SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 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
(Exact name of registrant as specified in its charter)
Wisconsin 39-0340430
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2120 Pewaukee Road 53188
Waukesha, Wisconsin (Zip Code)
(Address of principal executive
offices)
Registrant's telephone number, including area code: (414) 542-6611
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $1 par value American Stock Exchange
Common Share Purchase Rights American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for at least the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K, or any
amendment to this Form 10-K [ ]
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 7, 1996: $15,447,255
The number of shares outstanding of each registrant's classes of common
stock as of March 7, 1996: Common Stock, $1 par value -- 2,629,320 shares
DOCUMENTS INCORPORATED BY REFERENCE:
Definitive Proxy Statement dated March 13, 1996 relating to the
annual meeting of shareholders to be held on April 25, 1996
(Part III of Form 10-K).
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL. Hein-Werner Corporation was incorporated under the
laws of the State of Wisconsin on April 16, 1921 and is headquartered in
Waukesha, Wisconsin. Throughout the remainder of this Form 10-K, Hein-
Werner Corporation and its subsidiaries will be referred to as the
"Company" or the "Registrant" except where the context otherwise requires.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS. Industry segment
information is part of the Notes to Consolidated Financial Statements,
Segment Information which can be found in FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA, Item 8 of this report.
DESCRIPTION OF THE BUSINESS. The Company has three functional
industry segments: collision repair equipment, engine rebuilding
equipment and fluid power components.
COLLISION REPAIR EQUIPMENT
The Company serves the collision repair equipment market
worldwide, with operations centered in North America and in Europe. This
business segment represents approximately 56.7%, 54.6% and 55.6% of the
Company's net sales for 1995, 1994 and 1993, respectively.
Collision repair equipment is comprised of vehicle correction
equipment for straightening collision damaged cars, vehicle alignment
equipment for measuring cars as they are straightened and heavy duty
collision repair equipment for the truck market. The collision repair
market is made up of autobody shops and other collision repair facilities
owned by automotive dealers, franchisees and independents. The Company's
collision repair equipment is designed to straighten collision damaged
cars and trucks to original manufacturers' specifications. Using computer
aided design and patented measuring systems, the Company measures each new
model of automobile soon after its introduction and provides to its
customers books or magnetic media that detail measurement data covering
every model of car over the preceding three model years. When a damaged
automobile is to undergo collision repair, an autobody repair technician
applies controlled pressure to designated points on the body using chains
and hydraulic pumps to restore the body to its designated size and shape
utilizing the measurement equipment and specification data published by
the Company.
The majority of cars are now made with a unibody shell compared
to older vehicles built with frames. Unibody vehicles are designed to
better absorb the impact of a collision which necessitates more vehicle
straightening and a higher degree of accuracy in measuring vehicles as
they are straightened. The closer tolerances needed in repairing unibody
vehicles requires the use of sophisticated straightening and measurement
systems such as those designed, manufactured and marketed by the Company.
The insurance industry and automobile manufacturers encourage the use of
such systems.
In North America, the Company services the market with its
Kansas Jack,/R/ Blackhawk,/R/ Hein-Werner Heavy Duty,/R/ and Hein-Werner
SHARK/R/ brands. The Company's strategy is to offer the most complete
line of collision repair equipment available in the marketplace at a range
of price levels. The product offering is a full range of frame
straightening and vehicle alignment equipment for both trucks and
automobiles including floor-pull correction systems, rack and bench repair
systems and universal and dedicated vehicle alignment systems employing
the state of the art technology for laser, mechanical and ultrasonic
measurement of collision damaged vehicles. From North America, the
Company services the markets in North and South America, the Caribbean and
certain Pacific Rim countries.
The Company serves the rest of the international market through
wholly-owned subsidiaries in Europe. European operating units accounted
for approximately 62% of the Company's 1995 collision repair sales.
International operations are headquartered in Geneva, Switzerland. The
Company maintains manufacturing and sales facilities in the United Kingdom
and Italy; distribution and training facilities in France; and sales
offices in France, Germany and Switzerland.
In the international market served from Europe, the Company
principally sells collision repair equipment under the Blackhawk and Hein-
Werner trade names. All collision repair manufacturing facilities provide
product to markets worldwide. U.S. manufactured products are modified for
international markets at the Company's plant in Italy. European
manufactured products are modified for the North American market at the
Company's facilities in the United States.
The Company markets its collision repair products through sales
representatives, equipment distributors, automotive jobbers, and a direct
sales force, depending upon the country and local market. The Company
also participates in the equipment programs of all major U.S. and foreign
automotive manufacturers including Ford, General Motors, Chrysler, Nissan,
Toyota, Hyundai, Peugeot and Volvo, and national tool marketing programs
of the companies. The Company's products have been approved by all major
European automobile manufacturers. The Company has also been selected as
the sole source of collision repair equipment by several manufacturers.
Such approvals provide the Company with a significant competitive
advantage.
ENGINE REBUILDING EQUIPMENT
Engine rebuilding equipment is used by jobber machine shops
where professional and home mechanics bring engine parts to be rebuilt,
and by production engine rebuilders. This industry segment represented
approximately 15.0%, 17.0% and 16.9% of the Company's net sales in 1995,
1994 and 1993, respectively. Growth in this market is influenced by the
size and age of the vehicle population and overall economic growth. Sales
generally lag new car sales by approximately three to five years.
A full line of engine rebuilding equipment is manufactured and
sold under the Winona Van Norman and Van Norman trade names. The products
manufactured and sold include cleaning, grinding, boring, honing,
inspection and brake equipment. The Company is the exclusive distributor
in North America, Mexico and the Far East for Az di Alvise Zanrosso,
Rovimpex Novaledo Zona Industriale, and the Carin Equipment Group of
Italy, all leading manufacturers of complementary equipment. The
Company's engine rebuilding equipment is sold through manufacturers'
representatives.
The devaluation of the Mexican peso will have the short-term
effect of delaying purchases of Mexican customers until the peso
stabilizes and regains at best a portion of its value compared to the U.S.
dollar. There are no domestic competitors in Mexico for the Company's
engine rebuilding equipment. As a result, the Company does not expect the
demand for this type of equipment to be met by other sources immune to the
devaluation during the period of currency stabilization.
FLUID POWER COMPONENTS
The Company serves the fluid power component market through its
Great Bend Industries Division. The fluid power market represents
approximately 28.3%, 28.4% and 27.5% of the Company's net sales for 1995,
1994 and 1993, respectively. The Company specializes in the production of
single acting, double acting and telescopic hydraulic cylinders and
related hydraulic components for the Original Equipment Manufacturer (OEM)
market. These products are incorporated into equipment used in road
repair, construction, transportation, solid waste disposal, utility
vehicles and oil rigs. The demand for the Company's fluid power
components is determined by the demand for the capital goods produced by
the OEM manufacturers it serves. The Company's fluid power components are
sold through manufacturers' representatives, with some in-house accounts.
RAW MATERIALS. The Company's principal raw materials are steel
products, castings and forgings. The Company customarily procures its
castings and forgings from unaffiliated foundries. Steel products are
purchased by the Company from a number of steel mills and steel service
centers. The principal materials and supplies used by the Company can
ordinarily be procured in the general market. Raw materials, parts and
components are purchased from many different sources, generally on a
purchase order basis.
MANUFACTURING/PRODUCT SOURCING. The Company has supply
arrangements with manufacturers in Brazil, Italy, Taiwan and the People's
Republic of China for engine rebuilding and collision repair equipment
manufactured exclusively to the Company's standards and specifications.
Such equipment is shipped to the Company's facilities in Wisconsin,
Minnesota and France for packaging and shipment to the Company's
customers.
The Company has the ability to switch sources of manufacturing
to take advantage of wage rates, foreign exchange rates, foreign trade
developments and other factors. The Company can manufacture products
domestically as well.
PATENTS AND TRADEMARKS. The Company owns certain patents and
trademarks which are considered to be important to the success of the
Company's collision repair equipment business. The Company also owns
other patents, none of which are considered to be critical to the success
of its other business operations. The remaining term on the Company's
patents is one to seventeen years.
SEASONALITY. The Collision Repair equipment market experiences
a significant decline in order demand during July and August. To a lesser
extent, the same is true for the engine rebuilding equipment market.
CUSTOMERS. The Fluid Power segment has two customers whose
aggregate business represents approximately 34% of the segment's revenues.
The other segments and the overall business of the Company are not
dependent upon a single customer or on a few customers, the loss of which
would have a material adverse effect on any such segment or on the Company
taken as a whole.
BACKLOG. The estimated amount of backlog at December 31, 1995
was approximately $18.3 million; the comparable figure for December 31,
1994 was approximately $10.3 million. 17.5%, 2.4% and 80.1% of the 1995
year end backlog is attributable to the collision repair, engine
rebuilding and fluid power segments, respectively. The Company
anticipates that all orders on hand as of December 31, 1995 will be filled
during 1996. Most collision repair segment orders are filled within three
months.
COMPETITION. The Company experiences intense competition with
numerous domestic and foreign producers. Some of the Company's
competitors in each industry segment are significantly larger than the
Company and have substantially greater resources. The Company expects
that it will continue to encounter highly competitive conditions. The
Company believes that its collision repair equipment and engine rebuilding
equipment compete favorably primarily on the basis of the Company's
recognized brand names, reputation for product innovation and engineering
of high quality products and the Company's distribution channels. The
Company believes that its fluid power components compete favorably based
primarily on the ability of the Company to meet customers' quality,
reliability and service needs.
