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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 [FEE REQUIRED]
For the fiscal year ended September 30, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from Not Applicable to Not Applicable
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Commission file number 0-147
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HICKOK INCORPORATED
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(Exact name of registrant as specified in its charter)
Ohio 34-0288470
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10514 Dupont Avenue, Cleveland, Ohio 44108
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 541-8060
-----------------------
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Shares, $1.00 par value
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(Title of Class)
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
--- ---
As of December 14, 1995, the Registrant had 737,984 voting shares of
Class A Common Stock outstanding and 454,866 voting shares of Class B Common
Stock outstanding. As of such date, non-affiliates held 643,882 shares of
Class A Common Stock and 233,098 shares of Class B Common Stock. As of
December 14, 1995, based on the mean ($17.25 per share) between the bid and
asked prices in the over-the-counter market (most recent bid and asked prices
being as of December 14, 1995), the aggregate market value of the Class A Common
Stock held by such non-affiliates was approximately $12,730,224. There is no
trading market in the shares of Class B Common Stock.
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. /X/
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Documents Incorporated by Reference:
Document Incorporated by
Part of Form 10-K Reference
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Part III (Items 10, Portions of the Registrant's Definitive
11, 12 and 13) Proxy Statement to be used in connection
with its Annual Meeting of Shareholders
to be held on February 21, 1996.
Except as otherwise stated, the information contained in this Form 10-
K is as of September 30, 1995.
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Hickok Incorporated was organized in 1915 as an Ohio corporation, and
first offered its securities to the public in 1959. Except as otherwise stated,
the terms "Company" or "Hickok" as used herein mean Hickok Incorporated and its
subsidiary. Previously inactive subsidiaries were dissolved during fiscal 1993.
In February 1995 the shareholders approved a change in the Company's
name to Hickok Incorporated from The Hickok Electrical Instrument Company, which
was not representative of the Company's current products and markets and may
have conveyed an inaccurate image of the Company to customers, prospects and
investors. For those reasons the name change was made.
The Company is primarily involved in providing products and services
to original equipment manufacturers within the transportation industry. The
major market served is automotive. Other markets with which the Company is
involved include aircraft, locomotive and marine markets.
Regarding the products the Company supplies to the transportation
industry, the Company for many years has developed and produced precision
indicating instruments for aircraft, locomotive and general industrial
applications. In recent years the Company has adapted this expertise to become
a leader in the development of electronic diagnostic equipment for the
automotive market. Production of diagnostic test equipment is now one of the
Company's largest product classes.
In fiscal 1994 the Company added a new product for the automotive
market as part of a strategic program to expand both its customer base and its
product line using its existing expertise. In February, 1994 the Company
acquired the fastening systems business from Allen-Bradley Company, Inc. The
new business provides computerized equipment to control tools that tighten
threaded fasteners in an automotive assembly plant to provide high quality
threading applications. General Motors is the major customer for fastening
systems products. The fastening systems business was fully integrated into
Hickok's operations by June, 1994. This product has become a major part of
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the Company's total business.
In addition to its products, the Company also provides various
services to the transportation industry generally and to the automotive market
in particular. These services have become a very important component of the
Company's business and were developed because of the Company's close working
relationship with Ford Motor Company in the development of diagnostic tools to
service engines and other electronic systems in Ford automobiles. The Company
develops software for its own diagnostic tools used by Ford and assists in
supporting the overall Ford diagnostic system. This support is primarily in the
areas of software specifications and technical writing for the engine, body
chassis and electrical systems. In addition, the Company supports the
development of data bases used to track information generated from Ford's
diagnostic system. Finally, the Company provides telephone hotline information
to assist technicians who diagnose Ford vehicles in the dealership.
The Company also provides technical training to automotive technicians
and engineers relating to the use of diagnostic equipment on automobiles and to
the various components themselves. This training is provided both in the
Company's classroom facility and at customer sites and was implemented largely
as a result of the Company's involvement with Ford Motor Company.
Finally, in the service area, the Company is using its in-house
expertise to provide publishing services to its automotive customers. Documents
such as training manuals, sales and product brochures and other items are
designed and produced. This service was first offered three years ago and its
growth has been modest to date.
The Company's operations are currently concentrated in the United
States. Sales are primarily to domestic customers although the Company also
makes sales to international customers on a world-wide basis. Because its
international presence is growing, the Company has established international
representation in the sales and service area in fiscal 1995.
DESCRIPTION OF BUSINESS
PRODUCTS
The Company operates in one major industry segment: instrumentation
and controls products for the transportation industry.
The Company designs, manufactures and markets instruments used to
diagnose problems and to support the servicing of automotive electronic systems.
These products are sold primarily to original equipment manufacturers but also
to the aftermarket using jobbers and wholesalers. The Company has increased its
marketing efforts in order to expand the aftermarket business. Currently the
aftermarket accounts for less than 5% of automotive diagnostic tool sales.
As a result of the acquisition of the fastening systems business in
February, 1994, the Company designs and manufactures instrumentation used to
monitor and control pneumatic and electric tools that tighten threaded fasteners
so as to provide high quality threading applications. The
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equipment is sold to original equipment manufacturers in the automotive market.
The Company develops software and designs systems that are used to
develop diagnostic strategies involving automotive electronic systems. The
Company also provides automotive service and engineering technicians with
training in servicing electronic systems. Leased facilities in Lincoln Park,
Michigan are the headquarters for the training activities. Publishing services
provided to automotive customers are also performed in Lincoln Park.
In addition, the Company specializes in the development, manufacture
and marketing of precision indicating instruments used in aircraft, locomotives
and other original equipment applications. Within the aircraft market, the
Company sells its instruments primarily to manufacturers of business and
pleasure aircraft.
Revenue by class of product/service is shown in the table below.
<TABLE>
<CAPTION>
1995 1994 1993
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<S> <C> <C> <C>
Automotive Diagnostic Instruments $ 10,476,000 $ 10,789,000 $ 11,024,000
Automotive Diagnostic Service/
Training 5,749,000 6,337,000 7,690,000
Fastening Systems 10,968,000 2,652,000 -
Other product classes 2,191,000 2,493,000 2,162,000
------------ ------------ ------------
$ 29,384,000 $ 22,491,000 $ 20,876,000
</TABLE>
New Products/Services
A major new development in fiscal 1995 was the growth of the
fastening systems product which was added by way of acquisition in mid-fiscal
1994. The acquisition was a strategic move to diversify both the customer base
and the product line using existing engineering and manufacturing expertise.
Fastening systems accounted for $10,968,000 in revenue in fiscal 1995 due to the
sale of several large networked systems to General Motors Corporation. However,
a larger portion of the market for fastening controls is based on the use of
independent single tool controls. Hickok began developing a new line of
controls for this market in fiscal 1995 and expects to introduce its single tool
control product called ProSpec 1000 in mid-fiscal 1996.
There were several new market and product developments in fiscal 1995
within the diagnostic instrument area. The New Generation STAR tool (NGS) was
introduced for the first time to Ford dealers in Australia, South America and
South Africa. In fiscal 1996 the NGS unit is expected to be introduced to
several countries in Europe, Asia and the Far East. A new product, the End-of-
Line (EOL) unit was installed at a Ford and Mazda assembly plant in Mexico and
Michigan respectively. The EOL unit performs the final test of an automobile's
various electronic systems as the vehicle exits the assembly line. A similar
unit is being developed for at least one other vehicle manufacturer. Another
new product under development is an electrical vehicle controller to be used by
an OEM currently involved in building several thousand electric vehicles for
fleet use. These controllers are expected to be available in fiscal 1996.
Finally, a secondary ignition analyzer for large, non-automotive internal
combustion engine users was
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introduced in late fiscal 1995. Orders for the Watchdog 2000 Secondary Ignition
Monitor are expected in fiscal 1996. A smaller, portable version will be
developed in fiscal 1996 for use as a periodic maintenance tool for similar
though smaller engines.
Development of the analog/digital indicator for the aircraft market
continued in fiscal 1995 and orders for the product are expected in early fiscal
1996. Acceptance of this product in the industry should allow for significant
market expansion of the indicator product class. Another new indicator under
development is the solid state indicator which uses an electronic liquid crystal
device to display data. The product's long life and light weight make it
attractive. This product should be available in about a year.
New product developments in fiscal 1994 included the addition to the
NGS unit of communication capability with the electronic systems contained in
General Motors vehicles. In addition, direct GM capability was added to the
Transmission Tester. This was done to enhance these products in the
aftermarket. Other product enhancements include developing anti-lock brake and
traction control cables to allow for diagnosis of those systems and adding
printer capability to the Fuel Injection Regular System Tester (FIRST).
Preliminary development continued on diagnostic tools for use on electric
vehicles and initial development began on secondary ignition analyzer for large
non-automotive, internal combustion engine users.
New product development efforts during fiscal 1993 included
establishment of the Advanced Training Group whose focus is on training of
engineering personnel on Ford Electronic Engine Controls (EEC) Systems and on
Ford's Service Bay Diagnostic System. The Advanced Training Group operates out
of a leased 20,000 sq. ft. facility in Lincoln Park, Michigan. In May 1993
Hickok Creative Services was established, offering a technical publications
capability to automotive customers. It had no revenue in fiscal 1993.
Continuing development on the Company's New Generation STAR (NGS) resulted in
the issuance of two additional software upgrades for Ford vehicles and several
cable adapters. In addition, as part of the original plans for NGS, all units
were updated by installation of circuitry enabling the unit to communicate with
the newly mandated On-Board Diagnostics (OBD) II communications link to all
manufacturers' engine control computers. A tester for automatic diagnosis of
both distributor and distributorless ignition systems, which was partially
developed in fiscal 1992, was completed in fiscal 1993 and sold to Ford
dealerships.
SOURCES AND AVAILABILITY OF RAW MATERIALS
Raw materials essential to the business are acquired primarily from a
large number of U. S. manufacturers within the electronic components industry.
Materials include transistors, integrated circuits, resistors, capacitors,
switches, potentiometers and fabricated metal or plastic parts. In general, the
required materials are available, if ordered with sufficient lead times, from
multiple sources at current prices.
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IMPORTANCE OF PATENTS, LICENSES, FRANCHISES, TRADEMARKS AND CONCESSIONS
The Company presently owns certain patents and patent applications
which relate to certain of its products. It does not consider that any one
patent or group of patents is material to the conduct of its business as a whole
and believes that its position in the industry is dependent upon its present
level of engineering skill, research, production techniques and service rather
than upon its ownership of patents. The Company does not have any material
licenses, trademarks, franchises or concessions.
SEASONALITY
The Company does not believe there is any significant seasonality to
its business, except to the extent that shipments of certain products are
dependent upon customer release dates. The Company's operating results often
fluctuate widely from quarter to quarter. The primary reason for such quarterly
fluctuations is the effect of the Company's automotive diagnostic test equipment
business, since orders for such equipment frequently are relatively large and
subject to customer release. In recent years, the fourth quarter of each fiscal
year has accounted for a large portion of the Company's net sales. However, the
Company does not believe that the importance of the fourth quarter is due to
seasonal factors, but instead to the timing of customer release of orders.
PRACTICES RELATIVE TO WORKING CAPITAL ITEMS
The nature of the Company's business requires it to maintain
sufficient levels of inventory to meet rapid delivery requirements of customers.
The Company provides its customers with payment terms prevalent in the industry.
DEPENDENCE UPON SINGLE OR FEW CUSTOMERS
During the fiscal year ended September 30, 1995, sales to Ford and
General Motors Corporation accounted for approximately 50% and 37% respectively
of the consolidated sales of the Company. This compares with 64% and 12%
respectively during the prior fiscal year. The Company has no long-term
contractual relationships with either Ford or General Motors, and the loss of
business from either one without a corresponding increase in business from new
or existing customers would have a material adverse effect on the Company.
BACKLOG
At September 30, 1995, the unshipped customer order backlog totaled
$4,337,000 in contrast to $9,385,000 at September 30, 1994 and $4,271,000 at
September 30, 1993. The decrease in fiscal 1995 relative to fiscal 1994 is
largely due to orders for fastening systems products. This business was
acquired in mid-fiscal 1994 and an extraordinarily large order for $5.5 million
was booked late in the year. At the end of fiscal 1995 backlog for fastening
products was $1.1 million, a more typical backlog level for this product class.
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GOVERNMENT CONTRACT RENEGOTIATION
No major portion of the business is open to renegotiation of profits
or termination of contracts or subcontracts at the election of the Government.
COMPETITIVE CONDITIONS
The Company is engaged in a highly competitive industry and faces
competition from domestic and international firms. Several of the companies
with which the Company competes have greater financial resources and larger
sales organizations than the Company. Competition with respect to the Company's
diagnostic tool business arises from the existence of a number of other
significant manufacturers in the field, such as SPX Corporation, Hewlett-Packard
and Vetronix which dominate the total available market in terms of total sales.
