<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1996 Commission File No. 0-147
HICKOK INCORPORATED
Incorporated in the State of Ohio I.R.S. No. 34-0288470
10514 Dupont Avenue Cleveland, Ohio 44108
Telephone Number (216) 541-8060
Indicated below are the number of shares outstanding of each of the issuer's
classes of Common Stock as of the close of the period covered by this report.
Class A Common 737,984
Class B Common 454,866
Company or Group of Companies for which report is filed:
HICKOK INCORPORATED
SUPREME ELECTRONICS CORP.
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
---------- ----------
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
HICKOK INCORPORATED
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31 March 31
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales
Product Sales $ 5,245,788 $ 7,927,372 $11,046,512 $11,079,438
Service Sales 1,349,368 1,433,773 2,767,265 2,961,771
----------- ----------- ----------- -----------
Total Net Sales 6,595,156 9,361,145 13,813,777 14,041,209
Costs and Expenses:
Cost of Product Sold 2,815,401 5,086,009 6,504,046 7,010,535
Cost of Service Sold 1,253,852 1,298,177 2,482,808 2,469,354
Product Development 974,189 860,966 1,900,797 1,406,088
Operating Expenses 952,246 968,014 1,842,050 1,757,700
Interest Charges 49,775 19,515 100,470 29,022
Other Income (38,729) (31,937) (84,580) (64,617)
----------- ----------- ----------- -----------
6,006,734 8,200,744 12,745,591 12,608,082
----------- ----------- ----------- -----------
Income before
Income Taxes 588,422 1,160,401 1,068,186 1,433,127
Income Taxes 217,000 452,600 395,000 559,000
----------- ----------- ----------- -----------
Net Income $ 371,422 $ 707,801 $ 673,186 $ 874,127
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
EARNINGS PER COMMON SHARE:
Net Income $ .31 $ .59 $ .56 $ .73
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted Average Shares
of Common Stock Out-
standing 1,192,850 1,196,621 1,192,850 1,196,512
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Dividends per Share $ .10 $ .175 $ .10 $ .175
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
(2)
<PAGE>
HICKOK INCORPORATED
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30, March 31,
1996 1995 1995
------------ ------------ ------------
(Unaudited) (Note) (Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 459,566 $ 696,425 $ 442,337
Trade Accounts Receivable - Net 3,912,773 6,271,195 5,264,770
Inventories 6,016,013 6,921,192 5,244,439
Prepaid and Deferred Expenses 399,654 306,113 185,688
------------ ------------ ------------
TOTAL CURRENT ASSETS 10,788,006 14,194,925 11,137,234
------------ ------------ ------------
PROPERTY, PLANT AND EQUIPMENT
Land 139,192 139,192 139,192
Buildings 1,456,390 1,456,390 1,092,595
Machinery and Equipment 3,605,242 3,138,077 3,297,597
------------ ------------ ------------
5,200,824 4,733,659 4,529,384
Less: Allowance for Depreciation 2,779,320 2,473,556 2,467,590
------------ ------------ ------------
TOTAL PROPERTY - NET 2,421,504 2,260,103 2,061,794
------------ ------------ ------------
OTHER ASSETS
Goodwill - Net of Amortization 154,000 160,000 166,000
Deposits 13,744 13,744 13,444
------------ ------------ ------------
TOTAL OTHER ASSETS 167,744 173,744 179,444
------------ ------------ ------------
TOTAL ASSETS $ 13,377,254 $ 16,628,772 $ 13,378,472
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
NOTE: Amounts derived from audited financial statements previously filed with
the Securities and Exchange Commission.
See Notes to Consolidated Financial Statements.
(3)
<PAGE>
FORM 10-Q
<TABLE>
<CAPTION>
March 31, September 30, March 31,
1996 1995 1995
------------ ------------ -----------
(Unaudited) (Note) (Unaudited)
<S> <C> <C> <C>
LIABILITIES
CURRENT LIABILITIES
Notes Payable $ 1,000,000 $ 3,510,000 $ 1,800,000
Trade Accounts Payable 398,578 855,218 1,019,385
Accrued Payroll & Related Expenses 627,710 1,320,611 619,916
Accrued Expenses 243,629 353,763 188,858
Accrued Income Taxes - 35,744 54,745
------------ ------------ ------------
TOTAL CURRENT LIABILITIES 2,269,917 6,075,336 3,682,904
------------ ------------ ------------
DEFERRED INCOME TAXES 159,000 159,000 106,000
------------ ------------ ------------
STOCKHOLDERS' EQUITY
Class A, $1.00 par value;
authorized 3,750,000 shares;
737,984 shares outstanding(737,984
shares at September 30, 1995 and
737,484 shares at March 31, 1995)
excluding 9,586 shares in treasury 737,984 737,984 737,484
Class B, $1.00 par value;
authorized 1,000,000 shares;
454,866 shares outstanding
excluding 20,667 shares in treasury 454,866 454,866 454,866
Contributed Capital 914,316 914,316 910,816
Retained Earnings 8,841,171 8,287,270 7,486,402
------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY 10,948,337 10,394,436 9,589,568
------------ ------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 13,377,254 $ 16,628,772 $ 13,378,472
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
(4)
<PAGE>
HICKOK INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Cash received from customers $ 16,172,199 $ 14,818,065
Cash paid to suppliers and employees (12,318,794) (13,811,462)
Interest paid (113,437) (29,125)
Interest received 1,070 1,834
Income taxes paid (494,344) (756,421)
------------ ------------
Net Cash Provided by
Operating Activities 3,246,694 222,891
Cash Flows from Investing Activities:
Capital expenditures (207,165) (468,181)
Purchase of Beacon Gage assets (647,103) -
------------ ------------
Net Cash Used in Investing
Activities (854,268) (468,181)
Cash Flows from Financing Activities:
Change in short-term borrowing (2,510,000) 570,000
Purchase of Class B shares - (77,752)
Sale of Class A shares under option - 3,460
Dividends paid (119,285) (209,372)
------------ ------------
Net Cash (Used in) Provided by
Financing Activities (2,629,285) 286,336
------------ ------------
Net (decrease) increase in cash and
cash equivalents (236,859) 41,046
Cash and cash equivalents at beginning
of year 696,425 401,291
------------ ------------
Cash and cash equivalents at end
of second quarter $ 459,566 $ 442,337
------------ ------------
------------ ------------
</TABLE>
See Notes to Consolidated Financial Statements.
(5)
<PAGE>
FORM 10-Q
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Reconciliation of Net Income to Net
Cash Provided by Operating Activities:
Net Income $ 673,186 $ 874,127
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 311,764 311,928
Non-cash compensation charge
related to stock options - 28,908
Changes in assets and liabilities:
Decrease (Increase) in accounts
receivable 2,358,422 776,856
Decrease (Increase) in inventories 1,292,282 (1,400,037)
Decrease (Increase) in prepaid
expenses (93,541) (57,519)
Increase (Decrease) in trade
accounts payable (456,640) 477,362
Increase (Decrease) in accrued
payroll and related expenses (692,901) (545,092)
Increase (Decrease) in accrued
expenses (110,134) (46,223)
Increase (Decrease) in accrued
income taxes (35,744) (197,419)
------------ ------------
Total Adjustments 2,573,508 (651,236)
------------ ------------
Net Cash Provided by
Operating Activities $ 3,246,694 $ 222,891
------------ ------------
------------ ------------
</TABLE>
(6)
<PAGE>
FORM 10-Q
HICKOK INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and six-month periods ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the year
ended September 30, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended September 30, 1995.
