 10-Q
------------------
March 31, 1995
--------------
PAGE
PART I. Financial Information
Consolidated Condensed Balance Sheets -
March 31, 1995 and September 30, 1994 1
Consolidated Condensed Statements of Income
- for the three months ended
March 31, 1995 and 1994 2
Consolidated Condensed Statements of
Cash Flows - for the three months ended
March 31, 1995 and 1994 3
Notes to the Consolidated Condensed
Financial Statements 4
Management's Discussion and Analysis
of Financial Condition and Results of
Operations 5-7
PART II. Other Information 8
Signature 8
<PAGE> 3
<TABLE>
HMI INDUSTRIES INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31, 1995 and September 30, 1994
(unaudited)
<CAPTION>
Assets March 31 September 30
------ 1995 1994
Current Assets: ---------------- ----------------
<S> <C> <C>
Cash and cash equivalents $775,449 $690,177
Trade accounts receivable, net 26,035,214 23,719,891
Finance contracts receivable 3,081,577 3,647,592
Notes receivable 411,971 430,461
Inventories 17,546,706 15,585,921
Deferred income taxes 1,176,266 1,125,186
Prepaid expenses 1,166,293 1,006,689
---------------- ----------------
Total current assets 50,193,476 46,205,917
---------------- ----------------
Property, Plant and Equipment, Net 13,236,040 13,217,261
---------------- ----------------
Other Assets:
Long-term notes receivable 334,123 334,123
Cost in excess of net assets acquired 13,237,584 13,362,786
Deferred income taxes 507,458 507,458
Trademarks 1,792,679 2,430,498
Finance contracts receivable 1,634,783 1,242,142
Other 122,217 131,627
---------------- ----------------
Total other assets 17,628,844 18,008,634
---------------- ----------------
Total Assets $81,058,360 $77,431,812
================= ================
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities:
Line of credit $4,673,716 $587,060
Trade accounts and dividends payable 13,122,375 10,912,167
Accrued expenses and other liabilities 5,380,750 7,239,226
Income taxes payable 2,682,490 2,501,300
Long-term debt due within one year 2,019,024 2,024,977
---------------- ----------------
Total current liabilities 27,878,355 23,264,730
---------------- ----------------
Long-Term Liabilities
Long-term debt less current portion 12,580,861 13,942,768
Deferred income taxes 549,607 506,732
---------------- ----------------
Long-term liabilities 13,130,468 14,449,500
---------------- -----------------
Stockholders' Equity
Common stock, $1 par value; authorized
10,000,000 shares; issued, 5,295,556 shares 5,295,556 5,295,556
Capital in excess of par value 7,257,132 7,223,367
Retained earnings 32,928,840 30,111,101
Cumulative translation adjustment (3,444,415) (869,016)
----------------- -----------------
42,037,113 41,761,008
Less treasury stock 424,295 shares, at cost 1,987,576 2,043,426
----------------- -----------------
40,049,537 39,717,582
----------------- -----------------
Total Liabilities & Stockholders' Equity $81,058,360 $77,431,812
================= =================
See accompanying notes to consolidated condensed financial statements
</TABLE>
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<TABLE>
HMI INDUSTRIES INC.