With regard to fastening systems products, competition comes from both companies
that make the equipment to control fastening tools and from the tool makers
themselves. Specific names include Beta Tech, Atlas Copco, and Stanley. Hickok
is a major supplier in the high end market consisting of multi-spindle fastening
system control systems. The instrumentation industry is composed primarily of
companies which specialize in the production of particular items as opposed to a
full line of instruments. The Company believes that its competitive position in
this field should be gauged in the area of smaller specialized products, an area
in which the Company has operated since 1915 and in which the Company has
established itself competitively by offering high-quality, high-performance
products in comparison to high-volume, mass-produced items.
RESEARCH AND DEVELOPMENT ACTIVITIES
The Company expensed when incurred product research and development
costs of $3,550,450 in 1995, $2,145,073 in 1994 and $2,018,892 in 1993. These
expenditures included engineering product support, support for development of
diagnostic system manuals and research and development for fastening systems
products.
COMPLIANCE WITH ENVIRONMENTAL PROVISIONS
The Company's capital expenditures, earnings and competitive position
are not materially affected by compliance with federal, state and local
environmental provisions which have been enacted or adopted to regulate the
distribution of materials into the environment.
NUMBER OF PERSONS EMPLOYED
Total employment by the Company at September 30, 1995 was 354
employees. None of the employees are represented by a union. The Company
considers its relations with its employees to be good.
FINANCIAL INFORMATION CONCERNING FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES
During the fiscal year ended September 30, 1995, all manufacturing,
research and development and administrative operations were conducted in the
United States. Revenues derived from export sales approximated $887,000 in
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1995, $538,000 in 1994, and $586,000 in 1993. Shipments to Canada make up the
majority of export sales.
ITEM 2. PROPERTIES
During fiscal 1995, the Company had facilities in the United States as
shown below:
Owned or
Location Feet Description Leased
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Cleveland, 37,000 Two-story brick construction; Owned
Ohio used for corporate administra-
tive headquarters, marketing
and product development with
limited manufacturing.
Greenwood, 63,000 One-story modern concrete Leased, with
Mississippi block construction; used annual renewal
for manufacturing instru- options extending
ments, test equipment, and through 2061.
fastening systems products.
Lincoln Park, 20,000 One-story modern concrete Leased, with a
Michigan block construction. used renewal option
for training and publishing. extending through
1999.
Management believes that the Mississippi and Michigan facilities are
adequate to provide for current and anticipated business. In fiscal 1996 the
Company plans for modest expansion of the Cleveland facility to improve
operating efficiencies. This expansion was anticipated to occur in fiscal 1995
but zoning changes delayed the project for almost a year.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANT*
The following is a list of the executive officers of the Company as of
September 30, 1995. The executive officers are elected each year and serve at
the pleasure of the Board of Directors. Mr. Bauman was elected Chairman by the
Board of Directors in July 1993. He has been President since 1991. For at
least five years prior to 1991 he held the office of Vice President. Mr.
Nowakowski was elected Vice President, Finance and Chief Financial Officer by
the Board of Directors in December, 1993. He joined the Company in July, 1993
and, for at least five years prior to 1993, was a Vice President with Huntington
National Bank in Cleveland, Ohio.
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Office Officer Age
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Chairman, President and Robert L. Bauman 55
Chief Executive Officer
Vice President, Finance Eugene T. Nowakowski 52
and Chief Financial
Officer
* The description of Executive Officers called for in this Item is
included pursuant to Instruction 3 to Section (b) of Item 401 of
Regulation S-K.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
a) MARKET INFORMATION
The Registrant's Class A Common Shares are traded in the over-the-
counter market (NASDAQ Symbol: HICKA). There is no market for the Registrant's
Class B Common Shares. The following table sets forth the range of high and low
bid prices for the Registrant's Class A Common Shares for the periods indicated,
which prices reflect inter-dealer prices without retail mark-up, mark-down or
commissions and may not represent actual transactions:
BID PRICES FOR THE YEARS ENDED:
<TABLE>
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September 30, 1995 September 30,1994
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High Low High Low
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<S> <C> <C> <C> <C>
First Quarter 17 11 1/4 9 1/2 8
Second Quarter 17 13 1/2 12 3/4 9
Third Quarter 20 1/2 17 12 1/2 10 3/4
Fourth Quarter 22 18 12 1/2 10
</TABLE>
Source of quotations: NASDAQ.
Data adjusted for a 2 for 1 stock split in April, 1995.
b) HOLDERS
As of December 14, 1995, there were approximately 630 holders of
record of the Company's outstanding Class A Common Shares and approximately 5
holders of record of the Company's outstanding Class B Common Shares.
c) DIVIDENDS
On July 10, 1995 the Company paid a special dividend of $.10 per share
to the holders of its Class A and Class B Common Shares. On January 25, 1995
the Company paid a special dividend of $.175 per share to the holders of its
Class A and Class B Common Shares. On January 25, 1994 the Company paid a
special dividend of $.15 per share to the holders of its Class
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A and Class B Common Shares. On December 6, 1995, the Company declared a
special dividend of $.10 per share payable on January 25, 1996 to the holders of
record of its Class A and Class B Common Shares on January 3, 1996. The
declaration and payment of future dividends is restricted, under certain
circumstances, by the provisions of the Company's bank loan agreement. Such
restriction is not expected to materially limit the Company's ability to pay
dividends in the future, if declared.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For the years ended September 30
--------------------------------
1995 1994 1993 1992 1991
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(In Thousands of Dollars, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net Sales $29,384 $22,491 $20,876 $18,406 $11,706
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Net Income $ 1,794 $ 1,556 $ 1,524 $ 1,241 $ 578
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Working Capital $ 8,120 $ 6,991 $ 6,062 $ 5,181 $ 4,198
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Total Assets $16,629 $12,500 $11,149 $10,341 $ 7,733
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Long-term Debt - - - - -
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Total Stockholders'
Equity $10,394 $ 8,735 $ 7,338 $ 6,552 $ 5,366
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Net Income Per Share $ 1.50 $ 1.31 $ 1.27 $ 1.02 $ .48
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------- ------- ------- ------- -------
Dividends Declared
Per Share:
Class A $ .275 $ .15 $ .125 $ .075 $ .075
Class B $ .275 $ .15 $ .125 $ - $ -
Stockholders' Equity
Per Share: $ 8.71 $ 7.43 $ 6.32 $ 5.38 $ 4.40
Return on Assets 12.3% 13.2% 14.2% 13.7% 8.0%
Return on Equity 18.8% 19.4% 21.9% 20.8% 11.3%
Closing Stock Price (ask) $ 23.00 $ 12.75 $ 9.50 $ 8.75 $ 5.00
</TABLE>
Note: Share data adjusted for a 2 for 1 stock split in April 1995.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
For many years Hickok has had a long established reputation as a
leader in the development and manufacture of high technology precision
indicating instruments for aircraft, locomotive and general industrial
applications. For example, aircraft cockpit instruments represent important
products for the Company. Over the years, Hickok has also been recognized as an
authority in the design and implementation of electronics circuitry. In
addition, the Company has considerable experience in technical training and
vocational education, developing training courses and manuals for instruction of
technical skills.
In recent years these areas of expertise have combined to make the
Company one of the leaders in automotive electronics diagnostic technology.
Hickok designs and manufactures diagnostic tools which enable automotive service
technicians to identify problems in the rapidly increasing number of electronics
systems in automobiles. Hickok develops instructional programs and trains
automotive technicians and engineers in the use of electronic diagnostic tools
and systems. The Company now has three operating units based in the Detroit,
Michigan area. One unit, housed in a Ford Motor Company facility in Allen Park,
develops diagnostic strategies and provides other services for Ford. The other
two groups are housed in Lincoln Park in a facility leased by Hickok and provide
training and technical publication services.
In February, 1994 the Company added a new product for the automotive
market by acquiring the fastening systems business from Allen-Bradley Company,
Inc. This was part of a strategic program to expand both the Company's customer
base and its product line using existing expertise. The new business provides
computerized equipment to control tools that tighten threaded fasteners in an
automotive assembly plant to provide high quality threading applications. The
fastening systems business was fully integrated into Hickok's operations by
June, 1994 and made a positive contribution to the Company's operations in the
last two fiscal years. This product class has become a major part of the
Company's total business.
The timing of order releases in the Company's automotive diagnostic
test equipment business often creates wide fluctuations in the Company's
operating results, particularly on a quarter-to-quarter basis. The same
situation applies to the Company's newly acquired fastening systems products.
Orders for such equipment frequently are relatively large and subject to
customer release. The result can be substantial variations in quarterly sales
and earnings. For example, fiscal 1995 fourth quarter net income of $529,082,
or $.44 per share, represented 29.5% of the year's total net income. More
dramatic results occurred in fiscal 1994 when fourth quarter net income of
$813,819, or $.68 per share, represented 52.3% of the year's total net income.
The Company's contracts are subject to customer release, and although
historically the fourth quarter has accounted for a larger portion of sales and
net income, there can be no assurance that the Company's customers will continue
to authorize release of contracts during the fourth quarter of future fiscal
years. The Company is not aware of any seasonal factors which lead to its
customers' release of orders.
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Short-term earnings also can be affected by increases in expenditures
for product development, which has become increasingly significant in the
Company's operations.
The Company's order backlog as of September 30, 1995 totaled
$4,337,000 as compared to $9,385,000 as of September 30, 1994 and $4,271,000 as
of September 30, 1993. The decrease in fiscal 1995 relative to fiscal 1994 is
largely due to orders for fastening systems products. This business was
acquired in mid-fiscal 1994 and an extraordinarily large order for $5.5 million
was booked late in the year. At the end of fiscal 1995 backlog for fastening
products was $1.1 million which is a more typical backlog level for this product
class.
RESULTS OF OPERATIONS
Sales for the fiscal year ended September 30, 1995 rose to
$29,384,191, an increase of approximately 31% from fiscal 1994 sales. This
increase in sales is almost totally volume-driven and is attributable to
significantly higher sales of fastening systems products. Sales of fastening
systems products increased $8,316,000 which more than offset both a 5% volume
decrease in product sales other than fastening product and an 11% decrease in
service sales, almost all of which was volume related.
Sales for the fiscal year ended September 30, 1994 of $22,491,278 were
up approximately 8% from fiscal 1993 sales. The increase between fiscal 1994
and fiscal 1993 was primarily due to the addition of the fastening systems
business which offset modest volume decreases in automotive diagnostic equipment
and price-related decreases in service sales.
The high level of fastening systems sales realized in fiscal 1995 will
not continue in fiscal 1996 due to lower backlog at the end of fiscal 1995.
Even though sales of automotive diagnostic equipment have experienced a slight
decline the past three years, continuing development of existing and new
products and the opening of new international markets provide opportunities for
reversing that trend in fiscal 1996. For example, sales of approximately 4,000
NGS units to Mazda dealers outside of North America, previously expected to
occur in late fiscal 1995, are now planned for early in fiscal 1996. In
addition, approximately 1,000 NGS units are expected to be sold in fiscal 1996
to Ford dealers throughout the world, exclusive of Europe. Initial sales
occurred in fiscal 1995 to Ford dealers in South America, Australia and South
Africa. The sales decrease of precision indicating instruments, both aircraft
and locomotive, experienced in fiscal 1995 is expected to reverse itself in
fiscal 1996 due to stabilizing existing volume, introduction of new products and
selective price increases.
Cost of products sold during fiscal 1995 amounted to $13,975,800 or
60.0% of net product sales. For fiscal 1994 the cost of products sold amounted
to $9,050,256 or approximately 58.0% of net product sales and for fiscal 1993
the cost of products sold amounted to $7,400,468 or approximately 57.6% of net
product sales. The increase in cost of products sold as a percentage of net
product sales between fiscal 1995 and fiscal 1994 was due to higher costs of
fastening product sales relative to other product sales. The slight increase in
the percentage of cost of products sold relative to product sales between fiscal
1994 and fiscal 1993 was due to product mix.
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Cost of services sold during fiscal 1995 amounted to $4,909,962 or
80.6% of net service sales. In fiscal 1994 the figure was $5,148,767 or 74.8%
and in fiscal 1993 the figure was $5,503,973 or 68.6%. The increase in cost of
services sold as a percentage of net service sales between fiscal 1995 and
fiscal 1994 was caused primarily by the inability to reduce costs of services
sold to the same extent as service sales volume decreased. The increase in cost
of services sold as a percentage of net service sales between fiscal 1994 and
fiscal 1993 resulted primarily from a significant amount of large quantity
contracts involving significant price competition.
The percentage of cost of both products sold and services sold
relative to net sales in fiscal 1996 is expected to stabilize at the figures
experienced in fiscal 1995 based on cost control measures already implemented
and on projected product mix.
Fiscal 1995 net income amounted to $1,794,230, or $1.50 per share, an
increase of $237,927, or 15.3% from fiscal 1994 net income of $1,556,303, or
$1.31 per share. The increase in net income was due primarily to an increase in
sales and, to a lesser extent, to a reduction in the effective tax rate compared
to the prior year. Fiscal 1994 net income increased by $32,017 or 2.1% over
fiscal 1993 net income of $1,524,286, or $1.27 per share, due to an increase in
sales and cost control measures.