2. INVENTORIES
Inventories are valued at the lower of cost or market and consist of the
following:
<TABLE>
<CAPTION>
March 31, Sept. 30, March 31,
1996 1995 1995
----------- ----------- -----------
<S> <C> <C> <C>
Components $ 2,161,908 $ 2,488,711 $ 1,886,900
Work-in-Process 1,934,601 2,651,577 1,958,824
Finished Product 1,919,504 1,780,904 1,398,715
----------- ----------- -----------
$ 6,016,013 $ 6,921,192 $ 5,244,439
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
3. CAPITAL STOCK, TREASURY STOCK, CONTRIBUTED CAPITAL AND STOCK OPTIONS
On February 23, 1995, the number of authorized shares of Class A common
stock and Class B common stock were 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.
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 Company purchased an additional 4,560 shares of Class B
stock from the Estate on March 31, 1995 for approximately $78,000,
completing the obligation.
(7)
<PAGE>
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
Under the Company's Key Employees Stock Option Plan and the 1995 Key
Employees Stock Option Plan (collectively the "Employee Plans"), incentive
stock options, in general, are exercisable for up to ten years, at an
exercise price of not less than the market price on the date the option is
granted. Non-qualified stock options may be granted at such exercise
price and such other terms and conditions as the Compensation Committee of
the Board of Directors may determine. No options may be granted at a price
less than $2.925. Options for 53,850 Class A shares were outstanding at
March 31, 1996 (39,800 shares at September 30, 1995 and 40,300 shares at
March 31, 1995) at prices ranging from $2.925 to $17.25 per share. Options
for 14,050 shares and 7,200 shares were granted during the three month
period ended December 31, 1996 and December 31, 1995 respectively, at a
price of $17.25 and $6.92 per share respectively, all options are
exercisable. During the second quarter period ended March 31, 1995,
options for 500 Class A shares were exercised at a price of $6.92 per share
resulting in non-cash compensation to the optionee of $540. No other
options were granted or exercised during the three or six month periods
presented under the Employee Plans.
On February 23, 1995 the Board of Directors adopted, and shareholders
subsequently approved at the Company's Annual Meeting held on February 21,
1996, the 1995 Outside Directors Stock Option Plan (the "Directors Plan").
The Director's 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. Options for 18,000 Class A shares were outstanding at
March 31, 1996 (12,000 shares at September 30, 1995 and March 31, 1995) at
prices ranging from $16.125 to $18.00 per share. Options for 6,000 shares
and 12,000 shares were granted under the Director's Plan during the three
month period ended March 31, 1996 and March 31, 1995 respectively, at a
price of $16.125 and $18.00 per share respectively. All options under the
Directors Plan become exercisable on February 23, 1999.
Unissued shares of Class A common stock (526,716 shares) 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 Company declared a $.10 per share special dividend on its Class A and
Class B common shares on December 6, 1995 payable January 25, 1996 to
shareholders of record January 3, 1996. A special dividend of $.175 per
share on Class A and Class B common shares, payable January 25, 1995 to
shareholders of record January 3, 1995, was declared on December 7, 1994.
(8)
<PAGE>
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
4. EARNINGS PER COMMON SHARE
Earnings per common share are based on the weighted average number of
shares outstanding during each period.
5. PURCHASE
On January 31, 1996, the Company purchased certain assets of Maradyne
Corporation's Beacon Gage Division for $647,103 which has been accounted
for under the purchase method of accounting. The purchase consisted of
inventory ($387,103), machinery and equipment ($260,000).
Pro forma effects of the Beacon Gage Division on prior years operations are
not determinable. The Company's current quarter and year to date
operations were not significantly impacted from this business.
(9)
<PAGE>
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations, Second Quarter (January 1, 1996 through March 31, 1996)
Fiscal 1996 Compared to Second Quarter Fiscal 1995
----------------------------------------------------------------------------
Product sales for the quarter ended March 31, 1996 were $5,245,788 versus
$7,927,372 for the quarter ended March 31, 1995. The 33.8% decrease in product
sales in the current quarter is volume related and due to a $4.1 million drop in
fastening systems sales offset by a $1.5 million increase in automotive
diagnostic sales. Fastening systems sales in last year's second quarter were a
record due to an extraordinarily large $5.4 million order booked in late fiscal
1994.
Service sales for the quarter ended March 31, 1996 were $1,349,368 versus
$1,433,773 for the quarter ended March 31, 1995. The 5.9% decrease during the
current quarter was volume related and due primarily to a drop in technical
training revenue. This loss of training revenue should continue at the current
level for the remainder of the fiscal year.
Cost of product sold in the second quarter of fiscal 1996 was $2,815,401 or
53.7% of product sales as compared to $5,086,009 or 64.2% of product sales in
the second quarter of 1995. This change in the cost of product sold percentage
was due primarily to a change in product mix.
Cost of service sold for the quarter ended March 31, 1996 was $1,253,852 or
92.9% of service sales as compared to $1,298,177 or 90.5% of service sales in
the quarter ended March 31, 1995. The change in the cost of services sold
percentage was due to an increase in labor costs relative to a large service
contract involving significant price competition.
Product development expenses were $974,189 in the second quarter of fiscal 1996
or 18.6% of product sales as compared to $860,966 or 10.9% of product sales in
the second quarter of fiscal 1995. The absolute dollar increase in the second
quarter of fiscal 1996 is due primarily to a budgeted increase in new product
development costs, and costs incurred to enhance the Company's existing
products, both of which are expensed when incurred. The level of expenditures
incurred during the second quarter of fiscal 1996 is expected to continue
throughout all of fiscal 1996.
Operating expenses in the most recent quarter were $952,246 or 14.4% of total
sales versus $968,014 or 10.3% of total sales for the same period a year ago.
The percentage change is the result of lower shipments in the current quarter
which covered less of the Company's fixed expenses.
(10)
<PAGE>
FORM 10-Q
Interest expense was $49,775 in the second quarter of fiscal 1996, which
compares with $19,515 in the second quarter of fiscal 1995. This was due to
increased borrowing in the second quarter versus the same period a year ago.
Borrowing levels have been reduced and the level of interest expense incurred
during the current quarter is not expected to continue for the remainder of the
fiscal year.
Other income includes $20,618 of rental income from a sub-lease of excess space
during the current and prior quarter.
Net income of $371,422 earned in the second quarter of fiscal 1996 compares with
$707,801 in 1995. This decrease was due primarily to a decrease in product
sales.
Unshipped customer orders as of March 31, 1996 were $7,579,000 versus
$10,663,000 at March 31, 1995. The decrease was primarily due to lower
fastening systems customer orders during the current quarter.
Results of Operations, Six Months Ended March 31, 1996
Compared to Six Months Ended March 31, 1995
--------------------------------------------------------
Product sales for the six months ended March 31, 1996 were $11,046,512 versus
$11,079,438 for the same period in fiscal 1995. The slight decrease is due
primarily to a $4.2 million reduction in fastening systems product sales, almost
all of which were offset by a similar increase in sales of automotive diagnostic
instruments.
Service sales for the six months ended March 31, 1996 were $2,767,265
compared with $2,961,771 for the same period in fiscal 1995. The 6.6% decrease
during the current six-month period was volume related and due primarily to
a drop in technical training revenue. This loss of training revenue should
continue at the current level for the remainder of the fiscal year.
Cost of product sold was $6,504,046 or 58.9% of product sales as compared to
$7,010,535 or 63.3% of product sales for the six months ended March 31,
1995. This change in the cost of product sold percentage was due primarily to a
change in product mix during the second quarter of fiscal 1996.
Cost of service sold was $2,482,808 or 89.7% of service sales compared with
$2,469,354 or 83.3% of service sales for the six months ended March 31, 1995.
The change in the cost of service sold percentage was due to an increase in
labor costs relative to a large service contract involving significant price
competition.
Product development expenses were $1,900,797 or 17.2% of product sales as
compared to $1,406,088 or 12.7% of product sales for the six months ended
March 31, 1995. The higher level of expenditures is expected to continue for the
remainder of fiscal 1996 and represents a budgeted increase in new product
development costs and costs incurred to enhance the Company's existing products.