INCOME STATEMENT HIGHLIGHTS (unaudited)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31 MARCH 31
1995 1994 1995 1994
OPERATIONS
<S> <C> <C> <C> <C>
Income:
Net Product Sales $36,913,319 $33,503,731 $68,981,413 $62,115,156
Financing Revenue 241,822 244,658 587,858 498,436
-------------- -------------- --------------- -------------
Total Revenues $37,155,141 $33,748,389 $69,569,271 $62,613,592
-------------- -------------- --------------- -------------
Operating Costs and Expenses
Cost of Products sold 24,680,650 23,135,197 46,189,704 43,021,450
Financing related expenses 69,748 207,154 140,055 415,530
Selling, general and administrative expenses 8,816,244 7,307,470 16,393,948 13,302,649
Trademark amortization 269,792 289,063 558,855 385,417
Acquisition related costs 100,000 100,000 200,000 200,000
-------------- -------------- --------------- -------------
Total Operating Costs and Expenses 33,936,434 31,038,884 63,482,562 57,325,046
-------------- -------------- --------------- -------------
Operating Income 3,218,707 2,709,505 6,086,709 5,288,546
Other Income (Expense)
Interest and other income 15,663 71,032 35,849 71,032
Interest expense (387,610) (347,892) (728,942) (686,129)
-------------- -------------- --------------- --------------
Total Other Income (Expense) (371,947) (276,860) (693,093) (615,097)
-------------- -------------- --------------- --------------
Income Before Income Taxes $2,846,760 $2,432,645 $5,393,616 $4,673,449
Provision for Income Taxes 1,004,834 910,912 1,724,639 1,762,418
Net Income Before One Time Cumulative
Effect of Change in Accounting Principle -------------- -------------- --------------- --------------
for Income Taxes $1,841,926 $1,521,733 $3,668,977 $2,911,031
CHANGE IN ACCOUNTING PRINCIPLE
One Time Cumulative Effect of Change in
Accounting Principle for Income Taxes 0 0 0 719,016
-------------- -------------- --------------- --------------
Net Income $1,841,926 $1,521,733 $3,668,977 $3,630,047
============== ============== =============== =============
EARNINGS PER SHARE - Operations
Weighted Average Number of Shares 4,996,431 4,882,721 4,987,876 4,877,590
Outstanding
============== ============== =============== =============
Earnings Per Common Share:
Net Income from Continuing Operations $0.38 $0.32 $0.76 $0.62
Acquisition related costs (0.01) (0.01) (0.02) (0.02)
Net Income Before One Time Cumulative
Effect of Change in Accounting Principle -------------- -------------- --------------- --------------
for Income Taxes $0.37 $0.31 $0.74 $0.60
EARNINGS PER SHARE - After Change in Accounting Principle
One Time Cumulative Effect of Change in
Accounting Principle for Income Taxes $0.15
-------------- -------------- --------------- --------------
Net Income $0.37 $0.31 $0.74 $0.75
============== ============== =============== =============
See accompanying notes to consolidated condensed financial statements.
</TABLE>
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<TABLE>
HMI INDUSTRIES INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
for the six months ended March 31, 1995 and 1994
<CAPTION>
1995 1994
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $3,668,977 $3,630,047
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,839,721 1,355,293
Provision for losses on receivables 364,694 209,736
Amortization of deferred non-compete
agreements 200,000 198,036
Deferred income taxes (8,205) (1,006,695)
Changes in operating assets and
liabilities net of acquisitions:
Increase in receivables (2,488,153) (4,311,138)
Increase in inventories (1,960,785) (1,766,782)
Increase in prepaid expenses (359,604) (398,166)
Increase in accounts payable 2,210,208 3,254,932
Decrease in accrued expenses
and other liabilities (1,858,476) (1,052,044)
Increase in income taxes payable 181,190 278,890
Other, net 31,435 93,384
------------ ------------
Net cash provided by operating activities 1,821,002 485,493
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (1,491,873) (951,718)
Acquisition of businesses 0 (4,875,000)
------------ ------------
Net cash used in investing activities (1,491,873) (5,826,718)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt transactions:
Proceeds from line of credit 4,086,656 8,435,642
Payment of long term debt (1,361,907) (1,671,307)
------------ ------------
Cash provided by debt transactions 2,724,749 6,764,335
------------ ------------
Equity transactions:
Dividends paid (833,748) (770,874)
Sale of treasury shares 89,615 36,603
------------ ------------
Cash used in equity transactions (744,133) (734,271)
------------ ------------
Net cash provided by financing activities 1,980,616 6,030,064
------------ ------------
Effect of exchange rate changes on cash (2,224,473) (519,332)
------------ ------------
Net increase in cash and cash equivalents 85,272 169,507
Cash and cash equivalents, beginning of period 690,177 211,261
------------ ------------
Cash and cash equivalents, end of period $775,449 $380,768
============ ============
See accompanying notes to consolidated condensed financial statements
</TABLE>
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<PAGE> 6
HMI INDUSTRIES INC.
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
March 31, 1995
--------------
(1) Certain prior year amounts have been reclassified to conform to the
1995 classifications.
(2) The consolidated financial statements included in this report have
been prepared by the Company from the consolidated statements of HMI
Industries Inc. and its subsidiaries. In the opinion of the Company,
these consolidated financial statements contain all of the adjustments
necessary to present fairly the financial position as of March 31,
1995 and September 30, 1994, the results of operations and cash flows
for the three months ended March 31, 1995 and 1994. Independent public
accountants have not examined these statements.
