<PAGE> 1
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 June 30, 1995
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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)
3631 Perkins 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
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Outstanding as of May 12, 1995
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HMI INDUSTRIES INC.
AMENDED CONSOLIDATED CONDENSED BALANCE SHEETS
June 30, 1995 and September 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Assets June 30 September 30
------ 1995 1994
Current Assets: ----------- -----------
<S> <C> <C>
Cash and cash equivalents $ 450,718 $ 690,177
Trade accounts receivable, net 25,095,185 23,719,891
Finance contracts receivable 3,656,126 3,647,592
Notes receivable 387,203 430,461
Inventories 18,684,706 15,585,921
Deferred income taxes 793,911 1,125,186
Prepaid expenses 702,101 1,006,686
----------- -----------
Total current assets 49,769,950 46,205,914
----------- -----------
Property, Plant and Equipment, Net 14,129,258 13,217,261
----------- -----------
Other Assets:
Long-term notes receivable 334,123 334,123
Cost in excess of net assets acquired 13,142,770 13,362,786
Deferred income taxes 515,350 507,458
Trademarks 1,601,025 2,430,498
Finance contracts receivable 1,989,481 1,242,142
Other 117,636 131,630
----------- -----------
Total other assets 17,700,385 18,008,637
----------- -----------
Total Assets $81,599,593 $77,431,812
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities:
Line of credit $ 5,756,393 $ 587,060
Trade accounts and dividends payable 12,206,408 10,912,167
Accrued expenses and other liabilities 5,538,105 7,239,226
Income taxes payable 2,696,983 2,501,300
Long-term debt due within one year 2,019,024 2,024,977
----------- -----------
Total current liabilities 28,216,913 23,264,730
----------- -----------
Long-Term Liabilities
Long-term debt less current portion 12,812,283 13,942,768
Deferred income taxes 503,475 506,732
----------- -----------
Long-term liabilities 13,315,758 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 7,310,588 7,223,367
Retained earnings 32,957,404 30,111,101
Cumulative translation adjustment (3,532,470) (869,016)
----------- -----------
42,031,078 41,761,008
Less treasury stock 419,295 shares, at cost 1,964,156 2,043,426
----------- -----------
40,066,922 39,717,582
----------- -----------
Total Liabilities & Stockholders' Equity $81,599,593 $77,431,812
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements
<PAGE> 3
HMI INDUSTRIES INC.
AMENDED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 1995 and 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Nine Months Ended June 30,
1995 1994 1995 1994
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Income:
Net sales $34,029,079 $36,831,408 $103,010,492 $98,946,564
Financing Revenue 211,787 382,101 799,645 965,867
----------- ----------- ------------ -----------
34,240,866 37,213,509 103,810,137 99,912,431
Operating Costs and Expenses:
Cost of products sold 23,833,388 25,651,181 70,540,964 68,672,631
Selling, general and administrative expenses 8,366,224 8,094,584 24,900,227 21,898,093
----------- ----------- ------------ -----------
32,199,612 33,745,765 95,441,191 90,570,724
----------- ----------- ------------ -----------
Operating Income 2,041,254 3,467,744 8,368,946 9,341,707
Other Income (Expense)
Interest and other income 1,000 0 36,849 71,032
Interest expense (368,729) (334,915) (1,097,671) (1,021,044)
Trademark amortization (230,903) (289,062) (789,758) (674,479)
Acquisition related costs (100,000) (100,000) (300,000) (300,000)
----------- ----------- ------------ -----------
(698,632) (723,977) (2,150,580) (1,924,491)
----------- ----------- ------------ -----------
Income Before Income Taxes 1,342,622 2,743,767 6,218,366 7,417,216
Provision for Income Taxes 549,892 1,042,631 2,093,276 2,805,049
----------- ----------- ------------ -----------
Net Income Before Cumulative Effect
of Change in Accounting Principle
for Income Taxes 792,730 1,701,136 4,125,090 4,612,167
Cumulative Effect of Change in
Accounting Principle for Income Taxes 0 0 0 719,016
----------- ----------- ------------ -----------
Net Income $ 792,730 $ 1,701,136 $ 4,125,090 $ 5,331,183
=========== =========== ============ ===========
Weighted Average Number of Shares
Outstanding 4,998,330 4,882,721 4,991,361 4,879,335
=========== =========== ============ ===========
Earnings Per Common Share:
Net Income Before Cumulative Effect
of Change in Accounting Principle
for Income Taxes $0.16 $0.35 $0.83 $0.95
Cumulative Effect of Change in
Accounting Principle for Income Taxes $0.00 $0.00 $0.00 $0.15
----------- ----------- ------------ -----------
Net income $0.16 $0.35 $0.83 $1.10
=========== =========== ============ ===========
Cash Dividends Per Common Share $0.088 $0.083 $0.263 $0.249
=========== =========== ============ ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements
<PAGE> 4
HMI INDUSTRIES INC.