During fiscal 1995 new product development expenditures amounted to
$3,550,450 which represented a 66% increase over fiscal 1994 expenditures of
$2,145,073. Approximately 60% of the increase was attributable to engineering
and development of existing fastening systems products. The balance was spent
on final development of the secondary ignition analyzer, ongoing development of
existing automotive products and development of next generation technologies
relative to automotive product. It is anticipated that the amount spent on
product development in fiscal 1995 will remain at that level in fiscal 1996.
Product development expenditures in fiscal 1994 of $2,145,073 were slightly
higher than the $2,018,892 spent in fiscal 1993 due to the addition of the
fastening systems business.
Marketing and administrative expense amounted to $4,189,263, or
approximately 14.3% of net sales in fiscal 1995; $3,656,136, or approximately
16.3% of net sales in fiscal 1994; $3,510,279, or approximately 16.8% of net
sales in fiscal 1993. Expenditures in fiscal 1995 represented a 14.6% increase
from fiscal 1994, as compared with a 4.2% increase in fiscal 1994 over the prior
fiscal year. The absolute increase in the amount of marketing and
administrative expenses between 1995 and 1994 was entirely related to the higher
sales in the fastening systems product class. The absolute increase between
fiscal 1994 and 1993 was due to the addition of the fastening systems business
in the second quarter of fiscal 1994.
In fiscal 1995 income taxes were $976,000 and represented an effective
tax rate of 35.2%. Fiscal 1994 income taxes were $1,018,000 and represented an
effective tax rate of 39.5%. The decrease in the effective tax rate in fiscal
1995 was caused by research and development tax credits related to higher new
product development expenditures during the year. In fiscal 1993 income taxes
were $910,000 and represented an effective tax rate of 37.4%. The increase in
the effective tax rate in fiscal 1994 related to differences in the recognition
of revenue and expense for tax and financial reporting purposes. It is
anticipated that the effective tax rate in fiscal
-14-
<PAGE>
1996 will be about two percentage points higher than fiscal 1995 due to lower
available research and development tax credits.
Interest charges were $134,713 in fiscal 1995, compared with $26,116
in fiscal 1994 and $65,494 in fiscal 1993. The increase in interest charges in
fiscal 1995 compared to fiscal 1994 was caused primarily by higher borrowing by
the Company under its revolving line of credit to finance increased working
capital levels resulting from a 31% increase in sales. The decrease in interest
charges in fiscal 1994 compared to fiscal 1993 resulted primarily from decreased
borrowing by the Company under its revolving line of credit to finance working
capital levels.
Fiscal 1995 and 1994 results include other income of $146,227 and
$109,373 respectively coming primarily from rental income of excess space at the
Company's Lincoln Park, Michigan location. Fiscal 1995 other income also
includes approximately $60,000 of purchased discounts. Fiscal 1993 results
include a gain of $57,390 resulting from proceeds from insurance policies held
on the life of Robert L. Purcell, the former Chairman.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business requires relatively large inventories of both
work-in-process and finished goods in order to met anticipated delivery
schedules. At the end of fiscal 1995 inventory was up $3,076,790 over the prior
year in anticipation of significant orders for automotive product in the first
quarter of fiscal 1996. This increase had a temporary negative impact on
liquidity relative to the prior year since additional short-term borrowing was
required to finance 75% of the increase. The Company believes the impact on
liquidity is temporary; however, even though liquidity declined compared with
last year it remains strong. Furthermore, the Company believes that internal
funds and a $5,000,000 revolving line of credit provide sufficient liquidity to
meet ongoing working capital requirements.
Current assets of $14,194,925 at September 30, 1995 were 2.3 times
current liabilities and the total of cash and receivables was 1.1 times current
liabilities. These ratios compare to 3.0 and 1.9 respectively at the end of
fiscal 1994. Total current assets increased $3,779,437 from the previous year-
end primarily as a result of the above-mentioned $3,076,790 increase in
inventory. Total current liabilities increased $2,651,060 from the previous
year due primarily to an increase in short-term financing which was used to
finance the inventory increase.
Working capital at September 30, 1995 was $8,119,589 as compared to
$6,991,212 a year earlier. The increase between the two years was due to
retention of earnings and the proceeds were used to finance the increase in
inventory.
Internally generated funds in fiscal 1995 were a negative $646,322 and
were not adequate to fund the Company's primary non-operating cash requirement
consisting of capital expenditures which amounted to $943,605. The primary
reason for the negative cash flow from operations was a $3,076,790 increase in
inventory. The shortfall was made up by a $2,280,000 increase in short-term
borrowing. The Company does not anticipate the need to increase inventory in
fiscal 1996 to the same extent as occurred in fiscal 1995 and therefore expects
internally generated funds in fiscal 1996 to be
-15-
<PAGE>
adequate to fund approximately $1,100,000 of capital expenditures in fiscal
1996. Included in the $1,100,000 is approximately $450,000 to be spent on the
expansion of the Company's Cleveland, Ohio administrative headquarters to
accommodate further growth. The balance will be spent to upgrade engineering
and laboratory equipment. In fiscal 1994 and fiscal 1993 internally generated
funds paid for capital expenditures.
In January, 1995 the Company amended an existing credit agreement with
its financial lender. The agreement continues to provide for interest at the
prime commercial rate and is unsecured. This agreement was amended to provide
for a revolving credit facility of $5,000,000. At September 30, 1995, the
Company had an outstanding balance of $3,510,000 under this loan facility. The
revolving credit facility is subject to annual review by the Company's financial
lender. Although no determination has been made to seek renewal of the credit
agreement, the Company believes that, given its current financial condition,
renewal at the existing amount may be obtained on acceptable terms.
In August, 1988 the Company entered into a Section 303 Stock
Redemption Agreement (the "Stock Redemption Agreement") with Robert D. Hickok.
The Stock Redemption Agreement provided that, upon Mr. Hickok's death, his
estate will have the right to require the Company to purchase from the estate
Class A shares and Class B shares having a value equal to the estate,
inheritance, legacy and succession taxes (including any interest collected as
part of such taxes) imposed because of the death of Mr. Hickok, plus the amount
of funeral and administrative expenses allowable as deductions to the estate of
Mr. Hickok under Section 2053 of the Internal Revenue Code. The Stock
Redemption Agreement provided that the per share price payable by the company
for the shares purchased from Mr. Hickok's estate will be the then market value
of such shares. The Estate of Robert D. Hickok sold to the Company 16,107 Class
B shares on January 11, 1993 and 4,560 Class B shares on March 31, 1995. No
future redemption requests are anticipated from the Estate.
IMPACT OF INFLATION
In recent years, inflation has had a minimal effect on the Company
because of low rates of inflation and the Company's policy prohibiting the
acceptance of long-term fixed rate contracts without provisions permitting
adjustment for inflation.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following pages contain the Financial Statements
and Supplementary Data as specified for Item 8 of
Part II of Annual Report on Form 10-K.
-16-
<PAGE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item 10 as to the Directors of the
Company is incorporated herein by reference to the information set forth under
the caption "Information Concerning Nominees for Directors" in the Company's
definitive Proxy Statement for the Annual Meeting of Shareholders to be held on
February 21, 1996, since such Proxy Statement will be filed with the Securities
and Exchange Commission not later than 120 days after the end of the Company's
fiscal year pursuant to Regulation 14A. Information required by this Item 10 as
to the Executive Officers of the Company is included in Part I of this Annual
Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated by reference
to the information set forth under the caption "Executive Compensation" in the
Company's definitive Proxy Statement for the Annual Meeting of Shareholders to
be held on February 21, 1996, since such Proxy Statement will be filed with the
Securities and Exchange Commission not later than 120 days after the end of the
Company's fiscal year pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is incorporated by reference
to the information set forth under the captions "Principal Shareholders" and
"Share Ownership of Directors and Officers" in the Company's definitive Proxy
Statement for the Annual Meeting of Shareholders to be held on February 21,
1996, since such Proxy Statement will be filed with the Securities and Exchange
Commission not later than 120 days after the end of the Company's fiscal year
pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 13 is incorporated by reference
to the information set forth under the caption "Transactions with Management" in
the Company's definitive Proxy Statement for the Annual Meeting of Shareholders
to be held on February 21, 1996, since such Proxy Statement will be filed with
the Securities and Exchange Commission not later than 120 days after the end of
the Company's fiscal year pursuant to Regulation 14A.
PART III
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON REPORT 8-K
(a) (1) FINANCIAL STATEMENTS
The following Consolidated Financial Statements of the Registrant and its
subsidiaries are included in Part II, Item 8:
-17-
<PAGE>
Page
----
Report of Independent Auditors F-1
Consolidated Balance Sheet - As of
September 30, 1995 and 1994 F-2
Consolidated Statement of Income - Years
Ended September 30, 1995, 1994 and 1993 F-4
Consolidated Statement of Stockholders'
Equity - Years Ended September 30, 1995,
1994 and 1993 F-5
Consolidated Statement of Cash Flows -
Years Ended September 30, 1995, 1994
and 1993 F-7
Notes to the Consolidated Financial Statements F-9
(a) (2) FINANCIAL STATEMENT SCHEDULES
The following Consolidated Financial Statement Schedules of the Registrant and
its subsidiaries are included in Item 14 hereof.
Sequential Page
---------------
Report of Independent Auditors as to Schedules 33
Schedule VIII-Valuation and Qualifying Accounts 34
Schedule IX-Short-term Borrowings 35
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have been
omitted.
(a) (3) EXHIBITS
Reference is made to the Exhibit Index set forth herein.
(b) There were no reports filed on Form 8-K during the quarter ended
September 30, 1995.
-18-
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
SHAREHOLDERS AND BOARD OF DIRECTORS
HICKOK INCORPORATED
CLEVELAND, OHIO
We have audited the accompanying consolidated balance sheets of HICKOK
INCORPORATED as of September 30, 1995 and 1994, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended September 30, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these 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 that the financial statements are free from 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Hickok
Incorporated as of September 30, 1995 and 1994, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1995 in conformity with generally accepted accounting
principles.
MEADEN & MOORE, INC.
