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: June 29, 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
------------------------------------------------------
(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
----------------------------------------------------
(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
August 12, 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)
June 29, December 31,
1996 1995
--------- ------------
ASSETS
CURRENT ASSETS:
Cash $ 0 $ 396
Customers' accounts receivable 20,379 25,019
Less allowance for losses 1,545 1,742
------- -------
18,834 23,277
Inventories 17,161 17,271
Prepaid expenses and other 860 316
Income tax benefit receivable 16 265
------- -------
TOTAL CURRENT ASSETS 36,871 41,525
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land 90 90
Buildings 3,032 3,023
Machinery and equipment 13,769 13,404
------- -------
16,891 16,517
Less accumulated depreciation 11,621 11,163
------- -------
NET PROPERTY, PLANT AND EQUIPMENT 5,270 5,354
OTHER ASSETS:
Patents, net of accumulated amortization
of $526 for 1996 and $517 for 1995 23 32
Excess cost over net assets of
acquired companies, net of accumulated
amortization of $825 for 1996 and
$807 for 1995 1,457 1,475
Receivables, net of allowances of
$590 for 1996 and $727 for 1995 682 927
Other 330 344
------- -------
TOTAL OTHER ASSETS 2,492 2,778
------- -------
$ 44,633 $ 49,657
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 4,099 $ 4,209
Current installments of long-term debt 1,501 1,470
Accounts payable 3,487 9,231
Accrued payroll and related expenses 2,598 2,857
Accrued expenses related to a disposed
business 121 182
Accrued expenses, other 3,118 2,800
-------- --------
TOTAL CURRENT LIABILITIES 14,924 20,749
Long-term debt, excluding
current installments 11,192 10,902
Liabilities related to a
disposed business 407 491
Other 1,192 1,370
-------- --------
TOTAL LIABILITIES 27,715 33,512
STOCKHOLDERS' EQUITY:
Common stock of $1 par value per share
Authorized: 20,000,000 shares;
Issued: 2,629,320 shares at June 29, 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 1,989 1,308
Cumulative translation adjustments 357 827
-------- --------
16,970 16,197
Less cost of common shares in treasury -
2,957 shares at June 29, 1996 and
December 31, 1995 52 52
-------- --------
TOTAL STOCKHOLDERS' EQUITY 16,918 16,145
--------- ---------
$ 44,633 $ 49,657
========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Operations
($000) (except per share data) - Unaudited
Three months ended Six months ended
------------------- ------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
-------- ------- ------- -------
Net sales $ 17,870 $ 17,555 $ 35,494 $ 36,067
Cost of sales 11,506 11,245 22,477 23,031
-------- ------- ------- -------
Gross profit 6,364 6,310 13,017 13,036
Selling, engineering and
administrative expenses 5,384 5,504 10,857 11,307
-------- ------- ------- -------
Operating profit 980 806 2,160 1,729
Interest expense 415 456 835 940
Other (income) expense, net (21) 40 (58) 38
-------- ------- ------- -------
Income before income taxes 586 310 1,383 751
Income tax expense 104 18 121 37
-------- ------- ------- -------
NET INCOME $ 482 $ 292 $ 1,262 $ 714
======== ======== ======== ========
Primary earnings per share $ 0.18 $ 0.11 $ 0.48 $ 0.27
======== ======== ======== ========
Fully diluted earnings
per share $ 0.17 $ 0.11 $ 0.43 $ 0.27
======== ======== ======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Cash Flows - Unaudited
($000)
Six months ended
----------------------
June 29, July 1,
1996 1995
-------- --------
CASH FROM OPERATING ACTIVITIES:
Net income $ 1,262 $ 714
Adjustments to net income for expenses
(gains) not affecting cash:
Depreciation and amortization 799 635
Bad debt expenses 180 72
Gain on disposal of property,
plant and equipment (22) (7)
Increase (decrease) in cash due to changes
in:
Accounts receivable 4,263 (1,174)
Inventories 110 (834)
Prepaid expenses and other assets 18 17
Accounts payable (5,744) 145
Accrued expenses and other liabilities (264) (464)
-------- --------
Cash provided by (used in) operating
activities............................ 602 (896)
CASH USED IN INVESTING ACTIVITIES:
Capital expenditures..................... (739) (558)
CASH FROM FINANCING ACTIVITIES:
Increase (decrease) in notes payable (110) 535
Proceeds from long-term debt 321 100
Repayments of long-term debt -- (448)
Proceeds from the issuance of common
shares -- 94
-------- --------
Cash provided by (used in)
financing activities................... 211 281
Cumulative translation adjustments........... (470) 797
-------- --------
TOTAL CASH PROVIDED (USED) (396) (376)
CASH - BEGINNING OF THE PERIOD 396 466
-------- --------
CASH - END OF THE PERIOD $ 0 $ 90
======== ========
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 for 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)
6/29/96 12/31/95
-----------------------------------------------------------------
Raw Material $ 5,546 $ 5,837
Work-in-Process 1,081 1,125
Finished Goods 10,534 10,309
------------------------------------------------------------------
$17,161 $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 of up to six years and
expire in decreasing amounts through 2000. The amount guaranteed to each
institution is contractually limited to a portion of the amount financed
in a given year. The notes are collateralized by the equipment financed.
