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FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1994
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OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number
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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
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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
Outstanding as of February 10, 1995
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HMI INDUSTRIES INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
DECEMBER 31, 1994 AND SEPTEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Assets December 31 September 30
------ 1994 1994
Current Assets: ----------- ------------
<S> <C> <C>
Cash and cash equivalents $ 429,590 $ 690,177
Trade accounts receivable, net 23,580,050 23,719,891
Finance contracts receivable 3,374,283 3,647,592
Notes receivable 430,461 430,461
Inventories 17,475,901 15,585,921
Deferred income taxes 1,125,186 1,125,186
Prepaid expenses 721,378 1,006,689
----------- ------------
Total current assets 47,136,849 46,205,917
----------- ------------
Property, Plant and Equipment, Net 13,065,877 13,217,261
----------- ------------
Other Assets:
Long-term notes receivable 334,123 334,123
Cost in excess of net assets acquired 13,268,371 13,362,786
Deferred income taxes 507,458 507,458
Unamortized trade marks 2,171,567 2,430,498
Finance contracts receivable 1,415,080 1,242,142
Other 127,045 131,627
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Total other assets 17,823,644 18,008,634
----------- ------------
Total Assets $78,026,370 77431812
=========== ============
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities:
Line of credit $ 6,678,157 $ 587,060
Trade accounts and dividends payable 9,771,812 10,912,167
Accrued expenses and other liabilities 5,049,985 7,239,226
Income taxes payable 1,781,506 2,501,300
Long-term debt due within one year 2,014,438 2,024,977
----------- ------------
Total current liabilities 25,295,898 23,264,730
----------- ------------
Long-Term Liabilities
Long-term debt less current portion 12,357,032 13,942,768
Deferred income taxes 506,732 506,732
----------- ------------
Long-term liabilities 12,863,764 14,449,500
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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 7,238,268 7,223,367
Retained earnings 31,415,843 30,111,101
Cumulative translation adjustment (2,066,282) (869,016)
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41,883,385 41,761,008
Less treasury stock 424,295 shares, at cost 2,016,677 2,043,426
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39,866,708 39,717,582
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Total Liabilities & Stockholders' Equity $78,026,370 $ 77,431,812
=========== ============
</TABLE>
See accompanying notes to consolidated condensed financial statements
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HMI INDUSTRIES INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, 1994 and 1993
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended December 31,
1994 1993
------------ ------------
Income:
<S> <C> <C>
Net sales $ 32,068,094 $ 28,611,425
Financing Revenue 346,036 253,778
------------ ------------
32,414,130 28,865,203
Operating Costs and Expenses:
Cost of products sold 21,687,683 19,886,253
Financing related expenses 280,104 119,714
Selling, general and administrative expenses 7,367,907 6,119,841
------------ ------------
29,335,694 26,125,808
------------ ------------
Operating Income 3,078,436 2,739,395
Other Income (Expense)
Interest and other income 20,186 0
Interest expense (341,332) (302,237)
Trademark amortization (289,063) (96,354)
Acquisition related costs (100,000) (100,000)
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(710,209) (498,591)
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Income Before Income Taxes 2,368,227 2,240,804
Provision for Income Taxes 657,285 851,506
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Net Income Before Cumulative Effect
of Change in Accounting Principle
for Income Taxes 1,710,942 1,389,298
Cumulative Effect of Change in
Accounting Principle for Income Taxes 0 719,016
------------ ------------
Net Income $ 1,710,942 $ 2,108,314
============ ============
Weighted Average Number of Shares
Outstanding 4,978,529 4,870,737
============ ============
Earnings Per Common Share:
Net Income Before Cumulative Effect
of Change in Accounting Principle
for Income Taxes $ 0.34 $ 0.29
Cumulative Effect of Change in
Accounting Principle for Income Taxes $ 0.00 $ 0.15
------------ ------------
Net income $ 0.34 $ 0.44
============ ============
Cash Dividends Per Common Share $ 0.081 $ 0.075
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements
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HMI INDUSTRIES INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,710,942 $ 2,108,314
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 926,680 485,005
Provision for losses on receivables 248,481 131,736
Amortization of deferred non-compete
agreements 100,000 98,036
Deferred income taxes 0 (1,006,695)
Changes in operating assets and
liabilities net of acquisitions:
Increase in receivables (8,269) (764,538)
Increase in inventories (1,889,980) (739,302)
Increase in prepaid expenses 185,311 9,464
Increase in accounts payable (1,140,355) 318,607
Decrease in accrued expenses
and other liabilities (2,189,241) (1,518,341)
Increase in income taxes payable (719,794) 95,589
Other, net 4,582 46,083
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Net cash provided by operating activities (2,771,643) (736,042)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (421,950) (259,427)
Acquisition of businesses 0 (4,875,000)
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Net cash used in investing activities (421,950) (5,134,427)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt transactions:
Proceeds from line of credit 6,091,097 8,526,852
Payment of long term debt (1,596,275) (1,671,307)
----------- -----------
Cash provided by debt transactions 4,494,822 6,855,545
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Equity transactions:
Dividends paid (406,200) (366,482)
Sale of treasury shares 41,650 15,000
----------- -----------
Cash used in equity transactions (364,550) (351,482)
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Net cash provided by financing activities 4,130,272 6,504,063
----------- -----------
Effect of exchange rate changes on cash (1,197,266) (526,956)
----------- -----------
Net increase in cash and cash equivalents (260,587) 106,638
Cash and cash equivalents, beginning of period 690,177 211,261
----------- -----------
Cash and cash equivalents, end of period $ 429,590 $ 317,899
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</TABLE>
See accompanying notes to consolidated condensed financial statements
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HMI INDUSTRIES INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
December 31, 1994
(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 December 31,
1994 and September 30, 1994, the results of operations and cash flows
for the three months ended December 31, 1994 and 1993. 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 10-K.