CERTIFIED PUBLIC ACCOUNTANTS
NOVEMBER 17, 1995
CLEVELAND, OHIO
- -------------------------------------------------------------------------------
F-1
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
KICKOK INCORPORATED
SEPTEMBER 30
ASSETS
<TABLE>
<CAPTION>
1995 1994
--------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 696,425 $ 401,291
Accounts receivable - less allowance for
doubtful accounts of $15,000 (1995
and 1994) 6,271,195 6,041,626
Inventories-less allowance for obsolete inventory of
$60,200 (1995) 6,921,192 3,844,402
Prepaid and deferred expenses 306,113 128,169
--------------------------------
Total Current Assets 14,194,925 10,415,488
PROPERTY, PLANT AND EQUIPMENT:
Land 139,192 139,192
Buildings 1,456,390 1,092,595
Machinery and equipment 3,138,077 2,829,416
--------------------------------
4,733,659 4,061,203
Less accumulated depreciation 2,473,556 2,161,662
--------------------------------
2,260,103 1,899,541
OTHER ASSETS:
Goodwill-less accumulated amortization of $20,000
($8,000, 1994) 160,000 172,000
Deposits 13,744 13,444
--------------------------------
173,744 185,444
--------------------------------
Total Assets $16,628,772 $12,500,473
--------------------------------
--------------------------------
</TABLE>
See notes to consolidated financial statements
- --------------------------------------------------------------------------------
F-2
<PAGE>
- -------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
1995 1994
-----------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Short-term financing $ 3,510,000 $ 1,230,000
Trade accounts payable 855,218 542,023
Accrued payroll and related expenses 1,320,611 1,165,008
Accrued expenses 353,763 235,081
Accrued income taxes 35,744 252,164
-----------------------------
Total Current Liabilities 6,075,336 3,424,276
DEFERRED INCOME TAXES 159,000 106,000
REDEEMABLE STOCK - 9,800 Class B shares, 1994 - 235,000
STOCKHOLDERS' EQUITY:
Common shares - par value $1.00:
Class A 3,750,000 shares authorized, 747,570 shares
issued (1,000,000 shares authorized, 378,078 shares
issued, 1994) 737,984 368,492
Class B 1,000,000 convertible shares authorized,
475,533 shares issued (295,980 convertible shares
authorized, 245,820 shares issued less 9,800 shares
classified as redeemable, 1994) 454,866 219,913
Contributed capital 1,520,111 1,259,293
Treasury shares - 9,586 Class A shares and
20,667 Class B shares (16,107, 1994) (605,795) (532,603)
Retained earnings 8,287,270 7,420,102
-----------------------------
Total Stockholders Equity 10,394,436 8,735,197
-----------------------------
Total Liabilities and Stockholders Equity $16,628,772 $12,500,473
-----------------------------
-----------------------------
</TABLE>
See notes to consolidated financial statements
- --------------------------------------------------------------------------------
F-3
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
HICKOK INCORPORATED
FOR THE YEARS ENDED SEPTEMBER 30
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------------------------
<S> <C> <C> <C>
NET SALES
Product sales $23,294,950 $15,612,101 $12,852,524
Service sales 6,089,241 6,879,177 8,023,478
---------------------------------------------
Total net sales 29,384,191 22,491,278 20,876,002
---------------------------------------------
COSTS AND EXPENSES:
Cost of products sold 13,975,800 9,050,256 7,400,468
Cost of services sold 4,909,962 5,148,767 5,503,973
Product development 3,550,450 2,145,073 2,018,892
Marketing and administrative
expenses 4,189,263 3,656,136 3,510,279
Interest charges 134,713 26,116 65,494
Other income (146,227) (109,373) (57,390)
---------------------------------------------
26,613,961 19,916,975 18,441,716
---------------------------------------------
Income before Provision
for Income Taxes 2,770,230 2,574,303 2,434,286
PROVISION FOR INCOME TAXES:
Current 1,087,000 933,000 985,000
Deferred (111,000) 85,000 (75,000)
---------------------------------------------
976,000 1,018,000 910,000
---------------------------------------------
NET INCOME $ 1,794,230 $ 1,556,303 $ 1,524,286
---------------------------------------------
---------------------------------------------
NET INCOME PER COMMON SHARE $ 1.50 $ 1.31 $ 1.27
---------------------------------------------
---------------------------------------------
WEIGHTED AVERAGE SHARES OF
COMMON STOCK OUTSTANDING 1,194,500 1,192,304 1,197,994
---------------------------------------------
---------------------------------------------
</TABLE>
See notes to consolidated financial statements
- --------------------------------------------------------------------------------
F-4
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
HICKOK INCORPORATED
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
COMMON STOCK -
$1.00 PAR VALUE
-----------------
RETAINED
EARNINGS CLASS A CLASS B
-----------------------------------------------
<S> <C> <C> <C>
Balance at
September 30, 1992 $ 4,670,623 $ 363,892 $ 245,820
Dividend of $.25 per Class A and B shares (152,428) - -
Redemption of Class B shares - - (16,107)
Sale of Class A shares under option - 2,000 -
Reclassification of Class B shares
to redeemable - - (14,700)
Net income 1,524,286 - -
-----------------------------------------------
Balance at
September 30, 1993 6,042,481 365,892 215,013
Dividend of $.30 per Class A and B shares (178,682) - -
Sale of Class A shares under option - 2,600 -
Adjustment of redeemable Class B shares
based on market value - - 4,900
Net income 1,556,303 - -
-----------------------------------------------
Balance at
September 30, 1994 7,420,102 368,492 219,913
100% share dividend Class A and B shares (598,455) 368,742 229,713
Dividend of $.275 per Class A and B shares (328,607) - -
Sale of Class A shares under option - 750 -
Redemption of Class B shares - - (4,560)
Reclassification of redeemable Class B shares
after redemption completed - - 9,800
Compensation expense related to
stock option plans - - -
Net income 1,794,230 - -
-----------------------------------------------
Balance at
September 30, 1995 $ 8,287,270 $ 737,984 $ 454,866
-----------------------------------------------
-----------------------------------------------
</TABLE>
See notes to consolidated financial statements
- --------------------------------------------------------------------------------
F-5
<PAGE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
HICKOK INCORPORATED
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Contributed Treasury
Capital Shares Total
---------------------------------------------
<S> <C> <C> <C>
Balance at
September 30, 1992 $ 1,455,993 $ (183,842) $ 6,552,486
Dividend of $.25 per Class A and B shares - - (152,428)
Redemption of Class B shares - (348,761) (364,868)
Sale of Class A shares under option 12,000 - 14,000
Reclassification of Class B shares
to redeemable (220,300) - (235,000)
Net income - - 1,524,286
---------------------------------------------
Balance at
September 30, 1993 1,247,693 (532,603) 7,338,476
Dividend of $.30 per Class A and B shares 16,500 - 19,100
- - (178,682)
Sale of Class A shares under option
Adjustment of redeemable Class B shares
based on market value (4,900) - -
Net income - - 1,556,303
---------------------------------------------
Balance at
September 30, 1994 1,259,293 (532,603) 8,735,197
100% share dividend Class A and B shares - - -
Dividend of $.275 per Class A and B shares - - (328,607)
Sale of Class A shares under option 7,250 - 8,000
Redemption of Class B shares - (73,192) (77,752)
Reclassification of redeemable Class B shares
after redemption completed 225,200 - 235,000
Compensation expense related to
stock option plans 28,368 - 28,368
Net income - - 1,794,230
---------------------------------------------
Balance at
September 30, 1995 $ 1,520,111 $ (605,795) $ 10,394,436
---------------------------------------------
---------------------------------------------
</TABLE>
See notes to consolidated financial statements
- --------------------------------------------------------------------------------
F-6
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
HICKOK INCORPORATED
FOR THE YEARS ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 29,154,622 $ 22,394,353 $ 19,778,525
Cash paid to suppliers and employees (28,382,805) (19,875,787) (16,963,626)
Interest paid (117,606) (26,844) (61,440)
Interest received 2,887 6,335 5,398
Income taxes paid (1,303,420) (1,016,758) (752,888)
-----------------------------------------------------
Net Cash Provided by (Used in)
Operating Activities (646,322) 1,481,299 2,005,969
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (943,605) (684,258) (560,641)
Decrease (Increase) in deposits (300) 5,018 (1,067)
Net proceeds from life insurance
policies - - 85,297
Proceeds on sale of assets 4,800 - 4,525
Purchase of Fastening Systems assets - (730,675) -
-----------------------------------------------------
Net Cash Used in Investing
Activities (939,105) (1,409,915) (471,886)
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in short-term borrowings 2,280,000 (20,000) (800,000)
Purchase of Class B shares (77,752) - (364,868)
Sale of Class A shares under option 6,920 16,009 11,700
Dividends paid (328,607) (178,682) (152,428)
-----------------------------------------------------
Net Cash Provided by (Used in)
Financing Activities 1,880,561 (182,673) (1,305,596)
-----------------------------------------------------
Increase (Decrease) in Cash and Cash
Equivalents 295,134 (111,289) 228,487
Cash and Cash Equivalents at
Beginning of Year 401,291 512,580 284,093
-----------------------------------------------------
Cash and Cash Equivalents at
End of Year $ 696,425 $ 401,291 $ 512,580
-----------------------------------------------------
-----------------------------------------------------
</TABLE>
See notes to consolidated financial statements
- --------------------------------------------------------------------------------
F-7
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------------------------------
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $ 1,794,230 $ 1,556,303 $ 1,524,286
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Depreciation and amortization 587,213 512,011 402,056
Non-cash compensation charge related
to stock options 29,448 3,091 2,300
Gain on life insurance death
benefits - - (57,390)
Loss (Gain) on disposal of assets 3,030 13,417 (2,407)
Deferred income taxes (111,000) 85,000 (75,000)
CHANGES IN ASSETS AND LIABILITIES:
Increase in accounts receivable (229,569) (199,963) (1,094,266)
Decrease (Increase) in
inventories (3,076,790) (203,218) 726,249
Increase in prepaid and
deferred expenses (13,944) (3,984) (6,881)
Increase (Decrease) in trade
accounts payable 313,195 208,353 (104,838)
Increase in accrued payroll and
related expenses 155,603 20,592 228,453
Increase (Decrease) in other
accrued expenses 118,682 (426,545) 231,295
Increase (Decrease) in accrued
income taxes (216,420) (83,758) 232,112
----------------------------------------------------
Total Adjustments (2,440,552) (75,004) 481,683
----------------------------------------------------
Net Cash Provided by
(Used in) Operating
Activities $ (646,322) $ 1,481,299 $ 2,005,969
----------------------------------------------------
----------------------------------------------------
Non-cash Disclosure:
Proceeds from life insurance policies were reduced to satisfy outstanding policy
loans of $17,143 (1993).
</TABLE>
See notes to consolidated financial statements
- --------------------------------------------------------------------------------
F-8
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HICKOK INCORPORATED
SEPTEMBER 30, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION AND LINE OF BUSINESS:
The Board of Directors recommended and on February 23, 1995 the shareholders
approved the change of the name of the Company to Hickok Incorporated.
The consolidated financial statements include the accounts of Hickok
Incorporated and its wholly-owned domestic subsidiary ("Company"). Significant
intercompany transactions and balances have been eliminated in the financial
statements. Previously inactive subsidiaries were dissolved during 1993.
The Company operates in one major industry segment. The Company develops and
manufactures measuring, indicating, instrumentation and controls products,
fastening systems and related engineering services for the transportation
industry. As an extension of the sales of automotive electronic test equipment,
the Company also provides technical training programs for its automotive
technician customers in the proper use of the equipment. Sales in the Company's
principal product classes, as a percent of consolidated sales, are as follows:
PRODUCT CLASSES 1995 1994 1993
--------------- --------------------------
Automotive Test Equipment 35.7% 48.1% 52.7%
Diagnostic/Training 19.6 29.2 36.9
Fastening Systems 37.3 11.8 -
Other Product Classes 7.4 10.9 10.4
--------------------------
Total 100.0% 100.0% 100.0%
--------------------------
--------------------------
The Company extends normal credit terms to its customers. Customers in the
automotive industry (primarily original equipment manufacturers) comprise
approximately 91% of outstanding receivables at September 30, 1995, (84% in
1994). Sales to individual customers in excess of 10% of total sales
approximated $14,600,000 and $10,900,000 (1995), $14,500,000 and $2,700,000
(1994) and $16,500,000 (1993).
REVENUE RECOGNITION:
The Company records sales as manufactured items are shipped to customers.
Revenue from development contracts is recognized as earned under terms of the
contracts. The Company warrants certain products against defects for periods
ranging from 12 to 36 months. Charges against income for warranty expense and
sales returns and allowances were immaterial during each of the three years in
the period ending September 30, 1995.
PRODUCT DEVELOPMENT:
Research and product development costs, which include engineering production
support for development of diagnostic systems, are expensed as incurred.
Research and development performed for customers represents no more than 1% of
sales in each year; the arrangements do not include a repayment obligation by
the Company.
INVENTORIES:
Inventories are valued at the lower of cost (first-in, first-out) or market and
consist of:
<TABLE>
<CAPTION>
1995 1994
---------------------------------
<S> <C> <C>
Raw materials and component parts $ 2,488,711 $ 1,347,496
Work-in-process 2,651,577 1,617,218
Finished products 1,780,904 879,688
---------------------------------
$ 6,921,192 $ 3,844,402
---------------------------------
---------------------------------
</TABLE>
- --------------------------------------------------------------------------------
F-9
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are carried at cost. Maintenance and repair costs
are expensed as incurred. Additions and betterments are capitalized.
The depreciation policy of the Company is generally as follows:
Class Method Rate
-------------------------------------------------------------
Buildings Straight-line 2-1/2 to 4%
Machinery and equipment Straight-line 8 to 33-1/3%
Tools and dies Straight-line 33-1/3%
Depreciation amounted to $575,213 (1995), $504,011 (1994) and $402,056 (1993).
INCOME TAXES:
Effective October 1, 1993, the Company adopted the provisions of Financial
Accounting Standards Board Statement No. 109, "Accounting for Income Taxes." The
cumulative effect of the adoption was immaterial and is included in the 1994
deferred income tax provision. Prior to 1994, the Company accounted for deferred
income taxes under the provisions of Financial Accounting Standards Board
Statement No. 96.
INCOME PER COMMON SHARE:
Income per common share information is computed on the weighted average number
of shares outstanding during each period. All per share amounts on the
consolidated income statement have been retroactively adjusted to reflect the
100% share dividend. For the years presented, stock options have an immaterial
dilutive effect.
CASH EQUIVALENTS:
For purposes of the Statement of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
RECLASSIFICATIONS:
Certain prior year amounts have been reclassified to conform with current year
presentation.
2. SHORT-TERM FINANCING
The Company has an unsecured credit agreement with maximum available borrowings
of $5,000,000 with interest at the prime rate. The agreement includes covenants
with which the Company has complied. The weighted average interest rate on
short-term financing was 8.84% (7.00%, 1994).
3. LEASES
The Company leases a facility and certain equipment under operating leases
expiring through September 1996 with a three-year renewal option on the
facility. A portion of the facility has been sub-leased through September
1996.
The Company's future minimum commitments under operating leases are as follows:
<TABLE>
<S> <C>
1996 $ 261,396
1997 54,881
1998 17,634
1999 6,238
---------
Total $ 340,149
---------
---------
</TABLE>
Rental expense under these commitments was $266,106 (1995), $230,297 (1994) and
$142,827 (1993).
A facility held under a capital lease has a net book value of $50,000 at
September 30, 1995. Future minimum lease payments which extend through 2061 are
immaterial.
- --------------------------------------------------------------------------------
F-10
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
4. CAPITAL STOCK, TREASURY STOCK, CONTRIBUTED CAPITAL AND STOCK OPTIONS
On February 23, 1995, the number of authorized shares of Class A and Class B
common stock was increased to 3,750,000 from 1,000,000 and 1,000,000 from
295,980, respectively. On April 10, 1995, the Company distributed to
stockholders of record on March 10, 1995, a 2-for-1 stock split in the form of a
100% share dividend of Class A and Class B common stock. One share of Class A
common stock was issued for each share of Class A outstanding and one share of
Class B common stock was issued for each share of Class B outstanding.
