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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, 1999
-----------------
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 Number 2-30905
HMI INDUSTRIES INC.
-------------------
(Exact name of Registrant as Specified in Its Charter)
DELAWARE 36-1202810
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(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
Genesis Building, 6000 Lombardo Center, Suite 500, Seven Hills, Ohio 44131
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (216) 986-8008
--------------
3631 Perkins Avenue, Cleveland, Ohio 44114
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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 January 31, 2000
------------------------------------ -------------------------------
Common stock, $1 par value per share 5,355,100
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<TABLE>
INDEX
<S> <C>
PART I. FINANCIAL INFORMATION....................................................................................3
ITEM 1. FINANCIAL STATEMENTS...................................................................................3
CONSOLIDATED CONDENSED BALANCE SHEETS.......................................................................3
CONSOLIDATED CONDENSED STATEMENTS OF INCOME.................................................................4
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW..............................................................5
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS........................................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................7
Results of Operations.......................................................................................7
Liquidity and Capital Resources............................................................................10
Cautionary Statement for "Safe Harbor" Purposes Under the Private Securities Litigation
Reform Act of 1995.........................................................................................12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........................................12
PART II. OTHER INFORMATION......................................................................................12
ITEM 1. LEGAL PROCEEDINGS....................................................................................12
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS............................................................12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES......................................................................12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................................................12
ITEM 5. OTHER INFORMATION....................................................................................12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.....................................................................13
(a) Index to Exhibits......................................................................................13
(b) Reports on Form 8-K....................................................................................13
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, September 30,
1999 1999
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 211,714 $ 764,719
Trade accounts receivable (net of allowance of $632,894
and $691,205) 2,304,626 2,233,356
Notes receivable 105,211 105,211
Inventories:
Finished goods 1,936,484 1,697,577
Work-in-progress, raw material and supplies 1,193,156 1,136,980
Deferred income taxes 1,413,067 1,458,480
Prepaid expenses 196,237 177,199
Other current assets 41,641 46,471
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Total current assets 7,402,136 7,619,993
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PROPERTY, PLANT AND EQUIPMENT, NET 905,626 1,005,848
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OTHER ASSETS:
Long-term notes receivable (less amounts due within one year) 113,979 140,281
Cost in excess of net assets of acquired businesses
(net of amortization of $3,063,520 and $3,002,144) 6,163,904 6,218,464
Deferred income taxes 2,183,600 2,138,187
Unamortized trademarks 260,045 260,832
Other 116,301 81,496
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Total other assets 8,837,829 8,839,260
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Total assets $ 17,145,591 $ 17,465,101
============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 2,576,899 $ 2,887,198
Income taxes payable 1,009,999 1,015,730
Accrued expenses and other liabilities 2,903,426 3,062,879
Long-term debt due within one year 10,588 41,929
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Total current liabilities 6,500,912 7,007,736
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LONG-TERM LIABILITIES:
Other - 131,156
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Total long-term liabilities - 131,156
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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, 5,368,556 shares 5,368,556 5,368,556
Capital in excess of par value 7,471,919 7,561,586
Unearned compensation, net (66,128) (96,515)
Retained deficit (1,261,613) (1,512,922)
Other comprehensive loss (Note 5) (861,423) (868,197)
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10,651,311 10,452,508
Less treasury stock 6,201 and 32,233 shares,
respectively, at cost 6,632 126,299
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Total stockholders' equity 10,644,679 10,326,209
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Total liabilities and stockholders' equity $ 17,145,591 $ 17,465,101
============================================================================================================
</TABLE>
See notes to consolidated condensed financial statements.
3
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CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended December 31,
1999 1998
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<S> <C> <C>
Revenues:
Net product sales $8,479,223 $ 9,171,973
Financing revenue 36,693 115,658
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8,515,916 9,287,631
Operating costs and expenses:
Cost of products sold 5,100,481 6,556,405
Selling, general and administrative expenses 3,110,527 3,273,916
Interest expense 9,624 28,323
Impairment loss (Note 3) - 2,664,574
Other expenses 43,975 48,322
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Total expenses 8,264,607 12,571,540
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Income (loss) before income taxes 251,309 (3,283,909)
Provision (benefit) for income taxes - -
- -----------------------------------------------------------------------------------------
Net income (loss) $ 251,309 $ (3,283,909)
=========================================================================================
Weighted average number of shares outstanding:
Basic and diluted 5,352,648 5,182,276
=========================================================================================
Per share of common stock (Note 2):
Basic and diluted $ 0.05 $ (0.63)
=========================================================================================
Cash dividends paid per common share $ - $ -
=========================================================================================
</TABLE>
See notes to consolidated condensed financial statements.