AMENDED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 4,125,090 $ 5,331,183
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,772,765 2,483,845
Provision for losses on receivables 483,933 530,463
Amortization of deferred non-compete
agreements 300,000 300,000
Deferred income taxes 320,126 (1,006,695)
Changes in operating assets and
liabilities net of acquisitions:
Increase in receivables (2,571,842) (7,304,278)
Increase in inventories (3,098,785) (415,044)
(Increase) decrease in prepaid expenses 4,588 (132,051)
Increase in accounts payable 1,294,241 2,381,538
Decrease in accrued expenses
and other liabilities (1,701,121) (442,361)
Increase in income taxes payable 195,682 223,229
Other, net 13,991 (45,130)
----------- -----------
Net cash provided by operating activities 2,138,668 1,904,699
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (2,635,273) (1,854,775)
Acquisition of businesses 0 (4,875,000)
Payment of long term note receivable 0 300,000
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Net cash used in investing activities (2,635,273) (6,429,775)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Debt transactions:
Proceeds from line of credit 5,169,333 7,381,538
Payment of long term debt (1,136,438) (1,238,412)
----------- -----------
Cash provided by debt transactions 4,032,895 6,143,126
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Equity transactions:
Dividends paid (1,278,786) (1,175,658)
Sale of treasury shares 166,491 61,507
----------- -----------
Cash used in equity transactions (1,112,295) (1,114,151)
----------- -----------
Net cash provided by financing activities 2,920,600 5,028,975
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Effect of exchange rate changes on cash (2,663,454) (411,816)
----------- -----------
Net increase in cash and cash equivalents (239,459) 92,083
Cash and cash equivalents, beginning of period 690,177 211,261
----------- -----------
Cash and cash equivalents, end of period $ 450,718 $ 303,344
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements
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HMI INDUSTRIES INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 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 June 30, 1995
and September 30, 1994, the results of operations and cash flows for the
three and nine months ended June 30, 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 10-K.
(3) The Company is contingently liable under a Conditional Purchase
Agreement to a Netherlands bank in the amount of $1,260,000. 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 June 30, 1995 and September 30, 1994 consist of the
following:
<TABLE>
<CAPTION>
(unaudited)
June 30 September 30
------- ------------
<S> <C> <C>
Finished Goods $ 4,779,396 $ 5,985,143
Work in process, raw materials
and supplies 13,905,310 9,600,778
----------- -----------
$18,684,706 $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 $22,576,850 has been restated to reflect these items. These
adjustments totaled $1,256,538 for the third quarter resulting in cost
of goods sold of $23,833,388 for the quarter.