All per share amounts on the consolidated income statement have been
retroactively adjusted for the stock dividend. Additionally, an amount equal to
the $1.00 par value of the combined Class A and Class B common stock ($598,455)
has been transferred from retained earnings to common stock ($368,742 to Class A
common stock and $229,713 to Class B common stock).
The Company's Key Employees Stock Option Plan and the 1995 Key Employees Stock
Option Plan (collectively the "Employee Plans") provide the authority to the
Compensation Committee of the Board of Directors to grant options to Key
Employees to purchase up to 120,000 Class A shares. The options are exercisable
for up to 10 years. Incentive stock options are available at an exercise price
of not less than market price on the date the option is granted. However,
options available to an individual owning more than 10% of the Company's Class A
shares at the time of grant must be made at a price of not less than 110% of the
market price. Nonqualified stock options may be issued at such exercise price
and on such other terms and conditions as the Compensation Committee may
determine. No options may be granted at a price less than $2.925. Non-cash
compensation expense related to stock option plans was $29,448 (1995), $3,091
(1994), and $2,300 (1993). All options granted under the Employee Plans are
exercisable at September 30, 1995.
On February 23, 1995, the Board of Directors adopted the 1995 Outside Directors
Stock Option Plan (the "Directors Plan"), subject to future approval by the
Company's shareholders. The Directors Plan provides for the automatic grant of
options to purchase up to 30,000 shares of Class A common stock to members of
the Board of Directors who are not employees of the Company, at the fair market
value on the date of grant. All options granted under the Directors Plan become
exercisable on February 23, 1998.
A summary of stock option activity is as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------------
OPTION PRICE
EMPLOYEE PLANS: PER SHARE 1995 1994
--------------------------------------------------------
<S> <C> <C> <C>
Outstanding at beginning of year $ 2.925 to $ 11.75 33,600 27,000
Granted $ 6.92 to $ 11.75 7,200 11,800
Exercised $ 2.925 to $ 6.92 (1,000) (5,200)
----------------------
Outstanding at end of year $ 2.925 to $ 11.75 39,800 33,600
----------------------
----------------------
DIRECTORS PLAN:
Outstanding at beginning of year $ - - -
Granted $ 16.125 12,000 -
Exercised $ - - -
----------------------
Outstanding at end of year $ 16.125 12,000 -
----------------------
----------------------
</TABLE>
- --------------------------------------------------------------------------------
F-11
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Unissued shares of Class A common stock (506,666 and 246,513 shares in 1995 and
1994, respectively) are reserved for the share-for-share conversion rights of
the Class B common stock and stock options under the Employee Plans and the
Directors Plan. The Class A shares have one vote per share and the Class B
shares have three votes per share, except under certain circumstances such as
voting on voluntary liquidation, sale of substantially all the assets, etc.
Dividends up to $.10 per year, noncumulative, must be paid on Class A shares
before any dividends are paid on Class B shares.
The Company purchased 16,107 shares of Class B common stock for Treasury for
approximately $365,000 from the Estate of Robert D. Hickok (the "Estate") in
January 1993 pursuant to a Section 303 Stock Redemption Agreement (the
"Agreement"). The Agreement required the Company to purchase a sufficient number
of Class B common stock from the Estate, proceeds of which to be used by the
Estate for payment of taxes and expenses in connection with probating the
Estate. During 1994, the Company classified approximately $235,000 as redeemable
stock to allow for future possible redemption pursuant to the Agreement. The
Company purchased an additional 4,560 shares of Class B common stock from the
Estate on March 31, 1995 for approximately $78,000, completing the obligation.
The Company has reclassified the remaining shares of Class B common stock
(approximately $157,000) previously listed as Redeemable Common Stock. Excess of
market value over par value of redeemable shares has been added to contributed
capital.
5. INCOME TAXES
A reconciliation of the provision for income taxes to the statutory Federal
income tax rate is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------------------------------
<S> <C> <C> <C>
Income before income taxes $ 2,770,230 $ 2,574,303 $ 2,434,286
Statutory rate 34% 34% 34%
-----------------------------------------------------
941,878 875,263 827,657
State and local taxes, net of federal tax 141,900 115,500 116,820
Non-deductible expenses 26,530 7,970 5,530
Income not subject to tax (3,230) (15,606) (39,600)
Research and development credit (132,000) - -
Other 922 34,873 (407)
-----------------------------------------------------
$ 976,000 $ 1,018,000 $ 910,000
-----------------------------------------------------
-----------------------------------------------------
</TABLE>
Changes in deferred income taxes which relate to temporary differences in the
recognition of revenue and expenses for tax and financial reporting purposes
are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------------------------------
<S> <C> <C> <C>
Inventory costing $ (85,700) $ 16,000 $ (78,300)
Other (25,300) 69,000 3,300
-----------------------------------------------------
$ (111,000) $ 85,000 $ (75,000)
-----------------------------------------------------
-----------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
F-12
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Deferred tax assets (liabilities) consist of the following:
<TABLE>
<CAPTION>
1995 1994
--------------------------
<S> <C> <C>
Current:
Inventories $ 97,000 $ 11,000
Warranty reserves 49,000 49,000
Accrued liabilities 132,000 54,000
--------------------------
278,000 114,000
Noncurrent:
Depreciation (159,000) (134,000)
Other - 28,000
--------------------------
(159,000) (106,000)
--------------------------
Total $ 119,000 $ 8,000
--------------------------
--------------------------
</TABLE>
Deferred tax asset balances are included in "prepaid and deferred expenses".
6. EMPLOYEE BENEFIT PLANS
The Company has a formula based profit sharing bonus plan for officers and key
employees. The bonus is distributed by the Compensation Committee of the Board
of Directors after considering such factors as salary, length of service and
merit. The maximum individual distribution is 50% of the distributee's salary.
For fiscal years ended September 30, 1995, 1994 and 1993, approximately
$456,000, $447,200 and $444,800, respectively, were expensed.
During 1994, the Company started a 401(K) Savings and Retirement Plan covering
all full-time employees. Company contributions to the plan, including matching
of employee contributions, are at the Company's discretion. Contributions to the
plan were approximately $27,300 in 1995 and $26,000 in 1994. The Company does
not provide any other post retirement benefits to its employees.
During 1995, the Company established a deferred compensation plan for selected
management and highly compensated employees to make tax deferred contributions
in the form of a salary reduction instead of or in addition to contributions
made by them under the 401(K) Savings and Retirement Plan.
7. ACQUISITION
On February 4, 1994, the Company purchased certain assets of Allen-Bradley
Company, Inc.'s Fastening Systems Line for $730,675 which has been accounted for
under the purchase method of accounting. The purchase consisted of inventory
($461,092), machinery and equipment ($239,974), goodwill ($180,000) and
assumption of liabilities ($150,391). Goodwill will be amortized over 15 years.
Operations of the Fastening Systems Line have been included in the statement of
income from the date of acquisition. The pro forma effects of the Fastening
Systems Line on prior years operations are not determinable.
- --------------------------------------------------------------------------------
F-13
<PAGE>
The following pages contain the Consolidated Financial Statement
Schedules as specified for Item 14(a)(2) of Part IV of Form 10-K.
<PAGE>
REPORT OF INDEPENDENT AUDITORS AS TO CONSOLIDATED SCHEDULES
To the Shareholders and Board of Directors
Hickok Incorporated
Cleveland, Ohio
We have audited the consolidated financial statements of HICKOK INCORPORATED
(the "Company") as of September 30, 1995 and 1994, and for each of the three
years in the period ended September 30, 1995, and have issued our report thereon
dated November 17, 1995; such consolidated financial statements and report are
included in Part II, Item 8 of this Form 10-K. Our audits also included the
consolidated financial statement schedules ("schedules") of the Company listed
in Item 14 (a)(2). These schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, such schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
MEADEN & MOORE, INC.
Certified Public Accountants
December 18, 1995
Cleveland, Ohio
<PAGE>
HICKOK INCORPORATED
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
- ---------------------------------- ----------- --------------------------------- -------------- ------------
Additions
--------------------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Period Expenses Accounts Deductions of Period
- ---------------------------------- ----------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Deducted from Asset Accounts:
Year Ended September 30, 1993
------------------------------
Reserve for doubtful accounts $ 15,000 $ (5,188) (1) $ 1,394 (2) $ 6,582 (3) $ 15,000
Reserve for inventory obsolescence $ 15,305 $ 89,375 $ - $ 104,685 (5) $ -
Reserve for warranty claim (4) $ 142,995 $ - $ - $ 142,995 (4) $ -
Year Ended September 30, 1994
------------------------------
Reserve for doubtful accounts $ 15,000 $ 1,519 (1) $ 72 (2) $ 1,591 (3) $ 15,000
Reserve for inventory obsolescence $ - $ 36,729 $ - $ 36,729 (5) $ -
Reserve for warranty claim (4) $ - $ - $ - $ - $ -
Year Ended September 30, 1995
------------------------------
Reserve for doubtful accounts $ 15,000 $ 361 (1) $ 463 (2) $ 824 (3) $ 15,000
Reserve for inventory obsolescence $ - $ 142,783 $ - $ 82,583 (5) $ 60,200
Reserve for warranty claim (4) $ - $ - $ - $ - $ -
</TABLE>
(1) Classified as bad debt expense.
(2) Recoveries on accounts charged off in prior years.
(3) Accounts charged off during year as uncollectible.
(4) Reserve classified as an offset to a certificate of deposit of $142,995 in
current assets which collateralized a related bank guaranteed letter of
credit. The certificate was cashed in during fiscal 1993.
(5) Inventory charged off during the year as obsolete.
<PAGE>
HICKOK INCORPORATED
SCHEDULE IX - SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
- ---------------------------- ----------- -------- -------------- -------------- --------------------
Weighted Maximum Amount Average Amount Weighted Average
Balance at Average Outstanding Outstanding Interest Rate During
Category of Aggregate End of Interest During the During the the Period (3)
Short-term Borrowings Period Rate Period Period --------------------
- ---------------------------- ----------- -------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Year Ended September 30, 1993
------------------------------
Note Payable to Bank (1) $ 1,250,000 6.00% $ 2,650,000 $1,076,986 (2) 5.99%
Year Ended September 30, 1994
------------------------------
Note Payable to Bank (1) $ 1,230,000 7.00% $ 1,550,000 $ 365,836 (2) 7.26%
Year Ended September 30, 1995
------------------------------
Note Payable to Bank (1) $ 3,510,000 8.84% $ 3,510,000 $1,353,000 (2) 9.92%
</TABLE>
(1) Note payable to bank represents borrowings under a line-of-credit which has
no termination date but is reviewed annually for renewal.
(2) The average amount outstanding during the period was computed by dividing
the total of daily outstanding principal balances by 365.
(3) The weighted average interest rate during the period was computed by
dividing the actual interest by the average short-term debt outstanding.
<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 at Cleveland, Ohio this
20th day of December, 1995.
THE HICKOK ELECTRICAL INSTRUMENT COMPANY
By:/s/ Robert L. Bauman
-------------------------------------
Robert L. Bauman,
Chairman, 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 indicated and on the 20th day of December,
1995:
Signature: Title
- ---------- -----
/s/ Robert L. Bauman Chairman, President and Chief Executive
- ------------------------------ Officer (Principal Executive Officer)
Robert L. Bauman
/s/ Eugene T. Nowakowski Chief Financial Officer
- ------------------------------ (Principal Financial and Accounting
Eugene T. Nowakowski Officer)
/s/ Thomas H. Barton Director
- ------------------------------
Thomas H. Barton
/s/ Harry J. Fallon Director
- ------------------------------
Harry J. Fallon
/s/ T. Harold Hudson Director
- ------------------------------
T. Harold Hudson
/s/ George S. Lockwood, Jr. Director
- ------------------------------
George S. Lockwood, Jr.
/s/ Michael L. Miller Director
- ------------------------------
Michael L. Miller
/s/ Janet H. Slade Director
- ------------------------------
Janet H. Slade
<PAGE>
EXHIBIT INDEX
Exhibit No.: Document
- ------------ ------------
3(a) Articles of Incorporation and
Code of Regulations
3(b) Amendment to Articles of
Incorporation
10(a) Form of Section 303 Stock
Redemption Agreement by and
between the Company and Robert
D. Hickok (incorporated herein
by reference to the Company's
Annual Report on Form 10-K for
the fiscal year ended
September 30, 1988)
10(b) Loan Agreement dated as of May
20, 1991+wy and between the
Company and Huntington
National Bank. (Incorporated
herein by reference to the
Company's Annual Report on
Form 10-K for the fiscal year
ended September 30, 1991.)
10(c) First Amendment to Credit and
Security Agreement, dated as
of February 28, 1992, by and
between the Company and
Huntington National Bank.
(Incorporated herein by
reference to the Company's
Annual Report on Form 10-K for
the fiscal year ended
September 30, 1992).
10(d) Second Amendment to Credit and
Security Agreement, dated as
of February 28, 1993, by and
between the Company and
Huntington National Bank.
(Incorporated herein by
reference to the Company's
Annual Report on Form 10-K for
the fiscal year ended
September 30, 1993.)
10(e) Third Amendment to Credit and
Security Agreement, dated as
of February 28, 1994 by and
between the Company and The
Huntington National Bank.