Both costs are expensed when incurred.
(11)
<PAGE>
FORM 10-Q
Operating expenses were $1,842,050 for the six months ended March 31, 1996 or
13.3% of total sales versus $1,757,700 or 12.5% of total sales for the six
months ended March 31, 1995. The dollar increase represents higher marketing
expenses incurred in the Company's first fiscal quarter ended December 31, 1995
during which sales increased $2.5 million or 54%.
Interest expense was $100,470 for the six months ended March 31, 1996, and
$29,022 for the same period in 1995. This was due to increased borrowing to
support higher working capital levels during the period. Borrowing levels have
been reduced and the level of interest expense incurred during the current six-
month period is not expected to continue for the remainder of the fiscal year.
Other income includes $41,237 of rental income from a sub-lease of excess space
during the first six months of fiscal 1996 and fiscal 1995.
Net income of $673,186 or 4.9% of total sales for the six months ended March 31,
1996 compared with net income of $874,127 or 6.2% of total sales for the six
months ended March 31, 1995. The decrease was due primarily to higher product
development expenses incurred during the current period.
(12)
<PAGE>
FORM 10-Q
Liquidity and Capital Resources
-------------------------------
Total current assets were $10,788,006, $14,194,925 and $11,137,234 at March 31,
1996, September 30, 1995 and March 31, 1995, respectively. The decrease from
March to March was due to a $1.4 million drop in accounts receivable offset by a
$800,000 increase in inventory. The net decrease along with earnings retention
was used to reduce notes payable and trade accounts payable by $1.6 million in
total. The decrease in accounts receivable is due to lower sales in the current
quarter versus a year ago. The increase in inventory is due to inventory added
from the Beacon Gage acquisition and from an increase in inventory necessary to
support anticipated higher product sales in the second half of fiscal 1996.
Between March 1996 and September 1995 current assets dropped by $3.4 million due
primarily to decreases in accounts receivable and in inventory. The decrease in
accounts receivable was due to lower sales in the current quarter versus the
quarter ended September 30, 1995. The decrease in inventory was due to a
scheduled large shipment that occurred in the first quarter of fiscal 1996. The
overall decrease in both accounts receivable and inventory along with earnings
retention were used to reduce current liabilities from $6,075,336 at September
30, 1995 to $2,269,917 at March 31, 1996.
Working capital as of March 31, 1996 amounted to $8,518,089. This compares to
$7,454,330 a year earlier. Current assets were 4.8 times current liabilities
and total cash and receivables were 1.9 times current liabilities. These ratios
compare to 3.0 and 1.5, respectively, at March 31, 1995.
Internally generated funds of $3,246,694 during the six months ended March 31,
1996 were adequate to fund the Company's primary non-operating cash requirement
consisting of capital expenditures which amounted to $207,165. In addition,
internally generated funds were also adequate to fund the purchase of assets
totaling $647,103 of the Beacon Gage Division of Maradyne Corporation.
Management of the Company believes that cash and cash equivalents, together with
funds generated by operations and funds available under the Company's credit
agreement, will provide the liquidity necessary to support its current and
anticipated capital expenditures through the end of fiscal 1996.
Shareholders' equity during the six months ended March 31, 1996 increased by
$553,901 ($.46 per share) resulting from $673,186 of net income, less $119,285
payment of dividends.
In February 1996, the Company amended its credit agreement with its financial
lender. The agreement provides for a revolving credit facility of $5,000,000
with interest at the bank's prime commercial rate with a LIBOR option and is
unsecured. In addition, a supplemental $2,000,000 was provided on the same
terms and conditions except that the supplemental amount matures in December
1996.
(13)
<PAGE>
FORM 10-Q
PART II. OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Shareholders held on January 24, 1996, the
following individuals were elected to the Board of Directors:
Votes For Votes Withheld
--------- --------------
Thomas H. Barton 1,434,543 426
Robert L. Bauman 1,434,543 426
Harry J. Fallon 1,434,543 426
T. Harold Hudson 1,434,543 426
George S. Lockwood, Jr. 1,434,143 826
Michael L. Miller 1,434,543 426
Janet H. Slade 1,434,543 426
The following proposal was approved at the Company's Annual Meeting:
Affirmative Negative Votes
Votes Votes Withheld
----------- -------- --------
1. Approval of the adoption of
the 1995 Outside Directors
Stock Option Plan. 1,416,253 15,510 3,206
For information on how the votes for the above matters have been tabulated, see
the Company's definitive Proxy Statement used in connection with the Annual
Meeting of Shareholders held on January 24, 1996.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K:
The following exhibits are included herein: (10) Fifth Amendment to Credit and
Security Agreement, dated as of February 28, 1996 by and between the Company and
Huntington National Bank. (11) Statement re: Computation of earnings per
share.
The Company did not file any reports on Form 8-K during the three months ended
March 31, 1996.
(14)
<PAGE>
FORM 10-Q
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date May 8, 1996 HICKOK INCORPORATED
----------- -------------------
(Registrant)
/s/ E. T. Nowakowski
-----------------------------------------
E. T. Nowakowski, Chief Financial Officer
(15)
<PAGE>
FORM 10Q
EXHIBIT 10
FIFTH AMENDMENT TO CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (this "Fifth Amendment") is made
and entered into as of the 28 day of February, 1996, by and between HICKOK
INCORPORATED f/k/a THE HICKOK ELECTRICAL INSTRUMENT COMPANY, an Ohio corporation
("Borrower"), and THE HUNTINGTON NATIONAL BANK, a national banking association
("Bank").
RECITALS:
A. Borrower and Bank are the parties to that certain Credit Agreement
dated May 20, 1991, pursuant to which, INTER ALIA, Bank made available to
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, that certain Third Amendment to Credit Agreement dated as of February 28,
1994 and that certain Fourth Amendment to Credit Agreement dated as of January
13, 1995, all of the foregoing Credit Agreements, as so amended, hereinafter
collectively referred to as the "Loan Agreement".
B. Borrower has requested that Bank extend the term of the Revolving
Credit Facility, extend additional credit to Borrower in the form of a temporary
increase in the maximum amount of the Revolving Credit Facility and agree to
certain further modifications to the Loan Agreement.
C. Subject to the agreements of Borrower and the satisfaction of
conditions herein set forth, 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 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). The Revolving Credit
Facility shall have an initial term commencing February 28, 1996
and shall terminate on February 28, 1997; 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)"). In addition to the Revolving Credit
Facility, Bank will make available to Borrower from February 28,
1996 through December 31, 1996, an additional amount of Two Million
Dollars ($2,000,000) (the "Supplemental Revolving Loan"). Advances
under the Supplemental Revolving Loan shall be subject to the
provisions of the Loan Agreement, shall for all purposes be
considered Revolving Loans hereunder and the term "Revolving Loans"
shall include the Supplemental Revolving Loan. The Supplemental
Revolving Loan is not subject to any renewal, and shall expire in
accordance with its terms. 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 2.3 of the Loan Agreement is hereby deleted in its entirety
and the following inserted in lieu thereof:
"2.3. INTEREST RATES. Unless otherwise expressly provided
herein or in the Revolving Note or the Supplemental
Revolving Note, the Liabilities
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<PAGE>
shall bear interest, payable monthly as provided in Section 2.4,
calculated daily on the basis of a 360-day year (that is, computed by
obtaining a daily interest factor at the applicable rate based upon a
360-day factor at the applicable rate based upon a 360-day year and
multiplying such factor by the actual number of days elapsed in the
interest computation period), at either of the interest rates set
forth below as elected by Borrower from time to time at Borrower's
option in accordance herewith:
(A) PRIME COMMERCIAL RATE. Borrower agrees to pay Bank monthly
interest on the unpaid balance of the Revolving Loans at a
variable rate of interest equal to the Prime Commercial
Rate. Subject to any maximum interest rate limitation
specified by applicable law, the variable rate of interest
provided for herein shall change automatically without
notice to Borrower with each chance in the Prime Commercial
Rate. The Prime Commercial Rate shall be applicable at all
times prior to termination date of the Revolving Loans to
all the unpaid principal balance of the Revolving Loans that
is not subject to the alternative interest rate option as
may be elected by Borrower in accordance with Section 2.3(B)
below. A "Prime Interest Rate Advance" shall mean any
amount borrowed as part of the Revolving Loans that bears
interest at the Prime Commercial Rate.