RESEARCH AND DEVELOPMENT. The Company has 30 engineering
employees who devote all or a portion of their time to the development and
improvement of its products, and many of the features of the Company's
products are the result of its own development work. The Company spent
approximately $1.7 million, $1.5 million and $1.5 million in the years
ended December 31, 1995, 1994 and 1993, respectively, on engineering and
research activities for continuing operations relating to product
development and improvement, all of which were Company sponsored.
IMPACT OF ENVIRONMENTAL LEGISLATION. The Company did not during
1995, nor does it expect to during 1996, experience any material capital
expenditures as a result of federal, state or local environmental
legislation.
FOREIGN AND EXPORT SALES. Information concerning foreign and
export sales is part of the Notes to Consolidated Financial Statements,
segment information which can be found in FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA, Item 8 of this report.
EMPLOYEES. The Company had about 592 and 584 employees at the
end of 1995 and 1994, respectively. Approximately 75% and 72% of the
production employees in 1995 and 1994, respectively, were represented by
labor unions. The Company's labor agreements with labor unions were
renewed in 1995 and extend to April, 1998 at its Winona, Minnesota
location and June, 1998 at its Great Bend, Kansas plant. The Company
considers its employee relations to be satisfactory.
MISCELLANEOUS. On September 29, 1989, the Company consummated a
private placement of its $8,500,000 8% Convertible Subordinated Notes due
September 1, 1999 (the "Notes"). The Note Agreement, dated as of
September 1, 1989 ("Note Agreement"), was amended by the parties thereto
effective November 12, 1990, April 26, 1991, February 3, 1992, December
18, 1992 and February 21, 1994. The amendments, among other things,
revised certain financial covenants, reduced the conversion price per
share, provided for the repurchase of the Notes held by one noteholder and
provided noteholders with options to purchase shares of the Company's
Common Stock in the event of prepayments of the Notes. On January 16,
1991, the Company repurchased $4,000,000 principal amount of Notes from
one noteholder.
On January 26, 1996, the Company paid a 5% stock dividend to
shareholders of record on January 5, 1996.
ITEM 2. PROPERTIES
The following table sets forth certain information with respect
to the principal manufacturing facilities (20,000 square feet or more)
which the Company uses in its operations:
Expiration
Owned Date of Square
Location or Leased Lease Footage
Baraboo, WI Leased 12/05 73,000
Winona, MN Leased 01/98 63,000
Great Bend, KS Leased (1) 112,000
Ashford, Kent, England Leased 09/02 20,000
Verona, Italy Leased 04/98 43,000
_______________
(1) This property is leased under a long-term lease. The
Company has an option to purchase the property at a
nominal amount upon the expiration of the lease. This
lease has been capitalized for financial statement
purposes.
Sales, marketing, administrative and distribution and training
facilities are leased in Wisconsin, France, Germany and Switzerland.
Fluid power products are produced at the Great Bend, Kansas plant; engine
rebuilding equipment is produced at the plant in Winona, Minnesota; and
collision repair equipment is produced at the facilities in Ashford,
England, Verona, Italy and Baraboo, Wisconsin. The properties above are
considered to be adequate for present and planned future business.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings, claims and
administrative actions arising in the normal course of business. For
additional information, see the footnote "Commitments and Contingencies"
in Notes to Consolidated Audited Financial Statements (Item 8 of this
report).
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of its security
holders during the fourth quarter of 1995.
EXECUTIVE OFFICERS OF REGISTRANT
Set forth below is certain information concerning the executive
officers of the Registrant as of March 7, 1996:
Name, Age and Position Business Experience During Past 5 Years
Joseph L. Dindorf, 55 President and Chief Executive Officer,
President and Chief Hein-Werner Corporation (elected in
Executive Officer 1976).
Reinald D. Liegel, 53 Senior Vice President-Technology, Hein-
Senior Vice President- Werner Corporation (elected June, 1988).
Technology
Jean-Paul Barthelme, 58 Vice President, and President of European
Vice President, and Operations, Hein-Werner Corporation
President-European (elected September, 1988).
Operations
Michael J. Koons, 56 Vice President-Industrial Relations and
Vice President-Industrial Personnel, Hein-Werner Corporation
Relations and Personnel (elected in 1979).
James R. Queenan, 53 Elected June, 1990; prior thereto, self
Vice President, and employed as a marketing consultant and
President-Collision prior to January, 1988, President of the
Equipment Group Kansas Jack Division.
Maurice J. McSweeney, 57 Elected March, 1983; partner, Foley &
Secretary Lardner, attorneys, Milwaukee, Wisconsin.
The officers of Registrant are elected annually by the Board of
Directors following the Annual Meeting of Shareholders and each officer
holds office until his successor has been duly elected and qualified or
until his prior death, resignation or removal. The next Annual Meeting of
Shareholders is currently scheduled for April 25, 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SECURITY HOLDER MATTERS
The Company's Common Stock is listed on the American Stock
Exchange under the symbol "HNW." The following table sets forth the range
of high and low closing sales prices per share as reported on the American
Stock Exchange for the Company's Common Stock and the cash dividends
declared per share of Common Stock thereon during the periods indicated.
The Company paid a 5% stock dividend on (i) January 27, 1995 to
shareholders of record on January 6, 1995 and (ii) January 26, 1996 to
shareholders of record on January 5, 1996.
Cash
Closing sale price
dividends
High Low declared
1994
4th quarter . . . . . .
3rd quarter . . . . . . $5.500 $4.625 --
2nd quarter . . . . . . 6.125 5.000 --
1st quarter . . . . . . 7.375 5.125 --
8.000 3.875 --
1995
4th quarter . . . . . . $5.250 $4.375 --
3rd quarter . . . . . . 5.875 4.250 --
2nd quarter . . . . . . 5.875 4.750 --
1st quarter . . . . . . 5.375 4.500 --
As of March 7, 1996, the closing sales price of the Company's Common
Stock, as reported on the American Stock Exchange was $5.875 per share.
As of that date there were 666 holders of record of the Company's Common
Stock. Holders of Common Stock are entitled to receive such dividends, if
any, as may be declared from time to time by the Board of Directors out of
funds legally available therefor.
The Company's ability to pay dividends is restricted by the
terms of the Note Agreement and the Company's 8% Convertible Subordinated
Notes due September 1, 1999 issued thereunder and by the Company's credit
facility with Firstar Bank Milwaukee, N.A. and Continental Bank N.A.
(succeeded by BankAmerica N.A.'s Security Pacific Business Credit Inc.)
("Credit Facility"). Under the terms of the Credit Facility, the Company
is prohibited from paying dividends. In addition to the restrictions set
forth in the Credit Facility, the Note Agreement prohibits the payment of
any dividends if after giving effect thereto (together with certain other
payments or distributions in respect of Company capital stock), the
aggregate amount of all Restricted Payments (as defined in the Note
Agreement) during the period from and after December 31, 1988 to and
including the date of making the Restricted Payment (exclusive of the
dividend paid on January 13, 1989) would exceed 25% of Consolidated Net
Income (as defined in the Note Agreement) for such period.
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands, except per share data)
1995 1994 1993 1992 1991
Net sales . . . . . $73,693 $67,100 $60,328 $60,258 $54,708
Income (loss) from
continuing
operations . . . . 1,013 827 (1,580) (1,880) (3,217)
Income (loss) from
continuing
operations
per common share . $ 0.39 $ 0.32 ($ 0.61) ($ 0.72) ($ 1.23)
Total assets . . . 49,657 46,101 45,345 47,321 66,604
Long-term
obligations . . . 10,902 13,256 14,071 12,873 25,188
Cash dividends
declared per
common share . . . $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Per share data has been restated to give effect to stock dividends paid
through January 26, 1996.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NET SALES
Consolidated net sales for 1995 and 1994 have increased by 9.8%
and 11.2%, respectively, over previous years' levels.
(Amounts in thousands)
1995 1994 1993
North America $ 47,651 $ 44,657 $ 38,012
Europe 26,042 22,443 22,316
------- ------- --------
Total net sales $ 73,693 $67,100 $ 60,328
======= ====== =======
The Company's North American operations posted a 6.7% increase
in net sales in 1995 over 1994, following a 17.5% increase in 1994 over
1993. Improved economic conditions and increased demand for innovative
products introduced in 1992 contributed significantly to these increases.
International operations based in Europe achieved a 16.0%
increase in 1995 over 1994 net sales levels due primarily to recovery from
recessionary conditions in some European countries, an increase in demand
for certain products and the results of new distribution channels
established in the Eastern European and Pacific Rim countries. In 1994,
the recessionary pressures were mainly responsible for an increase of only
0.6% in net sales over 1993.
Net Sales by
Segment*
1995 1994 1993
Collision Repair 56.7% 54.6% 55.6%
Engine Rebuilding 15.0 17.0 16.9
Fluid Power 28.3 28.4 27.5
----- ----- -----
Total net sales 100.0% 100.0% 100.0%
====== ====== ======
* Refer to the Segment Information in the Notes to
Consolidated Financial Statements for more information.
In 1995, net sales for the Collision Repair segment increased by
14.2% over 1994. The fourth quarter was particularly strong as major
national accounts committed to purchase new high technological products.
The German collision repair subsidiary went through changes which included
the redeployment of resources to ensure profitability in 1996 at reduced
volume levels consistent with the German economy.
In 1994, net sales increased by 7.6% from 1993 levels due
primarily to the Company's participation in the Ford Focus Partner program
and other national account programs that contributed to improved market
penetration in the United States. The agreement with Nissan Altia of
Japan expanded channels of distribution for the Company in the Far East.