(Incorporated herein by
reference to the Company's
Quarterly Report on Form 10-Q
for the fiscal quarter ended
March 31, 1994.)
10(f) Fourth Amendment to Credit and
Security Agreement, dated as
of January 13, 1995, by and
between the Company and
Huntington National Bank.
11 Computation of Net Income Per
Common Share
E-1
<PAGE>
22 Subsidiaries of the Registrant
(Incorporated herein by
reference to the Company's
Annual Report on Form 10-K for
the fiscal year ended
September 30, 1993.)
23 Consent of Independent
Auditors.
27 Financial Data Schedule
E-2
<PAGE>
These Articles of Incorporation
of
The Hickok Electrical Instrument Company,
WITNESSETH. THAT WE, THE UNDERSIGNED(1), ALL OF WHOM ARE CITIZENS OF THE
STATE OF OHIO, DESIRING TO FORM A CORPORATION FOR PROFIT, UNDER THE GENERAL
CORPORATION LAWS OF SAID STATE, DO HEREBY CERTIFY:
FIRST. THE NAME OF SAID CORPORATION SHALL BE THE HICKOK ELECTRICAL
INSTRUMENT COMPANY.
SECOND. SAID CORPORATION IS TO BE LOCATED AT CLEVELAND IN CUYAHOGA COUNTY,
OHIO, AND ITS PRINCIPAL BUSINESS THERE TRANSACTED.
THIRD. SAID CORPORATION IS FORMED FOR THE PURPOSE OF manufacturing,
repairing, buying, selling, importing and exporting, or otherwise dealing in,
either directly or indirectly, through the medium of agents or otherwise,
mechanical and electrical devices, appliances and machinery of all sorts and
descriptions; with full power and authority to purchase, lease or otherwise
acquire lands and buildings in this State or elsewhere, for the erection and
establishment of a manufactory or manufactories and workshops with suitable
plants, engines and machinery; to acquire the land and buildings, plants and
other properties of any persons or companies engaged in a like business; to
purchase or otherwise acquire patents, patent rights and privileges,
improvements or secret processes for or in any way relating to all or any of the
objects aforesaid, and to grant licenses for the use of, or to sell or otherwise
deal with any patents, patent rights and privileges, improvements or secret
processes acquired by the company; to sell, mortgage, lease or otherwise deal
with real and personal property of the company, and such other and further
things as are necessary or incidental thereto.
FOURTH. THE CAPITAL STOCK OF SAID CORPORATION SHALL BE Ten Thousand DOLLARS
($10,000.00) DIVIDED INTO One Hundred (100) SHARES OF One Hundred DOLLARS ($100)
EACH.
IN WITNESS WHEREOF, WE HAVE HEREUNTO SET OUR HANDS, THIS 10th DAY OF September,
A.D. 1915.
Malvern E. Schultz
Carl D. Bechberger
L. M. Diehl
Lee E. Skiel
Carlton F. Schultz
- ---------------
(1) "all" or "majority"
1
<PAGE>
CERTIFICATE OF INCREASE OF CAPITAL STOCK
R. D. Hickok, President, and W. E. Eberle, secretary of The Hickok
Electrical Instrument Company, duly authorized in the premises, and acting on
behalf of said Company, do hereby certify that on the 9th day of May, 1921, the
capital stock of said Company was fully subscribed for, and an installment of
ten percent on each share of stock had been paid; that on said day, by a vote of
the holders of a majority of the stock of said Company, at a meeting called by a
majority of its directors, and held at the office of the Company in the city of
Cleveland, Cuyahoga County, Ohio, and at which meeting all the holders of the
capital stock of said Company were present in person or by proxy, and waived in
writing the notice by publication and by letter, of the time, place and object
of such meeting required by law, and also agreed in writing to the increase of
capital stock hereinafter set forth, it was, on motion, "Resolved, that the
capital stock of said The Hickok Electrical Instrument Company, be increased
from Ten Thousand Dollars ($10,000.00) its present capital stock, to Fifteen
Thousand Dollars ($15,000.00), divided into one hundred and fifty (150) shares
of One Hundred Dollars ($100.00) each; and further, that the president and
secretary of said Company be instructed to file a certificate of such increase
with the secretary of state;" which is done accordingly.
In witness whereof, the aforesaid R. D. Hickok, president, and W. H.
Eberle, secretary of The Hickok Electrical Instrument Company, acting for and on
behalf of said Company, have hereunto set their hands this 9th day of May, A.D.
1921.
THE HICKOK ELECTRICAL INSTRUMENT COMPANY,
By R. D. Hickok
President
By W. E. Eberle
Secretary
2
<PAGE>
ANNUAL REPORTS MADE BY ALL CORPORATIONS ORGANIZED PRIOR TO JULY 23, 1929, MUST
BE ACCOMPANIED BY FOLLOWING DESIGNATION OF AGENT.
Appointment of Agent
Ohio Corporation,
Section 8623-129, General Code
KNOW ALL MEN BY THESE PRESENTS, That Robert D. Hickok of 354 East 105th
Street, in Cleveland, Cuyahoga County, Ohio, a natural person and resident of
said county, being the county in which the principal office of The Hickok
Electrical Instrument Company is located, is hereby appointed as the person on
whom process, tax notices and demands against said The Hickok Electrical
Instrument Company may be served as authorized by resolution of Board of
Directors.
The Hickok Electrical Instrument Company
Name of Corporation
R. D. Hickok
President
L.McCann
Assistant Secretary
Cleveland, Ohio,
, A. D. 19
The Hickok Electrical Instrument Company
Name of Corporation
Gentlemen: I hereby accept the appointment as the representative of your
company upon whom process, tax notices, or demands may be served.
/s/ Robert D. Hickok
State of Ohio,
County of Cuyahoga, as:
Personally appeared before me, the undersigned, a Notary Public in and for
said County, this 17th day of March, A. D. 1930, the above named R. D. Hickok
who acknowledged the signing of the foregoing to be his free act and deed for
the uses and purposes therein mentioned.
WITNESS my hand and official seal on the day and year last aforesaid.
Lloyd W. Hill
Notary Public in and for
Cuyahoga County, Ohio.
3
<PAGE>
Certificate of Amendment
To Articles Of
THE HICKOK ELECTRICAL INSTRUMENT COMPANY, R. D. Hickok, President, and W. H.
Eberle Secretary, of The Hickok Electrical Instrument Company, an Ohio
corporation, with its principal office located at Cleveland, Ohio, do hereby
certify that a meeting of the holders of the shares of said corporation
entitling them to vote on the proposal to amend the articles of incorporation
thereof, as contained in the following resolution, was duly called and held on
the Second day of January, 1936, at which meeting a quorum of such
shareholders(2) (and each class thereof) was present in person or by proxy, and
that by affirmative vote of the holders of shares entitling them to exercise(3),
3/4 of the voting power of the corporation on such proposal* the following
resolution of amendment was adopted:
"That the capital stock of the Hickok Electrical Instrument
Company, having been fully subscribed and paid for that the same by
increased from $15,000.00 as at present, to $50,000.00, divided into
500 shares of $100.00 each instead of 150 shares of $100.00 each and
that the President and Secretary of said Company be instructed to file
a certificate of such increase with the Secretary of State."
IN WITNESS WHEREOF, said R. D. Hickok, President, and W. H. Eberle, Secretary,
of The Hickok Electrical Instrument Company, acting for and on behalf of said
corporation, have hereunto subscribed their names and caused the seal of said
corporations to be hereunto affixed this Second day of January, 1936.
By R. D. Hickok
President
By W. H. Eberle
Secretary
- --------------
(2) Strike out matter in parenthesis if not necessary. (See Sec. 8623-15,
G. C.)
(3) Two-thirds, or such other proportion, not less than a majority, or
vote by classes, as the articles may permit or require. (See Sec. 8623-15,
paragraph b, G. C.)
4
<PAGE>
CERTIFICATE OF AMENDMENT TO
ARTICLES OF INCORPORATION
OF
THE HICKOK ELECTRICAL INSTRUMENT COMPANY
R. D. Hickok, Sr., President-Treasurer and W. H. Eberle, Secretary of the
Hickok Electrical Instrument Company, an Ohio corporation, with its principal
office located at Cleveland, Ohio, do hereby certify that a meeting of the
holders of shares of said company entitling them to vote on the proposal to
amend the Articles of Incorporation thereof, as contained in the following
resolutions, was duly called and held on the 5th day of October, 1944 at which
meeting a quorum of such stockholders was present in person or by proxy, and
that by the affirmative vote of the shareholders entitled under the Articles of
Incorporation to exercise all of the voting power of the corporation on such
proposals, the following resolutions were adopted:
RESOLVED, that the Articles of Incorporation of the Hickok Electrical
Instrument Company (Article Fourth) as amended, be and the same hereby are,
amended so that the same shall henceforth read as follows: The maximum number of
shares which the corporation is authorized to have outstanding is as follows:
2000 Class A shares of common capital stock without par value,
15,000 Class B shares of common capital stock without par value,
The aforesaid Class A shares shall be issued subject to the following
provision which shall be incorporated into each certificate issued to the holder
of such shares: "For each of the five fiscal years of the Hickok Electrical
Instrument Company subsequent to June 30, 1944 each share of Class A common
capital stock of the said company shall be entitled, out of dividends voted by
the Board of Directors, to the payment of a dividend of
5
<PAGE>
$2.50 per share before any dividends are paid upon any other class of shares of
the company; but such dividends shall not be cumulative from one fiscal year to
another. After payment of said dividend for any one fiscal year, any further
dividends declared and paid for that fiscal year shall then be applied to the
payment of dividends not exceeding $2.50 per share on each of the issued and
outstanding shares of Class B stock. After there shall have been paid upon each
issued and outstanding Class B share said dividend of $2.50 during any such
fiscal year, all further dividends declared and paid for such fiscal year shall
be applied and paid equally to all issued and outstanding shares regardless of
class. After the expiration of said five year period, all shares of all classes
shall participate equally in all dividends."
All of the shares of the common capital stock of the company having a par
value of $100.00 each whether issued or unissued, shall be and they hereby are
changed into 15,000 Class B shares of common capital stock without par value, on
the basis of 30 Class B shares for 1 share of said $100.00 par value common
capital stock. Class B shares shall be issued subject to the above-quoted
provisions to be incorporated into the Class A shares.
Each of the said Class A and Class B shares shall have equal voting rights
one with the other in all corporate matters, except with respect to any proposed
change affecting the aforesaid prior dividend right of said Class A shares.
With respect to such prior dividend right, no change or amendment shall be made
to these Articles prior to July 1, 1949, except upon the consent of the holders
of two-thirds or more of said Class A shares.
And, be it further RESOLVED, that the Articles of Incorporation of the
Hickok Electrical Instrument Company as amended, be and the same hereby are
amended, to provide that the Board of
6
<PAGE>
Directors of this company be and they hereby are authorized and empowered to
redeem, repurchase, buy, sell, trade, resell or otherwise deal in all shares of
the common capital stock of the company, at such prices, upon such terms and
under such conditions as said Board of Directors shall in its discretion deem
advisable and for the best interests of this company.
IN WITNESS WHEREOF, said R. D. Hickok, Sr., President-Treasurer and W. H.
Eberle, Secretary, of the Hickok Electrical Instrument Company, acting for and
on behalf of said corporation have hereunto subscribed their names and caused
the seal of said corporation to be hereunto affixed this 22nd day of November,
1944.
R. D. Hickok, Sr., President-Treasurer
W. H. Eberle, Secretary
7
<PAGE>
CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
THE HICKOK ELECTRICAL INSTRUMENT COMPANY
Robert D. Hickok, President, and Einar G. Carlson, Secretary of the Hickok
Electrical Instrument Company, an Ohio corporation, with its principal office
located at Cleveland, Ohio, do hereby certify that a meeting of the holders of
shares of said Company entitling them to vote on the proposal to amend the
Amended Articles of Incorporation thereof, as contained in the following
resolutions, was duly called and held on the 24th day of August, 1959, at which
meeting a quorum of such shareholders was present in person, and that by the
affirmative vote of the shareholders entitled under the Amended Articles of
Incorporation to exercise all of the voting power of the corporation on such
proposals, the following resolutions of amendment were adopted:
That the Articles of Incorporation of The Hickok Electrical Instrument Company
(Articles Third and Fourth) as amended, be and the same hereby are further
amended and changed so that the same shall henceforth read as follows:
THIRD: The Corporation is formed for the following purposes, and any of them:
To manufacture, in whole or in part, repair, treat, service, buy
purchase or otherwise acquire, invest in, own, mortgage, pledge,
exchange, sell, assign and transfer or otherwise dispose of, trade,
deal in and deal with, import and export, in every manner, goods,
wares, merchandise, personal property, products, materials, and
articles of every kind, class and description, for any commercial,
industrial, military, scientific or other purpose.
To carry on and perform research, development, evaluation,
investigation, planning, design, testing, technical studies, invention
and consulting or other service, for any commercial, industrial,
military, scientific or other purpose, and in any field or fields.
To maintain and operate manufacturing, testing and related equipment,
chemical, physical and other laboratories, training schools and such
other facilities as may be appropriate for the foregoing purposes and
to carry on such activities.
