<PAGE> 1
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 December 31, 1997 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 740,984
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> 2
FORM 10-Q
PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS:
<TABLE>
<CAPTION>
HICKOK INCORPORATED
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
Three months ended
December 31,
-------------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Net Sales
Product Sales $ 4,572,810 $ 3,580,473
Service Sales 232,206 1,070,536
-------------- --------------
Total Net Sales 4,805,016 4,651,009
Costs and Expenses:
Cost of Products Sold 2,544,998 2,336,189
Cost of Services Sold 188,053 971,037
Product Development 753,515 800,719
Operating Expenses 898,272 865,882
Interest Charges 8,468 2,328
Other Income (44,725) (16,505)
-------------- --------------
4,348,581 4,959,650
-------------- --------------
Income (Loss) before
Income Taxes 456,435 (308,641)
Income (Recovery of) taxes 169,000 (114,200)
-------------- --------------
Net Income (Loss) $ 287,435 $ (194,441)
============== ==============
Earnings per Common Share:
Net Income (Loss) $ .24 $ (.16)
============== ==============
Earnings per Common Share
Assuming Dilution:
Net Income (Loss) $ .24 $ (.16)
============== ==============
Dividends per Common Share $ .10 $ .20
============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
(2)
<PAGE> 3
HICKOK INCORPORATED
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30, December 31,
1997 1997 1996
------------ ------------ ------------
(Unaudited) (Note) (Unaudited)
ASSETS
- ------
<S> <C> <C> <C>
Current Assets
- --------------
Cash and Cash Equivalents $ 2,750,423 $ 2,668,345 $ 1,178,807
Trade Accounts Receivable - Net 2,990,140 3,312,988 3,070,072
Inventories 4,971,771 4,884,401 4,530,824
Prepaid and Deferred Expenses 267,347 231,121 170,298
Refundable Income Taxes -- -- 381,799
------------ ------------ ------------
Total Current Assets 10,979,681 11,096,855 9,331,800
-------------------- ------------ ------------ ------------
Property, Plant and Equipment
- -----------------------------
Land 199,611 199,611 215,495
Buildings 1,410,141 1,410,141 1,472,050
Machinery and Equipment 3,921,952 3,813,873 3,506,189
------------ ------------ ------------
5,531,704 5,423,625 5,193,734
Less: Allowance for Depreciation 3,322,206 3,129,290 2,831,550
------------ ------------ ------------
Total Property - Net 2,209,498 2,294,335 2,362,184
-------------------- ------------ ------------ ------------
Other Assets
- ------------
Goodwill - Net of Amortization 220,209 224,889 238,875
Deferred Charges - Net of Amortization 98,129 115,988 143,279
Deposits 1,750 4,350 16,344
------------ ------------ ------------
Total Other Assets 320,088 345,227 398,498
------------------ ------------ ------------ ------------
Total Assets $ 13,509,267 $ 13,736,417 $ 12,092,482
============ ============ ============ ============
<FN>
NOTE: Amounts derived from audited financial statements previously filed with the Securities
and Exchange Commission.
</FN>
</TABLE>
See Notes to Consolidated Financial Statements.
(3)
<PAGE> 4
FORM 10-Q
<TABLE>
<CAPTION>
December 31, September 30, December 31,
1997 1997 1996
------------- ------------- -------------
(Unaudited) (Note) (Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
- -------------------
<S> <C> <C> <C>
Short-term Financing $ -- $ -- $ --
Current Portion of Capitalized Lease 63,550 63,550 --
Trade Accounts Payable 487,425 657,285 180,348
Accrued Payroll & Related Expenses 351,840 422,772 584,477
Dividends Declared 119,625 -- 238,570
Accrued Expenses 91,137 131,662 111,072
Customer Deposits 83,249 237,587 --
Accrued Income Taxes 246,743 305,400 --
------------- ------------- -------------
Total Current Liabilities 1,443,569 1,818,256 1,114,467
------------------------- ------------- ------------- -------------
Deferred Income Taxes 174,000 174,000 176,000
- --------------------- ------------- ------------- -------------
Long-term Debt
- --------------
Capitalized Lease Liability - Less
Current Portion 106,828 127,101 --
------------- ------------- -------------
Stockholders' Equity
- --------------------
Class A, $1.00 par value;
authorized 3,750,000 shares; 740,984
shares outstanding at December 31,
1997 and September 30, 1997 (737,984
shares at December 31, 1996) excluding
9,586 shares in treasury 740,984 740,984 737,984
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 926,603 926,603 914,316
Retained Earnings 9,662,417 9,494,607 8,694,849
------------- ------------- -------------
Total Stockholders' Equity 11,784,870 11,617,060 10,802,015
-------------------------- ------------- ------------- -------------
Total Liabilities and
Stockholders' Equity $ 13,509,267 $ 13,736,417 $ 12,092,482
==================== ============= ============= =============
