SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the Quarterly Period Ended: March 29, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __________ to
__________.
Commission File Number 1-2725
HEIN-WERNER CORPORATION
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(Exact name of registrant as specified in its charter)
WISCONSIN 39-0340430
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
2120 Pewaukee Road, Waukesha, Wisconsin 53188-2404
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(Address of principal executive offices) (Zip Code)
(414) 542-6611
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Number of shares of $1 par value common stock issued and outstanding at
May 13, 1997:
Issued 2,760,489
Treasury 3,259
----------
Outstanding 2,757,230
==========
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - Unaudited
($000)
March 29, December 31,
1997 1996
-------------- ------------
ASSETS
CURRENT ASSETS:
Cash $ 0 $ 0
Accounts receivable 18,996 20,445
Less allowance for losses 1,627 1,651
--------- --------
17,369 18,794
Inventories 16,397 17,415
Prepaid expenses and other 638 881
--------- ---------
TOTAL CURRENT ASSETS 34,404 37,090
PROPERTY, PLANT AND EQUIPMENT,
AT COST:
Land 90 90
Buildings 3,187 3,125
Machinery and equipment 14,800 14,361
--------- ---------
18,077 17,576
Less accumulated depreciation 12,522 12,125
--------- ---------
NET PROPERTY, PLANT AND
EQUIPMENT 5,555 5,451
OTHER ASSETS:
Patents and trademarks 1,229 1,359
Goodwill 2,282 2,282
--------- ---------
3,511 3,641
Less accumulated amortization 1,491 1,467
--------- ---------
Net intangibles 2,020 2,174
Noncurrent notes receivable 1,088 1,159
Less allowance for uncollectible
notes 500 500
--------- ---------
Net receivables 588 659
Other 215 224
--------- ---------
TOTAL OTHER ASSETS 2,823 3,057
--------- ---------
$ 42,782 $ 45,598
========= =========
See accompanying notes to interim consolidated financial statements.
<PAGE>
Consolidated Balance Sheets - Unaudited
($000)
March 29, December 31,
1997 1996
-------------- -------------
LIABILITIES AND STOCKHOLDERS'
EQUITY CURRENT LIABILITIES:
Notes payable $ 2,618 $ 3,281
Current installments of
long-term debt 1,780 1,856
Accounts payable 3,763 4,873
Accrued payroll and related
expenses 1,678 2,199
Accrued commissions 897 1,055
Other accrued expenses 2,595 2,933
--------- ---------
TOTAL CURRENT LIABILITIES 13,331 16,197
Long-term debt, excluding
current installments 10,549 10,161
Other long-term liabilities 1,545 1,304
--------- ---------
TOTAL LIABILITIES 25,425 27,662
STOCKHOLDERS' EQUITY:
Common stock of $1 par value
per share Authorized:
20,000,000 shares; Issued:
2,760,489 shares at March 29,
1997 and 2,629,320 at
December 31, 1996 2,760 2,629
Capital in excess of par value 12,732 11,995
Retained earnings 2,337 2,921
Cumulative translation
adjustments (420) 443
--------- ---------
17,409 17,988
Less cost of common shares
in treasury - 3,259 shares at
March 29, 1997 and 3,104 shares
at December 31, 1996 52 52
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 17,357 17,936
--------- ---------
$ 42,782 $ 45,598
========= =========
See accompanying notes to interim consolidated financial statements.
<PAGE>
Consolidated Statements of Operations
($000) (except per share data) - Unaudited
Three months ended
March 29, March 30,
1997 1996
--------- ---------
Net sales $ 16,124 $ 17,623
Cost of goods sold 10,250 10,970
-------- --------
Gross profit 5,874 6,653
Selling, general and administrative
expenses 5,121 5,473
-------- --------
Operating profit 753 1,180
Interest expense - net 319 420
Other (income) expense - net 10 (37)
-------- --------
Income before income taxes 424 797
Income tax expense 154 17
NET INCOME $ 270 $ 780
========== =========
Earnings per share - primary $ 0.10 $ 0.28
========== =========
Earnings per share - fully diluted $ 0.10 $ 0.25
========== =========
See accompanying notes to interim consolidated financial statements.
<PAGE>
Consolidated Statements of Cash Flows - Unaudited
($000)
Three months ended
-----------------------
March 29, March 30,
1997 1996
--------- ---------
CASH FROM OPERATING ACTIVITIES:
Net income $ 270 $ 780
Adjustments to net income for
expenses (gains) not affecting
cash:
Depreciation and amortization 310 205
Bad debt expenses 14 106
Increase (decrease) in cash due to
changes in:
Accounts receivable 1,411 3,906
Inventories 1,018 (1,498)
Prepaid expenses and other assets 452 110
Accounts payable (1,110) (3,482)
Accrued expenses and other
liabilities (776) (378)
--------- ---------
Cash provided by (used in)
operating activities................ 1,589 (251)
CASH USED IN INVESTING ACTIVITIES:
Capital expenditures.................. (501) (210)
CASH FROM FINANCING ACTIVITIES:
Increase (decrease) in notes payable (663) (620)
Proceeds from long-term debt 312 816
--------- --------
Cash provided by (used in)
financing activities.................. (351) 196
Cumulative translation adjustments...... (737) (209)
--------- --------
TOTAL CASH PROVIDED (USED) 0 (474)
CASH - BEGINNING OF THE PERIOD 0 396
--------- --------
CASH - END OF THE PERIOD $ 0 $ (78)
========== =========
See accompanying notes to interim 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 are normal and recurring. All
items stated herein are subject to year-end audit.
