SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the Quarterly Period Ended: September 30, 1995
---------------------
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 1-2725
HEIN-WERNER CORPORATION
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(Exact name of registrant as specified in its charter)
WISCONSIN 39-0340430
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
2120 Pewaukee Road, Waukesha, Wisconsin 53188-2404
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(Address of principal executive offices) (Zip Code)
(414) 542-6611
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(Registrant's telephone number, including area code)
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 [ ]
Number of shares of $1 par value common stock issued and
outstanding at October 19, 1995:
Issued 2,504,421
Treasury 2,957
----------
Outstanding 2,501,464
==========
<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - Unaudited
($000)
September 30, December 31,
1995 1994
--------- ----------
ASSETS
CURRENT ASSETS:
Cash $ 411 $ 466
Customers' accounts receivable 20,767 21,545
Less allowance for losses 1,334 1,670
--------- ---------
19,433 19,875
Inventories 17,970 16,154
Prepaid expenses and other 809 350
Income tax benefit receivable -0- 508
-------- ---------
TOTAL CURRENT ASSETS 38,623 37,353
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land 90 90
Buildings 2,995 2,839
Machinery and equipment 13,701 13,101
--------- ---------
16,786 16,030
Less accumulated depreciation 11,576 10,765
--------- ---------
NET PROPERTY, PLANT AND EQUIPMENT 5,210 5,265
OTHER ASSETS:
Excess cost over net assets of
acquired companies, net of accumulated
amortization of $792 for 1995 and
$747 for 1994 1,490 1,535
Receivables, net of allowances of
$624 in 1995 and $955 for 1994 1,017 1,452
Other 406 496
--------- ---------
TOTAL OTHER ASSETS 2,913 3,483
--------- ---------
$ 46,746 $ 46,101
========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Balance Sheets - Unaudited
($000)
September 30, December 31,
1995 1994
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 3,789 $ 3,189
Current installments of long-term debt 333 316
Accounts payable 7,231 7,302
Accrued payroll and related expenses 2,424 2,705
Accrued expenses related to a disposed
business 355 354
Accrued expenses, other 3,755 3,164
--------- ---------
TOTAL CURRENT LIABILITIES 17,887 17,030
Long-term debt, excluding
current installments 12,507 13,256
Liabilities related to a
disposed business 347 689
Other 717 804
--------- ---------
TOTAL LIABILITIES 31,458 31,779
STOCKHOLDERS' EQUITY:
Common stock of $1 par value per share
Authorized: 20,000,000 shares;
Issued: 2,504,421 shares at September 30,
1995 and 2,386,477 at December 31, 1994 2,504 2,386
Capital in excess of par value 11,377 11,377
Retained earnings 807 827
Cumulative translation adjustments 651 110
--------- ---------
15,339 14,700
Less cost of common shares in treasury -
2,957 shares at September 30, 1995
and 21,707 shares at December 31, 1995 51 378
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 15,288 14,322
--------- ---------
$ 46,746 $ 46,101
========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>
<TABLE>
Consolidated Statements of Operations
($000) (except per share data) - Unaudited
Three months ended Nine months ended
----------------------- -----------------------
September 30, October 1, September 30, October 1,
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 16,377 $ 14,537 $ 52,444 $ 47,731
Cost of sales 10,550 9,468 33,581 30,852
--------- ---------- --------- ---------
Gross profit 5,827 5,069 18,863 16,879
Selling, engineering and
administrative expenses 5,768 4,870 17,075 15,537
--------- ---------- --------- ---------
Operating profit 59 199 1,788 1,342
Interest expense 443 522 1,383 1,404
Other expense/(income), net 77 (132) 115 (295)
--------- ---------- --------- ---------
Income before income taxes (461) (191) 290 233
Income tax expense (benefit) (79) (479) (42) (433)
--------- ---------- --------- ---------
NET INCOME $ (382) $ 288 $ 332 $ 666
========= ========= ========= =========
Primary earnings per share $ (0.15) $ 0.12 $ 0.13 $ 0.27
========= ========= ========= =========
Fully diluted earnings per share $ (0.15) $ 0.12 $ 0.13 $ 0.27
========= ========= ========= =========
<FN>
See accompanying notes to consolidated financial statements.