These programs, along with the outstanding success of the SHARK/R/
computerized sonar measuring system and the BlackoSpace/R/ workbay concept
system, helped offset weak economic conditions in Germany and Italy.
The Engine Rebuilding segment experienced a decline in net sales
of 3.9% from 1994 amounts due in large part to a softening of the market
in the United States and a significant reduction in shipments to Mexico
due to that country's currency problems. In 1994, net sales increased by
11.9% from 1993 primarily from the improved economy in the United States
and renewed focus on the export sales business.
The Fluid Power segment improved net sales by 9.6% over 1994.
Increasing capacity by 20% and making shipments at a record pace, as well
as continuing to produce quality products and meet customers' delivery
requirements which were offset by pricing pressures in the marketplace,
are contributing factors to this segment's continuous improvement in net
sales. In 1994, net sales increased by 14.8% over 1993 levels. The
increase is attributable to increased volume and the production of quality
products.
COSTS AND PROFIT MARGINS
Gross profits improved by 10.4% from $24.3 million in 1994 to
$26.8 million in 1995. The increase in 1994 gross profit was 13.0% from
$21.5 million in 1993.
Gross Profit as a % of Net
Sales
1995 1994 1993
Collision Repair 48.1% 47.3% 45.2%
Engine Rebuilding 24.2 26.3 28.5
Fluid Power 19.5 21.2 20.4
----- ----- -----
Consolidated 36.4% 36.2% 35.7%
==== ==== ====
The positive trend in gross profit margins in the Collision
Repair segment is a result of both increased efficiencies in the
utilization of productive capacity and higher margins on newly introduced
products. As economic conditions improved in the United States, the
Company was able to spread fixed manufacturing costs over a larger sales
volume, thus utilizing productive capacity more efficiently. Products
introduced since 1992 were able to command higher margins because of their
technological superiority due to the investment made in research and
development. In North America, these products are sold directly to the
end user resulting in higher margins for the Company. Part of this
benefit is offset by commissions paid to distributors. The changes to the
distribution methods have provided the Company with better control of the
distribution channel and improved market research information regarding
the equipment users.
The Company has continued to incur increases in the cost of
materials since 1994. By seeking alternative sources of supply and by
re-engineering products to reduce their material cost content (value
engineering), the Company was able to absorb these increases without
materially affecting gross profit.
The Engine Rebuilding segment's decline in gross profit margins
is primarily due to the continued competitiveness of the domestic market
and the Company not being able to pass the increases in material and labor
costs to the equipment purchasers in 1995 and 1994.
The gross profit margins for the Fluid Power segment are down
slightly from 1994. Even though there are continuous increases in sales
volume, pricing pressures are affecting the gross profit margins realized
by the Company.
OPERATING EXPENSES AND PROFIT
The rise in 1995 and 1994 operating expenses is primarily due to
higher commission expenses incurred in the Collision Repair segment from
increased sales volume. As a percentage of net sales, however,
consolidated operating expenses were down in 1995 and 1994, despite the
rising commission expenses.
(Amounts in thousands) 1995 1994 1993
Operating expenses $ 23,918 $ 22,414 $ 21,599
======= ======= =======
Operating profit (loss) $ 2,908 $ 1,889 $ (91)
======= ======= =======
For the most part, operating expenses have been well controlled
in all business segments with an overall positive trend. The higher
percentage figure in 1995 for the Collision Repair segment is due to an
increase in net sales to end users, on which a commission is paid. In
1994, the decrease in the percentage of operating expenses to net sales
was primarily due to a decrease in bad debt expense compared to 1993.
The changes in the percentage figures for the Engine Rebuilding
segment in 1995 and 1994 are a direct result of the fluctuations of net
sales levels in those years.
The Company expects the positive trend in operating expenses, as
a percentage of net sales, to continue as net sales increase.
Operating Expenses as a % of Net Sales
1995 1994 1993
Collision Repair 46.0% 39.0% 41.8%
Engine Rebuilding 26.2 22.6 26.2
Fluid Power 8.6 9.6 10.8
---- ---- ----
Consolidated 32.5% 33.4% 35.8%
==== ==== ====
NONOPERATING INCOME AND EXPENSE
Interest expense is the largest component of nonoperating
expense. It is interest paid to banks, leasing companies and other
lenders for borrowed money or for capitalized leases. The overall
borrowing level has remained consistent with 1994, however, higher
interest rates in the first half of 1995 increased overall interest
expense by $148,000. In 1994, declining levels of borrowing offset by
rising interest rates resulted in a $93,000 increase in interest expense
from 1993 levels.
(Amounts in thousands) 1995 1994 1993
Interest expenses $ (1,838) $ (1,690) $ (1,597)
Gain (loss) on foreign
exchange (135) (28) 146
Miscellaneous, net 42 339 125
------- ------- ------
Total nonoperating
expense, net $ (1,931) $ (1,379) $ (1,326)
======= ======== =======
The foreign exchange gains and losses are primarily attributed
to European operations where a considerable amount of buying and selling
is done in nonlocal currencies. Receivables and payables denominated in
nonlocal currencies give rise to foreign exchange gains and losses on a
regular basis. Normally, foreign exchange risk in this category is
managed by a review of the balance of receivables and payables and, where
warranted, the purchase of foreign exchange contracts to minimize risk. In
1993, the Company recorded a $267,000 foreign exchange gain as a result of
closing the Spanish operation and consolidating the remaining accounts in
the Company's Swiss subsidiary.
INCOME TAX EXPENSE
The income tax benefit recorded for in 1995 and 1994 was the
result of recoverable income taxes from net operating loss carrybacks and
the favorable resolution of audits of prior year returns. Income tax
expense in 1995, 1994 and 1993 is from European operations.
DISCONTINUED OPERATIONS
The Company sold its North American Automotive Service Equipment
business in 1992. The Company's intent in selling this business was to
focus its assets and efforts on its higher margin products where quality
rather than price and volume is the important factor to profitability.
Proceeds from the sale of the business were $10.1 million and
the Company recorded a net gain of $155,000 in 1992. Through the first six
months of 1992, the Automotive Service Equipment business generated $13.2
million in net sales, a 15% decline from $15.5 million for the same period
the year earlier. Sales for 1991 were $30.3 million. Gross margins for
the six months of 1992 were 18% of net sales, compared to 19% for the year
ended December 31, 1991.
The Company retains its rights to sell automotive service
equipment through its other businesses in the markets of Europe, the
Middle East and the Orient. These markets do not display the same
negative characteristics.
The additional loss on the discontinued business of $756,000 was
recorded in 1993 as the result of revaluation of pension liability for
current interest rates, an adjustment to the product liability
self-insurance reserves and the recording of a loss on the disposition of
assets held for sale.
EXTRAORDINARY GAIN
In July 1993, the Company's Baraboo, Wisconsin manufacturing
facility sustained considerable damage due to flooding. The insurance
protecting the property replaced any equipment damaged beyond repair with
new equipment. As a result, a gain was recorded for the market value of
the new equipment and an offsetting loss was recorded for the book value
of the equipment destroyed. In addition, certain unreimbursed expenses
related to the flooding were also charged against the gain.
FINANCIAL CONDITION
LIQUIDITY
Net income adjusted for noncash items has increased consistently
during the past three years. 1995 produced $3.2 million; 1994 produced
$2.8 million; and 1993 produced $1.8 million.
(Amounts in thousands) 1995 1994 1993
Net income (loss) $ 1,013 $ 827 $ (1,576)
Adjustments for noncash items 2,202 2,001 3,458
------ ----- ------
3,215 2,828 1,882
Changes in cash from certain
assets & liabilities (2,676) (1,689) 963
------- ------ -------
Cash provided by operating
activities $ 539 $ 1,139 $ 2,845
====== ====== ======
Cash provided by operating activities continues to supply the
Company with sufficient cash to satisfy debt service requirements and the
investment in capital assets.
In 1995 and 1994, the build-up in working capital was necessary
to support the growing sales volume. The increase, primarily inventory
and receivables, reduced overall cash flows from operations. The Company
expects to reverse this build-up in 1996, providing additional cash from
operating activities to reduce debt.
(Amounts in thousands) 1995 1994 1993
Current assets $ 41,525 $ 37,353 $ 35,584
Current liabilities 20,749 16,491 16,341
------- ------- -------
Working capital $ 20,776 $ 20,862 $ 19,243
======= ======= =======
Current ratio 2.0 to 1 2.3 to 1 2.2 to 1
Credit arrangements in Europe are short-term in nature and
designed to satisfy seasonal fluctuations in liquidity requirements.
Those arrangements are renewed annually and are sufficient to support the
needs of the Company's European operations.
FINANCING ACTIVITIES
The Company extended its current credit agreement with domestic
banks during the year. Actual amounts available under the $12 million
credit line are dependent upon the balances of the underlying collateral.
At December 31, 1995, $9.8 million of the line of credit was available and
$6.3 million was utilized. This line of credit, along with cash provided
by operating activities, is considered adequate to satisfy the cash needs
of the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index
Report of Management
Independent Auditors' Report
Consolidated Statements of Operations
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
<PAGE>
REPORT OF MANAGEMENT
The management of Hein-Werner Corporation is responsible for the
preparation and presentation of financial statements. Management believes
the established policies, internal accounting controls and review
procedures provide reasonable assurance that the consolidated financial
statements included herein are prepared in accordance with generally
accepted accounting principles. This preparation has been based upon the
best estimates and judgments and giving due consideration to materiality.