Proceeds from the resale of recovered equipment have generally been 80% to
90% of repurchased notes.
The maximum credit risk to the Company at June 29, 1996 was approximately
$2,800,000.
B) Litigation
The Company is involved in legal proceedings, claims and administrative
actions arising in the normal course of business. In the opinion of
management, the Company's liability, if any, under any pending litigation
or administrative proceeding would not materially affect its financial
condition or operations.
C) Environmental Claims
From time to time the Company is identified as a potentially responsible
party in environmental matters, primarily related to waste disposal sites,
which contain residuals from the manufacturing process that were
previously disposed of by the Company in accordance with applicable
regulations in effect at the time of disposal. Materials generated by the
Company at 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, claim, or investigation, 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 second quarter of 1996 were $17.9 million, up 1.8% over
the same period in 1995. Sales originating in North America were up 8.0%
from 1995 levels to $12.1 million for the quarter compared to $11.2
million in the same period a year earlier. European sales for the second
quarter of 1996 were $5.8 million, a 7.9% decline from the $6.3 million
recorded in the second quarter of 1995.
Net sales for the six months ended June 29, 1996 were $35.5 million
compared to $36.1 million for the 1995 period, a decrease of 1.6%. Net
sales originating in North America rose 3.1% while European net sales
declined 10.5%.
Gross profit margins in North America were 30.5% for the second quarter of
1996 compared to 28.1% for the same period in 1995. Margins in Europe
were 46.2% for the second quarter of 1996 compared to 49.8% for the same
period in 1995. Consolidated gross profit margins were 35.6% for the
second quarter of 1996 compared to 35.9% for the same period in 1995. The
six month results showed an improvement in 1996 with 36.7% gross profit
margins compared to 36.1% for the same period in 1995.
Operating expenses as a percent of net sales decreased from 31.3% for the
first six months of 1995 to 30.6% for the comparable period in 1996, and
from 31.4% for the second quarter of 1995 to 30.1% for the second quarter
of 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.
Interest expense declined 9.0% for the three months ended June 29, 1996
versus the comparable period in 1995 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 4: Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of shareholders on April
25, 1996. The shareholders were asked to vote on the
selection of one director and to ratify the selection of
auditors. Mr. Friend was elected as director to serve until
the annual meeting in 1999 and until his successor is duly
elected and qualified pursuant to the following vote:
2,377,850 votes cast FOR, -0- votes AGAINST, and 17,677
ABSTENTIONS. With respect to the selection of auditors, KPMG
Peat Marwick LLP was ratified as the Company's auditors for
the 1996 fiscal year pursuant to the following vote:
2,374,582 FOR, 12,846 AGAINST, and 8,099 ABSTENTIONS.
ITEM 6: (a) Exhibits
(4) Letter dated June 25, 1996 by Firstar Bank
Milwaukee, N.A., as administrator of the Revolving
Loan and Security Agreement dated October 13, 1993
by and between the Company and Firstar Bank
Milwaukee, N.A. amending and extending the agreement
through June 30, 1999.
(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 June 29, 1996.
<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)
August 13, 1996
---------------
Date
<PAGE>
Index of Exhibits
Exhibit No. Description
----------- ----------------------------------------------------
(4) Letter dated June 25, 1996 by Firstar Bank Milwaukee,
N.A., as administrator of the Revolving Loan and Security
Agreement dated October 13, 1993 by and between the
Company and Firstar Bank Milwaukee, N.A. amending and
extending the agreement through June 30, 1999.
(11) Computation of Earnings Per Share
(27) Financial Data Schedule
Exhibit 4
FIRSTAR BANK MILWAUKEE, N.A.
Firstar Financial Services
Michael A. Hintz,
Vice President
June 25, 1996
Hein-Werner Corporation
2120 Pewaukee Road
Waukesha, WI 53187
Attn: Mr. Joseph Dindorf, President
Gentlemen:
Please refer to the Revolving Loan and Security Agreement by and between
Firstar Financial Services, a division of Firstar Bank Milwaukee, N.A.
