<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(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, 1996
-----------------
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.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-1202810
- ----------------------------------- -----------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
Incorporation or organization)
3631 Perkins, Cleveland, Ohio 44114
- --------------------------------------- ------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 432-1990
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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 ninety (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.
Class Outstanding at February 14, 1997
------------------------------------ --------------------------------
Common stock, $1 par value per share 4,919,370
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HMI INDUSTRIES INC.
CONSOLIDATED CONDENSED BALANCE SHEET
DECEMBER 31, 1996 AND SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
(Unaudited)
December 31, September 30,
1996 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 476,210 $ 472,408
Trade accounts receivable (net of allowance of $1,335,589 and $2,439,406) 25,798,017 26,252,884
Finance contracts receivable 2,119,895 2,224,480
Notes receivable 583,179 560,884
Inventories 18,570,813 18,364,597
Income tax receivable 1,463,000 1,463,000
Deferred income taxes 1,665,188 1,772,129
Prepaid expenses 2,369,577 2,683,711
Net assets held for sale at realizable value 3,200,000 4,228,059
------------ ------------
Total current assets 56,245,879 58,022,152
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, NET 15,404,374 15,717,653
------------ ------------
OTHER ASSETS:
Long-term notes receivable (less amounts due within one year) 334,123 334,123
Cost in excess of net assets of acquired businesses
(net of amortization of $3,247,487 and $3,092,432) 12,535,685 12,636,147
Unamortized trademarks 342,714 312,775
Finance contracts receivable (less amounts due within one year) 4,239,791 4,449,628
Other 219,458 237,481
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Total other assets 17,671,771 17,970,154
------------ ------------
Total assets $ 89,322,024 $ 91,709,959
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $ 3,233,506 $ 3,132,975
Trade accounts payable 16,293,437 17,785,859
Income taxes payable 1,166,569 1,013,979
Accrued expenses and other liabilities 7,926,797 7,202,989
Long-term debt due within one year 3,342,649 3,485,641
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Total current liabilities 31,962,958 32,621,443
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LONG-TERM LIABILITIES:
Long-term debt (less amounts due within one year) 20,337,945 22,334,613
Deferred income taxes 189,523 192,372
Other 2,953,197 3,010,109
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Total long-term liabilities 23,480,665 25,537,094
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STOCKHOLDERS' EQUITY:
Preferred stock, $5 par value; authorized, 300,000 shares; issued, none -- --
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 7,686,944 7,686,944
Retained earnings 23,827,605 23,408,806
Cumulative translation adjustment (1,169,145) (1,077,325)
------------ ------------
35,640,960 35,313,981
Less treasury stock 376,186 shares, at cost 1,762,559 1,762,559
------------ ------------
Total stockholders' equity 33,878,401 33,551,422
============ ============
Total liabilities and stockholders' equity $ 89,322,024 $ 91,709,959
============ ============
<FN>
See accompanying notes to consolidated condensed financial statements.
</TABLE>
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HMI INDUSTRIES INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
1996 1995
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<S> <C> <C>
REVENUES:
Net product sales $ 29,660,797 $ 25,961,452
Financing revenue and other 170,145 159,934
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29,830,942 26,121,386
OPERATING COSTS AND EXPENSES:
Cost of products sold 21,771,274 18,797,315
Selling, general and administrative expenses 6,939,360 6,855,200
Interest expense 565,758 356,158
Other expenses (1,087) 171,166
Special charges -- 243,513
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Total expenses 29,275,305 26,423,352
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Income (loss) before income taxes 555,637 (301,966)
Provision (benefit) for income taxes 211,142 (235,000)
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INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS 344,495 (66,966)
------------ ------------
Income (loss) from discontinued operations - Mexico -- (231,604)
Income (loss) from discontinued operations - HRS 74,304 (131,291)
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NET INCOME (LOSS) $ 418,799 $ (429,861)
============ ============
Weighted average number of shares outstanding 4,919,408 4,886,927
============ ============
PER SHARE OF COMMON STOCK:
Income (loss) before discontinued operations $ 0.7 (0.01)
Income (loss) from discontinued operations $ 0.2 (0.08)
============ ============
Net income (loss) $ 0.9 (0.09)
============ ============
Cash dividends per common share $ -- $ 0.081
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
2
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HMI INDUSTRIES INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 418,799 $ (429,861)
Adjustments to reconcile net income (loss) to net cash provided (used)
by operating activities:
Depreciation and amortization 614,330 977,151
Provision for losses on receivables 213,534 161,920
Deferred income taxes 104,092 (244,065)
Changes in operating assets and liabilities:
Decrease (increase) in receivables 533,460 (488,112)
Increase in inventories (206,216) (2,401,384)
Decrease (increase) in prepaid expenses 314,134 (770,615)
Increase (decrease) in accounts payable (1,492,422) 2,723,642
Increase (decrease) in accrued expenses and other liabilities 666,896 (44,640)
Increase (decrease) in income taxes payable 152,590 (20,314)
Other, net (72,479) (82,419)
-------------------------------
Net cash provided by (used in) operating activities 1,246,718 (618,697)
-------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets 1,120,916 --
Capital expenditures (324,703) (605,046)
-------------------------------
Net cash provided by (used in) investing activities 796,213 (605,046)
-------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 206,084 3,267,739
Payment of long term debt (2,245,213) (1,814,584)
Proceeds from financing -- 856,820
Dividends paid -- (429,716)
-------------------------------
Net cash (used in) provided by financing activities (2,039,129) 1,880,259
-------------------------------
Effect on exchange rate changes on cash -- (386,529)
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Net increase in cash and cash equivalents 3,802 269,987
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 472,408 570,759
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 476,210 $ 840,746
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<FN>
See accompanying notes to consolidated condensed financial statements.