4
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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended December 31,
1999 1998
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 251,309 $(3,283,909)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 236,601 234,785
Impairment of asset - 2,664,574
Treasury shares issued, net of unearned compensation 60,387 174,298
Provision for losses on receivables 30,395 -
Deferred income taxes - (238,004)
Changes in operating assets and liabilities:
(Increase) decrease in receivables (75,363) 925,403
(Increase) decrease in inventories (295,083) 500,098
(Increase) decrease in prepaid expenses (19,038) 11,481
Decrease (increase) in other current assets 4,830 (29,674)
Decrease in accounts payable (310,299) (1,180,759)
Decrease in accrued expenses and other liabilities (290,609) (144,507)
(Decrease) increase in income taxes payable (5,731) 235,273
Other, net (36,558) 47,972
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Net cash used in operating activities (449,159) (82,969)
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Cash flows from investing activities:
Capital expenditures (72,505) -
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Net cash used in investing activities (72,505) -
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Cash flows from financing activities:
Net borrowings under credit facility - 84,478
Payment of long term debt (31,341) (31,270)
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Net cash (used in) provided by financing activities (31,341) 53,208
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Net decrease in cash and cash equivalents (553,005) (29,761)
Cash and cash equivalents, beginning of period 764,719 51,365
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Cash and cash equivalents, end of period $ 211,714 $ 21,604
=======================================================================================================
</TABLE>
See notes to consolidated condensed financial statements.
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
----------------------------------------------
BASIS FOR PREPARATION OF THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The interim consolidated condensed financial statements included in this report
have been prepared, without audit, by HMI Industries Inc. from our consolidated
statements and those of our subsidiaries, pursuant to the rules and regulations
of the Securities and Exchange Commission. Although we believe 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.
In the opinion of our management, the unaudited financial information for the
interim periods presented reflects all adjustments (which include only normal,
recurring adjustments) necessary for a fair presentation. These condensed
consolidated financial statements and related notes should be read in
conjunction with the consolidated financial statements and related notes
included in our Annual Report on Form 10-K for the fiscal year ended September
30, 1999. Operating results for interim periods are not necessarily indicative
of operating results for an entire fiscal year.
2. Earnings Per Share
---------------------
All 454,000 options outstanding, and subject to purchase, during the three
months ended December 31, 1999 were not included in the computation of diluted
EPS because the options' exercise price were greater than the average market
price of the common stock during the period and, therefore, the effect would be
anti-dilutive. Thus the denominators for calculating our basic and diluted
earnings per share are identical as of December 31, 1999. In addition, the
denominators for calculating our basic and diluted earnings per share were
identical as of December 31, 1998 as the outstanding options were not assumed as
the result would have been anti-dilutive since a loss from continuing operations
existed for this period.
In the second quarter of fiscal 2000, we anticipate the completion of an
offering of up to 2,500,000 shares of our common stock in a transaction exempt
from the registration requirements under federal securities law. This
transaction could potentially dilute a current investor's percentage of our
common stock.
3. Property, Plant and Equipment
--------------------------------
On January 12, 1999, we sold our Perkins Avenue facility and related land in
Cleveland, Ohio, to Rose Management Company, a local real estate investment
company, for $840,000. The net book value of the related land and building at
the time of sale was $3,504,600. In December 1998 we recorded a non-cash
impairment loss of $2,664,600 on the building to reflect the difference between
the sales price and the net book value of the property. The impairment loss
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was recorded as a separate line item under operating expenses in the
Consolidated Condensed Statement of Income.
4. Debt
-------
Our credit facility agreement includes, but is not limited to, various covenants
that limit our ability to incur additional indebtedness, limit compensation to
key personnel and transactions with affiliates, restrict paying dividends, limit
book net worth and limit the ability for capital expenditures. On December 17,
1999, we entered into an agreement with our lender to reset certain of these
covenants in anticipation of exceeding the previous established levels during
our fiscal year ending September 30, 2000. There were no covenant violations
under the credit facility agreement as of December 31, 1999.
