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: March 30, 1996
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
------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
2120 Pewaukee Road, Waukesha, Wisconsin 53188-2404
--------------------------------------- ----------------------
(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 May 14, 1996:
Issued 2,629,320
Treasury 2,957
----------
Outstanding 2,626,363
==========
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - (Unaudited)
($000)
March 30, December 31,
1996 1995
-------- --------
ASSETS
CURRENT ASSETS:
Cash $ (78) $ 396
Customers' accounts receivable 21,024 25,019
Less allowance for losses 1,759 1,742
-------- --------
19,265 23,277
Inventories 18,769 17,271
Prepaid expenses and other 547 316
Income tax benefit receivable 90 265
-------- --------
TOTAL CURRENT ASSETS 38,593 41,525
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land 90 90
Buildings 3,023 3,023
Machinery and equipment 13,614 13,404
-------- --------
16,727 16,517
Less accumulated depreciation 11,349 11,163
-------- --------
NET PROPERTY, PLANT AND EQUIPMENT 5,378 5,354
OTHER ASSETS:
Patents, net of accumulated amortization
of $521 for 1996 and $517 for 1995 28 32
Excess cost over net assets of
acquired companies, net of accumulated
amortization of $822 for 1996 and
$807 for 1995 1,460 1,475
Receivables, net of allowances of
$727 in 1996 and 1995 810 927
Other 295 344
-------- --------
TOTAL OTHER ASSETS 2,593 2,778
-------- --------
$46,564 $49,657
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Balance Sheets - (Unaudited)
($000)
March 30, December 31,
1996 1995
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 3,589 $ 4,209
Current installments of long-term debt 1,501 1,470
Accounts payable 5,749 9,231
Accrued payroll and related expenses 2,747 2,857
Accrued expenses related to a disposed
business 137 182
Accrued expenses, other 2,707 2,800
-------- --------
TOTAL CURRENT LIABILITIES 16,430 20,749
Long-term debt, excluding
current installments 11,687 10,902
Liabilities related to a
disposed business 434 491
Other 1,297 1,370
-------- --------
TOTAL LIABILITIES 29,848 33,512
STOCKHOLDERS' EQUITY:
Common stock of $1 par value per share
Authorized: 20,000,000 shares;
Issued: 2,629,320 shares at March 30,
1996 and 2,504,421 at December 31,
1995 2,629 2,504
Capital in excess of par value 11,995 11,558
Retained earnings 1,526 1,308
Cumulative translation adjustments 618 827
-------- --------
16,768 16,197
Less cost of common shares in treasury -
2,957 shares at March 30, 1996 and
at December 31, 1995 52 52
-------- --------
TOTAL STOCKHOLDERS' EQUITY 16,716 16,145
-------- --------
$46,564 $49,657
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Operations - (Unaudited)
($000) (except per share data)
Three months ended
----------------------
March 30, April 1,
1996 1995
-------- --------
Net sales $17,623 $18,512
Cost of sales 10,970 11,786
-------- --------
Gross profit 6,653 6,726
Selling, engineering and
administrative expenses 5,473 5,803
-------- --------
Operating profit 1,180 923
Interest expense 420 484
Other income, net (37) (2)
-------- --------
Income before income taxes 797 441
Income tax expense 17 19
-------- --------
NET INCOME $ 780 $ 422
======== ========
Earnings per share - primary $ 0.30 $ 0.16
======== ========
Earnings per share - fully diluted $ 0.26 $ 0.15
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Cash Flows - (Unaudited)
Three Months Ended
---------------------
March 30, April 1,
1996 1995
-------- --------
CASH FROM OPERATING ACTIVITIES:
Net income $ 780 $ 422
Adjustment to net income for expenses
(gains) not affecting cash:
Depreciation and amortization 205 330
Bad debt expenses 106 120
Increase (decrease) in cash due to changes
in:
Accounts receivable 3,906 (916)
Inventories (1,498) 2
Prepaid expenses and other assets 110 (54)
Accounts payable (3,482) 147
Accrued expenses and other liabilities (378) (406)
-------- --------
Cash provided by (used in) operating
activities............................... (251) (355)
CASH USED IN INVESTING ACTIVITIES:
Capital expenditures......................... (210) (275)
CASH FROM FINANCING ACTIVITIES:
Increase (decrease) in notes payable (620) 332
Proceeds from long-term debt 816 --
Repayment of long-term debt -- (638)
-------- --------
Cash provided by (used in) financing
activities............................... 196 (306)
Cumulative translation adjustments........... (209) 878
-------- --------
TOTAL CASH PROVIDED (USED) (474) (98)
CASH - BEGINNING OF THE PERIOD 396 466
-------- --------
CASH - END OF THE PERIOD $ (78) $ 368
======== ========
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, other
than adjustments to the accrual of expenses related to the
discontinued business which is included as a current liability on
the balance sheet, are normal and recurring. All items stated
herein are subject to year-end audit.