</TABLE>
(4)
<PAGE> 5
HICKOK INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31,
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Cash received from customers $ 5,127,864 $ 6,938,571
Cash paid to suppliers and employees (4,717,681) (4,718,613)
Interest paid (8,468) (10,738)
Interest received 33,772 9,737
Income taxes paid (227,657) --
------------- -------------
Net Cash Provided by
Operating Activities 207,830 2,218,957
Cash Flows from Investing Activities:
Capital expenditures (108,079) (101,362)
Deferred charges -- (48,000)
Decrease (Increase) in deposits 2,600 (2,600)
------------- -------------
Net Cash Used in
Investing Activities (105,479) (151,962)
Cash Flows from Financing Activities:
Decrease in short-term financing -- (1,375,000)
Decrease in long-term financing (20,273) --
------------- -------------
Net Cash Used in
Financing Activities (20,273) (1,375,000)
Net Increase in cash and
cash equivalents 82,078 691,995
Cash and cash equivalents at beginning
of year 2,668,345 486,812
------------- -------------
Cash and cash equivalents at end
of first quarter $ 2,750,423 $ 1,178,807
============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
(5)
<PAGE> 6
FORM 10-Q
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Reconciliation of Net Income (Loss) to Net
Cash Provided by Operating Activities:
Net Income (Loss) $ 287,435 $ (194,441)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 215,455 177,553
Changes in assets and liabilities:
Decrease (Increase) in accounts
receivable 322,848 2,287,562
Decrease (Increase) in inventories (87,370) 382,034
Decrease (Increase) in prepaid
expenses (36,226) (673)
(Increase) in refundable
income taxes -- (114,200)
Increase (Decrease) in trade
accounts payable (169,860) (179,795)
Increase (Decrease) in accrued
payroll and related expenses (70,932) (185,123)
Increase (Decrease) in accrued
expenses (194,863) 46,040
Increase (Decrease) in accrued
income taxes (58,657) --
-------------- --------------
Total Adjustments (79,605) 2,413,398
-------------- --------------
Net Cash Provided by
Operating Activities $ 207,830 $ 2,218,957
============== ==============
</TABLE>
(6)
<PAGE> 7
FORM 10-Q
HICKOK INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
DECEMBER 31, 1997
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 month period ended December 31, 1997 are not
necessarily indicative of the results that may be expected for the year
ended September 30, 1998. For further information, refer to the
consolidated financial statements and related footnotes included in the
Company's annual report on Form 10-K for the year ended September 30,
1997.
2. Inventories
-----------
Inventories are valued at the lower of cost or market and consist of the
following:
<TABLE>
<CAPTION>
Dec. 31, Sept. 30, Dec. 31,
1997 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Components $ 2,688,652 $ 2,482,194 $ 2,330,148
Work-in-Process 1,097,120 1,268,995 827,423
Finished Product 1,185,999 1,133,212 1,373,253
----------- ----------- -----------
$ 4,971,771 $ 4,884,401 $ 4,530,824
=========== =========== ===========
</TABLE>
3. Capital Stock, Treasury Stock, Contributed Capital and Stock Options
--------------------------------------------------------------------
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. Nonqualified stock options may be issued at such exercise price
and such other terms and conditions as the Compensation Committee of the
Board Directors may determine. No options may be granted at a price less
than $2.925. Options for 78,400 Class A shares were outstanding at
December 31, 1997 (78,400 shares at September 30, 1997 and 81,400 shares
at December 31, 1996) at prices ranging from $2.925 to $17.25 per share.
Options for 27,550 shares were granted during the three month period ended
December 31, 1996 at a price of $10.75, all options are exercisable.
(7)
<PAGE> 8
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
The 1995 Outside Directors Stock Option Plan (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. Options for 24,000 shares were outstanding at December 31, 1997
(24,000 shares at September 30, 1997 and 18,000 shares at December 31,
1996) at prices ranging from $8.50 to $18.00 per share. All options
granted under the Directors Plan become fully exercisable on February 23,
2000.
Unissued shares of Class A common stock (557,266 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 11, 1997 payable January 23, 1998 to
shareholders of record January 5, 1998. A special dividend of $.20 per
share on Class A and Class B common shares, payable January 24, 1997 to
shareholders of record January 3, 1997, was declared December 13, 1996.
4. Earnings per Common Share
-------------------------
Earnings per common share are based on the provisions of FAS Statement No.