<PAGE>
</TABLE>
<PAGE>
Consolidated Statements of Cash Flows - Unaudited
($000)
Nine months ended
-----------------------
September 30, October 1,
1995 1994
--------- ---------
CASH FROM OPERATING ACTIVITIES:
Net income $ 332 $ 666
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 983 1,020
Bad debt expense 340 447
Gain on disposal of property, plant
and equipment (4) (9)
Increase (decrease) in cash due to changes
in assets and liabilities:
Receivables, net 101 1,035
Inventories (1,817) (2,835)
Prepaid expenses and other assets 470 (373)
Accounts payable (70) (1,192)
Accrued expenses and other liabilities (119) 497
--------- ---------
Cash provided by (used) in operating
activities.......................... 216 (744)
CASH FROM INVESTING ACTIVITIES:
Capital expenditures (790) (512)
Proceeds from the sale of property,
plant, and equipment 16 13
--------- ---------
Cash used in investing activities......... (774) (499)
CASH FROM FINANCING ACTIVITIES:
Increase (decrease) in notes payable 600 635
Proceeds from long-term debt 262 1,462
Repayments of long-term debt (994) (1,892)
Proceeds from the issuance of common shares 94 --
--------- ---------
Cash provided by (used in)
financing activities.................. (38) 205
Cumulative translation adjustments........... 541 895
--------- ---------
Total Cash Provided (Used) .................. (55) 601
Beginning of the Period Cash................. 466 339
--------- ---------
End of the Period Cash...................... $ 411 $ 940
========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES:
The financial statements reflect all adjustments which are, in
the opinion of management, necessary to a fair statement of the
results of the interim periods presented. All adjustments are
normal and recurring. All items stated herein are subject to
year-end audit.
INVENTORY:
=================================================================
(Amounts in thousands)
9/30/95 12/31/94
-----------------------------------------------------------------
Raw Material $ 6,043 $ 5,902
Work-in-Process 1,492 1,481
Finished Goods 10,435 8,771
-----------------------------------------------------------------
$ 17,970 $ 16,154
=================================================================
LONG-TERM DEBT:
As of September 30, 1995 the Company was not in compliance with
an interest coverage covenant contained in the debt agreement
with holders of the Company's 8% convertible subordinated notes.
The Company requested and the note holders granted a waiver of
compliance with the covenant. As a result of the waiver of this
covenant, the interest coverage test becomes effective for the
quarter which will end December 31, 1995. Had the Company not
obtained the waiver of the compliance, the subordinated notes
could have become currently payable.
COMMON STOCK:
An additional 117,944 common shares were issued since December
31, 1994 in the form of a 5% stock dividend. Treasury shares
were reduced during the period by 18,975 shares contributed to
the Profit Sharing Fund.
MATERIAL CONTINGENCIES:
A) Financial Instruments with Off-Balance-Sheet Risk.
To meet the financing needs of consumers of its collision repair
and engine rebuilding products, the Company is, in the normal
course of business, a party to financial instruments with off-
balance-sheet risk. The instruments are guarantees of notes
payable to financing institutions arranged by the Company. The
Company performs credit reviews on all such guarantees. These
guarantees extend for periods of up to six years and expire in
decreasing amounts through 2000. The amount guaranteed to each
institution is contractually limited to a portion of the amount
financed in a given year. The notes are collateralized by the
equipment financed. Proceeds from the resale of recovered
equipment have generally been 80% to 90% of repurchased notes.
The maximum credit risk to the Company at December 31, 1994 was
approximately $3,400,000.
B) Litigation
The Company is involved in legal proceedings, claims and
administrative actions arising in the normal course of business.
In the opinion of management, the Company's liability, if any,
under any pending litigation or administrative proceeding would
not materially affect its financial condition or operations.
C) Environmental Claims
From time to time the Company is identified as a potentially
responsible party in environmental matters, primarily related to
waste disposal sites which contain residuals from the
manufacturing process that were previously disposed of by the
Company in accordance with applicable regulations in effect at
the time of disposal. Materials at these sites which were
generated by the Company have been small and claims against the
Company have been handled on a de minimis basis. In addition, the
Company has indemnified some purchasers of property previously
sold by the Company against any environmental damage which may
have existed at the time of the sale. In the opinion of
management, the Company's liability, if any, under any pending
administrative proceeding, claim, or investigation, would not
materially affect its financial condition or operations.
INCOME TAXES:
The Company has recorded tax benefits which exceed tax expense
for the nine months ended September 30, 1995, because it has
incurred losses in countries where tax benefits are available and
has recorded profits in some countries where operating loss
carryovers offset income tax expense which would otherwise have
been recorded. During the three month period ended October 1,
1994, the Company settled an income tax audit for a prior period.
The amount of additional income tax and interest thereon was less
than the liability which had been recorded. Included in income
tax benefits for the three month and nine month periods ended
October 1, 1994 is $375,000 for the adjustment of that liability
resulting from the settlement.
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net sales for the third quarter of 1995 were $16.4 million, up
12.7% over the same period of 1994. Sales originating in North
America were up 8.9% from 1994 levels to $10.8 million for the
quarter compared to $9.9 million in the same period a year
earlier. European sales rose 20.6% for the quarter from $4.7
million in 1994 to $5.6 million for the third quarter of 1995.
Only the engine rebuilding business segment had lower sales than
the prior year period, down 16.1% from the 1994 levels.
Net sales for the nine months ended September 30,1995 were 9.9%
higher than in same period a year earlier. The 1995 period
posted $52.4 million in net sales compared to $47.7 for the 1994
period. Net sales originating in Europe were up by 14.5% and
North American net sales rose 7.6%.
Gross profit margins in North America were 27.6% for the third
quarter of 1995 compared to 27.2% for the same period of 1994.