The Company maintains internal accounting control systems and
related policies and procedures. These systems are designed to provide
reasonable assurance that assets are safeguarded, transactions are
executed in accordance with management's authorization and properly
recorded, and accounting records may be relied upon for the preparation of
financial statements and other financial information. The design,
monitoring and revision of internal accounting control systems involve,
among other things, management's judgment with respect to the relative
cost and expected benefits of specific control measures.
The independent auditors are responsible for expressing their
opinion as to whether the financial statements present fairly the
financial position, operating results and cash flows of the Company. In
this process, they obtain a sufficient understanding of the internal
accounting systems to establish the audit scope, review selected
transactions and carry out other audit procedures.
The Audit Committee of the Board of Directors is composed of two
nonemployee directors who meet periodically with the independent auditors
and the Company's management. This Committee considers the audit scope,
discusses financial and reporting subjects and reviews management actions
on these matters. The independent auditors have full and free access to
the Audit Committee.
/s/ Joseph L. Dindorf
Joseph L. Dindorf
President and Chief Executive Officer
Waukesha, Wisconsin
February 20, 1996
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of Hein-Werner Corporation:
We have audited the accompanying consolidated balance sheets of
Hein-Werner Corporation and subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of operations and cash flows for
each of the years in the three-year period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position
of Hein-Werner Corporation and subsidiaries as of December 31, 1995 and
1994, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 1995, in conformity
with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Milwaukee, Wisconsin
February 20, 1996
<PAGE>
Consolidated Statements of Operations
Years Ended December 31, 1995, 1994, and 1993
(Amounts in thousands, except per share amounts)
1995 1994 1993
Net Sales $ 73,693 $ 67,100 $ 60,328
Cost of Sales 46,867 42,797 38,820
------ ------ ------
Gross Profit 26,826 24,303 21,508
Selling, Engineering and
Administrative Expenses 22,948 21,711 19,848
Bad Debt Expense 970 703 1,751
------- ------- -------
23,918 22,414 21,599
------- ------- -------
Operating Profit (Loss) 2,908 1,889 (91)
Nonoperating Income (Expense)
Interest (1,838) (1,690) (1,597)
Other (93) 311 271
------- ------- -------
(1,931) (1,379) (1,326)
------- -------- -------
Income (Loss) From Continuing
Operations, Before Income
Tax 977 510 (1,417)
Income Tax Expense (Benefit) (36) (317) 163
------- -------- -------
Net Income (Loss) From
Continuing Operations 1,013 827 (1,580)
Discontinued Business
Loss from the sale of a
business, net of related
income tax -- -- (756)
Extraordinary Item
Gain from the involuntary
conversion of assets, net
of related income tax -- -- 760
------ ------- -------
Net Income (Loss) $ 1,013 $ 827 $ (1,576)
====== ======= =======
Earnings (Loss) Per Common
Share From Continuing
Operations $ 0.39 $ 0.32 $ (0.61)
======= ======= ======
Earnings (Loss) Per Common
Share $ 0.39 $ 0.32 $ (0.60)
======= ======== ======
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Balance Sheets
As of December 31, 1995 and 1994
(Amounts in thousands, except share amounts)
1995 1994
Assets
Current Assets:
Cash $ 396 $ 466
Accounts receivables, net 23,277 19,875
Inventories 17,271 16,154
Prepaid expenses and other 581 858
------ ------
Total Current Assets 41,525 37,353
Property, Plant and Equipment, Net 5,354 5,265
Other Assets 2,778 3,483
------- -------
$ 49,657 $ 46,101
======= =======
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable $ 4,209 $ 3,189
Current installments of long-term debt 1,470 316
Accounts payable 9,231 7,302
Other current liabilities 5,839 5,684
------- -------
Total Current Liabilities 20,749 16,491
Long-Term Debt, Excluding Current
Installments 10,902 13,256
Other Long-Term Liabilities 1,861 2,032
Commitments and Contingencies ------ ------
Total Liabilities 33,512 31,779
------ ------
Stockholders' Equity:
Common stock of $1 par value per share
Authorized: 20,000,000 shares;
Issued: 2,504,421 and 2,386,477 shares
at December 31, 1995 and 1994,
respectively 2,504 2,386
Capital in excess of par value 11,558 11,377
Retained earnings 1,308 827
Cumulative translation adjustments 827 110
------ ------
16,197 14,700
Less cost of common shares in treasury -
2,957 and 21,707 shares at December 31,
1995 and 1994, respectively 52 378
------- -------
Total Stockholders' Equity 16,145 14,322
------- -------
$ 49,657 $ 46,101
======= =======
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Cash Flows
Years Ended December 31, 1995, 1994, and 1993
(Amounts in thousands)
1995 1994 1993
Cash From Operating Activities:
Net income (loss) $ 1,013 $ 827 $(1,576)
Adjustments to reconcile net income
(loss) to cash provided by
operating activities:
Adjustments to net income (loss)
for items not using or providing
cash:
Depreciation and amortization 1,234 1,301 1,175
Bad debt expense 970 703 1,751
Deferred tax expense -- -- 523
(Gain) loss on sale property,
plant and equipment (2) (3) 13
Gain from the involuntary
conversion of assets -- -- (760)
Loss from the sale of a business -- -- 756
Increase (decrease), net of the
effects of the disposed
business, due to changes in:
Accounts receivable (4,372) (1,621) (1,882)
Inventories (1,117) (1,530) 1,033
Prepaid expenses and other
assets 806 1,259 1,701
Accounts payable 1,929 (320) 1,246
Accrued expenses and other
liabilities 78 523 (1,135)
----- ------ ------
Cash provided by operating
activities 539 1,139 2,845
----- ------ ------
Cash From Investing Activities:
Capital expenditures (1,174) (737) (1,148)
Proceeds from sale of property,
plant and equipment 28 13 44
------ ------ ------
Cash used in investing activities (1,146) (724) (1,104)
------ ------ ------
Cash From Financing Activities:
Increase (decrease) in notes
payable 1,020 235 (1,316)
Proceeds from long-term debt 163 1,461 2,006
Deferred debt issuance costs -- (15) (70)
Repayment of long-term debt (1,363) (2,749) (1,408)
------ ------ ------
Cash used in financing activities (180) (1,068) (788)
------ ------ ------
Cumulative Translation Adjustments 717 780 (728)
------ ------ ------
Total Cash Provided (Used) (70) 127 225
Cash - Beginning of Year 466 339 114
----- ------ ------
Cash - End of Year $ 396 $ 466 $ 339
===== ====== ======
See accompanying notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Nature of Operations
The Company is a multinational manufacturer of collision repair,
engine rebuilding, and fluid power equipment. The collision repair and
engine rebuilding equipment are sold to end users and distributors in
North and South America, Europe and Asia. The fluid power equipment is
primarily sold to original equipment manufacturers in North America.
(B) Financial Statement Presentation
The consolidated financial statements include the accounts of the
Company and its subsidiaries, all of which are wholly-owned. All
significant intercompany balances and transactions have been eliminated in
consolidation.
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosures of contingent assets and liabilities to prepare these
consolidated financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those estimates.
(C) Cash Equivalents
For purposes of the statements of cash flows, the Company considers
all highly liquid investments purchased with a maturity of three months or
less to be cash equivalents.
(D) Inventories
Inventories are stated at the lower of cost or market. Cost is
determined on the first-in, first-out basis.
Inventory which is repossessed is recorded at the lesser of its
original fifo cost, the amount receivable from the customer, or its fair
market value.
(E) Property, Plant and Equipment
The cost of plant and equipment is depreciated over the estimated
useful lives of the respective assets using the straight-line method.
Major replacements and betterments are capitalized while maintenance and
repairs are expensed as incurred.
(F) Intangibles
Patents are amortized over their estimated useful lives but not
exceeding seventeen years. The excess cost over net assets of acquired
companies is amortized on the straight-line basis over a forty-year
period. Deferred debt issuance costs are amortized over the term of the
underlying debt agreements. The Company periodically evaluates the
carrying value and remaining amortization periods of intangible assets for
impairment.
(G) Noncurrent Receivables
Certain accounts receivable from distributors in the Collision Repair
segment were renegotiated during 1993 to notes with payment schedules
which extend beyond one year. These notes, which bear an interest rate of
8%, have been collateralized with personal guarantees of the owners,
partners and principals of the distributors and are presented as
noncurrent assets. The allowance for uncollectible notes is management's
estimate of uncollectible amounts based upon a review of the outstanding
balances.
(H) Revenue Recognition and Concentration of Credit Risk
Sales are recognized upon shipment of products to equipment
distributors, automotive jobbers, warehouse distributors and retail
dealers for resale; and on shipments directly to original equipment
manufacturers and end-users. Estimated losses on accounts receivable and
guaranteed notes are provided for in allowance for losses.
The Company extends customary industry credit terms to customers in
North America and in Europe. Sales outside these regions are generally
supported by letters of credit. Accounts receivable from resellers of
equipment are generally collateralized by the products sold and the
Company also obtains guarantees from some owners, partners, or principals.
When product is repossessed for which the Company has obtained a
guarantee, the guarantor takes possession of the product and the Company
records a receivable from the guarantor. If there is no third party
guarantor, the Company takes possession of the equipment and reverses any
previously recognized revenue or charges any recognizable loss to an
allowance account established for that purpose.