These consolidated financial statements should be read in conjunction
with the financial statements and the notes included in the Company's
latest annual report on Form 10K.
(3) The Company is contingently liable under a Conditional Purchase
Agreement to a Netherland bank in the amount of $1,397,000. If the
contingent liability were called upon by the bank, the Company would
take possession of certain finished goods and work in process
inventories and sell them into existing markets.
(4) Inventories at March 31, 1995 and September 30, 1994 consist of the
following:
(unaudited)
March 31 September 30
----------- -----------
Finished Goods $5,653,752 $5,985,143
Work in process, raw materials
and supplies 11,892,954 9,600,778
----------- -----------
$17,546,706 $15,585,921
=========== ===========
(5) Effective October 1, 1993, the Company adopted Financial Accounting
Standard (FAS) No. 109, "Accounting for Income Taxes". The adoption of this
accounting principle resulted in the recognition of a ONE TIME CUMULATIVE TAX
BENEFIT of $719,000 or $0.15 per share during the quarter ended December 31,
1993. The statement has been applied prospectively and prior year financial
statements were not restated.
4
<PAGE> 7
HMI INDUSTRIES INC
- - ------------------
MANAGEMENTS' DISCUSSION AND ANALYSIS
- - ------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- - ------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES -
- - ---------------------------------
MATERIAL CHANGES IN FINANCIAL POSITION
--------------------------------------
The working capital balance at March 31, 1995 was $22,315,000 a decrease of 3%
from the September 30, 1994 balance of $22,941,000.
The effect of foreign exchange is primarily limited to the Canadian and Mexican
operations. The Consolidated Statements of Cash Flows incorporates the effects
of foreign exchange in each of the categories presented. The impact of the
devaluation in Mexico during the quarter in the amount of $1,378,000
($2,575,000 for the six months ended March 31, 1995) has been reflected as a
component of equity based on the nature of the Company's investment and
intended timing of repayment of the amounts due. The value of the Mexican Peso
versus the US dollar continues to fluctuate. In managements' opinion, the
amount of additional adjustments, if any, would not have a material effect on
consolidated shareholders' equity.
The Company's cash increased by $85,000 for the six months ended March 31,
1995. Trade receivables increased by $2,315,000, inventories increased by
$1,961,000, trade payables increased by $2,210,000 and accrued expenses and
other liabilities decreased by $1,858,000. The increase in trade receivables
reflects the strong sales in all operations during the last half of the quarter
and the inventory growth reflects the continuation of this pattern. The
Company acquired all of the assets and business of the HRS Division of Reckitt
& Colman Canada, Inc. in December 1993 for $4,875,000. The acquisition was
financed by the Company's line of credit. The purchase price included
$3,375,000 which was assigned to certain license agreements related to use of
trade marks in the US and Canada. The amount is being amortized over 18 months
to 4 years. Unamortized balances are reflected in the accompanying balance
sheets. The acquisition agreement also provides for a contingent Earn Out of
$1,875,000 to be paid out over a 10 year period dependent upon business
expansion and revenue generation.
At March 31, 1995, $5,000,000 of the unsecured, 9.86%, seven year private
placement notes were outstanding. This debt was obtained in 1990 to finance the
acquisition of Bliss Manufacturing Company. A portion of the Company's line of
credit ($5,000,000) has been classified as long term based on the agreement
with the bank dated July 1994.
Capital expenditures during the six months ended March 31, 1995 were $1,492,000
as compared to $952,000 in the previous year. Outlays in the Consumer Goods
Division include $148,000 for tooling additions and improvements, $156,000 for
computer software and $244,000 for new steam cleaning equipment for the HRS
operations. Additions in the Manufactured Products Division include $77,000 for
tubular fabrication machinery and equipment and $534,000 for machinery and
5
<PAGE> 8
equipment for the industrial and commercial stamping operations. These
latter additions at Bliss Manufacturing Co. including a Turret Punch Press
($397,000) were added to specifically meet the customer demand and increase
both capacity and efficiencies. Future capital expenditure commitments include
$125,000 for the 1995 completion of a new filter cone manufacturing machine.
The outstanding balance on the Company's line of credit was $9,673,716 at March
31, 1995. The increase in the outstanding balance is principally due to the
payment of annual bonus and profit sharing plan contributions, private
placement debt reductions and inventory increases.