(B) LIBOR RATE. Borrower may from time to time prior to the
termination date of the Revolving Loans, elect to have
interest accrue on all or part of the outstanding principal
balance of the Revolving Loans at a rate of interest equal
to two and three quarters percent (2 3/4%) per annum in
excess of the LIBOR Rate. "LIBOR Rate" shall mean, with
respect to any LIBOR Rate Advance and the related Interest
Period (as hereinafter defined), the per annum rate that is
equal to the quotient of:
(i) the actual or estimated arithmetic mean of the per
annum rates of interest at which deposits in U.S.
dollars for the related Interest Period and in an
aggregate amount comparable to the amount of such LIBOR
Rate Advance are being offered to U.S. banks by one or
more prime banks in the London interbank market, as
determined by Bank in its discretion based upon
reference to information appearing on the display
designated as page "LIBOR" on the Reuters Monitor Money
Rate Service (or such other page as may replace the
LIBOR page on that service for the purpose of
displaying London interbank offered rates of major
banks) or any comparable index selected by Bank, the
obtaining of rate quotations, or any other reasonable
procedure, at approximately 11:00 a.m. London, England,
time, on the second LIBOR business day prior to the
first
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day of the related Interest Period; all as determined by
Bank, such sum to be rounded up, if necessary, to the
nearest whole multiple of 1/16 of 1%; divided by
(ii) a percentage equal to 100% minus the rate (expressed as a
percentage), if any, at which reserve requirements are
imposed on Bank, on the second LIBOR business day prior to
the first day of the related Interest Period, with respect
to any "Eurocurrency liabilities" under Regulation D of the
Board of Govenors of the Federal Reserve System or any other
regulations of any governmental authority having
jurisdiction with respect thereto (including, without
limitation, any marginal, emergency, supplemental, special
or other reserves) for a term comparable to such Interest
Period. This provision is for the benefit of Bank and is
not intended to increase the expected yield to Bank above
the rates of interest provided for in this Agreement.
"LIBOR Rate Advance" shall mean any amount borrowed as part of
the Revolving Loans that bears interest at a rate calculated with
reference to the LIBOR Rate. "LIBOR business day" shall mean,
with respect to any LIBOR Rate Advance, a day which is both a day
on which Bank is open for business and a day on which dealings in
U.S. dollar deposits are carried out in the London interbank
market. Any and all LIBOR Rate Advances shall be requested by
Borrower in a minimum amount not less than Five Hundred Thousand
Dollars ($500,000).
(C) NOTICE OF ELECTION. Borrower may initially elect to request an
Advance of any type, continue an Advance of one type as an
Advance of the then existing type or convert an Advance of one
type to an Advance of another type, by giving notice thereof to
Bank in writing not later than 10:00 a.m. New York time, three
LIBOR business days prior to the date any such continuation of or
conversion to a LIBOR Rate Advance is to be effective, PROVIDED,
that an outstanding Advance may only be converted on the last day
of the then current Interest Period (if applicable) with respect
to such Advance, and PROVIDED, FURTHER, that upon the
continuation or conversion of an Advance such notice shall also
specify the Interest Period (if applicable) to be applicable
thereto upon such continuation or conversion. If Borrower shall
fail to timely deliver such a notice with respect to any
outstanding Advance, Borrower shall be deemed to have elected to
convert such Advance to a Prime Interest Rate Advance on the last
day of the then current Interest Period with respect to such
Advance.
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<PAGE>
(D) INTEREST CALCULATION AND INTEREST PAYMENT DATE.
"Interest Period" shall mean:
(i) With respect to any LIBOR Rate Advance, an initial period
commencing, as the case may be, on the day such an Advance
shall be made by Bank, or on the day of conversion of any
then outstanding Advance to an Advance of such type, and
ending on the date thirty (30) days, sixty (60) days or
ninety (90) days thereafter, all as Borrower may elect
pursuant to Section 2.3(B) of this Agreement, provided, that
(a) any Interest Period with respect to a LIBOR Rate Advance
that shall commence on the last LIBOR business day of the
calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last LIBOR business day of
the appropriate subsequent calendar month; and (b) each
Interest Period with respect to a LIBOR Rate Advance that
would otherwise end on a day which is not a LIBOR business
day shall end on the next succeeding LIBOR business day or,
if such next succeeding LIBOR business day falls in the next
succeeding calendar month, on the next preceding LIBOR
business day.
(ii) With respect to a Prime Interest Rate Advance, an initial
period commencing, as the case may be, on the day such an
Advance shall be made by Bank, or on the day of conversion
of any then outstanding Advance to an Advance of such type,
and ending on the day of conversion to an Advance of a
different type.
(E) ADDITIONAL COSTS. In the event that any applicable law, treaty,
rule or regulation (whether domestic or foreign) now or hereafter
in effect, or any interpretation or administration thereof by any
governmental authority charged with the interpretation or
administration thereof, or compliance by Bank with any request or
directive of any such authority (whether or not having the force
of law), shall (a) affect the basis of taxation of payments to
Bank of any amounts payable by Borrower for LIBOR Rate Advances
under this Agreement (other than taxes imposed on the overall net
income of Bank by the jurisdiction, or by any political
subdivision or taxing authority of any such jurisdiction, in
which Bank has its principal office), or (b) shall impose, modify
or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account
of, or credit extended by Bank, or (c) shall impose any other
condition, requirement or
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<PAGE>
charge with respect to this Agreement or the Revolving Loans
(including, without limitation, any capital adequacy requirement,
any requirement which affects the manner in which Bank allocates
capital resources to its commitments or any similar requirement),
and the result of any of the foregoing is to increase the cost to
Bank of making or maintaining the Revolving Loans or any Advance
thereunder, to reduce the amount of any sum receivable by Bank
thereon, or to reduce the rate of return on Bank's capital, then
Borrower shall pay to Bank, from time to time, upon request of
Bank, additional amounts sufficient to compensate Bank for such
increased cost, reduced sum receivable or reduced rate of return
to the extent Bank is not compensated therefor in the computation
of the interest rates applicable to the Revolving Loans. A
detailed statement as to the amount of such increased cost,
reduced sum receivable or reduced rate of return, prepared in
good faith and submitted by Bank to Borrower, shall be conclusive
and binding for all purposes relative to Bank, absent manifest
error in computation. Bank shall promptly notify Borrower of any
event occurring after the date of this Agreement that entitles
Bank to additional compensation pursuant to this Section 2.3(E).