INVENTORY:
=========================================================================
(Amounts in thousands) 3/29/97 12/31/96
-------------------------------------------------------------------------
Raw Material $ 5,423 $ 5,574
Work-in-Process 1,141 1,172
Finished Goods 9,833 10,669
-------------------------------------------------------------------------
$ 16,397 $ 17,415
==========================================================================
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 March 29, 1997 was approximately
$2,199,000.
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.
SUBSEQUENT EVENT:
On April 9, 1997, the Company entered into an agreement for the sale of
substantially all of the business and assets, and the transfer of certain
of the liabilities, of its Great Bend Industries Division to Kaydon
Acquisition VIII, Inc., a wholly-owned subsidiary of Kaydon Corporation.
Under the terms of the agreement, the purchase price is $22 million
payable in cash at closing (with $2 million thereof being paid into an
escrow), plus or minus any change in the net asset value of the division
between December 31, 1996 and the closing. Consummation of the
transaction, which is expected to occur in May 1997, is subject to
customary closing conditions, including the expiration of the applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
Selected unaudited financial information of the Great Bend Industries
Division is as follows:
March 29, March 30,
1997 1996
----------- -----------
Net sales $ 4,305 $ 5,885
Gross profit 848 1,315
Net income 195 610
March 29, December 31,
1997 1996
----------- -----------
Current assets $ 6,851 $ 5,752
Noncurrent assets 2,275 1,990
Current liabilities 1,393 1,277
Noncurrent liabilities 727 605
ITEM 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Net sales for the first quarter of 1997 were $16.1 million, compared with
$17.6 million for the same period in 1996. Sales originating in North
America were $11.1 million for the first quarter of 1997 compared to $12.3
million in the same period a year earlier. European sales for the first
quarter of 1997 were $5.0 million versus the $5.3 million recorded in the
first quarter of 1996.
Gross profit margins in North America were 32.8% for the first quarter of
1997 compared to 32.6% for the same period in 1996. Margins in Europe
were 44.4% for the first quarter of 1997 compared to 49.7% for the same
period in 1996. Consolidated gross profit margins were 36.4% for the
first quarter of 1997 compared with 37.8% for the same period in 1996.
Operating expenses as a percent of net sales were 31.8% for the first
quarter of 1997 compared to 31.1% for the same period in 1996.
Interest expense declined 24.0% for the three months ended March 29, 1997
versus the comparable period in 1996 as a result of reduced interest rates
and debt levels.
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.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6: (a) Exhibits
(11) Computation of Earnings Per Share
(27) Financial Data Schedule
(b) Form 8-K
There were no reports on Form 8-K filed for the three
months ended March 29, 1997.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HEIN-WERNER CORPORATION
("Registrant")
/s/Mary L. Kielich
--------------------------------
Corporate Controller
Assistant Treasurer
(Principal Financial Officer)
May 13, 1997
-----------------
Date
<PAGE>
Index of Exhibits
Exhibit No. Description
----------- ----------------------------------------------
(11) Computation of Earnings Per Share
(27) Financial Data Schedule
Exhibit 11
Computation of Earnings per Share
($000 except per share data)
Three months ended
March 29, March 30,
1997 1996
PRIMARY:
Weighted average common shares outstanding 2,760 2,757
Common equivalent shares 59 7
------- -------
Weighted average common shares and common
equivalent shares outstanding 2,819 2,764
------- -------
Net income applicable to common shares $ 270 $ 780
------- -------
Primary earnings per share $ 0.10 $ 0.28
------- -------
FULLY DILUTED:
Weighted average common shares outstanding 2,760 2,757
Common equivalent shares 59 19
Additional shares assuming conversion of
subordinated debentures 564 753
------- -------
Fully diluted weighted average common
shares and common equivalent shares
outstanding 3,383 3,529
------- -------
Net income for diluted common shares $ 322 $ 869
------- -------
Fully diluted earnings per share $ 0.10 $ 0.25
------- -------
---------------------------------
Common shares have been adjusted to give effect to the 5% stock dividend
paid January 24, 1997.
The 8% Convertible Subordinated Notes of $3,375,000 at March 29, 1997 and
$4,500,000 at March 30, 1996, are convertible to common shares at a price
of $5.98 per share after giving effect to the stock dividend paid January
24, 1997.
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 AND THE COMPUTATION
OF EARNINGS PER SHARE (EXHIBIT 11) AS OF AND FOR THE THREE MONTHS ENDED MARCH
29, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS AND COMPUTATION.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-29-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 18,996
<ALLOWANCES> 1,627
<INVENTORY> 16,397
<CURRENT-ASSETS> 34,404
<PP&E> 18,077
<DEPRECIATION> 12,522
<TOTAL-ASSETS> 42,782
<CURRENT-LIABILITIES> 13,331
<BONDS> 0
0
0
<COMMON> 2,760
<OTHER-SE> 14,597
<TOTAL-LIABILITY-AND-EQUITY> 42,782
<SALES> 16,124
<TOTAL-REVENUES> 16,124
<CGS> 10,250
<TOTAL-COSTS> 15,371
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 319
<INCOME-PRETAX> 424
<INCOME-TAX> 154
<INCOME-CONTINUING> 270
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 270
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