5. Comprehensive Income/Loss
----------------------------
Comprehensive income/loss combines net income/loss and "other comprehensive
items," which represents foreign currency translation adjustments, reported as a
component of shareholders' equity in the accompanying consolidated condensed
balance sheet. We present such information in our statement of stockholders'
equity on an annual basis and in a footnote in our quarterly reports. We had
comprehensive income of $258,100 and comprehensive loss of $3,281,400 for the
quarters ended December 31, 1999 and 1998, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
FIRST QUARTER OF FISCAL 2000 COMPARED TO FIRST QUARTER OF FISCAL 1999
Net Product Sales
-----------------
Net product sales of $8,479,200 for the quarter ended December 31, 1999,
decreased by $692,800 or 7.6% as compared to $9,172,000 for the same quarter in
fiscal 1999. This decrease is largely due to a decline in unit sales in Western
Europe and the Americas offset by increased sales in Asia and Eastern
Europe/Middle East.
Western European Majestic(R) sales were adversely affected by decreased sales to
our Holland importer and a U.K. importer. Both parties have been adjusting their
inventories to reflect current conditions in their businesses. Some Eastern
European and Middle Eastern distributors have increased their volume enough to
be able to order containers directly from HMI. As such, they are no longer
purchasing product from the Holland importer. This change in ordering practices
is evident in the increase from the prior year in Eastern Europe/Middle East and
attests to part of the decrease in Western European sales. The U.K. distributor
has decreased his purchases from us as the network in his region is suffering
due to several office closings resulting from the loss of two master
distributors to a competitor. We are working to offer assistance in
restructuring and rebuilding his network. Defender(R) sales, in the Western
European area, were
7
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also unfavorable to prior year. This unfavorable variance is largely
attributable to a reduction in orders from France and Holland. Sales of the
Defender(R) in France have decreased as their focus has been on Majestic(R)
sales in an effort to grow their business. Holland orders are also down as they
work to deplete their inventory of the old style of Defender(R).
Majestic(R) sales in the Americas have remained below last year's figures due to
recruiting challenges and consumer financing constraints. The sustained U.S.
economy is making recruiting much more difficult. As a result there are not as
many people entering the "Edge Success Program" (the "Edge") or opening new
offices. The Edge is an innovative, highly structured 12-step program that
provides business training from the earliest level of a new recruit to the most
senior level of a premier master distributor and provides incentives at each
level to promote the development and retention of quality distributors and sales
associates. Business and management training includes a business management
correspondence course and a training seminar, the Business Management Institute,
designed in conjunction with Eckerd College in Florida. The program addresses
everything from in-home demonstration techniques to generation of sales leads,
personnel recruiting, compliance matters, and other aspects of owning and
operating a distributorship. Although the availability of consumer financing has
diminished following the merger of Beneficial and Household Finance and Avco
Financial Services, the two largest U.S. consumer credit companies, the new
national financing deal has been instrumental in improving the closing rate of
financed sales.
Asian Majestic(R) sales were favorable to prior year primarily due to the
continued growth in the Korean market over the same period last year. Our
redesign of the marketing structure in Korea from a few importers to only one
importer has been instrumental in focusing the sales effort and thus growing the
business.
Net product sales and income from continuing operations are not materially
impacted by inflation or changing prices.
Financing Revenue
-----------------
Financing revenue represents the interest and fees generated on the contracts
financed by our Australian, Canadian, and United States Subsidiaries. The
decline in financing revenue is attributable to our decision in January 1998 to
discontinue the financing of contracts to the end customers.
Gross Profit
------------
Gross profit, exclusive of financing revenue, for the quarter ended December 31,
1999, was $3,378,700, or 39.8%, as compared to $2,615,600, or 28.5%, in the
quarter ended December 31, 1998. The increase in the margin is largely a result
of a reduction in material and overhead costs offset by unfavorable sales volume
variances of $301,500 (see explanation of Net Product Sales above).
Reduced material and manufacturing costs of $878,100 and $186,600, respectively,
are the direct result of our initiatives to strengthen operational processes,
reduce cost, and improve quality. These initiatives, originally adopted in the
fourth quarter of fiscal year 1997, have become an
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important part of our culture as we continually review our manufacturing cost
structures and operational processes in an attempt to further improve quality,
reduce plant spending and improve labor efficiencies.