</TABLE>
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PART I - ITEM 1
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
In the opinion of the Company, these consolidated condensed financial statements
contain all of the adjustments necessary to present fairly the financial
position as of December 31, 1996 and September 30, 1996, and the results of
operations and cash flows for the three months ended December 31, 1996 and 1995.
1. BASIS FOR PREPARATION OF THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The consolidated condensed financial statements included in this report have
been prepared, without audit, by the Company from the consolidated statements of
HMI Industries Inc. and its subsidiaries, pursuant to the rules and regulations
of the Securities and Exchange Commission. Although the Company believes that
the disclosures are adequate to make the information presented not misleading,
certain information and footnote disclosures, including significant accounting
policies, normally included in annual financial statements have been condensed
or omitted pursuant to such rules and regulations.
It is suggested that these consolidated condensed financial statements be read
in conjunction with the Company's latest Annual Report on Form 10-K.
2. ASSETS HELD FOR SALE
At December 31, 1996 assets held for sale include the assets of Household Rental
Systems recorded at their estimated net realizable value. The former Bedford
Heights, Ohio facility for the Tubular operation, which was recorded as an asset
held for sale at September 30, 1996, was sold in December 1996.
3. RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to the 1996
presentation.
4. DISCONTINUED OPERATIONS
During the fourth quarter of 1996, the Company adopted a plan to exit its direct
sales operation in Mexico. Revenues and expenses related to this business have
been classified as discontinued operations for the three month period ended
December 31, 1995.
In March 1996, the Company adopted a plan to sell its steam cleaning rental
leasing operations distributed through grocery chains and supermarkets in
Canada. Revenues and expenses related to this business have been classified as
discontinued operations for the three months ended December 31, 1996 and 1995.
Net assets of Household Rental Systems are included in assets held for sale.
4
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5. INVENTORIES
Inventories at December 31, 1996 and September 30, 1996 consist of the
following:
<TABLE>
<CAPTION>
December 31, September 30,
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<S> <C> <C>
Finished goods $ 8,049,028 $ 6,943,970
Work-in-progress, raw materials
and supplies 10,521,785 11,420,627
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$18,570,813 $18,364,597
=========== ===========
</TABLE>
6. DEBT
In November 1996, the Company made another annual principal payment of
$1,666,666 on the unsecured, 9.86%, seven year private placement term notes,
leaving a balance of $1,666,667. The final principal payment on this debt,
obtained in November 1990 to finance the acquisition of Bliss Manufacturing
Company, is required in November 1997.
In November 1996, the Company increased the line of credit facility from
$17,500,000 to $19,500,000 with a principal payment of $2,000,000 due by
February 28, 1997. The Company expects to refinance the $2,000,000 principal
payment due at the end of February, 1997. Under the Company's line of credit
agreement, a principal amount of $2,500,000 was due no later than January 2,
1997. In December 1996, the proceeds from the sale of the Bedford Heights, Ohio
tubular facility were utilized to pay down the $2,500,000 principal amount to
$1,379,100. In January 1997, proceeds from a federal income tax refund were
used to pay the remaining principal amount due.
The agreements relating to the Company's outstanding debt include various
covenants that limit its ability to incur additional indebtedness, and restricts
paying dividends, as well as require it to meet various financial covenants. At
December 31,1996, the Company was not in compliance with certain of these
covenants contained in its credit agreements; however, the Company obtained
waiver on these covenants through December 31, 1996.
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PART I - ITEM 2
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NET SALES- Net product sales for the quarter ended December 31, 1996 were
$29,660,800, an increase of 14.2% from $25,961,500 in the comparable quarter.
Increased revenue was due primarily to new contracts awarded to Bliss
Manufacturing in the Manufactured Products Division which had an overall sales
increase of $2,400,000 for the quarter ended December 31, 1996 as compared to
the quarter ended December 31, 1995. Continued strong European sales in the
Consumer Goods Division, and new product sales of the " Defender " room air
cleaner and aftermarket sales contributed to the sale increase that offset some
softness in the North American and Asian markets. Sales in the Consumer Goods
Division increased $1,300,000 for the quarter ended December 31, 1996 over the
quarter ended December 31, 1995.