("FFS") and Hein-Werner Corporation, dated October 13, 1993, with
amendments thereto ("Agreement"). This letter shall serve to further
amend the Agreement as follows:
Effective July 1, 1996, the fourth sentence of subsection (a) of Section
1. LOANS AND SECURITY INTEREST shall be amended to read:
"The interest rate hereunder shall be computed at an annual rate
equal to .9 percent plus the rate announced from time to time by
Lender as its 'prime rate,' which may or may not be the best rate
available at said bank. The interest rate shall reduce by 1/4
percent in the event Debtor's North American operations show a
$500,000.090 profit during 1996 (with said reduction effective the
first day of the month following Lender's receipt of Debtor's
December 31, 1996 financial statements showing an overall profit)
and reduce by another 1/4 percent at such time as Massachusetts
Mutual agrees in writing to defer the first debt installment due
from Debtor until January, 1998 or the same is otherwise converted
from debt to equity. The interest rate shall increase by 1/4
percent if Debtor's financial statements for the subsequent year
show a consolidated loss, but shall not be increased above .9
percent plus the rate announced from time to time by Lender as its
'prime rate,' which may or may not be the best rate available at
said bank."
The second sentence of subsection (a) of Section 9, TERMINATION shall be
amended to read:
"While this Agreement is in effect, Debtor agrees to borrow
funds and pay, at minimum, to Lender the Minimum Monthly
Charge specified in Section 1. LOANS AND SECURITY
INTEREST of this Agreement until June 30, 1999, and from year
to year thereafter, unless Debtor notifies Lender that it does
not intend to extend the Agreement for another year by giving
Lender written notice at least ninety (90) days prior to the
expiration of the then existing term of this Agreement."
In all other respects, the Agreement shall remain unchanged and in full
force and effect.
The foregoing amendments are contingent upon the approval of the
participant in this loan: Mercantile Business Credit, Inc.
If the above agrees with your understanding and approval, please indicate
same by signing the original of this letter and returning it to the
undersigned. (NOTE: If you return executed documents via facsimile, you
must also return the original executed documents. You agree FFS may rely
on facsimile signatures for all purposes and without any liability to
you.) If the preconditions (if any) to this amendment are not satisfied
or if this amendment letter is not executed and returned to FFS on or
before July 8, 1996, then the proposed amendments herein may be withdrawn
by FFS by written notice to you. The amendments set forth herein and any
accompanying documents will be deemed effective and accepted in Milwaukee,
Wisconsin, upon our receipt of the executed documents.
Sincerely,
Michael A. Hintz
Division Vice President
mkf
Enclosure
cc: Nolan H. Zadra
Agreed to this 28 day of June, 1996.
HEIN-WERNER CORPORATION
By: J. L. Dindorf
Title President and C.E.O.
The undersigned guarantors of the indebtedness of Hein-Werner Corporation
hereby consent to the foregoing amendments and confirm that their
guaranties remain in full force and effect.
BLACKHAWK COLLISION REPAIR, INC.
By: J. L. Dindorf
Title President and C.E.O.
HEIN-WERNER OF CANADA, LTD.
By: J. L. Dindorf
Title President and C.E.O.
HEIN-WERNER EXPORT CORP.
By: J. L. Dindorf
Title President and C.E.O.
Exhibit 11
Computation of Earnings per Share
($000 except per share data)
Three months ended Six months ended
--------------------- ----------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
--------------------- ----------------
PRIMARY:
Wtd avg common shares outstanding 2,626 2,621 2,626 2,613
Common equivalent shares 41 10 29 3
--------------------- ----------------
Wtd avg common shares and common
equivalent shares outstanding 2,667 2,631 2,655 2,616
===================== ================
Net income applicable to
common shares $ 482 292 $ 1,262 714
===================== ================
Primary earnings per share $ 0.18 0.11 $ 0.48 0.27
===================== ================
FULLY DILUTED:
Wtd avg common shares outstanding 2,626 2,621 2,626 2,613
Common equivalent shares 45 11 45 11
Additional shares assuming conversion
of subordinated debentures 717 717 717 717
--------------------- ----------------
Fully diluted wtd avg common
shares and common equivalent
shares outstanding 3,388 3,349 3,388 3,341
===================== ================
Net income for diluted common shares $ 572 382 $ 1,442 894
===================== ================
Fully diluted earnings per share $ 0.17 0.11 $ 0.43 0.27
===================== ================
----------------------------------------------
Common shares have been adjusted to give effect to the 5% stock dividend
paid January 26, 1996.
The $4,500,0000 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>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF HEIN-WERNER CORPORATION AS OF AND
FOR THE SIX MONTHS ENDED JUNE 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-29-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 20,379
<ALLOWANCES> 1,545
<INVENTORY> 17,161
<CURRENT-ASSETS> 36,871
<PP&E> 16,891
<DEPRECIATION> 11,621
<TOTAL-ASSETS> 44,633
<CURRENT-LIABILITIES> 14,924
<BONDS> 0
0
0
<COMMON> 2,629
<OTHER-SE> 14,341
<TOTAL-LIABILITY-AND-EQUITY> 44,633
<SALES> 35,494
<TOTAL-REVENUES> 35,494
<CGS> 22,477
<TOTAL-COSTS> 33,334
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 835
<INCOME-PRETAX> 1,383
<INCOME-TAX> 121
<INCOME-CONTINUING> 1,262
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,262
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.43
</TABLE>