(3) The Company is contingently liable under a Conditional Purchase
Agreement to a Netherlands bank in the amount of $1,175,000. 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 December 31, 1994 and September 30, 1994 consist of the
following:
<TABLE>
<CAPTION>
(unaudited)
December 31 September 30
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<S> <C> <C>
Finished Goods $ 6,164,452 $ 5,985,143
Work in process, raw materials
and supplies 11,311,449 9,600,778
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$17,475,901 $ 15,585,921
=========== ============
</TABLE>
(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 $719,016 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.
(6) Inventory analysis revealed that costs in the Tubular operations were
understated by some items previously sold under contract and due to
erroneous accounting entries. Accordingly, cost of goods sold as
reported of $21,509,054 has been restated to reflect these items. These
adjustments totaled $178,629 for the first quarter resulting in cost of
goods sold for the quarter of $21,687,683.
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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 December 31, 1994 was $21,841,000 a decrease of
5% 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 in late December, 1994 in the amount of $1,180,000 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 has continued to fluctuate since December 31,
1994. In managements' opinion, the amount of additional adjustments, if any,
would not have a material effect on consolidated shareholders' equity.
The Company's cash decreased by $261,000 for the three months ended December 31,
1994. Trade receivables decreased by $140,000, inventories increased by
$1,890,000 and trade payables decreased by $1,140,000. The decrease in cash is
primarily due to the annual December contributions for the Company sponsored
bonus and profit sharing plans. Inventories have increased primarily as a result
of a build up for the scheduled shipments for the quarter commencing January 1,
1995, especially in the Manufactured Products Division where inventories were up
approximately $1,150,000. In December, due to the strong level of orders for
their products, these operations did not observe the traditional shut down
periods during the holidays. The Mexican Consumer Goods operation is still
displaying strong growth, although the previously mentioned devaluation
adjustment offset the growth in finance contracts receivable by $943,000. The
Company acquired all of the assets 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 December 31, 1994, $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 three months ended December 31, 1994 were
$422,000 as compared to $259,000 in the previous year. Outlays in the Consumer
Goods Division include $49,000 for
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tooling additions and improvements, $39,000 for computer software and $77,000
for new steam cleaning equipment for the HRS operations. Future capital
expenditure commitments include $250,000 for the 1995 completion of a new filter
cone manufacturing machine. Additions in the Manufactured Products Division
include $30,000 for tubular fabrication machinery and equipment and $137,000 for
machinery and equipment, $50,000 for building improvements and $38,000 for
vehicles and office equipment for the industrial and commercial stamping
operations. The machinery and equipment additions at Bliss Manufacturing Co.
were added to meet specific customer demands, increase both capacity and
efficiencies and enable Bliss to meet increased demand overall.
The outstanding balance on the Company's line of credit was $11,678,000 at
December 31, 1994. The increase in the amount outstanding is principally due to
the previously mentioned payment of bonus and profit sharing plan contributions,
inventory increases and accounts payable reductions.
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 - Net product sales increased from $28,611,000 for the three months
ended December 31, 1993 to $32,068,000 for the current quarter, an improvement
of 12%. Sales increases in the Consumer Products and Manufactured Products
Division for the current quarter compared to the 1993 quarter were 7% and 13%,
respectively. The existing Consumer Goods Division's markets continue to grow
and the additional HRS sales contribute to this increase. A new filtration
product introduced at the annual meeting in January, 1995 was enthusiastically
received and will allow the Company access to new markets of allergy and dust
sensitive household members. Sales in the Commercial and Industrial Stamping
operations continue to increase due to increased capacity through the addition
of specific equipment and as a result of the operation's ability to accommodate
customer requirements on short-term notice.
Gross Profit - Gross profit for the quarter ended December 31, 1994 was
$10,380,000 or 32.4% as compared to $8,725,000 or 30.5% in the 1993 period. The
improvement of the Mexican operation and the addition of the HRS operations have
contributed to improved gross margins in the Consumer Goods Division. The gross
margins in the manufactured Products Division have improved by 1.9% primarily as
a result of the increased productivity at the Commercial and Industrial Stamping
operations. 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 sales were 23.6% as compared to 21.6%
for the three months ended December 31, 1994 and 1993, respectively. The
increase in these costs reflects the growth in the Mexican operations and the
addition of HRS in December 1993, both of which while contributing higher gross
margins, also have higher selling costs.
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Financing Revenue - Financing revenue represents the interest and fees generated
by the Company's Health-Mor Acceptance Corporation and Mexican subsidiaries
generated on the contracts financed.
Interest expense - The 9.86%, seven year, unsecured Term Notes, comprise
$160,000 and $192,000 of the three month interest expense for the quarters ended
December 31, 1994 and 1993, respectively. The balance of the interest expense
was comprised principally of short term borrowing interest of $181,000 (compared
to $110,000 in 1993).
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 as previously
discussed.
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 $719,016 and is
included in the results for the three months ended December 31, 1994. This item
should not be considered a continuing item.
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HMI INDUSTRIES INC.
PART II - OTHER INFORMATION AND SIGNATURE
DECEMBER 31, 1994
PART II - OTHER INFORMATION
NONE
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 there to duly authorized.
HMI Industries Inc.
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Registrant
Date: January 12, 1996
/s/ Kevin Dow
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KEVIN DOW
Vice President and
Chief Financial Officer