Since December 1998 we have driven down the cost of our motors and filters, two
of the primary components of our products, reduced labor costs and implemented
Total Quality Control procedures in our manufacturing plant. In addition, our
parts specifications have been conveyed clearly to our suppliers to meet our
specifications. Vendor charge back has become the norm when parts fail our
quality inspection. These are several examples of the attention to cost and
quality, which directly resulted in improved gross margins.
Selling, General, and Administrative
------------------------------------
SG&A expenses for the first quarter of fiscal 2000 as compared to fiscal 1999
were favorable by $163,400 primarily as a result of decreased commissions of
$118,800, equipment and facility rental of $123,400 and sales meetings of
$103,800. These decreases were offset by increased benefits expense of $121,600
and outside consulting expenses of $50,800. The lower commissions are a direct
result of the decreased sales volume from the prior year and the rental expenses
are favorable to prior year primarily because there have been no charges in
fiscal 2000 for certain computer equipment leases which have since expired. A
substantial portion of the outside consulting expense is for Information Systems
services and relates to Y2K and the relocation of our offices and plant. Sales
meeting expenses are favorable because of the timing of events this year versus
last year. The increase in benefits expense is attributable to 401K match
expense, which commenced in October 1999, and higher accrued profit sharing
expense.
Impairment Loss
---------------
On January 12, 1999, we sold our Cleveland, Ohio facility and related land to
Rose Management Company, a local real estate investment company, for $840,000.
The net book value of the related land and building at the time of sale was
$3,504,600. In December 1998, we recorded a non-cash impairment loss of
$2,664,600 on the building to reflect the difference between the sales price and
the net book value of the property.
Income Taxes
------------
The effective income tax rate for the first quarter of fiscal 2000 is zero due
to the utilization of net loss carryforwards not previously recognized.
Year 2000
---------
GENERAL
Older computer software programs that use two digits rather than four digits to
identify the year in a date field have been and continue to be a concern for
year 2000. If not corrected, many computer applications may fail to treat dates
intended to represent years in the twenty-first century as such but instead
treat them as still in the twentieth century. This could potentially result in
system failures or miscalculations disruptive of business operations, including,
among other things, an inability to initiate, receive, process, invoice or
otherwise complete normal business activities. These Year 2000 issues affect
virtually all companies and organizations.
9
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SYSTEMS
Through the use of internal personnel and outside consultants, we performed a
detailed review to assess the impact of the Year 2000 issue on our continuing
operations and actively addressed each issue noted during our review. All
non-compliant IT and non-IT hardware and software was remediated or replaced to
meet Year 2000 compliance. Individual components, sub-systems, and systems were
thoroughly tested before they were installed. In addition a full compliance test
was completed in November 1999. Testing attempted to verify that all systems
functioned correctly and extended to interfaces with key business partners.
Additionally, our distribution network and our vendors were contacted to ensure
their compliance with Year 2000 issues. No negative responses were received.
Contingency plans were also developed. Approaches to reducing risks of
interruption due to supplier failures included identification of alternate
suppliers and utility providers, accumulation of inventory to assure production
capability where warranted, and establishment of crisis teams to address
unexpected problems. These activities were intended to provide a means of
managing risk, but could not eliminate the potential for disruption due to third
party failure. The inventory accumulation plan included a 60% increase in raw
material safety stock and a buildup of extra finished goods.
RISKS
As of the date of this filing, we have not experienced any material business
disruptions as a result of our internal IT and non-IT systems or applications,
and have not experienced any problems with the IT and non-IT systems or
applications of our third party vendors, service providers or distributor
network. However, while no such occurrence has developed, Year 2000 issues may
arise that may not become immediately apparent. Therefore, we will continue to
monitor and work to remediate any issues that may arise. Although we expect not
to be materially impacted, such future events cannot be known with certainty.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
--------------------
Cash flows from operating activities utilized net cash of $449,200 for the three
months ended December 31, 1999, principally due to cash outflows resulting from
decreases in accounts payable and accrued expenses of $310,000 and $290,600,
respectively, and increased inventory of $295,100, offset by non-cash expenses
of $236,600 relating to depreciation and amortization, and net income of
$251,300.