To buy, purchase, or otherwise acquire, invest in, own, mortgage,
pledge, exchange, sell, assign and transfer, or otherwise dispose of,
trade, deal in and deal with real property of any description and any
shares of capital stock or voting trust certificates in respect of
shares of capital stock, scrip, warrants, bonds, debentures, notes,
trust receipts and other securities, obligations, choses in action
and evidences of indebtedness or interest, issued or created by this
corporation or by any other corporation, joint stock company,
syndicate, association, firm, trust, government or person, public or
private, and as owner thereof to possess and exercise all the rights,
powers and privileges of ownership, and to do any and all acts and
things necessary and advisable for the preservation, protection,
improvement and enhancement in value thereof.
To enter into, make and perform contracts of every kind and
description, including contracts of joint venture, with any firm,
association, corporation, government or person, public or private.
8
<PAGE>
To do all things necessary or incidental to any of the foregoing,
including owning, holding and dealing, in every manner, in all real
and personal property.
In general, to carry on any other lawful activity or business
whatsoever in connection with the foregoing and the business of the
Corporation, or which is calculated, directly or indirectly, to
promote the interests of the Corporation or to enhance the value of
its properties.
The foregoing shall be construed as purposes, objectives and powers,
and nothing herein shall be deemed to limit or exclude in any manner
any power, right or privilege now or hereafter given to the
Corporation by law or any authority which it now or hereafter is
permitted to exercise under the statutes of Ohio.
FOURTH: The Maximum number of shares which the Corporation is
authorized to have outstanding is as follows:
1,000,000 Class A shares of common capital stock of $1.00 par
value.
275,000 Class B shares of common capital stock of $1.00 par
value.
All of the shares of Class A or Class B common capital stock
without par value of the Company, issued and outstanding on the
effective date of these Amended Articles of Incorporation, shall
be and they hereby are changed and converted at the option of the
holder thereof, into either Class A shares of common capital
stock of $1.00 par value or Class B shares of common capital
stock of $1.00 par value, on the basis of twenty (20) Class A or
Class B shares of $1.00 par value for each one Class A or Class B
share without par value. The foregoing option shall expire ten
(10) days after said date of these Amended Articles, and in the
event said option is not exercised affirmatively by said holder
within said period of time, such failure shall be construed as an
election by the holder to convert said holder's shares into Class
A shares of common capital stock of $1.00 par value.
The aforesaid Class A and Class B shares shall be issued subject
to the following provisions which shall be incorporated into each
certificate issued to the holder of such shares:
DIVIDEND RIGHTS
Holders of Class A common capital stock are entitled to receive,
when and as declared by the Board of Directors of the Company out
of any funds legally available therefor, cash dividends of five
cents per share for each one-half of the fiscal year ending June
30, 1960 and twenty cents per share for each full fiscal year
thereafter, such dividends to be non-cumulative.
After any of the said dividends have been declared and paid or
set aside, then for the same half or full fiscal year, one or
more cash dividends may be paid to the holders of the Class B
common capital stock up to the total paid to the holders of Class
A common capital stock in the same period. Thereafter, for that
half or full fiscal year the holders of Class A and Class B
common capital stock shall be entitled to the payment of the same
dividend or dividends per share, when and as
9
<PAGE>
declared by the Board of Directors. Notwithstanding the
foregoing, the holders of Class A common capital stock shall be
entitled to no preference with respect to the payment of stock
dividends and such stock dividends when and as declared, paid or
ordered by the Board of Directors, shall be distributed to the
holders of Class A and Class B common capital shares on a share-
for-share basis.
VOTING RIGHTS
Except as hereinafter provided, each share of the Class A common
capital stock of the Company shall be entitled to one vote for
each share thereof; and except as otherwise hereinafter provided,
each share of the Class B common capital stock of the Company
shall be entitled to three votes for each share thereof. Except
as otherwise expressly provided in the Articles of Incorporation
(as amended) or as otherwise required by Ohio law, the holders of
Class A and Class B shares of stock shall vote on all matters as
though all of said shares were of one class, the voting shall be
on the aforesaid basis of one vote for each share of Class A
common capital stock and three votes for each share of Class B
common capital stock.
Notwithstanding the foregoing, the written consent or the
affirmative vote of the holders of two-thirds of the Class A
common capital stock, at the time outstanding, shall be required
to effect or validate any one or more of the following:
(a) The issuance of any additional shares of Class B common
capital stock;
(b) The alteration of any of the powers, preferences or rights
of the shares of Class A common capital stock in any manner
substantially prejudicial to the holders thereof;
(c) The voluntary liquidation of the Company or the sale, lease
or conveyance of all or substantially all of the properties and
business of the Company; or
(d) After there has been a public offering of shares of Class A
common capital stock of this Company, the issuance of any
additional Class A common capital stock, for cask, for less than
the public offering price (except for reasonable commissions or
discounts for the underwriting or marketing thereof) received by
the Company through the public offering next preceding such
proposed issuance; but without such vote or consent of the
holders of Class A common capital stock:
(i) Class A common capital stock may be sold for a lesser
consideration per share if first offered on a pro-rata??
basis to the holders of such shares and thereafter issued
for a consideration not less than that at which such shares
were so offered to such holders, less reasonable commissions
or discounts for the underwriting or marketing thereof; and
10
<PAGE>
(ii) Class A common capital stock may be issued to
employees under the provisions of Restricted Stock Options
in the aggregate number heretofore or hereafter authorized
by the shareholders of the Company; and
(iii) Such shares may be issued for property other than
cash.
CONVERSION RIGHTS
Each share of Class B common capital stock shall be convertible
at the option of the holder and at any time, into Class A common
capital stock on a share-for-share basis. In the event each of
the outstanding shares of the Class A common capital stock shall
be changed into or exchanged for a different number or kind of
shares of stock, or other securities of the Company, or of
another corporation, whether through reorganization,
recapitalization, stock dividend, stock split, combination of
shares, merger or consolidation, then For the purposes of the
said option there shall be substituted for each share of Class A
common capital stock, the number and kind of shares of stock or
other securities into which each such share of Class A common
capital stock of the Company shall be so changed or increased, or
for which each such share shall be so exchanged, and the shares
or securities so substituted for each such share of Class A
common capital stock shall be subject to the conversion option
hereinabove provided. Upon conversion, no adjustments will be
made for dividends theretofore declared, and no fractions of
shares shall be issued. In lieu of fractions of shares, the
Company shall make a cash adjustment on the basis of the market
value of the Class A shares of the conversion date.
PREEMPTIVE RIGHTS
No holder of Class A or Class B shares of this Company shall have
any preemptive rights with respect to such shares except as
hereinabove expressly authorized.
That the said Articles of Incorporation (as amended) be further
amended to add the following Article Fifth:
FIFTH:
The Corporation, by its Directors, is authorized to buy,
purchase, or otherwise acquire, invest in, own, mortgage, pledge,
exchange, sell, assign and transfer, or otherwise dispose of,
trade, deal in and deal with real property of any description and
any shares of capital stock or voting trust certificates in
respect of shares of capital stock, scrip, warrants, bonds,
debentures, notes, trust receipts and other securities,
obligations, choses in action and evidences of indebtedness or
interest, issued or created by this corporation or by any other
corporation, joint stock company, syndicate, association, firm,
trust, government or person, public or private, and as owner
thereof to possess and exercise all the rights, powers and
privileges of ownership, and to do any and all acts and things
necessary and advisable for the preservation, protection,
improvement and enhancement in value thereof.
IN WITNESS WHEREOF, the said Robert D. Hickok, President, and Einar G.
Carlson
11
<PAGE>
Secretary, of The Hickok Electrical Instrument Company, acting for and
on behalf of said Corporation, have hereunto subscribed their names
and caused the seal of said Corporation to be hereunto affixed this
2nd day of September, 1959.
THE HICKOK ELECTRICAL INSTRUMENT COMPANY
By Robert D. Hickok
President
By Einar G. Carlson
Secretary
12
<PAGE>
CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
THE HICKOK ELECTRICAL INSTRUMENT COMPANY
Robert D. Hickok, President, and Einar G. Carlson, Secretary of The Hickok
Electrical Instrument Company, an Ohio corporation, with its principal office
located at Cleveland, Ohio, do hereby certify that a meeting of the holders of
shares of said company entitling them to vote on the proposal to amend the
Amended Articles of Incorporation thereof, as contained in the following
resolution, was duly called and held on the 25th day of September, 1959, at
which meeting a quorum of such shareholders was present in person, and that by
the affirmative vote of the shareholders entitled under the Amended Articles of
Incorporation to exercise all of the voting power of the corporation on such
proposals, the following resolution of amendment was adopted:
That the Articles of Incorporation of The Hickok Electrical Instrument
Company (Article Fourth) as amended, be and the same hereby are
further amended to increase the number of authorized Class B shares of
common capital stock of $1.00 par value from 275,000 shares to 295,980
shares; all of such shares to be issued subject to the conditions and
provisions set forth in the Certificate of Amendment of The Hickok
Electrical Instrument Company dated September 2, 1959, filed with the
Secretary of the State of Ohio on September 5, 1959 and recorded on
Roll B 119 at Frame 163 of the Records of Incorporation and
Miscellaneous Filings.
IN WITNESS WHEREOF, the said Robert D. Hickok, President, and Einar G.
Carlson, Secretary, of The Hickok Electrical Instrument Company, acting for and
on behalf of said Corporation, have hereunto subscribed their names and caused
the seal of the said Corporation to be hereunto affixed this 25th day of
September, 1959.
THE HICKOK ELECTRICAL INSTRUMENT COMPANY
By Robert D. Hickok
President
By Einar G. Carlson
Secretary
13
<PAGE>
CERTIFICATE OF AMENDMENT TO
AMENDED ARTICLES OF INCORPORATION
OF
THE HICKOK ELECTRICAL INSTRUMENT COMPANY
The undersigned officers of The Hickok Electrical Instrument Company
(the "Corporation"), an Ohio corporation, do hereby certify that at a meeting of
the Shareholders by a vote greater than the two-thirds majority vote of each
class of Common Shares required by the Company's Amended Articles of
Incorporation, the following amendments to the Amended Articles of Incorporation
of the Corporation were adopted on February 23, 1995:
RESOLVED, that Article First of the Amended Articles of Incorporation
of the Corporation shall be amended in its entirety to read as
follows:
FIRST: The name of said corporation shall be Hickok
Incorporated.
RESOLVED, that Article Fourth of the Amended Articles of Incorporation
of the Corporation shall be amended in its entirety to read as
follows:
FOURTH: The Maximum number of shares which the Corporation is
authorized to have outstanding is as follows:
3,750,000 Class A shares of common capital stock of $1.00 par
value
1,000,000 Class B shares of common capital stock of $1.00 par
value
The aforesaid Class A and Class B shares shall be issued subject to
the following provisions which shall be incorporated into each
certificate issued to the holder of such shares:
DIVIDEND RIGHTS
Holders of Class A common capital stock are entitled to receive,
when and as declared by the Board of Directors of the Company out
of any funds legally available therefor, cash dividends of five
cents per share fore each one-half of the fiscal year ending
June 30, 1960 and twenty cents per
<PAGE>
share for each full fiscal year thereafter, such dividends to be
non-cumulative.
After any of the said dividends have been declared and paid or
set aside, then for the same half or full fiscal year, one or
more cash dividends may be paid to the holders of the Class B
common capital stock up to the total paid to the holders of Class
A common capital stock in the same period. Thereafter, for that
half or full fiscal year the holders of Class A and Class B
common capital stock shall be entitled to the payment of the same
dividend or dividends per share, when and as declared by the
Board of Directors. Notwithstanding the foregoing, the holders
of Class A common capital stock shall be entitled to no
preference with respect to the payment of stock dividends and
such stock dividends when and as declared, paid or ordered by the
Board of Directors, shall be distributed to the holders of Class
A and Class B common capital shares on a share-for-share basis.
VOTING RIGHTS
Except as hereinafter provided, each share of the Class A common
capital stock of the Company shall be entitled to one vote for
each share thereof; and except as otherwise hereinafter provided,
each share of the Class B common stock of the Company shall be
entitled to three votes for each share thereof. Except as
otherwise expressly provided in the Articles of Incorporation (as
amended) or as otherwise required by Ohio law, the holders of
Class A and Class B shares of stock shall vote on all matters as
though all of said shares were of one class; and in any such
voting as though all of said shares were of one class, the voting
shall be on the aforesaid basis of one vote for each share of
Class A common capital stock and three votes for each share of
Class B common capital stock.