(I) Income Taxes
The Company uses the asset and liability method of accounting for
income taxes. Under the asset and liability method, deferred tax assets
and liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates
in effect for the year in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
(J) Translation of Foreign Financial Statements
Assets and liabilities of foreign subsidiaries are translated at
year-end exchange rates and the statements of operations are translated at
the average exchange rates for the year. Gains or losses resulting from
translating foreign currency financial statements are accumulated as a
separate component of stockholders' equity until the entity is sold or
substantially liquidated, at which time any gain or loss is included in
net earnings.
Gains or losses from foreign currency transactions (transactions
denominated in a currency other than the entity's functional currency) are
included in net earnings.
(K) Research and Development Expenses
The Company incurred research and development costs in continuing
operations of approximately $1,719,000 in 1995, $1,475,000 in 1994, and
$1,450,000 in 1993. Research and development costs are expensed as
incurred.
(L) Earnings per Common Share
Earnings per share data and weighted average shares outstanding have
been restated for all years presented to give effect to the 5% stock
dividends paid January 26, 1996 and all previous stock dividends.
Earnings per share are based on the weighted average number of shares
outstanding during each year and the assumed exercise of dilutive
employees' stock options (less the number of treasury shares assumed to be
purchased from the proceeds). Primary earnings per share are based on
2,620,000 shares in 1995 and 2,607,000 shares in 1994 and 1993, as
adjusted for stock dividends. Fully diluted earnings per share based on
the assumed conversion of the 8% convertible subordinated notes issued
September 29, 1989 were not dilutive in any of the years presented.
(M) Pending Accounting Changes
Statement of Financial Accounting Standards (FASB) No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of", was issued in March 1995. This statement requires that
long-lived assets and identifiable intangibles held and used by an entity
be reviewed for impairment in certain circumstances. The statement also
requires that these assets expected to be disposed of be reported at the
lower of the carrying amount or fair value less costs to sell. This
statement will be adopted in the first quarter of 1996 and it has not yet
been determined what the effect will be on the Company's financial
position or results of operations.
FASB No. 123 "Accounting for Stock-Based Compensation" was issued in
October 1995. This statement requires accounting for employee stock
compensation plans using either the fair value method or the intrinsic
value based method. This statement will be adopted in the first quarter
of 1996 and the Company anticipates retaining the intrinsic value based
method of accounting for stock options, which is in use in 1995.
(N) Reclassifications
Certain amounts in 1994 and 1993 have been reclassified to conform to
the 1995 presentation.
ACCOUNTS RECEIVABLE
(Amounts in thousands) 1995 1994
Accounts Receivable $25,019 $21,545
Allowance for losses 1,742 1,670
------ -------
Total $23,277 $19,875
====== ======
INVENTORIES
(Amounts in thousands) 1995 1994
Raw material $ 5,837 $ 5,902
Work-in-process 1,125 1,481
Finished goods 10,309 8,771
------ ------
Total $17,271 $16,154
====== ======
PREPAID EXPENSES AND OTHER ASSETS
(Amounts in thousands) 1995 1994
Prepaid expenses and
other $ 316 $ 350
Recoverable income
tax 265 508
---- ----
Total $581 $858
==== ====
PROPERTY, PLANT AND EQUIPMENT, NET
(Amounts in thousands) 1995 1994
Land $ 90 $ 90
Buildings 3,023 2,839
Machinery & equipment 13,404 13,101
------ ------
16,517 16,030
Accumulated depreciation 11,163 10,765
------ ------
Total $ 5,354 $ 5,265
====== ======
OTHER ASSETS
(Amounts in thousands) 1995 1994
Patents $ 563 $ 563
Goodwill 2,282 2,282
----- -----
2,845 2,845
Accumulated amortization 1,338 1,259
----- -----
Net Intangibles 1,507 1,586
Deferred debt issuance costs, net -- 97
Noncurrent notes receivable 1,654 2,407
Less allowance for uncollectible
notes 727 955
----- -----
Net receivables 927 1,452
Other 344 348
----- ------
$2,778 $3,483
===== =====
The fair value of noncurrent notes receivable is estimated using
discounted cash flows on expected payments to be received based on the
terms of the notes and current interest rates. The fair value of the
noncurrent notes receivable are estimated to be approximately $595,000 at
December 31, 1995.
SHORT-TERM BORROWINGS AND LINES OF CREDIT
The Company has various unsecured lines of credit with foreign banks
aggregating $8,053,000. The amount of unused available borrowings under
these various lines of credit was $3,844,000 at December 31, 1995. The
weighted average interest rate on outstanding amounts was 7.4% and 8.0% at
December 31, 1995 and 1994, respectively.
In addition, the Company has the ability to borrow funds outside of
these lines of credit at foreign banks by using local currency receivables
as collateral. The Company was not utilizing this facility as of December
31, 1995.
OTHER CURRENT LIABILITIES
(Amounts in thousands) 1995 1994
Accrued payroll and related
expenses $ 1,769 $ 1,599
Accrued commissions 1,088 1,106
Accrued expenses related to a
disposed business 182 354
Other accrued expenses 2,800 2,625
----- -----
Total $5,839 $5,684
===== =====
LONG-TERM DEBT
(Amounts in thousands) 1995 1994
Revolving credit agreement $ 5,885 $ 7,024
8% Convertible subordinated notes
due 1996 to 1999 4,500 4,500
11.5% Financing due to 2000 945 1,082
8.75% Financing due to 2004 295 318
5.0% Financing due to 2002 163 --
Capitalized leases due to 2005 512 576
Other 72 72
------- ------
12,372 13,572
Less current installments of
long-term debt 1,470 316
------- -------
Total long-term debt, excluding
current installments $ 10,902 $ 13,256
======= =======
Aggregate required annual principal payments, including capital
leases, for the next five years are:
(Amounts in thousands)
1996 $ 1,470
1997 7,569
1998 1,407
1999 1,345
2000 368
In 1995, the Company entered into a 5% financing arrangement with a
county in the state of Kansas allowing borrowings up to $195,000. The
borrowings are collateralized by a second mortgage on buildings and
fixtures with a net book value of $976,000.
The revolving credit agreement provides for borrowings not to exceed
$12 million based on the availability of collateral assets, primarily
inventory and accounts receivable, and matures May 31, 1997. At year end,
the borrowing base approximated $9.8 million. At December 31, 1995, the
net book value of such eligible collateral was approximately $17.3
million. Unused letters of credit issued on behalf of the Company
totalled $394,000 at December 31, 1995. A commitment fee of 1/2 of 1% per
annum is payable monthly on the average daily amount of the unused
borrowing availability. The Company can borrow at the prime rate of
interest plus 1.75% The prime rate in effect at December 31, 1995 was
8.5%.
The 11.5% financing is collateralized by machinery and equipment with
a net book value of $1.3 million and a standby letter of credit in the
amount of $114,000. The 8.75% financing is collateralized by buildings
and fixtures with a net book value of $608,000.
The 8% convertible subordinated notes are convertible into common
stock at a price of approximately $6.28 per share after giving effect to
the 5% stock dividend paid January 26, 1996.
The various underlying agreements contain certain restrictive
covenants principally relating to additional debt, long-term leases,
working capital levels, net worth, the ratio of debt to net worth and
interest charge coverage. In addition, the Company is restricted from
paying cash dividends and from purchasing or redeeming its own stock. The
convertible subordinated note agreement restricts the Company's cash
dividend payments, on a cumulative basis, to not more than 25% of the
cumulative net income from December 31, 1988 to the date of the payment.
At December 31, 1995, the Company is in compliance with all covenants.
The fair value of the Company's long-term debt is estimated using
discounted cash flow analyses based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements. The carrying
amounts of long-term debt approximates fair value at December 31, 1995.
Interest paid during 1995, 1994, and 1993 was $1,842,000, $1,649,000,
and $1,681,000, respectively.
OTHER LONG-TERM LIABILITIES
(Amounts in thousands) 1995 1994
Accrued expenses related to a
disposed business $ 491 $ 689
Other 1,370 1,343
----- -----
Total $1,861 $2,032
===== =====
COMMITMENTS AND 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 five 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
approximated 90% of repurchased notes.
The maximum credit risk to the Company at December 31, 1995 and 1994
was approximately $3,022,000 and $3,400,000, respectively. Proceeds from
guaranteed notes totalled approximately $1,307,000 in 1995, $2,100,000 in
1994, and $1,600,000 in 1993.
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 diminimus 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.
D) Leases
At December 31, 1995, future minimum lease payments under capital
leases and under noncancelable operating leases with initial terms greater
than one year are as follows:
Capitalized Operating
(Amounts in thousands) Leases Leases
1996 $210 $1,693
1997 263 1,446
1998 33 991
1999 16 833
2000 16 823
2001-2005 69 892
--- -----
Total minimum lease payments 607 $6,678
Less amount representing interest 95
--- -----
Present value of minimum lease
payments $512
===
Current portion of capitalized
lease obligations $168
===
Property, plant and equipment includes the following amount relating
to leases which have been capitalized:
(Amounts in thousands) 1995 1994
Machinery and equipment $1,041 $951
Less: accumulated depreciation 416 319
----- ----
$ 625 $632
===== ====
Operating leases are for buildings, warehouses and equipment. Rental
expense for operating leases was $1,955,000 in 1995, $1,765,000 in 1994,
and $1,841,000 in 1993.
CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Total
Capital in Cumulative stock-
Common excess of Retained translation Treasury holders'
(Amounts in thousands) stock par value earnings adjustments stock equity
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1992 $2,386 $12,023 $ 4,742 $ 58 $(4,188) $15,021
Net loss -- -- (1,576) -- -- (1,576)
Translation
adjustments -- -- -- (728) -- (728)
5% Stock
dividend paid
January 2, 1993,
106,952 shares issued -- -- (1,859) -- 1,859 --
5% Stock
dividend,
fractional shares -- -- (1) -- -- (1)
----- ------ ----- ----- ----- ------
Balance at
December 31, 1993 2,386 12,023 1,306 (670) (2,329) 12,716
Net Income -- -- 827 -- -- 827
Translation
adjustments -- -- -- 780 -- 780
5% Stock
dividend paid
January 21, 1994,
112,271 shares -- (646) (1,305) -- 1,951 --
5% Stock
dividend,
fractional shares -- -- (1) -- -- (1)
----- ------ ------ ---- ------ ------
Balance at
December 31, 1994 2,386 11,377 827 110 (378) 14,322
Net Income -- -- 1,013 -- -- 1,013
Translation
adjustments -- -- -- 717 -- 717
5% Stock
dividend paid January
27, 1995, 117,944
shares issued 118 413 (531) -- -- --
5% Stock
dividend,
fractional shares -- -- (1) -- -- (1)
Shares contributed
to employee benefit
plan -- (232) -- -- 326 94
----- ----- ------ ----- ----- -----
Balance at
December 31, 1995 $2,504 $11,558 $ 1,308 $ 827 $ (52) $16,145
===== ====== ====== ====== ====== ======
</TABLE>
STOCK PLANS
Under the 1987 Stock Option and Incentive Plan, the Company is
authorized to grant 140,392 stock options. The options are subject to the
following conditions and limitations: no option may be exercised until
three (3) years after the date of grant when 50% of the options granted
become exercisable; five (5) years after the date of grant 100% of the
options granted are exercisable. Options expire ten (10) years after the
date of grant. Under provisions defined in the Plan, all options become
exercisable in the event of a public tender offer or if an exchange offer
is made for the Company's stock.
Stock option activity for each of the three years in the period
ended December 31, 1995 follows:
Option Price*
Shares Per Share
December 31, 1992 102,551 $5.08 - $5.29
Granted via stock dividend 5,128
-------
December 31, 1993 107,679 $5.08 - $5.29
Expired (579)
Granted via stock dividend 5,355
-------
December 31, 1994 112,455 $5.08
Cancelled (5,788)
Granted via stock dividend 5,623
-------
December 31, 1995 112,290 $5.08
=======
At December 31, 1995:
Exercisable 56,145 $5.08
=======
Available for future grants 28,102
=======
* Option share and price are adjusted to give effect to the stock
dividend paid January 27, 1995.
Each outstanding share of common stock is entitled to one common
share purchase right. Under certain circumstances, each right entitles
the holder to purchase one share of common stock at $65, subject to
adjustment. The rights are not exercisable until ten days after a public
announcement that a person or group has acquired at least 20% of the
outstanding common stock or ten business days (or later date determined by
the Board of Directors) after a person or group announces an intention to
make or commences a tender or exchange offer that would result in
ownership of 20% or more of the Company's common stock. Subject to
certain limitations, the Company's Board of Directors may reduce the
thresholds applicable to the rights to not less than 10%.
If a person or group acquires 20% or more of the outstanding
common stock, or certain other events occur, each right not owned by a 20%
or greater stockholder will become exercisable for that number of shares
of common stock having a market value of twice the exercise price of the
right. If the Company is acquired in a merger or other business
combination or 50% or more of its consolidated assets or earning power is
sold at any time after the rights become exercisable, the rights will
entitle the holder thereof to purchase common stock of the acquiring
company having a market value equal to two times the exercise price of the
rights.
The rights, which do not have voting privileges, may be redeemed
by the Company at a price of $.03 per right at any time prior to public
announcement that a person or group has acquired 20% or more of the
Company's common stock. In addition, under certain circumstances the
rights may be redeemed by stockholder action in connection with an
acquisition proposal. Further, at any time after a person or group
acquires 20% or more of the Company's common stock and prior to that
person or group acquiring 50% or more of the common stock, the Company may
exchange the rights (other than rights owned by such 20% or greater
stockholder) in whole or in part for one share of common stock per right.
The rights expire on May 23, 1999.
EMPLOYEE BENEFIT PLANS
A profit sharing and retirement plan is in effect for all
domestic employees of the Company. The Company can contribute between 5%
and 16% of its earnings before income taxes in excess of varying levels,
ranging from $250,000 to $4,500,000. In 1995 and 1994, the Company's
expense under the terms of the plan was $96,600 and $21,250, respectively.
In 1995, an additional special contribution of $93,750 was made in the
form of 18,750 shares of the Company's common stock valued at the 1994
year end closing price of $5.00 per share. No contribution was made for
1993.
The Company does not provide post-retirement benefits under
current benefit programs. Obligations under previous programs are not
material.
INCOME TAXES
Income (loss) from continuing operations, before income taxes,
consists of the following:
(Amounts in 1995 1994 1993
thousands)
Domestic $ (551) $ (798) $(2,712)
Foreign 1,528 1,308 1,295
------ ------ -------
$ 977 $ 510 $ (1,417)
====== ====== ========
Income tax expense (benefit) attributable to income (loss) from
continuing operations consists of the following:
(Amounts in thousands) 1995 1994 1993
CURRENT:
U.S. Federal $ (306) $ (668) $ (557)
Foreign 270 351 197
---- ----- -----
(36) (317) (360)
---- ----- -----
DEFERRED:
U.S. Federal -- -- 557
Foreign -- -- (34)
---- ----- -----
-- -- 523
---- ----- -----
$ (36) $ (317) $ 163
The significant components of deferred income tax expense
(benefit) attributable to income (loss) from continuing operations are as
follows:
(Amounts in thousands) 1995 1994 1993
Deferred income tax expense
(benefit) (exclusive of the
effects of other components
listed below) $ 32 $(159) $ (34)
Increase (decreases) in the
valuation allowance for
deferred tax assets (32) 159 557
--- ---- ----
$ -- $ -- $ 523
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities are as follows:
(Amounts in thousands) 1995 1994
Inventory valuation $ 170 $ 145
Accounts receivable valuation 58 30
Vacation accrual 172 158
Self-insurance accrual 311 288
Sale of business 247 383
Net operating loss carryforwards 2,458 2,799
Other, including undistributed
earnings of foreign
subsidiaries 474 208
------ -------
Gross deferred tax assets 3,890 4,011
Less valuation allowance (2,975) (3,007)
------ -------
Deferred tax assets $ 915 $ 1,004
====== =======
Depreciation (913) (964)
Other, including undistributed
earnings of foreign subsidiaries (2) (40)
------ -------
Deferred tax liabilities (915) (1,004)
------ -------
Net deferred tax assets $ -- $ --
====== =======
A reconciliation of actual income tax expense (benefit)
attributable to income (loss) from continuing operations to the "expected"
income tax expense (benefit) computed by applying the U.S. Federal
corporate tax rate to income (loss) from continuing operations, before
income taxes, follows:
(Percent of pretax earnings) 1995 1994 1993
Statutory rate 34.0% 34.0% (34.0%)
Amortization of excess cost over
net assets of acquired companies 2.0 4.0 1.4
Effect of foreign operations 20.6 (23.4) (16.3)
Net operating losses carried forward
(utilized) -- (9.4) 24.9
Resolution of income tax examinations (31.4) (88.6) --
Purchase accounting adjustments from tax
basis differences at acquisition -- (1.6) (0.6)
Change in the valuation allowance for
deferred tax assets allocated to income
tax expense (30.3) 25.5 39.3
Other items, net 1.4 (2.7) (3.2)
----- ----- ------
(3.7)% (62.2)% 11.5%
Deferred income taxes have been provided on that portion of the
undistributed earnings of foreign subsidiaries which the Company expects
to recover in a taxable manner, such as through the receipt of dividends.
Provision has not been made for U.S. or additional foreign taxes on
foreign earnings which have been and will continue to be reinvested. It
is not practicable to estimate the amount of additional tax that might be
payable on these foreign earnings. At December 31, 1995, the
undistributed earnings of these foreign subsidiaries on which taxes have
not been provided were approximately $5,200,000.
Approximate net operating loss carryforwards available at
December 31, 1995 to offset future taxable earnings of the Company are as
follows:
(Amounts in thousands) Amount Year of Expiration
U.S. Federal $ 2,500 2008 through 2009
State 13,000 1998 through 2010
Foreign 1,200 1996 through 2000
Foreign 100 Indefinite
A valuation allowance has been provided for the future benefit
of the above net operating loss carryforwards.
The Company received net income tax refunds of $306,000,
$191,000, and $528,000 during 1995, 1994, and 1993, respectively.
DISCONTINUED OPERATIONS
In 1992, the Company sold certain assets relating to
Hein-Werner's manufacture and North American distribution of jacks and
other automotive lifting equipment, automotive battery service equipment,
and automotive welding equipment and accounted for the sale as
discontinued operations.
As a result of the disposal, certain related plant and property
was sold by the Company during 1993. At December 31, 1992, these assets
had been written down to their estimated net realizable value and
reclassified as other current assets. Included in liabilities at December
31, 1992 were accruals for expenses and costs to be incurred and satisfied
at future dates. During 1993, an additional expense of $756,000 was
accrued for future pension costs (primarily as a result of using a 7%
discount rate), for the reserve for product liability insurance
retroactive premium adjustments, and for losses on the sale of excess
plant and property.