(F) LIMITATIONS ON REQUESTS AND ELECTIONS. Notwithstanding any other
provision of this Agreement to the contrary, if, upon receiving a
request for an Advance or a request for a contribution of an
Advance as an Advance of the then existing type or conversion of
an Advance to an Advance of another type (a) in the case of any
LIBOR Rate Advance, deposits in dollars for periods comparable to
the Interest Period elected by Borrower are not available to Bank
in the London interbank or secondary market, or (b) the LIBOR
Rate will not accurately cover the cost to Bank of making or
maintaining the LIBOR Rate Advance, or (c) by reason of national
or international financial, political or economic conditions or
by reason of any applicable law, treaty, rule or regulation
(whether domestic or foreign) now or hereafter in effect, or the
interpretation or administration thereof by any governmental
authority charged with the interpretation or administration
thereof, or compliance by Bank with any request or directive of
such authority (whether or not having the force of law),
including without limitation exchange controls, it is
impracticable, unlawful or impossible for Bank (i) to make the
LIBOR Rate Advance or (ii) to continue such Advance as a LIBOR
Rate Advance or (iii) to convert an Advance to a LIBOR Rate
Advance, then Borrower shall not be entitled, so long as such
circumstances continue, to request a LIBOR Rate Advance or a
continuation of or conversion to such Advances from Bank. In the
event that such circumstances no longer exist, Bank shall again
consider requests for LIBOR
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<PAGE>
Rate Advances of the affected type and requests for contributions
of and conversions to such Advances of the affected type.
(G) ILLEGALITY AND IMPOSSIBILITY. In the event that any applicable
law, treaty, rule or regulation (whether domestic or foreign)
now or hereafter in effect, or any interpretation or
administration thereof by any governmental authority charged
with the interpretation or administration thereof, or compliance
by Bank with any request or directive of such authority (whether
or not having the force of law), including without limitation
exchange controls, shall make it unlawful or impossible for Bank
to maintain any Advance under this Agreement, Borrower shall upon
receipt of notice thereof from Bank, repay in full the then
outstanding principal amount of all Advances made by Bank
together with all accrued interest thereon to the date of
payment and all amounts due to Bank under Section 2.3(H), (a)
on the last day of the then current Interest Period, if any,
applicable to such Advance, if Bank may lawfully continue to
maintain such Advances to such day, or (b) immediately if
Bank may not continue to maintain such Advance to such day.
This provision is for the benefit of Bank and is not intended
to increase the yield to Bank above the rates of interest
provided for in this Agreement. This Section 2.3(G) shall
apply only as long as such illegality exists. Bank shall use
reasonable, lawful efforts to avoid the impact of such law,
treaty, rule or regulation. As an alternative to the repayment
obligation provided in this Section 2.3(G), Borrower may, at
its option, and at the time provided in this Section 2.3(G),
convert any affected Advance to a Prime Interest Rate Advance.
(H) INDEMNIFICATION. If Borrower makes any payment of principal with
respect to any Advance an any other date than the last day of an
Interest Period applicable thereto or if Borrower fails to borrow
any Advance after notice has been given to Bank in accordance
with Section 2.3(C), or fails to make any payment of principal
or interest in respect of an Advance when due or at the
termination date of the Revolving Loans, Borrower shall reimburse
Bank on demand for any resulting loss or expense incurred by
Bank, determined in Bank's reasonable opinion, including without
limitation any loss incurred in obtaining, liquidating or
employing deposits from third parties. A detailed statement as
to the amount of such loss or expense, prepared in good faith and
submitted by Bank to Borrower shall be conclusive and binding for
all purposes absent manifest error in computation. Bank shall
promptly notify Borrower of any event occurring after the
date of this Agreement that entitles Bank to reimbursement
pursuant to this Section 2.3(H).
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<PAGE>
(I) SURVIVAL OF OBLIGATIONS. The provisions of Sections 2.3(E) and
2.3(H) shall survive the termination of this Agreement and the
payment in full of all promissory notes outstanding pursuant thereto.
(J) PREPAYMENT PREMIUM. Borrower further agrees that if Borrower shall
elect to prepay, upon at least five (5) business days prior written
notice to Bank, all or part of the unpaid balance of a LIBOR Rate
Advance, Borrower shall pay a Prepayment Premium (as herein defined)
in accordance with the following: If (i) said prepayment shall be made
on or before the date that is the last day of the applicable Interest
Period, and (ii) the Rate of Differential (as defined below) is greater
than zero, then the undersigned shall pay to Bank on the date of
prepayment a Prepayment Premium calculated using the following
formula:
Prepayment Premium = RD x Y x (AP - AD) x PVF
where:
(i) RD is the Rate Differential and means (a) Bank's cost
of funding for the original term of the obligation
evidenced by the Revolving Note or the Supplemental
Revolving Note to the last scheduled payment of
principal expressed as a per annum rate of interest, as
determined by Bank, minus (b) the rate at which Bank
re-employs or could re-employ the funds prepaid for the
remaining term of the obligation evidenced by the Note
through the last scheduled payment of principal,
expressed as a per annum rate of interest, as
determined by Bank;
(ii) Y is the Years and means the number of years in
fractions of years beginning on the date of the
prepayment and ending on the last day prior to the end
of the applicable Interest Period for a LIBOR Rate
Advance;
(iii) AP is the Amount Paid and means the actual amount of
principal paid on the date of prepayment;
(iv) AD is the Amount Due and means the principal portion of
the Revolving Loans paid on the date of the prepayment;
and
(v) PVF is the Present Value Factor and means the value of
$1.00 for Y number of years discounted at
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<PAGE>
the per annum rate of interest at which Bank re-
employs or could re-employ the funds prepaid for the
remaining term of the obligation evidenced by the
Revolving Note or the Supplemental Revolving Note
through the last scheduled payment of principal,
expressed as a per annum rate of interest, as
determined by Bank.
Any prepayment of a LIBOR Rate Advance made hereunder shall be
in an amount equal to the sum of (a) the amount of the prepayment
as calculated above; (b) all interest accrued to date of such
prepayment; (c) any late charge or charges then due and owing;
and (d) an amount sufficient to compensate Bank for any loss,
charges, penalties or other sums incurred or suffered by Bank
because of any match funding of all or any part of the principal
amount of the Revolving Loans."
(C) 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,
1997 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). The entire balance of the
principal and accrued interest of the Supplemental Revolving Loan
shall be payable in full on December 31, 1996."
(D) Section 5.2(J) is hereby amended by deleting therefrom the
numerals "$6,000,000.00" and inserting the numerals "$7,000,000.00" in lieu
thereof.
"(E) Section 5.2(K) is hereby amended by deleting therefrom the
numerals $8,000,000.00" and inserting the numerals "$10,000,000.00" in lieu
thereof.
2. EFFECTIVE DATE: CONDITIONS PRECEDENT. The modifications to the Loan
Agreement set forth in Paragraph 1, above, shall be effective on February 28,
1996, or such later date as is mutually acceptable to Borrower and Bank ("the
Effective Date"), provided that such effectiveness shall be subject to the
satisfaction by Borrower of each of the following conditions precedent:
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<PAGE>
(a) Borrower shall have executed and delivered to Bank on Amended and
Restated Revolving Note in the form of EXHIBIT A hereto and a Supplemental
Revolving Note in the form of EXHIBIT B hereto.
(b) The Secretary of Borrower shall have delivered his or her
certificate, attaching a true and correct copy of the resolutions of its Board
of Directors authorizing its execution and delivery of this Fifth Amendment,
and the taking of the actions contemplated hereby.
(c) Each of the Existing Subsidiaries shall have executed and
delivered a confirmation and acknowledgment of their respective Continuing
Guaranties in the form of EXHIBIT C hereto.
(d) The Secretary of each Existing Subsidiary shall have delivered
his or her certificate attaching a true and correct copy of the resolutions of
its Board of Directors authorizing its execution and delivery of the
confirmation and acknowledgment of their respective Continuing Guaranties.
(e) Borrower shall have delivered to Bank such other instruments and
taken such other actions as 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 Fifth Amendment, and the term "Other
Agreements" shall be deemed to include the other documents contemplated to be
delivered hereunder.
5. BANK'S EXPENSE. Borrower agrees to reimburse Bank promptly for Bank's
costs and expenses incurred in connection with this Fifth Amendment and the
transactions contemplated hereby, including, without limitation, the fees and
expenses of Bank's special counsel.