INVENTORY:
=================================================================
(Amounts in thousands)
3/30/96 12/31/95
-----------------------------------------------------------------
Raw Material $ 5,789 $ 5,837
Work-in-Process 1,527 1,125
Finished Goods 11,453 10,309
-----------------------------------------------------------------
$ 18,769 $ 17,271
=================================================================
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 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, 1995 was
approximately $3,022,000.
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 which were previously disposed of by the
Company in accordance with applicable regulations in effect at
the time of disposal. Materials generated by the Company in
these sites have been small and claims against the Company have
been handled on a de minimis basis. In addition, the Company has
indemnified 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 or claim, would not materially affect its financial
condition or operations.
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net sales for the first quarter of 1996 were $17.6 million,
down 4.8% from the same period of 1995. Sales originating in
North America of $12.3 million were less than 1% below the
$12.4 million in sales in the first quarter of 1995.
Increased sales in both the Collision Repair and Fluid Power
divisions were offset by reductions in the Engine Rebuilding
division. European sales were down 12.6% for the quarter from
$6.1 million for the first quarter of 1995 to $5.3 million in
the first quarter of 1996.
Gross profit margins in North America improved in the first
quarter from 30.2% in 1995 to 32.6% in 1996. Margins in Europe
also improved, moving from 48.8% in the first quarter of 1995 to
49.7% for the 1996 first quarter. Consolidated gross profit
margins were 37.8% for the first quarter of 1996 compared to 36.3%
for the same period of 1995.
Operating expenses decreased as a percent of net sales, from 31.3%
in the 1995 period to 31.1% in 1996. Actual expenses were lower
in 1996 than in 1995, with the majority of the decrease in
administrative and marketing expense due to cost controls and
in commission expense due to reduced sales.
Interest expense for the three months ended March 30, 1996
decreased 13% from the first quarter of 1995 primarily as a
result of reduced interest rates.
Financial Condition
Continued improvements in cost control and balance sheet
management are expected. The Company expects its liquidity
requirements will be met by cash generated 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.
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 March 30, 1996. <PAGE>
<PAGE>
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")
/s/ Mary L. Kielich
Corporate Controller
Assistant Treasurer
(Principal Financial Officer)
May 14, 1996
----------------------
Date
<PAGE>
Index of Exhibits
Exhibit No. Description
----------- -------------------------------------------------
(11) Computation of Earnings Per Share
(27) Financial Data Schedule
Computation of Earnings per Share EXHIBIT 11
($000) (except per share data)
The three months ended
-------------------------
March 30, April 1,
1996 1995
----------- -----------
PRIMARY:
Weighted average common shares outstanding 2,626 2,608
Common equivalent shares 7 0
----------- -----------
Weighted average common shares and common
equivalent shares outstanding 2,633 2,608
=========== ===========
Net income applicable to common shares $ 780 $ 422
=========== ===========
Primary earnings per share $ 0.30 $ 0.16
=========== ===========
FULLY DILUTED:
Weighted average common shares outstanding 2,626 2,608
Common equivalent shares 18 0
Additional shares assuming conversion
of subordinated debentures 717 717
----------- -----------
Fully diluted weighted average common shares
and common equivalent shares outstanding 3,361 3,325
=========== ===========
Net income for diluted common shares $ 869 $ 513
=========== ===========
Fully diluted earnings per share $ 0.26 $ 0.15
=========== ===========
Common shares have been adjusted to give effect to the 5% stock dividend
paid January 26, 1996.
The $4,500,000 8% Convertible Subordinated Notes are convertible to common
shares at a price of $6.28 per share after giving effect to the stock
dividend paid January 26, 1996.
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 exercised. 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> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF HEIN-WERNER CORPORATION FOR THE THREE MONTHS
ENDED MARCH 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-30-1996
<CASH> (78)
<SECURITIES> 0
<RECEIVABLES> 21,024
<ALLOWANCES> 1,759
<INVENTORY> 18,769
<CURRENT-ASSETS> 38,593
<PP&E> 16,727
<DEPRECIATION> 11,349
<TOTAL-ASSETS> 46,564
<CURRENT-LIABILITIES> 16,430
<BONDS> 0
0
0
<COMMON> 2,629
<OTHER-SE> 14,087
<TOTAL-LIABILITY-AND-EQUITY> 46,564
<SALES> 17,623
<TOTAL-REVENUES> 17,623
<CGS> 10,970
<TOTAL-COSTS> 16,443
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 420
<INCOME-PRETAX> 797
<INCOME-TAX> 17
<INCOME-CONTINUING> 780
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 780
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.26
</TABLE>