128, "Earnings per Share." Accordingly, the adoption of this statement did
not affect the Company's results of operations, financial position or
liquidity. The effects of applying FAS No. 128 on earnings per share and
required reconciliations are as follows:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-------------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
BASIC EARNINGS PER SHARE
Income (Loss) available to
common stockholders $ 287,435 $ (194,441)
Shares denominator 1,195,850 1,192,850
Per share amount $ .24 $ (.16)
============== ==============
EFFECT OF DILUTIVE SECURITIES
Average shares outstanding 1,195,850 1,192,850
Stock options 16,304 19,623
-------------- --------------
1,212,154 1,212,473
DILUTED EARNINGS PER SHARE
Income (Loss) available to
common stockholders $ 287,435 $ (194,441)
Per share amount $ .24 $ (.16)
============== ==============
</TABLE>
(8)
<PAGE> 9
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
Options to purchase 63,600 shares of common stock at prices ranging from
$10.75 to $18.00 per share were outstanding during the first quarter of
fiscal 1998 and the first quarter of fiscal 1997 but were not included in
the computation of diluted earnings per share because the option's
exercise price was greater than the average market price of the common
shares.
(9)
<PAGE> 10
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations, First Quarter (October 1, 1997 through December 31, 1997)
Fiscal 1998 Compared to First Quarter Fiscal 1997
- --------------------------------------------------------------------------------
Product sales for the quarter ended December 31, 1997 were $4,572,810 versus
$3,580,473 for the quarter ended December 31, 1996. The 27.7% current quarter
increase in product sales was primarily volume related due to an increase in
shipments of both automotive diagnostic equipment and fastening systems product.
The current level of product sales is anticipated to continue for the remainder
of the fiscal year.
Service sales for the quarter ended December 31, 1997 were $232,206 versus
$1,070,536 for the quarter ended December 31, 1996. The reduction was entirely
volume related due to the absence of diagnostic service revenue caused by the
termination of a contract in late fiscal 1997 to provide such services to Ford
Motor Company. The contract was not renewed because Ford consolidated suppliers
in this area. The current level of service sales is expected to continue for the
balance of the fiscal year.
Cost of products sold in the first quarter of fiscal 1998 was $2,544,998 or
55.7% of sales as compared to $2,336,189 or 65.2% of sales in the first quarter
of fiscal 1997. This decrease in the cost of products sold percentage was due
primarily to a change in product mix. The current cost of products sold
percentage is anticipated to increase several percentage points during the
balance of the fiscal year due to a change in product mix.
Cost of services sold in the first quarter of fiscal 1998 was $188,053 or 81.0%
of sales as compared to $971,037 or 90.7% of sales in the first quarter of
fiscal 1997. This improvement in the cost of services sold percentage is
entirely due to the elimination of costs associated with the termination of a
contract in late fiscal 1997 to provide diagnostic services to Ford Motor
Company.
Product development expenses were $753,515 in the first quarter of fiscal 1998
or 16.5% of product sales as compared to $800,719 or 22.4% of product sales in
the first quarter of fiscal 1997. The percentage decrease was due to a slight
reduction in product development expenses combined with an almost 28% increase
in the level of product sales. The current level of product development expenses
is expected to continue for the balance of the fiscal year.
Operating expenses were $898,272 or 18.7% of total sales versus $865,882 or
18.6% of total sales for the same period a year ago. The dollar increase is
primarily due to slightly higher administrative expenses.
Interest expense was $8,468 in the first quarter of fiscal 1998, which compares
with $2,328 in the first quarter of fiscal 1997. This was due to the increase in
long-term debt which occurred in late fiscal 1997.
Other income increased by $28,220 during the first quarter of fiscal 1998 due
primarily to an increase in interest income caused by a higher level of
short-term cash investments.
(10)
<PAGE> 11
FORM 10-Q
Net income of $287,435 was earned in the first quarter of fiscal 1998 which
compares with a net loss of $194,441 in the first quarter of fiscal 1997. The
improvement was due primarily to an increase in gross margin due to a change in
product mix and to a $28,220 increase in other income.
Unshipped customer orders as of December 31, 1997 were $2,148,000 versus
$2,787,000 at December 31, 1996. Most of the decrease in backlog was due to the
termination of a contract in late fiscal 1997 to provide diagnostic services to
Ford Motor Company. The contract was not renewed because Ford consolidated
suppliers in this area.
Liquidity and Capital Resources
-------------------------------
Total current assets were $10,979,681, $11,096,855 and $9,331,800 at December
31, 1997, September 30, 1997 and December 31, 1996, respectively. The increase
from December to December is primarily due to an increase in inventory related
to an anticipated increase in product sales. The decrease since September is
primarily due to a reduction in accounts receivable resulting from a decrease in
shipments during the current quarter. The reduction in accounts receivable at
December 31, 1997 generated cash that was used to reduce trade payables and
accrued payroll, resulting in a reduction of current liabilities from $1,818,256
at September 30, 1997 to $1,443,569 at December 31, 1997. At December 31, 1996
current liabilities amounted to $1,114,467.