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<PAGE>
6. REVOLVING CREDIT FACILITY FEES. Borrower agrees to pay Bank a
facility fee for the Revolving Credit Facility of Five Thousand and 00/100
Dollars ($5,000.00) payable on the date of execution of this Fifth Amendment.
Borrower further agrees to pay Bank an additional facility fee for the
Supplemental Revolving Loan of One Thousand and 00/100 Dollars
($1.000.00) payable on the date of execution of this Fifth Amendment.
7. REAFFIRMATION OF BORROWER'S REPRESENTATIONS AND WARRANTIES/BINDING
EFFECT. Borrower hereby represents and warrants to Bank that on the Effective
Date (a) Borrower has the legal power and authority to execute and deliver this
Amendment; (b) the officials executing this Fifth Amendment have been duly
authorized to execute and deliver the same and bind Borrower with respect to the
provisions hereof; (c) the execution and delivery hereof by Borrower and the
performance and observance by Borrower of the provisions hereof do not violate
or conflict with the organizational agreements of Borrower or any law applicable
to Borrower or result in a breach of any provisions of or constitute a default
under any other agreement, instrument or document binding upon or enforceable
against Borrower; (d) after giving effect to the amendments effected hereby,
there shall exist no Possible Default or Event of Default; and (e) this
Amendment constitutes a valid and binding obligation upon Borrower in every
respect.
8. NO OTHER MODIFICATIONS: SAME INDEBTEDNESS. Except as expressly
provided in this Fifth 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 Fifth Amendment and by the other
instruments 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 Borrower and Bank hereby that the Indebtedness owing under
the
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Loan Agreement, as amended by this Fifth Amendment, be and is the same
Indebtedness as that owing under the Loan Agreement immediately prior to the
effectiveness hereof.
9. GOVERNING LAW. This Fifth Amendment shall be governed by and construed
in accordance with the laws of the State of Ohio and shall be binding upon
Borrower, Bank and their respective successors and assigns.
IN WITNESS WHEREOF, Borrower and Bank have hereunto set their hands as of
the date first above written.
THE HUNTINGTON NATIONAL BANK HICKOK INCORPORATED f/k/a
THE HICKOK ELECTRICAL
INSTRUMENT COMPANY
/s/ Herbert A. Werner /s/ Robert L. Bauman
By: -------------------------------- By: -----------------------
Herbert A. Werner, Vice President Robert L. Bauman, President
and Chief Executive Officer
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<PAGE>
THE HUNTINGTON NATIONAL BANK
AMENDED AND RESTATED REVOLVING NOTE
- ------------------------------------------------------------------------------
City Office Cleveland Division 266 Branch [ ] Secured
--------------- ------ -----
Account No. 8241400008 Note No. [X] Unsecured
--------------- --------------
Account Name Hickok Incorporated f/k/a The Hickok Electrical Instrument Company
-----------------------------------------------------------------
[X] Corporation [ ] Partnership [ ] Individual/Proprietorship
[ ] Other
--------------------------------------------------------------------
Bank Approval Officer Initial Bank Closing Officer Initial
------- -------
- ------------------------------------------------------------------------------
$5,000,000.00 Cleveland, Ohio As of February 28, 1996
----
FOR VALUE RECEIVED, the undersigned promises to pay to the order of THE
HUNTINGTON NATIONAL BANK (hereinafter called the "Bank," which term shall
include any holder hereof) at such place as the Bank may designate or, in the
absence of such designation, at any of the Bank's offices, the sum of Five
Million and No/100 Dollars ($5,000,000.00) or so much thereof as shall have been
advanced by the Bank at any time and not hereafter repaid (hereinafter referred
to as "Principal Sum") together with interest as hereinafter provided and
payable at the time(s) and in the manner(s) hereinafter provided all of the
foregoing in accordance with the terms of the Credit Agreement (hereinafter
defined). Subject to the provisions of the Credit Agreement, the proceeds of
the Revolving Loans evidenced hereby may be advanced, repaid and readvanced in
partial amounts during the term of this revolving note ("Note") and prior to
maturity. Each such advance shall be made to the undersigned upon receipt by
the Bank of the undersigned's application therefor and disbursement
instructions, which shall be in such form as the Bank shall from time to time
prescribe. The Bank shall be entitled to rely on any oral or telephonic
communication requesting an advance and/or providing disbursement instructions
hereunder, which shall be received by it in good faith from anyone reasonably
believed by the Bank to be the undersigned, or the undersigned's authorized
agent. The undersigned agrees that all advances made by the Bank will be
evidenced by entries made by the Bank into its electronic data processing system
and/or internal
<PAGE>
memoranda maintained by the Bank. The undersigned further agrees that the sum
or sums shown on the most recent printout from the Bank's electronic data
processing system and/or on such memoranda shall be rebuttably presumptive
evidence of the amount of the Principal Sum and of the amount of any accrued
interest.
INTEREST
Interest will accrue on the unpaid balance of the Principal Sum until paid
at a rate of interest per annum determined in accordance with the interest rate
options provided in the Credit Agreement.
Upon default, whether by acceleration or otherwise, interest will accrue on
the unpaid balance of the Principal Sum and unpaid interest, if any, until paid
at a variable rate of interest per annum, which shall change in the manner set
forth below, equal to four (4) percentage points in excess of the Prime
Commercial Rate, provided that at no time shall the rate of interest upon
default be less than 8% per annum.
All interest shall be calculated by obtaining a daily interest factor for
the applicable interest rate based upon a 360-day year and multiplying it by the
actual number of days the Principal Sum or any part thereof remains unpaid.
Prepayment may only be made in the manner permitted in the Credit Agreement.
The amount of any payment shall first be applied to the payment of any interest
which is due.
As used herein, Prime Commercial Rate shall have the same meaning as set
forth in the Credit Agreement. Subject to any maximum or minimum interest rate
limitation specified herein or by applicable law, any variable rate of interest
on the obligations evidenced hereby shall change automatically without notice to
the undersigned immediately with each change in the Prime Commercial Rate.
MANNER OF PAYMENT
Subject to the provisions of the Default paragraph below and of Article 6
of the Credit Agreement dated May 20, 1991 by and between the undersigned and
the Bank, as amended and supplemented thereafter, including the modifications
set forth in the Fifth Amendment to Credit Agreement executed by and between the
undersigned and the Bank of even date herewith (the foregoing Credit Agreement
and all Amendments thereto collectively referred to herein as the "Credit
Agreement"), the Principal Sum shall be payable in full on the later of (i)
February 28, 1997 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) of the Credit Agreement. Accrued interest hereunder
shall be due and payable in arrears on the first day of each calendar month
beginning on March 1, 1996, or, as otherwise provided in Section 2.3 of the
Credit Agreement with respect to LIBOR Rate Advances, or, at the Bank's option,
shall be added to the Principal Sum.
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<PAGE>
LATE CHARGE
Any installment or other payment not made within five (5) days of the date
such payment or installment is due shall be subject to a late charge equal to 5%
of the amount of the installment or payment.
DEFAULT
Upon the occurrence of an Event of Default (as defined in the Credit
Agreement) of the type described in Section 6.1(F) or (G) of the Credit
Agreement, the maturity of the obligations evidenced hereby shall, automatically
and without any action by Bank, be accelerated, and such obligations shall be
immediately due and payable. Upon the occurrence of any other Event of Default,
the Bank may, at its option, without notice or demand, accelerate the maturity
of the obligations evidenced hereby, which obligations shall become immediately
due and payable. Upon the occurrence and during the continuance of any Event of
Default, the rate of interest accruing hereunder shall, at the Bank's option, be
increased to a rate per annum which shall be four percentage points (4.0%) in
excess of the Prime Commercial Rate. In no event shall the rate of interest
hereunder exceed the maximum rate allowable under applicable law. In the event
the Bank shall institute an action for the enforcement or collection of the
obligations evidenced hereby, the undersigned agrees to pay all costs and
expenses of such action, including reasonable attorneys' fees, to the extent
permitted by law.