Cash disbursements for the quarter ended December 31, 1999 were approximately
$300,000 greater than purchases recorded for the same time period thus resulting
in a decreased accounts payable balance. Although the finished goods inventory
balances at December 31, 1999 exceeded those at September 30, 1999, the bulk of
the raw materials needed to build the finished goods were purchased in the
months of October and November and due to vendor terms were paid for by the end
of the first quarter of fiscal 2000. In addition, lower than anticipated sales
in December 1999 resulted in the reduction of raw material purchases, which also
contributed to the decrease in accounts payable.
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The decrease in accrued expenses and other liabilities is primarily a result of
the settlement of obligations relating to sales financed by our United States
financing subsidiary prior to our January 1998 decision to discontinue the
financing of contracts to the end customers.
Inventory increased as a result of a safety stock that was built to prevent any
interruptions to the distribution network for a possible Year 2000 crisis and
for the relocation, in January 2000, of our manufacturing operation to our new
production facility.
Investing Activities
--------------------
Capital expenditures of $72,500 represent the entire net cash used in investing
activities for the quarter ended December 31, 1999.
Financing Activities
--------------------
Net cash used in financing activities, for the payment of long-term debt, was
$31,300.
Our credit facility agreement includes, but is not limited to, various covenants
that limit our ability to incur additional indebtedness, limit compensation to
key personnel and transactions with affiliates, restrict paying dividends, limit
book net worth and limit the ability for capital expenditures. On December 17,
1999, we entered into an agreement with our lender to reset certain of these
covenants in anticipation of exceeding the previous established levels during
our fiscal year ending September 30, 2000. There were no covenant violations
under the credit facility agreement as of December 31, 1999.
In November 1999, we announced that we expect to offer for sale up to 2,500,000
shares of our common stock in a transaction exempt from the registration
requirements under federal securities law. We expect to conclude the sale of
these shares in the second quarter of fiscal 2000. This transaction could
potentially dilute a current investor's percentage of our common stock. Net
proceeds received from the sale of the shares being offered will be used in the
implementation of our strategic initiatives.
As part of our continuing initiative to streamline costs and restructure our
company to its core business of manufacturing and distributing high filtration
portable surface cleaners, central vacuum systems and portable room air
cleaners, we have developed a strategic plan for growth. We intend to leverage
our position as a leading manufacturer and direct seller of high filtration
portable surface cleaners, central vacuum systems and portable room air cleaners
by undertaking key initiatives that we believe will drive revenues higher and
lower operating costs.
The key initiatives include but are not limited to the following:
- Develop a better trained and more knowledgeable distribution network;
- Increase product awareness and brand recognition;
- Expand the geographic and demographic markets in which our products are
distributed and sold;
- Continue to streamline processes and lower costs; and
- Invest in new infrastructure and pursue additional growth
opportunities.
11
<PAGE> 12
Our plan is to use the proceeds from this offering and funds from operations and
bank financing to implement our strategic plan. There can be no assurance that
the full amount of proceeds anticipated from this offering will be raised. Even
if the full amount contemplated by this offering is raised, there can be no
assurance that cash generated from operations or other sources of financing will
be available that will enable us to fully implement the strategic plan. In
addition, there can be no assurance that our financial condition and results of
operations will not be materially and adversely affected if we are unable to
fully implement our strategic initiatives.
CAUTIONARY STATEMENT FOR "SAFE HARBOR" PURPOSES UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
This report, including Management's Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking statements within
the meaning of the Federal securities laws. As a general matter, forward-looking
statements are those focused upon future plans, objectives or performance as
opposed to historical items and include statements of anticipated events or
trends and expectations and beliefs relating to matters not historical in
nature, including, but not limited to, the statements made in "Year 2000"
concerning the uncertainty of the impact of any future events and the impact of
these events on our future operating results, financial condition and cash flows
and "Liquidity and Capital Resources" regarding our ability to sell the
anticipated shares of our Common Stock in our offering. Such forward-looking
statements are subject to uncertainties such as future Year 2000 issues and our
ability to sell the anticipated offering shares. Such uncertainties are
difficult to predict and could cause our actual results of operation to differ
materially from those matters expressed or implied by such forward-looking
statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) INDEX TO EXHIBITS
10.00 Material Contracts Finova Loan and Security
Agreement Covenant Amendment
Letter dated December 17, 1999, Attached.