Loss per common share from the loss on the sale was $0.28 in
1993 which has been adjusted for the 5% stock dividend paid January 26,
1996.
EXTRAORDINARY ITEM
In 1993, a Company manufacturing facility sustained damage from
flooding. Insurance coverage replaced damaged equipment with new. As a
result, the Company recorded a gain for the value of the replacement
equipment of $1,194,000 and a loss for the net book value of the equipment
destroyed of $141,000. In addition, costs of $293,000 related to the
flooding which were not reimbursed by insurance coverage were also charged
against the gain. Accordingly, an extraordinary gain of $760,000, or
$0.29 per share, (there was no related income tax expense) was included in
1993. Earnings per share data for 1993 have been adjusted for the 5%
stock dividend paid January 26, 1996.
SEGMENT INFORMATION
The Company's operations are principally in the Collision
Repair, Engine Rebuilding and Fluid Power industry segments. The
Collision Repair segment includes frame straightening and vehicle
measurement equipment, as well as various tools and accessories. Engine
Rebuilding products include hones, lathes, grinders, and the like, along
with various accessories. Products for the Fluid Power segment include
single-acting, double-acting and telescoping hydraulic cylinders.
Affiliated inter-segment sales and geographic sales are nominal
in amount.
Data by industry segment with a reconciliation to the
consolidated financial statements are presented below:
<TABLE>
<CAPTION>
(Amounts in thousands) Earnings
before
Net sales income Capital
1995: unaffiliated taxes Assets Depreciation Expenditures
<S> <C> <C> <C> <C> <C>
Collision Repair $41,819 $2,520 $37,624 $ 518 $ 663
Engine Rebuilding 10,986 (946) 7,448 167 55
Fluid Power 20,888 1,548 8,529 178 438
------ ----- ------ ---- -----
Business segments 73,693 3,122 53,601 863 1,156
Corporate and
eliminations -- (2,145) (4,032) 195 18
------ ----- ------ ------ ------
Consolidated $73,693 $ 977 $49,569 $ 1,058 $ 1,174
====== ===== ====== ====== ======
1994:
Collision Repair $36,615 $1,444 $33,194 $ 501 $ 438
Engine Rebuilding 11,436 (458) 7,407 197 75
Fluid Power 19,049 1,530 7,815 166 122
------ ------ ------ ----- -----
Business Segments 67,100 2,516 48,416 864 635
Corporate and
eliminations -- (2,006) (2,315) 256 102
------ ------ ------ ------ ------
Consolidated $67,100 $ 510 $46,101 $ 1,120 $ 737
====== ===== ====== ====== ======
1993:
Collision Repair $33,515 $ (334) $36,351 $ 439 $ 406
Engine Rebuilding 10,219 (682) 7,704 186 321
Fluid Power 16,594 946 14,302 189 98
------ ------ ------ ------ ------
Business Segments 60,328 70 58,357 814 825
Discontinued operation
& extraordinary gain -- 4 -- -- --
Corporate and
eliminations -- (1,347) (13,012) 218 323
------ ------ ------ ------ ------
Consolidated $60,328 $(1,413) $45,345 $ 1,032 $ 1,148
====== ===== ====== ====== ======
</TABLE>
Data for geographic regions, excluding Corporate and eliminations,
for 1995, 1994, and 1993 is presented below:
<TABLE>
<CAPTION>
(Amounts in thousands) Earnings
before
Net sales income Capital
1995: unaffiliated taxes Assets Depreciation Expenditures
<S> <C> <C> <C> <C> <C>
North America $47,651 $ 1,594 $27,666 $ 521 $588
Europe 26,042 1,528 25,935 342 568
------ ------ ------ ---- ------
$73,693 $ 3,122 $53,601 $ 863 $ 1,156
====== ===== ====== ==== ======
1994:
North America $44,657 $ 1,208 $27,420 $ 575 $ 320
Europe 22,443 1,308 20,996 289 315
------ ------ ------ ---- ------
$67,100 $2,516 $48,416 $ 864 $ 635
====== ===== ====== ==== ======
1993:
North America $38,012 $(1,365) $39,503 $ 555 $ 478
Europe 22,316 1,295 18,854 259 347
------ ------ ------ ---- ------
$60,328 $ (70) $58,357 $ 814 $ 825
====== ===== ====== ==== ======
</TABLE>
Export sales of United States operations, made to unaffiliated customers
located in foreign countries aggregated $4,438,000, $3,622,000, and
$4,216,000 in 1995, 1994, and 1993, respectively.
SUPPLEMENTAL QUARTERLY DATA
The following table contains certain selected unaudited
quarterly consolidated financial data for the last two years which
includes all adjustments which the Company considers necessary to a fair
presentation thereof:
(Amounts in thousands except per share data)
1995
Quarter 1st 2nd 3rd 4th
Net Sales $18,512 $17,555 $16,377 $21,249
Gross profit 6,726 6,310 5,827 7,963
Net income (loss) $ 422 $ 292 $ (382) $ 681
------ ------- -------- ------
Earnings (loss) per
share $ 0.16 $ 0.11 $ (0.14) $ 0.26
------ ------- -------- ------
Stock price high $ 5.375 $ 5.875 $ 5.875 $ 5.250
Stock price low $ 4.500 $ 4.750 $ 4.250 $ 4.375
------ ------- ------- -------
1994
Quarter 1st 2nd 3rd 4th
Net sales $15,873 $17,321 $14,537 $19,369
Gross profit 5,612 6,198 5,069 7,424
Net income $ 123 $ 255 $ 288 $ 161
------ ------- ------- -------
Earnings per share $ 0.05 $ 0.10 $ 0.11 $ 0.06
------ ------- ------- -------
Stock price high $ 8.000 $ 7.375 $ 6.125 $ 5.500
Stock price low $ 3.875 $ 5.125 $ 5.000 $ 4.625
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURES
The Company did not file a Form 8-K within the 24 months prior
to the date of its most recent financial statements that reports a change
of accountants and a disagreement on any matter of accounting principles
or practices or financial statement disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to directors
is included under the headings "ELECTION OF DIRECTORS" and "MISCELLANEOUS"
in the definitive Proxy Statement, dated March 13, 1996, relating to the
annual meeting of shareholders scheduled for April 25, 1996 and is
incorporated herein by reference. Information about executive officers
appears at the end of Part I of this Form 10-K under the caption
"EXECUTIVE OFFICERS OF REGISTRANT."
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation is included under
the heading "EXECUTIVE COMPENSATION" in the definitive Proxy Statement,
dated March 13, 1996, relating to the annual meeting of shareholders
scheduled for April 25, 1996 and is incorporated herein by reference;
provided, however, that the subsection entitled "Report on Executive
Compensation" shall not be deemed to be incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Information concerning security ownership is included under the
heading "STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" in
the definitive Proxy Statement, dated March 13, 1996, relating to the
annual meeting of shareholders scheduled for April 25, 1996 and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning relationships and related transactions is
included under the heading "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS" in the definitive Proxy Statement, dated March 13, 1996,
relating to the annual meeting of shareholders scheduled for April 25,
1996 and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) 1. and 2. Financial Statements and Financial Statement
Schedules. Reference is made to the separate index to
consolidated financial statements and schedules contained
hereinafter.
3. Exhibits. Reference is made to the Exhibit Index contained
herein.
(b) Form 8-K
There were no reports on Form 8-K filed during the fiscal
quarter ended December 31, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated March 7, 1996
HEIN-WERNER CORPORATION
By: /s/ J. L. Dindorf
J. L. Dindorf
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
Dated March 7, 1996 By: /s/ J. L. Dindorf
J. L. Dindorf
President and Chief Executive
Officer; Director (Principal
Executive Officer, Principal
Financial Officer and Principal
Accounting Officer)
Dated March 7, 1996 By: /s/ O. A. Friend
O. A. Friend
Director
Dated March 7, 1996 By: /s/ J. S. Jones
J. S. Jones
Director
Dated March 7, 1996 By: /s/ M. J. McSweeney
M. J. McSweeney
Director
Dated March 7, 1996 By: /s/ D. J. Schuetz
D. J. Schuetz
Director
<PAGE>
Index to Consolidated Financial Statements
and Schedules for Form 10-K
The consolidated financial statements of Hein-Werner Corporation and
Subsidiaries, together with the opinion thereon of KPMG Peat Marwick LLP
dated February 20, 1996, appear in Item 8 of this report. The following
additional financial data should be read in conjunction with the financial
statements in such 1995 Annual Report to Shareholders.
Additional Financial Data
Independent Auditors' Report on Financial Statement Schedules
Schedule Submitted:
II - Valuation and qualifying accounts
All other schedules are omitted because they are either not applicable or
the required information is shown in the financial statements or the notes
thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Hein-Werner Corporation
Under date of February 20, 1996, we reported on the consolidated balance
sheets of Hein-Werner Corporation and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of operations and cash
flows for each of the years in the three-year period ended December 31,
1995, as contained in the 1995 Annual Report on Form 10-K. In connection
with our audits of the aforementioned consolidated financial statements,
we also audited the related financial statement schedule as listed in the
accompanying index. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statement schedule based on our
audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Milwaukee, Wisconsin
February 20, 1996
<PAGE>
Schedule II
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1995, 1994, and 1993
(Dollars in thousands)
Allowances for Losses(1)
Balance at Charged to Balance
beginning cost and Other(2) at end
of period expenses Additions Deduction(3) of period
1995 $2,625 $ 970 $ -- $1,126 $2,469
1994 $2,933 $ 850 $ 245 $1,403 $2,625
1993 $2,145 $1,751 $ 139 $1,102 $2,933
Inventory Valuation Reserve
Balance at Charged to Balance
beginning cost and Other at end
of period expenses Additions Deduction(4) of period
1995 $ 588 $ 576 $ -- $ 474 $ 690
1994 $ 417 $ 407 $ -- $ 236 $ 588
1993 $ 437 $ 40 $ -- $ 60 $ 417
_____________
(1) Includes allowances for customer accounts receivable and non-current
receivables.