Working capital as of December 31, 1997 amounted to $9,536,112. This compares to
$8,217,333 a year earlier. The increase was due to earnings retention net of
internally financed capital expenditures. Current assets were 7.6 times current
liabilities and total cash and receivables were 4.0 times current liabilities.
These ratios compare to 8.4 and 3.8, respectively, at December 31, 1996.
Internally generated funds of $207,830 during the three months ended December
31, 1997 were adequate to fund the Company's primary non-operating cash
requirements consisting of capital expenditures of $108,079 and capitalized
lease payments of $20,273.
Shareholders' equity during the three months ended December 31, 1997 increased
by $167,810 resulting from $287,435 net income and an accrual of $119,625 for a
dividend declared.
The Company has a credit agreement with its financial lender that provides for a
revolving credit facility of $5,000,000 at December 31, 1997. The agreement
provides for interest at the prime commercial rate with a LIBOR option and is
unsecured. The Company remains in compliance with its loan covenants. The
Company is in the annual process of renewing its credit arrangement with its
financial lender. Although no assurance can be given, management of the Company
believes that a renewal may be obtained on terms which are similar to its
current credit facility.
(11)
<PAGE> 12
FORM 10-Q
Forward-Looking Statements
--------------------------
The foregoing discussion includes forward-looking statements relating to the
business of the Company. These forward-looking statements, or other statements
made by the Company, are made based on management's expectations and beliefs
concerning future events impacting the Company and are subject to uncertainties
and factors (including, but not limited to, those specified below) which are
difficult to predict and, in many instances, are beyond the control of the
Company. As a result, actual results of the Company could differ materially from
those expressed in or implied by any such forward-looking statements. These
uncertainties and factors include (a) the Company's dependence upon a limited
number of customers, including Ford and General Motors, (b) the highly
competitive industry in which the company operates, which includes several
competitors with greater financial resources and larger sales organizations, and
(c) the acceptance in the marketplace of new products and/or services developed
or under development by the Company including automotive diagnostic products,
fastening systems products and indicating instrument products.
PART II. OTHER INFORMATION
- ---------------------------
ITEMS 1 through 5: Not applicable
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K:
The following exhibit is included herein: (11) Statement re: Computation of
earnings per share.
The Company did not file any reports on Form 8-K during the three months ended
December 31, 1997.
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 February 17, 1998 HICKOK INCORPORATED
----------------- -------------------
(Registrant)
/s/ E. T. Nowakowski
-------------------------------------------------
E. T. Nowakowski, Chief Financial Officer
(12)
<PAGE> 1
FORM 10-Q
EXHIBIT 11
HICKOK INCORPORATED
STATEMENT RE: COMPUTATION OF PER COMMON SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
PRIMARY
- -------
Average shares outstanding 1,195,850 1,192,850
Net effect of dilutive
stock options - based
on the treasury stock
method using average
market price 16,304 19,623
-------------- --------------
Total Shares 1,212,154 1,212,473
-------------- --------------
Net Income (Loss) $ 287,435 $ (194,441)
-------------- --------------
Per Share $ .24 $ (0.16)
============== ==============
FULLY DILUTED
- -------------
Average shares outstanding 1,195,850 1,192,850
Net effect of dilutive
stock options - based
on the treasury stock
method using period-end
market price, if
higher than average
market price 18,982 19,623
-------------- --------------
Total Shares 1,214,832 1,212,473
-------------- --------------
Net Income (Loss) $ 287,435 $ (194,441)
============== ==============
Per Share $ 0.24 $ (0.16)
============== ==============
</TABLE>
(13)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,750,423
<SECURITIES> 0
<RECEIVABLES> 2,990,140
<ALLOWANCES> 0
<INVENTORY> 4,971,771
<CURRENT-ASSETS> 10,979,681
<PP&E> 5,531,704
<DEPRECIATION> 3,322,206
<TOTAL-ASSETS> 13,509,267
<CURRENT-LIABILITIES> 1,443,569
<BONDS> 106,828
0
0
<COMMON> 1,195,850
<OTHER-SE> 10,589,020
<TOTAL-LIABILITY-AND-EQUITY> 13,509,267
<SALES> 4,805,016
<TOTAL-REVENUES> 4,805,016
<CGS> 2,733,051
<TOTAL-COSTS> 2,733,051
<OTHER-EXPENSES> 1,607,062
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,468
<INCOME-PRETAX> 456,435
<INCOME-TAX> 169,000
<INCOME-CONTINUING> 287,435
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 287,435
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