GENERAL PROVISIONS
This Note represents an amendment and restatement of the terms of that
certain Revolving Note originally dated May 20, 1991, and amended and restated
by that certain Amended and Restated Revolving note dated as of February 28,
1992, that certain Amended and Restated Revolving Note dated as of February 28,
1993, that certain Amended and Restated Revolving Note dated as of February 28,
1994 and that certain Amended and Restated Revolving Note dated January 13,
1995. This Note shall be governed by and have the benefit of all the terms and
provisions of that certain Credit Agreement dated May 20, 1991, 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, that certain
Third Amendment to Credit Agreement dated as of February 28, 1994, that certain
Fourth Amendment to Credit Agreement dated January 13, 1995, and that Fifth
Amendment to Credit Agreement executed of even date herewith. All terms used
herein and not otherwise defined shall have the same meaning as in the Credit
Agreement.
All of the parties hereto, including the undersigned, and any indorser,
surety, or guarantor, hereby severally waive presentment, notice of dishonor,
protest, notice of protest, and diligence in bringing suit against any party
hereto, and consent that, without discharging any of them, the time of payment
may be extended an unlimited number of times before or after maturity without
notice. The Bank shall not be required to pursue any party hereto, including
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<PAGE>
any guarantor, or to exercise any rights against any collateral herefor before
exercising any other such rights.
The obligations evidenced hereby may from time to time be evidenced by
another note or notes given in substitution, renewal or extension hereof. Any
security interest or mortgage which secures the obligations evidenced hereby
shall remain in full force and effect notwithstanding any such substitution,
renewal, or extension.
The captions used herein are for references only and shall not be deemed a
part of this Note. If any of the terms or provisions of this Note shall be
deemed unenforceable, the enforceability of the remaining terms and provisions
shall not be affected. This Note shall be governed by and construed in
accordance with the law of the State of Ohio.
WAIVER OF RIGHT TO TRIAL BY JURY
THE UNDERSIGNED ACKNOWLEDGES THAT, AS TO ANY AND ALL DISPUTES THAT MAY
ARISE BETWEEN THE UNDERSIGNED AND THE BANK, THE COMMERCIAL NATURE OF THE
TRANSACTION OUT OF WHICH THIS NOTE ARISES WOULD MAKE ANY SUCH DISPUTE UNSUITABLE
FOR TRIAL BY JURY. ACCORDINGLY, THE UNDERSIGNED HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY AS TO ANY AND ALL DISPUTES THAT MAY ARISE RELATING TO THIS NOTE OR
TO ANY OF THE OTHER INSTRUMENTS OR DOCUMENTS EXECUTED IN CONNECTION HEREWITH.
WARRANT OF ATTORNEY
The undersigned authorizes any attorney at law to appear in any Court of
Record in the State of Ohio or in any state or territory of the United States
after the above indebtedness becomes due, whether by acceleration or otherwise,
to waive the issuing and service of process, and to confess judgment against the
undersigned in favor of the Bank for the amount then appearing due together with
costs of suit, and thereupon to waive all errors and all rights of appeal and
stays of execution. The foregoing warrant of attorney shall survive any such
judgment and should any such judgment be vacated for any reason, the foregoing
warrant of attorney nevertheless may thereafter be utilized for obtaining
judgment or judgments.
-4-
<PAGE>
WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOOD, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
Signed and acknowledged in the HICKOK INCORPORATED f/k/a
presence of: THE HICKOK ELECTRICAL
INSTRUMENT COMPANY
- ------------------------------
Print Name: E. Nowakowski
-------------------
By: /s/ Robert L. Bauman
- ------------------------------ ------------------------------
Print Name: Karen Gaul Robert L. Bauman, President
and Chief Executive Officer
This instrument prepared by:
Anne T. Corrigan, Esq.
McDonald, Hopkins, Burke & Haber Co., L.P.A.
2100 Bank One Center
600 Superior Avenue, E.
Cleveland, Ohio 44114-2653
(216) 348-5400
-5-
<PAGE>
THE HUNTINGTON NATIONAL BANK
SUPPLEMENTAL REVOLVING NOTE
- ------------------------------------------------------------------------------
City Office Cleveland Division 266 Branch [ ] Secured
--------------- ------ -----
Account No. 8241400008 Note No. [X] Unsecured
--------------- --------------
Account Name Hickok Incorporated f/k/a The Hickok Electrical Instrument Company
-----------------------------------------------------------------
[X] Corporation [ ] Partnership [ ] Individual/Proprietorship
[ ] Other
--------------------------------------------------------------------
Bank Approval Officer Initial Bank Closing Officer Initial
------- -------
- ------------------------------------------------------------------------------
$2,000,000.00 Cleveland, Ohio As of February 28, 1996
----
FOR VALUE RECEIVED, the undersigned promises to pay to the order of THE
HUNTINGTON NATIONAL BANK (hereinafter called the "Bank," which term shall
include any holder hereof) at such place as the Bank may designate or, in the
absence of such designation, at any of the Bank's offices, the sum of Two
Million and No/100 Dollars ($2,000,000.00) or so much thereof as shall have been
advanced by the Bank at any time and not hereafter repaid (hereinafter referred
to as "Principal Sum") together with interest as hereinafter provided and
payable at the time(s) and in the manner(s) hereinafter provided all of the
foregoing in accordance with the terms of the Credit Agreement (hereinafter
defined). Subject to the provisions of the Credit Agreement, the proceeds of
the Revolving Loans evidenced hereby may be advanced, repaid and readvanced in
partial amounts during the term of this revolving note ("Note") and prior to
maturity. Each such advance shall be made to the undersigned upon receipt by
the Bank, of the undersigned's application therefor and disbursement
instructions, which shall be in such form as the Bank shall from time to time
prescribe. The Bank shall be entitled to rely on any oral or telephonic
communication requesting an advance and/or providing disbursement instructions
hereunder, which shall be received by it in good faith from anyone reasonably
believed by the Bank to be the undersigned, or the undersigned's authorized
agent. The undersigned agrees that all advances made by the Bank will be
evidenced by entries made by the Bank into its electronic data processing system
and/or internal
<PAGE>
memoranda maintained by the Bank. The undersigned further agrees that the sum
or sums shown on the most recent printout from the Bank's electronic data
processing system and/or on such memoranda shall be rebuttably presumptive
evidence of the amount of the Principal Sum and of the amount of any accrued
interest.
INTEREST
Interest will accrue on the unpaid balance of the Principal Sum until paid
at a rate of interest per annum determined in accordance with the interest rate
options provided in the Credit Agreement.
Upon default, whether by acceleration or otherwise, interest will accrue on
the unpaid balance of the Principal Sum and unpaid interest, if any, until paid
at a variable rate of interest per annum, which shall change in the manner set
forth below, equal to four (4) percentage points in excess of the Prime
Commercial Rate, provided that at no time shall the rate of interest upon
default be less than 8% per annum.
All interest shall be calculated by obtaining a daily interest factor for
the applicable interest rate based upon a 360-day year and multiplying it by the
actual number of days the Principal Sum or any part thereof remains unpaid.
Prepayment may only be made in the manner permitted in the Credit Agreement.
The amount of any payment shall first be applied to the payment of any interest
which is due.
As used herein, Prime Commercial Rate shall have the same meaning as set
forth in the Credit Agreement. Subject to any maximum or minimum interest rate
limitation specified herein or by applicable law, any variable rate of interest
on the obligations evidenced hereby shall change automatically without notice to
the undersigned immediately with each change in the Prime Commercial Rate.