Management believes the Company's long term liquidity needs will continue to be
met by cash flow from operations, its access to the line of credit and its
potential to borrow from existing debt sources.
RESULTS OF CONTINUING OPERATIONS:
- - ---------------------------------
NET SALES - Sales increased from $33,504,000 for the three months ended March
31, 1994 to $36,913,000 for the current quarter. Sales for the six months
ended March 31, 1995 were $68,981,000 compared to $62,115,000 for the same
period ending March 31, 1994. Sales increases in the Consumer Goods and
Manufactured Products Divisions for the current quarter compared to the 1994
quarter were 13% and 3% respectively. The existing Consumer Goods Division's
markets continue to grow. The ability of the Commercial and Industrial
Stamping operations to accommodate customer requirements on short-term notice
continues to add sales opportunities.
GROSS PROFIT - Gross profit for the quarter ended March 31, 1995 was
$12,233,000 or 33.1% as compared to $10,369,000 or 30.9% in the 1994 period.
Gross profit for the six months ended March 31, 1995 was $22,792,000 or 33.0%
as compared to $19,094,000 or 30.7% in the period ended March 31, 1994. The
Company-owned distribution channel in Mexico and the HRS operations have
contributed to improved gross margins in the Consumer Goods Division. The
Company remains committed to utilizing available capacity in the Tubular
Products Group and thereby increase sales and return on assets.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - Selling, general and
administrative expenses as a percent of total revenues were 23.7% as compared
to 21.7% for the three months ended March 31, 1995 and 1994, respectively. For
the six months ended March 31, 1995, these expenses were 23.6% compared to
21.2% for the prior comparable period. The increase in these costs reflects
the Company-owned Mexican operation and the addition of HRS in December 1993,
both of which while contributing higher gross margins, also have higher selling
costs.
FINANCING REVENUE - Financing revenue represents the interest and fees
generated by the Company's Health-Mor Acceptance Corporation, Australian and
Mexican subsidiaries generated on the contracts financed.
6
<PAGE> 9
INTEREST EXPENSE - The 9.86%, seven year, unsecured Term Notes, comprise
$123,000 and $164,000 of the three month interest expense for the quarters
ended March 31, 1995 and 1994, respectively. The balance of the interest
expense was comprised of short term borrowing interest of $264,000 (compared to
$184,000 in 1994).
TRADEMARK AMORTIZATION - These expenses represent the allocation of the amounts
paid for the rights to use specific trademarks arising from the acquisition of
HRS over periods ranging from eighteen months to four years.
ACQUISITION RELATED COSTS - These costs represent amortization of non-compete
Agreements arising in the course of the Company's acquisitions.
ACCOUNTING CHANGE FOR INCOME TAXES - The Financial Accounting Standards Board
issued Statement of Financial Accounting Standard No. 109 - Accounting for
Income Taxes which became effective for the Company in the current fiscal year.
The cumulative effect of the change in accounting principle was $719,000 and is
included in the results for the six months ended March 31, 1994. This item
should not be considered a continuing item.
7
<PAGE> 10
HMI INDUSTRIES INC.
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PART II - OTHER INFORMATION AND SIGNATURE
-----------------------------------------
March 31, 1995
--------------
PART II - OTHER INFORMATION
---------------------------
(27) Financial Data Schedule
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 thereto duly authorized.
HMI Industries Inc.
------------------------------
Registrant
Date: May 12, 1995 /s/ KEVIN DOW
------------------------------
KEVIN DOW
Vice President and Chief
Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 775,449
<SECURITIES> 0
<RECEIVABLES> 26,447,185
<ALLOWANCES> 0
<INVENTORY> 17,546,706
<CURRENT-ASSETS> 50,193,476
<PP&E> 13,236,040
<DEPRECIATION> 0
<TOTAL-ASSETS> 81,058,360
<CURRENT-LIABILITIES> 27,878,355
<BONDS> 0
<COMMON> 5,295,556
0
0
<OTHER-SE> 34,753,981
<TOTAL-LIABILITY-AND-EQUITY> 81,058,360
<SALES> 36,913,319
<TOTAL-REVENUES> 37,155,141
<CGS> 24,680,650
<TOTAL-COSTS> 33,936,434
<OTHER-EXPENSES> 371,947
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 387,610
<INCOME-PRETAX> 2,846,760
<INCOME-TAX> 1,004,834
<INCOME-CONTINUING> 1,841,926
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,841,926
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
</TABLE>