Margins in Europe declined from 51.2% in 1994 to 50.8% for the
1995 third quarter. Consolidated gross profit margins were 35.6%
for the third quarter of 1995 compared to 34.9% for the same
period of 1994. The nine month results showed an improvement in
1995 with 36.0% gross margin compared to 35.4% for the same
period of 1994.
Operating expenses as a percent of net sales were unchanged for
the nine months at 32.6% of both 1995 and 1994. The actual
dollars spent in 1995, however, were higher than in 1994. Most
of the expenses resulted from selling activities - higher
marketing expenses in Europe and in the engine rebuilding
equipment business, and more commission expense on the higher
North American sales volume. Administrative expenses were also up
in Europe. The 1995 fourth quarter should see operating
expenses, excluding commission expenses, comparable to 1994
levels.
Interest expense was down slightly for the three months ended
September 30, 1995 as a result of lower borrowing in North
America.
Financial Condition
The long-term borrowing declined during the third quarter of
1995. In North American operations, payments to suppliers slowed
during the quarter to accomodate both rising inventory levels and
reduction in long-term debt. The Company expects its liquidity
requirements will be met by reduced asset levels, and by cash
from operations and from its credit facilities.
Short-term credit facilities in Europe are considered sufficient
to supplement cash from operating activities to satisfy liquidity
requirements there. Changes in short-term borrowing are
primarily due to seasonal cash usage patterns.
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
ITEM 6: (a) Exhibits
(11) Computation of Earnings Per Share
(27) Financial Data Schedule
(b) Form 8-K
There were no reports on Form 8-K filed for the
three months ended September 30, 1995.
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 thereunto duly authorized.
HEIN-WERNER CORPORATION
("Registrant")
Edward F. Duffy
Vice President - Finance and Treasurer
(Principal Financial Officer)
October 19, 1995
----------------------
Date<PAGE>
<PAGE>
Index of Exhibits
Exhibit No. Description
----------- -------------------------------------------------
(11) Computation of Earnings Per Share
(27) Financial Data Schedule
<PAGE>
<PAGE>
<PAGE>
<TABLE>
EXHIBIT 11
Computation of Earnings per Share
($000 except per share data)
<CAPTION>
The three months ended The nine months ended
----------------------- -----------------------
September 30 October 1, September 30 October 1,
1995 1994 1995 1994
----------------------- -----------------------
<S> <C> <C> <C> <C>
PRIMARY:
Wtd avg common shares outstanding 2,501 2,501 2,493 2,501
Common equivalent shares 5 0 3 0
----------------------- -----------------------
Wtd avg common shares and commom
equivalent shares outstanding 2,506 2,501 2,496 2,501
======================= =======================
Net income applicable to common shares $ (382) 288 $ 332 666
======================= =======================
Prmiary earnings per share $ (0.15) 0.12 $ 0.13 0.27
======================= =======================
FULLY DILUTED:
Wtd avg common shares outstanding 2,496 2,501 2,489 2,501
Common equivalent shares 10 0 10 0
Additional shares assuming conversion
of subordinated debentures 683 650 683 650
----------------------- -----------------------
Fully diluted wtd avg common shares and
common equivalent shares outstanding 3,189 3,151 3,182 3,151
======================= =======================
Net income for diluted common shares $ (292) 377 $ 602 936
======================= =======================
Fully diluted earnings per share $ (0.09) 0.12 $ 0.19 0.30
======================= =======================
----------------------------------------
<FN>
Common shares have been adjusted to give effect to the 5% stock dividend paid January 27,
1995.
The $4,500,000 8% Convertible Subordinated Notes are convertible to common shares at a price
of $6.59 per share after giving effect to the stock dividend paid January 27, 1995.
Earnings per common share and common equivalent share were computed by dividing the net
income by the weighted average number of shares of common stock and common stock equivalents
outstanding during the period.
Earnings per common share, assuming full dilution, is determined by assuming that at the
beginning of the period convertible notes were converted at the price per share in effect at
that time and common share options were excercised. As to the options, incremental shares
would be calculated using the treasury stock method, assuming common share purchases at the
greater of the average market price of the common shares for the period or the ending price
of the common shares.
</TABLE>
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1995,
THE CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1995, AND THE COMPUTATION OF
EARNINGS PER SHARE (EXHIBIT 11) FOR THE THREE AND THE NINE MONTHS
ENDED SEPTEMBER 30, 1995; AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 411
<SECURITIES> 0
<RECEIVABLES> 20,767
<ALLOWANCES> 1,334
<INVENTORY> 17,970
<CURRENT-ASSETS> 38,623
<PP&E> 16,786
<DEPRECIATION> 11,576
<TOTAL-ASSETS> 46,746
<CURRENT-LIABILITIES> 17,887
<BONDS> 0
<COMMON> 2,504
0
0
<OTHER-SE> 12,784
<TOTAL-LIABILITY-AND-EQUITY> 46,746
<SALES> 52,444
<TOTAL-REVENUES> 52,444
<CGS> 33,581
<TOTAL-COSTS> 33,581
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,383
<INCOME-PRETAX> 290
<INCOME-TAX> (42)
<INCOME-CONTINUING> 332
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 332
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