MANNER OF PAYMENT
Subject to the provisions of the Default paragraph below and of Article 6
of the Credit Agreement dated May 20, 1991 by and between the undersigned and
the Bank, as amended and supplemented thereafter, including the modifications
set forth in the Fifth Amendment to Credit Agreement executed by and between the
undersigned and the Bank of even date herewith (the foregoing Credit Agreement
and all Amendments thereto collectively referred to herein as the "Credit
Agreement"), the Principal Sum shall be payable in full on December 31, 1996.
Accrued interest hereunder shall be due and payable in arrears on the first day
of each calendar month beginning on March 1, 1996, or, as otherwise provided in
Section 2.3 of the Credit Agreement with respect to LIBOR Rate Advances, or, at
the Bank's option, shall be added to the Principal Sum.
-2-
<PAGE>
LATE CHARGE
Any installment or other payment not made within five (5) days of the date
such payment or installment is due shall be subject to a late charge equal to 5%
of the amount of the installment or payment.
DEFAULT
Upon the occurrence of an Event of Default (as defined in the Credit
Agreement) of the type described in Section 6.1(F) or (G) of the Credit
Agreement, the maturity of the obligations evidenced hereby shall, automatically
and without any action by Bank, be accelerated, and such obligations shall be
immediately due and payable. Upon the occurrence of any other Event of Default,
the Bank may, at its option, without notice or demand, accelerate the maturity
of the obligations evidenced hereby, which obligations shall become immediately
due and payable. Upon the occurrence and during the continuance of any Event of
Default, the rate of interest accruing hereunder shall, at the Bank's option, be
increased to a rate per annum which shall be four percentage points (4.0%) in
excess of the Prime Commercial Rate. In no event shall the rate of interest
hereunder exceed the maximum rate allowable under applicable law. In the event
the Bank shall institute an action for the enforcement or collection of the
obligations evidenced hereby, the undersigned agrees to pay all costs and
expenses of such action, including reasonable attorneys' fees, to the extent
permitted by law.
GENERAL PROVISIONS
This Note shall be governed by and have the benefit of all the terms and
provisions of that certain Credit Agreement dated May 20, 1991, 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, that certain
Third Amendment to Credit Agreement dated as of February 28, 1994, that certain
Fourth Amendment to Credit Agreement dated January 13, 1995, and that Fifth
Amendment to Credit Agreement executed of even date herewith. All terms used
herein and not otherwise defined shall have the same meaning as in the Credit
Agreement.
All of the parties hereto, including the undersigned, and any indorser,
surety, or guarantor, hereby severally waive presentment, notice of dishonor,
protest, notice of protest, and diligence in bringing suit against any party
hereto, and consent that, without discharging any of them, the time of payment
may be extended an unlimited number of times before or after maturity without
notice. The Bank, shall not be required to pursue any party hereto, including
any guarantor, or to exercise any rights against any collateral herefor before
exercising any other such rights.
The obligations evidenced hereby may from time to time be evidenced by
another note or notes given in substitution, renewal or extension hereof. Any
security interest or mortgage which secures the obligations evidenced hereby
shall remain in full force and effect notwithstanding any such substitution,
renewal, or extension.
-3-
<PAGE>
The captions used herein are for references only and shall not be deemed a
part of this Note. If any of the terms or provisions of this Note shall be
deemed unenforceable, the enforceability of the remaining terms and provisions
shall not be affected. This Note shall be governed by and construed in
accordance with the law of the State of Ohio.
WAIVER OF RIGHT TO TRIAL BY JURY
THE UNDERSIGNED ACKNOWLEDGES THAT, AS TO ANY AND ALL DISPUTES THAT MAY
ARISE BETWEEN THE UNDERSIGNED AND THE BANK, THE COMMERCIAL NATURE OF THE
TRANSACTION OUT OF WHICH THIS NOTE ARISES WOULD MAKE ANY SUCH DISPUTE UNSUITABLE
FOR TRIAL BY JURY. ACCORDINGLY, THE UNDERSIGNED HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY AS TO ANY AND ALL DISPUTES THAT MAY ARISE RELATING TO THIS NOTE OR
TO ANY OF THE OTHER INSTRUMENTS OR DOCUMENTS EXECUTED IN CONNECTION HEREWITH.
WARRANT OF ATTORNEY
The undersigned authorizes any attorney at law to appear in any Court of
Record in the State of Ohio or in any state or territory of the United States
after the above indebtedness becomes due, whether by acceleration or otherwise,
to waive the issuing and service of process, and to confess judgment against the
undersigned in favor of the Bank for the amount then appearing due together with
costs of suit, and thereupon to waive all errors and all rights of appeal and
stays of execution. The foregoing warrant of attorney shall survive any such
judgment and should any such judgment be vacated for any reason, the foregoing
warrant of attorney nevertheless may thereafter be utilized for obtaining
judgment or judgments.
-4-
<PAGE>
WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOOD, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
Signed and acknowledged in the HICKOK INCORPORATED f/k/a
presence of: THE HICKOK ELECTRICAL
INSTRUMENT COMPANY
- ------------------------------
Print Name: E. Nowakowski
-------------------
By: /s/ Robert L. Bauman
- ------------------------------ ------------------------------
Print Name: Karen Gaul Robert L. Bauman, President
and Chief Executive Officer
This instrument prepared by:
Anne T. Corrigan, Esq.
McDonald, Hopkins, Burke & Haber Co., L.P.A.
2100 Bank One Center
600 Superior Avenue, E.
Cleveland, Ohio 44114-2653
(216) 348-5400
- 5 -
<PAGE>
FORM 10-Q
EXHIBIT 11
HICKOK INCORPORATED
STATEMENT RE: COMPUTATION OF PER COMMON SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
--------------------- ---------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
PRIMARY
Average shares outstanding 1,192,850 1,196,621 1,192,850 1,196,512
Net effect of dilutive
stock options - based
on the treasury stock
method using average
market price 27,750 27,528 29,879 27,048
--------- --------- --------- ---------
Total Shares 1,220,600 1,224,149 1,222,729 1,223,560
--------- --------- --------- ---------
Net Income $ 371,422 $ 707,801 $ 673,186 $ 874,127
--------- --------- --------- ---------
Per Share $ 0.30 $ 0.58 $ 0.55 $ 0.71
--------- --------- --------- ---------
--------- --------- --------- ---------
FULLY DILUTED
Average shares outstanding 1,192,850 1,196,621 1,192,850 1,196,512
Net effect of dilutive
stock options - based
on the treasury stock
method using year-end
market price, if
higher than average
market price 27,750* 27,528* 29,879* 27,340
--------- --------- --------- ---------
Total Shares 1,220,600 1,224,149 1,222,729 1,223,852
--------- --------- --------- ---------
Net Income $ 371,422 $ 707,801 $ 673,186 $ 874,127
--------- --------- --------- ---------
--------- --------- --------- ---------
Per Share $ 0.30 $ 0.58 $ 0.55 $ 0.71
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
*Period-end market price is less than average market price, use same as primary
shares.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 459566
<SECURITIES> 0
<RECEIVABLES> 3912773
<ALLOWANCES> 0
<INVENTORY> 6016013
<CURRENT-ASSETS> 10788006
<PP&E> 5200824
<DEPRECIATION> 2779320
<TOTAL-ASSETS> 13377254
<CURRENT-LIABILITIES> 2269917
<BONDS> 0
0
0
<COMMON> 1192850
<OTHER-SE> 9755487
<TOTAL-LIABILITY-AND-EQUITY> 13377254
<SALES> 13813777
<TOTAL-REVENUES> 13898357
<CGS> 8986854
<TOTAL-COSTS> 3742847
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100470
<INCOME-PRETAX> 1068186
<INCOME-TAX> 395000
<INCOME-CONTINUING> 673186
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 673186
<EPS-PRIMARY> .56
<EPS-DILUTED> .56
</TABLE>