<PAGE> 6
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 June 30, 1995 was $21,553,000 a decrease of 6%
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. There was little change
in the US dollar as compared to the Mexico peso during the quarter. The
adjustments of $2,575,000 during the first six months rising from the
devaluation of the Mexican peso have 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 decreased by $239,000 for the nine months ended June 30,
1995. Trade receivables increased by $1,375,000, inventories increased by
$3,099,000, trade payables increased by $1,294,000 and accrued expenses and
other liabilities decreased by $1,701,000. The increase in inventories since
September 30, 1994 reflects the increase in Consumer Goods finished goods
inventories from previous low levels, the addition of raw materials for the new
products and the slightly slower than projected shipping in June. Inventory
levels are anticipated to decrease over the next quarter.
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 June 30, 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.
<PAGE> 7
Capital expenditures during the nine months ended June 30, 1995 were $2,635,000
as compared to $1,855,000 in the previous year. The largest outlay in June 1995
was $665,000 to acquire a production and office facility for the Consumer Goods
operations in Cleveland, Ohio. The Company is planning to spend an additional
$3,000,000 during the next three quarters to renovate the facility. Outlays in
the Consumer Goods Division include $446,000 for tooling additions and
improvements, $156,000 for computer software and $297,000 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
$738,000 for machinery and equipment for the industrial and commercial stamping
operations. These latter additions at Bliss Manufacturing Co. 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 $10,756,393 at June
30, 1995. The increase in the outstanding balance is principally due to the debt
reductions, inventory increases and the addition of the above-mentioned capital
expenditures.
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 decreased from $36,831,000 for the three months
ended June 30, 1994 to $34,029,000 for the current quarter. Net product sales
for the nine months ended June 30, 1995 were $103,010,000 compared to
$98,947,000 for the same period ending June 30, 1994. Sales during the current
quarter were down due to the Mexican market and the inability to simultaneously
introduce the new Optima and Captiva product lines. After a successful
introduction of the Optima product during the last quarter, production
difficulties and the introduction problems caused production to be halted
resulting in lower sales during April, May and June. Production difficulties are
corrected and the Captiva filtration products will be available and introduced
during the next two quarters. In Mexico, the peso dollar relationship has
increased real prices and lowered consumer confidence. Due to uncertainty of any
short term turnaround in the Mexican economy and consumer market, management
will emphasize cost reduction and resource allocation to develop our South
American markets. The Commercial and Industrial Stamping operations continue to
accommodate customer requirements on short-term notice and add sales
opportunities.
Gross Profit - Gross profit for the quarter ended June 30, 1995 was $10,196,000
or 29.9% as compared to $11,180,000 or 30.4% in the 1994 period. Gross profit
for the nine months ended June 30, 1995 was $32,470,000 or 31.5% as compared to
$30,274,000 or 30.6% in the period ended June 30, 1994. The Company's Tube Form
operations has experienced a decline in profitability due to the erosion of its
efficiency of operations and corresponding cost increases. The Company remains
<PAGE> 8
focused on utilizing available capacity in the Tubular Products Group and to
increase sales and profitability.
Selling, General and Administrative Expenses - Selling, general and
administrative expenses as a percent of total revenues were 24.4% as compared to
21.8% for the three months ended June 30, 1995 and 1994, respectively. For the
nine months ended June 30, 1995, these expenses were 24.0% compared to 21.9% for
the prior comparable period. The Company-owned Mexican operation and the HRS
operations while contributing higher gross margins, also have higher selling
costs, which when combined with the expenditure on new products and their
introductions account for the percentage increase over the previous quarter.
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.
Interest expense - The 9.86%, seven year, unsecured Term Notes, comprise
$129,000 and $152,000 of the three month interest expense for the quarters ended
June 30, 1995 and 1994, respectively. The balance of the interest expense was
comprised principally of short term borrowing interest of $221,000 (compared to
$144,000 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 $719,016 and is
included in the results for the nine months ended June 30, 1994. This item
should not be considered a continuing item.
<PAGE> 9
HMI INDUSTRIES INC.
PART II - OTHER INFORMATION AND SIGNATURE
JUNE 30, 1995
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