(2) Excess fundings from guaranteed consumer notes resulting from an
interest rate spread to cover losses.
(3) Bad debts written off.
(4) Inventory written off.
<PAGE>
EXHIBIT INDEX
Exhibits
(3) Articles of Incorporation and By-Laws:
(3.1) By-Laws of the Company, as amended
through March 8, 1990 (incorporated by
reference to Exhibit 3.1 to the Company's
Form 10-Q for the quarter ended October
1, 1994)
(3.2) Restated Articles of Incorporation, as
amended through February 21, 1991
(incorporated by reference to Exhibit 3.2
to the Company's Form 10-K for the year
ended December 31, 1993)
(4) Instruments defining the rights of security holders,
including indentures:
(4.1) Revolving Loan and Security Agreement
dated October 13, 1993 by and between the
Company and Firstar Bank Milwaukee, N.A.
and Continental Bank N.A. (incorporated
by reference to Exhibit 4.1 to the
Company's Form 10-Q for the quarter ended
October 2, 1993)
(4.2) Letter dated October 27, 1994 by Firstar
Bank Milwaukee, N.A., as administrator of
the Revolving Loan and Security Agreement
dated October 13, 1993 by and between the
Registrant and Firstar Bank Milwaukee,
N.A. and BankAmerica N.A.'s Pacific
Business Credit Inc. (formerly
Continental Bank, N.A.), extending the
Revolving Loan and Security Agreement to
May 31, 1996 (incorporated by reference
to Exhibit 4.1 to the Company's Form 10-Q
for the quarter ended October 1, 1994)
(4.3) Form of Note Agreement dated as of
September 1, 1989 regarding the Company's
$8,500,000 8% Convertible Subordinated
Notes due September 1, 1999 (incorporated
by reference to Exhibit 4.2 to the
Company's Form 10-K for the year ended
December 31, 1993)
(4.4) Amendment dated November 12, 1990 to Note
Agreement dated as of September 1, 1989
Re: $8,500,000 8% Convertible
Subordinated Notes due September 1, 1999
(incorporated by reference to Exhibit 4.3
to the Company's Form 10-K for the year
ended December 31, 1993)
(4.5) Amendment No. 2 dated April 26, 1991 to
Note Agreement dated as of September 1,
1989 Re: $8,500,000 8% Convertible
Subordinated Notes due September 1, 1999
(incorporated by reference to Exhibit 4.4
to the Company's Form 10-K for the year
ended December 31, 1993)
(4.6) Amendment No. 3 dated February 3, 1992 to
Note Agreement dated as of September 1,
1989 Re: $8,500,000 8% Convertible
Subordinated Notes due September 1, 1999
(incorporated by reference to Exhibit 4.5
to the Company's Form 10-K for the year
ended December 31, 1993)
(4.7) Amendment No. 4 dated December 18, 1992
to Note Agreement dated as of September
1, 1989 Re: $8,500,000 8% Convertible
Subordinated Notes due September 1, 1999
(incorporated by reference to Exhibit 4.6
to the Company's Form 10-K for the year
ended December 31, 1993)
(4.8) Amendment No. 5 dated February 21, 1994
to Note Agreement dated as of
September 1, 1989 Re: $8,500,000 8%
Convertible Subordinated Notes due
September 1, 1999 (incorporated by
reference to Exhibit 4.7 to the Company's
Form 10-K for the year ended December 31,
1993)
(4.9) Rights Agreement by and between the
Company and Firstar Trust Company (formerly
First Wisconsin Trust Company)
(incorporated by reference to Exhibit 4.8
to the Company's Form 10-K for the year
ended December 31, 1993)
(10) Material contracts:
(10.1)* Change of Control Agreement
between the Company and Joseph L.
Dindorf dated January 27, 1984
(incorporated by reference to
Exhibit 10.1 to the Company's Form
10-K for the year ended December
31, 1993)
(10.2)* 1980 Stock Option and Performance
Share Plan (incorporated by
reference to Exhibit 1 of the
Company's Form S-8 Registration
Statement (Registration No. 2-
68020))
(10.3) Lease dated January 25, 1983
between the Company and Winvan,
Inc. (incorporated by reference to
Exhibit 10.3 to the Company's Form
10-K for the year ended December
31, 1993)
(10.4)* 1987 Stock Option and Incentive
Plan (incorporated by reference to
Exhibit 10.4 to the Company's Form
10-K for the year ended December
31, 1993)
(10.5)* 1988 Corporate Officer Incentive
Bonus Schedule (incorporated by
reference to Exhibit 10.5 to the
Company's Form 10-K for the year
ended December 31, 1993)
(11) Computation of Earnings Per Share
(21) Subsidiaries
(23) Consent of KPMG Peat Marwick LLP
(27) Financial Data Schedule
(99) Definitive Proxy Statement dated March 13, 1996
relating to the Annual Meeting of Shareholders to be
held on April 25, 1996
[Except to the extent specifically incorporated by
reference, the Company's Proxy Statement dated March
13, 1996 relating to the Annual Meeting of
Shareholders to be held on April 25, 1996 is not
deemed to be filed with the Commission as part of this
Annual Report on Form 10-K]
* A management contract or compensatory plan or arrangement.
Exhibit 11
Computation of Earnings Per Share
(Thousands, except per share data)
Three months ended Twelve months ended
December 31, December 31,
1995 1994 1995 1994
Primary:
Weighted average
common shares
outstanding . . . 2,626 2,607 2,620 2,607
Common equivalent
shares . . . . . 0 6 0 6
------ ------ ------ ------
Weighted average
common shares and
common equivalent
shares outstanding 2,626 2,613 2,620 2,613
===== ===== ====== =====
Net income
applicable to
common shares . . $ 681 $ 161 $1,013 $ 827
===== ===== ===== =====
Primary earnings per
share . . . . . . $ 0.26 $ 0.06 $ 0.39 $ 0.32
===== ===== ====== =====
Fully Diluted:
Weighted average
common shares
outstanding . . . 2,626 2,607 2,620 2,607
Common equivalent
shares . . . . . 0 0 0 6
Additional shares
assuming conversion
of subordinated
debentures . . . 717 717 717 717
------ ------ ------ ------
Fully diluted
weighted average
common shares and
common equivalent
shares outstanding 3,343 3,324 3,337 3,330
===== ===== ===== =====
Net income
applicable to
diluted common . $ 772 $ 250 $1,373 $1,187
===== ===== ===== =====
Fully diluted
earnings per share $ 0.23 $ 0.08 $ 0.41 $ 0.36
===== ===== ===== ====
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 at
December 31, 1993 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 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.
Exhibit 21
SIGNIFICANT SUBSIDIARIES OF THE REGISTRANT
The Company has seven wholly-owned subsidiaries, each of which
is included in the consolidated financial statements of the Company:
(a) Blackhawk Collision Repair Inc., a Wisconsin corporation
(b) Blackhawk Automotive Ltd., a British corporation
(c) Blackhawk GmbH, a German corporation
(d) Blackhawk Italia Srl, an Italian corporation
(e) Blackhawk S.A., a French corporation
(f) Hein-Werner Europe S.A., a Swiss corporation
(g) HWC Export Sales Corporation, a Barbados corporation
incorporated January 3, 1989, for the purpose of qualifying
as a Foreign Sales Corporation (FSC) under applicable
Internal Revenue Code provisions.
Exhibit 23
Consent of KPMG Peat Marwick LLP
The Board of Directors
Hein-Werner Corporation:
We consent to incorporation by reference in the registration statement
(No. 2-68020) on Form S-8 of Hein-Werner Corporation of our report dated
February 20, 1996, relating to the consolidated balance sheets of Hein-
Werner Corporation and subsidiaries as of December 31, 1995 and 1994, and
the related consolidated statements of operations and cash flows for each
of the years in the three-year period ended December 31, 1995, and our
report dated February 20, 1996, relating to the financial statement
schedule for each of the years in the three-year period ended December 31,
1995 which reports appear in the December 31, 1995 Annual Report on Form
10-K of Hein-Werner Corporation.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Milwaukee, Wisconsin
March 20, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31,
1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 396
<SECURITIES> 0
<RECEIVABLES> 25,019
<ALLOWANCES> 1,742
<INVENTORY> 17,271
<CURRENT-ASSETS> 41,525
<PP&E> 16,517
<DEPRECIATION> 11,163
<TOTAL-ASSETS> 49,657
<CURRENT-LIABILITIES> 20,749
<BONDS> 0
0
0
<COMMON> 2,504
<OTHER-SE> 13,641
<TOTAL-LIABILITY-AND-EQUITY> 49,657
<SALES> 73,693
<TOTAL-REVENUES> 73,693
<CGS> 46,867
<TOTAL-COSTS> 69,815
<OTHER-EXPENSES> 93
<LOSS-PROVISION> 970
<INTEREST-EXPENSE> 1,838
<INCOME-PRETAX> 977
<INCOME-TAX> (36)
<INCOME-CONTINUING> 1,013
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,013
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.41
</TABLE>