Notwithstanding the foregoing, the written consent or the
affirmative vote of the holders of two-thirds of the Class A
common capital stock, at the time outstanding, shall be required
to effect or validate any one or more of the following:
(a) The issuance of any additional shares of Class B common
capital stock;
(b) The alteration of any of the powers, preferences or
rights of the shares of Class A
2
<PAGE>
common capital stock in any manner substantially prejudicial
to the holders thereof;
(c) The voluntary liquidation of the Company or the sale,
lease or conveyance of all or substantially all of the
properties and business of the Company; or
(d) After there has been a public offering of shares of
Class A common capital stock of this Company, the issuance
of any additional Class A common capital stock, for cash,
for less than the public offering price (except for
reasonable commissions or discounts for the underwriting or
marketing thereof) received by the Company through the
public offering next preceding such proposed issuance; but
without such vote or consent of the holders of Class A
common capital stock:
(i) Class A common stock may be sold for a lesser
consideration per share if first offered on a pro-rata
basis to the holders of such shares and thereafter
issued for a consideration not less than that at which
such shares were so offered to such holders, less
reasonable commissions or discounts for the
underwriting or marketing thereof; and
(ii) Class A common capital stock may be issued to
employees under the provisions of Restricted Stock
Options in the aggregate number heretofore or hereafter
authorized by the shareholders of the Company; and
(iii) Such shares may be issued for property other
than cash.
CONVERSION RIGHTS
Each share of Class B common capital stock shall be convertible
at the option of the holder and at any time, into Class A common
capital stock on a share-for-share basis. In the event each of
the outstanding shares of the Class A common capital stock shall
be changed into or exchanged for a different number or kind of
shares of stock, or other securities of the Company, or of
another corporation, whether through reorganization,
recapitalization, stock dividend, stock split,
3
<PAGE>
combination of shares, merger or consolidation, then for the
purposes of the said option there shall be substituted for each
share of Class A common capital stock, the number and kind of
shares of stock or other securities into which each such share of
Class A common capital stock of the Company shall be so changed
or increased, or for which each such share shall be so exchanged,
and the shares or securities so substituted for each such share
of Class A common capital stock shall be subject to the
conversion option hereinabove provided. Upon conversion, no
adjustments will be made for dividends theretofore declared, and
no fractions of shares shall be issued. In lieu of fractions of
shares, the Company shall make a cash adjustment on the basis of
the market value of the Class A shares of the conversion date.
PREEMPTIVE RIGHTS
No holder of Class A or class B shares of this Company shall have
any preemptive rights with respect to such shares except as
hereinabove expressly authorized.
OTHER
Notwithstanding the foregoing terms of this Article Fourth, the
Company may issue shares of Class B common capital stock to give
effect to a share dividend, stock split or other non-cash
distribution without the written consent or the affirmative vote
of the holders of the Company's Class A common capital stock,
provided such share dividend, stock split or non-cash
distribution is equal for both the Class A common capital stock
and the Class B common capital stock, on a per share basis.
Notwithstanding the foregoing terms of this Article Fourth, in
the event the Company shall pay a dividend or made a distribution
on its Class A common capital stock that is paid or made in
Class A common capital stock of the Company, an adjustment to the
minimum price at which any additional shares of Class A common
capital stock of the Company may be issued without the written
consent or the affirmative vote of the holders of the Company's
Class A common capital stock shall automatically occur such that
the product of the share price restriction in effect immediately
prior to the authorization of such dividend or distribution
multiplied by the number of shares of
4
<PAGE>
Class A common capital stock of the Company outstanding
immediately prior to the payment of such dividend or distribution
shall be the same as the product of the adjusted share price
restriction multiplied by the number of shares of Class A common
capital stock of the Company outstanding immediately following
the payment of such dividend or distribution.
Notwithstanding the foregoing terms of this Article Fourth, in
the event the Company shall pay a dividend or make a distribution
on its Class A common capital stock that is paid or made in
Class A common capital stock of the Company, an adjustment to the
twenty cents per share of Class A common capital stock dividend
amount set forth above shall automatically occur such that the
product of twenty cents per share of Class A common capital stock
(or the adjusted amount in effect immediately prior to the
authorization of such dividend or distribution, if previously
adjusted) multiplied by the number of shares of Class A common
capital stock outstanding immediately prior to the payment of
such dividend or distribution shall be the same as the product of
the adjusted per share amount multiplied by the number of shares
of Class A common capital stock outstanding immediately following
the payment of such dividend or distribution. Any adjustment
made pursuant to this Article Fourth shall become effective
immediately following the record date relating to such change.
RESOLVED, that the Chairman of the Board, the President and Chief
Executive Officer or any Vice President and the Secretary of the
Corporation are authorized and directed to execute and file in the
office of the Secretary of State of Ohio an appropriate Certificate of
Amendment to render effective said Amendments to the Amended Articles
of Incorporation of the Corporation.
IN WITNESS WHEREOF, the undersigned officers of the Corporation have
hereunto subscribed their names as of the 23rd day of February, 1995.
/s/ Robert L. Bauman /s/ Michael L. Miller
- ------------------------- -------------------------
Robert L. Bauman Michael L. Miller
Chairman, President and Secretary
Chief Executive Officer
5
<PAGE>
FOURTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this "Fourth
Amendment") is made and entered into as of the 13th day of January, 1995, and
between THE HICKOK ELECTRICAL INSTRUMENT COMPANY, an Ohio corporation (the
"Borrower"), and THE HUNTINGTON NATIONAL BANK, a national banking association
(the "Bank").
RECITALS:
A. The Borrower and the Bank are the parties to that certain Credit
Agreement dated May 20, 1991, pursuant to which, INTER ALIA, the Bank made
available to the Borrower a Revolving Credit Facility in the maximum amount of
$1,500,000, subject to the terms and conditions thereof. Said Credit Agreement
was amended by that certain First Amendment to Credit Agreement dated as of
February 28, 1992, that certain Second Amendment to Credit Agreement dated as of
February 28, 1993, and that Third Amendment to Credit Agreement dated as of
February 28, 1994, all of the foregoing Credit Agreements, as so amended,
hereinafter collectively referred to as the "Loan Agreement".
B. The Borrower has requested that the Bank extend the term of the
Revolving Credit Facility, and agree to certain further modifications to the
Loan Agreement.
C. Subject to the agreements of the Borrower and the satisfaction of
conditions herein set forth, the Bank is willing to grant such requests.
D. Capitalized terms used in this Agreement and not otherwise
defined herein shall have the meanings assigned to them in the Loan Agreement.
<PAGE>
AGREEMENTS:
FOR AND IN CONSIDERATION of the foregoing Recitals, the mutual
covenants and agreements hereinafter set forth, the sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. AMENDMENTS.
(A) Section 2.1 of the Loan Agreement is hereby deleted in its
entirety and the following inserted in lieu thereof:
"2.1 REVOLVING CREDIT: REVOLVING NOTE.
(A) Subject to the terms and conditions of this agreement, Bank
will make available to Borrower a revolving credit facility (the
"Revolving Credit Facility") under which the Bank shall, from
time to time, upon written or oral (confirmed promptly in
writing) request of Borrower therefor, advance loans to Borrower
(each a "Revolving Loan" and, collectively, the "Revolving
Loans") in the maximum aggregate principal amount at any one time
outstanding of not more than Five Million Dollars
($5,000,000.00). The Revolving Credit Facility shall have an
initial term commencing January 13, 1995 and shall terminate on
February 28, 1996; provided, however, that unless Bank or
Borrower shall have given written notice of termination to the
other not later than 60 days prior to the last date of such term
(or renewal term), the Revolving Credit Facility shall be
extended automatically for successive (1) year terms (the
"Renewal Term(s)"). All advances of Revolving Loans shall be
repayable as provided in Section 2.4, and shall be used by
Borrower as provided in Section 5.5, below."
(B) Section 2.4(C) of the Loan Agreement is hereby deleted in its
entirety and the following inserted in lieu thereof:
"(C) The entire balance of the principal of the Revolving Credit
Facility shall be payable in full on the later of (i) February 28,
1996 or (ii) the date on which any current Renewal Term expires
without such term having been renewed for a subsequent additional
Renewal Term pursuant to Section 2.1 (A)."
2
<PAGE>
(C) Section 5.2(H) is hereby amended by deleting therefrom the
numerals "$525,000.00" and inserting the numerals "$1,500,000.00" in lieu
thereof.
(D) Section 5.2(J) is hereby amended by deleting therefrom the
numerals "$4,500,000.00" and inserting the numerals "$6,000,000.00" in lieu
thereof.
(E) Section 5.2(K) is hereby amended by deleting therefrom the
numerals "$5,000,000.00" and inserting the numerals "$8,000,000" in lieu
thereof.
2. EFFECTIVE DATE; CONDITIONS PRECEDENT. The modifications to the
Loan Agreement set forth in Paragraph 1, above, shall be effective on
January 13, 1995, or such later date as is mutually acceptable to the Borrower
and the Bank ("the Effective Date"), provided that such effectiveness shall be
subject to the satisfaction by the Borrower of each of the following conditions
precedent:
(a) On the Effective Date, (i) after giving effect to the
amendments effected hereby, there shall exist no Possible Default or Event of
Default, and the Borrower shall have delivered to the Bank written confirmation
thereof as of the Effective Date, and (ii) the representations and warranties of
the Borrower under the Loan Agreement shall be reaffirmed in writing on the
Effective Date, except for such matters relating thereto as are indicated in
such reaffirmation which shall be satisfactory to the Bank.
(b) The Borrower shall have executed and delivered to the Bank
an Amended and Restated Revolving Note in the form of EXHIBIT A hereto.
3
<PAGE>
(c) The Secretary of the Borrower shall have delivered his or
her certificate, attaching a true and complete copy of the resolutions of its
Board of Directors authorizing its execution and delivery of this Fourth
Amendment, and the taking of the actions contemplated hereby.
(d) Each of the Existing Subsidiaries shall have executed and
delivered a confirmation and acknowledgment of their respective Continuing
Guaranties in the form of EXHIBIT B hereto.
(e) The Borrower shall have delivered to the Bank such other
instruments and taken such other actions as the Bank or its special counsel may
reasonably request.
4. OTHER LOAN DOCUMENTS. Any reference in any of the Other
Agreements to the Loan Agreement shall, from and after the Effective Date, be
deemed to refer to the Loan Agreement, as modified by this Fourth Amendment; and
the term "Other Agreements" shall be deemed to include the other documents
contemplated to be delivered hereunder.
5. BANK'S EXPENSE. The Borrower agrees to reimburse the Bank
promptly for the Bank's costs and expenses incurred in connection with this
Fourth Amendment and the transactions contemplated hereby, including, without
limitation, the fees and expenses of Bank's special counsel.
6. NO OTHER MODIFICATIONS; SAME INDEBTEDNESS. Except as expressly
provided in this Fourth Amendment, all of the terms and conditions of the Loan
Agreement and the Other Agreements remain unchanged and in full force and
effect. The modifications effected by this Fourth Amendment and by the other
instruments
4
<PAGE>
contemplated hereby shall not be deemed to provide for or effect a repayment and
re-advance of any of the Liabilities now outstanding, it being the intention of
both the Borrower and the Bank hereby that the Indebtedness owing under the Loan
Agreement, as amended by this Fourth Amendment, be and is the same Indebtedness
as that owing under the Loan Agreement immediately prior to the effectiveness
hereof.
7. GOVERNING LAW; BINDING EFFECT. This Fourth Amendment shall be
governed by and construed in accordance with the laws of the State of Ohio and
shall be binding upon the Borrower, the Bank and their respective successors and
assigns.
IN WITNESS WHEREOF, the Borrower and the Bank have hereunto set their
hands as of the date first above written.
THE HUNTINGTON NATIONAL BANK THE HICKOK ELECTRICAL INSTRUMENT
COMPANY
By:/s/ Herbert E. Werner By:/s/ Robert L. Bauman
-------------------------- ---------------------------
Herbert A. Werner, Robert L. Bauman, President
Vice President
5
<PAGE>
HICKOK INCORPORATED
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Year Ended September 30
--------------------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
PRIMARY
Average shares outstanding 1,194,500 1,192,304 1,197,994
Net effect of dilutive stock options
- based on the treasury stock
method using average market price 27,918 19,422 18,340
----------- ----------- -----------
Total Shares 1,222,418 1,211,726 1,216,334
----------- ----------- -----------
----------- ----------- -----------
Net Income $ 1,794,230 $ 1,556,303 $ 1,524,286
----------- ----------- -----------
----------- ----------- -----------
Net Income per Share $ 1.47 $ 1.29 $ 1.26
----------- ----------- -----------
----------- ----------- -----------
FULLY DILUTED
Average shares outstanding 1,194,500 1,192,304 1,197,994
Net effect of dilutive stock options
- based on the treasury stock
method using year-end market price
if higher than average market price 29,474 19,422* 18,340*
----------- ----------- -----------
Total Shares 1,223,974 1,211,726 1,216,334
----------- ----------- -----------
----------- ----------- -----------
Net Income $ 1,794,230 $ 1,556,303 $ 1,524,286
----------- ----------- -----------
----------- ----------- -----------
Net Income Per Share $ 1.47 $ 1.29 $ 1.26
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
* Year-end market price is less than average market price, use same as
primary shares.
<PAGE>
EXHIBIT 23 - CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement No. 33-
68196 on Form S-8 dated September 1, 1993 of our report on the consolidated
financial statements and report as to schedules included in the Annual Report on
Form 10-K of Hickok Incorporated for the year ended September 30, 1995.
MEADEN & MOORE, INC.
Certified Public Accountants
December 18, 1995
Cleveland, Ohio
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