27.00 Financial Data Schedule
(b) REPORTS ON FORM 8-K
On November 11, 1999, we filed a Form 8-K with the Commission, announcing our
expectation of positive earnings from continuing operations for the fourth
quarter ended September 30, 1999. We also announced that we expected to offer
for sale up to 2,500,000 shares of our Common Stock in a transaction exempt from
the registration requirements under federal securities law.
On November 18, 1999, we filed another Form 8-K with the Commission announcing
our approximated earnings for the fourth quarter ended September 30, 1999,
intended facilities relocation and changes in sales management. We also
announced again that we expected to offer for sale up to 2,500,000 shares of our
Common Stock in a transaction exempt from the registration requirements under
federal securities law.
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 7, 2000 /s/ Julie A. McGraw
---------------- -------------------------------
Julie A. McGraw
Vice President - Chief Accounting
Officer
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Exhibit 10.00
FINOVA
FINOVA CAPITAL CORPORATION
COMMERCIAL FINANCE
111 WEST 40TH STREET
14TH FLOOR
NEW YORK, NEW YORK 10018
TEL 212 403 0700
FAX 212 403 0913
December 17,1999
Mr. Robert M. Benedict, Jr.
Executive Vice President
HMI Industries, Inc.
3631 Perkins Avenue
Cleveland, OH 44114
Re: FINOVA CAPITAL CORPORATION WITH HMI INDUSTRIES, INC. AND
HMI INDUSTRIES, INC. (COLLECTIVELY "THE BORROWER")
--------------------------------------------------
Dear Bob:
Reference is made to that certain Loan and Security Agreement dated May 12,
1999, between FINOVA Capital Corporation and the Borrower ("Security
Agreement"). Borrower has requested and FINOVA has agreed that FINOVA shall
forbear in declaring default under the Security Agreement, for any default with
respect to negative covenant "Capital Expenditures" and "Indebtedness" for
fiscal year ended September 30, 1999.
Borrower has requested and FINOVA has agreed to reset the following covenants:
1) "Capital Expenditure"; Borrower shall not make or incur any Capital
Expenditure if, after giving effect thereto, the aggregate amount of all Capital
Expenditures by Borrower in any fiscal year (beginning with the fiscal year
ending September 30, 1999) would exceed $3,OOOM and 2) "Indebtedness" covenant;
Borrower shall not create, incur, assume or permit to exist any Indebtedness for
Borrowed Money in excess of $ 1,OOOM other than (i) the Obligations, (ii) other
Indebtedness existing on the date of this Agreement and reflected in the Loan
and Security Agreement dated May 12, 1999.
FINOVA Capital Corporation will earn a one-time fee of $3,500.00 for this
accommodation. Fee will be earned on December 22, 1999.
Unless amended herein, all of the other terms and conditions contained in the
Security Agreement shall remain in full force and effect. Please sign a copy of
this letter to indicate your agreement to the above and retain a copy for your
records.
Sincerely yours,
FINOVA CAPITAL CORPORATION
/s/ Eliana Casiano
------------------
Eliana Casiano
Associate Account Executive
AGREED TO AND ACKNOWLEDGED:
/s/ Robert M. Benedict, Jr.
- ---------------------------
Robert M. Benedict, Jr. Executive Vice President
cc. Donna Calderaro, VP
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<S> <C>
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<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 211,714
<SECURITIES> 0
<RECEIVABLES> 3,156,710
<ALLOWANCES> 632,894
<INVENTORY> 3,129,640
<CURRENT-ASSETS> 7,402,136
<PP&E> 5,180,232
<DEPRECIATION> 4,274,606
<TOTAL-ASSETS> 17,145,591
<CURRENT-LIABILITIES> 6,500,912
<BONDS> 0
0
0
<COMMON> 5,368,556
<OTHER-SE> 5,276,123
<TOTAL-LIABILITY-AND-EQUITY> 17,145,591
<SALES> 8,479,233
<TOTAL-REVENUES> 8,515,916
<CGS> 5,100,481
<TOTAL-COSTS> 8,254,983
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,624
<INCOME-PRETAX> 251,309
<INCOME-TAX> 0
<INCOME-CONTINUING> 251,309
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 251,309
<EPS-BASIC> 0.05
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