FINANCING REVENUE AND OTHER INCOME - Financing revenues represent the interest
and fees generated on the contracts financed by the Company's Australian,
Canadian, and United States subsidiaries.
GROSS PROFIT - Gross profit for the quarter ended December 31, 1996 was
$7,889,500 or 26.6% compared to $7,164,100 or 27.6% in the quarter ended
December 31, 1995. In the Consumer Goods Division, cost reduction initiatives in
manufacturing yielded increased productivity, resulting in higher margins versus
the comparable period in 1995. This increase was offset by lower margins in the
Manufactured Products Division. Pricing pressures from a market with excess
capacity, and a change in product mix resulted in lower gross margins for the
comparable period in 1995.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES - Selling, general and
administrative expenses were $84,200 higher for the quarter ended December 31,
1996 on increased sales compared to the quarter ended December 31, 1995. As a
percent to sales, selling, general and administrative expenses were 23.3% versus
26.2% for the comparable period.
Cost containment measures initiated in fiscal 1996 continued to drive expenses
down in the first fiscal quarter. In the Consumer Goods Division, an aggressive
program of selling costs reduction has resulted in lower expenses on increased
sales. The Manufactured Products Division is experiencing lower costs due to
reduced legal expenses connected to labor relations and contract negotiations
that were settled in the prior comparable period.
INTEREST EXPENSE - Interest expense has increased as a result of additional
borrowings during fiscal year 1996. Interest on bank lines of credit was
$368,700 and $203,500 during the quarters ended December 31, 1996 and 1995,
respectively.
6
<PAGE> 8
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The working capital balance at December 31, 1996 was $24,283,000, a decrease of
4.4% from the September 30, 1996 balance of $25,401,000.
The Company's cash increased $3,800 during the quarter ended December 31, 1996.
Receivables increased by $533,500 primarily as a result of increases in trade
receivables of $1,558,700, finance contracts receivables of $314,400, offset by
a $1,317,000 write-off of trade receivables, previously reserved. The increase
in trade receivables was primarily due to an increase in sales for the
comparable period. Accounts payable decreased $1,492,400 due to an improvement
in the Company's restricted cash position.
Capital expenditures for the three months ended December 31, 1996 and 1995 were
$324,700 and $605,000, respectively. For the quarter, capital expenditures in
the Consumer Goods Division were $283,900 and $40,800 in the Manufactured
Products Division. Significant expenditures in the Consumer Goods Division
consisted of $193,000 for customized computer software and $56,500 for leasable
carpet cleaning machinery. No significant additions were made for the
Manufactured Products Division.
In November 1996, the Company made another annual principal payment of
$1,666,666 on the unsecured, 9.86%, seven year private placement term notes,
leaving a balance of $1,666,667. The final principal payment on this debt,
obtained in November 1990 to finance the acquisition of Bliss Manufacturing
Company, is required in November 1997.
In November 1996, the Company increased the line of credit facility from
$17,500,000 to $19,500,000 with a principal payment of $2,000,000 due by
February 28, 1997. The Company expects to refinance the $2,000,000 principal
payment due at the end of February, 1997. Under the Company's line of credit
agreement, a principal amount of $2,500,000 was due no later than January 2,
1997. In December 1996, the proceeds from the sale of the Bedford Heights, Ohio
tubular facility were utilized to pay down the $2,500,000 principal amount to
$1,379,100. In January 1997, proceeds from a federal income tax refund were
used to pay the remaining principal amount due.
The agreements relating to the Company's outstanding debt include various
covenants that limit its ability to incur additional indebtedness, and restricts
paying dividends, as well as require it to meet various financial covenants. At
December 31,1996, the Company was not in compliance with certain of these
covenants contained in its credit agreements; however, the Company obtained
waiver on these covenants through December 31, 1996.
PART II - OTHER INFORMATION
- ---------------------------
None.
7
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SIGNATURES
----------
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.
HMI Industries Inc.
-------------------
(Registrant)
Date: February 14, 1997 \s\ Mark A. Kirk
----------------- ---------------------------------
Vice President and Chief
Financial Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 476,210
<SECURITIES> 0
<RECEIVABLES> 34,076,471
<ALLOWANCES> 1,335,589
<INVENTORY> 18,570,813
<CURRENT-ASSETS> 56,245,879
<PP&E> 30,991,855
<DEPRECIATION> 15,587,481
<TOTAL-ASSETS> 89,322,024
<CURRENT-LIABILITIES> 31,962,958
<BONDS> 0
<COMMON> 5,295,556
0
0
<OTHER-SE> 28,582,845
<TOTAL-LIABILITY-AND-EQUITY> 89,322,024
<SALES> 29,660,797
<TOTAL-REVENUES> 29,830,942
<CGS> 21,771,274
<TOTAL-COSTS> 28,709,547
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 565,758
<INCOME-PRETAX> 555,637
<INCOME-TAX> 211,142
<INCOME-CONTINUING> 344,495
<DISCONTINUED> 74,304
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 418,799
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
