<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934 for the quarterly period ended June 30, 1998 or
--------------------------------------------
Transition Report Pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934 for the transition period from _____ to _____ .
Commission File No. 0-147
HICKOK INCORPORATED
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Ohio 34-0288470
- -------------------------------- --------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
10514 Dupont Avenue; Cleveland, Ohio 44108
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (216) 541-8060
- ------------------------------------------------------------------------------
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
the filing requirements for the past 90 days.
Yes X No
------ -------
As of AUGUST 13, 1998, 742,884 Hickok Incorporated Class A Common
Shares and 454,866 Class B Common Shares were outstanding.
<PAGE> 2
FORM 10-Q
PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS:
<TABLE>
<CAPTION>
HICKOK INCORPORATED
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
Three months ended Nine months ended
June 30, June 30,
------------------------------- --------------------------------
1998 1997 1998 1997
------------ ------------ ----------- -------------
<S> <C> <C> <C> <C>
Net Sales
Product Sales $ 4,644,415 $ 3,257,499 $ 14,857,747 $ 10,650,502
Service Sales 279,378 1,092,001 875,567 3,193,638
------------ ------------ ------------ --------------
Total Net Sales 4,923,793 4,349,500 15,733,314 13,844,140
Costs and Expenses:
Cost of Product Sold 2,383,197 2,083,002 8,084,319 6,739,871
Cost of Service Sold 266,146 907,927 644,092 2,770,085
Product Development 795,307 848,340 2,304,960 2,524,110
Operating Expenses 1,390,677 917,604 3,364,624 2,679,922
Interest Charges 20,382 2,171 39,732 6,546
Other Income (22,956) (34,454) (109,908) (77,994)
------------ ------------ ------------ ------------
4,832,753 4,724,590 14,327,819 14,642,540
------------ ------------ ------------ ------------
Income (Loss) before
Income Taxes 91,040 (375,090) 1,405,495 (798,400)
Income (Recovery of)
Taxes 33,600 (138,800) 520,000 (295,400)
------------ ------------ ------------ ------------
Net Income (Loss) $ 57,440 $ (236,290) $ 885,495 $ (503,000)
============ ============ ============ ============
Earnings per Common Share:
Net Income (Loss) $ .05 $ (.20) $ .74 $ (.42)
============ ============ ============ ============
Earning per Common Share
Assuming Dilution:
Net Income (Loss) $ .05 $ (.19) $ .73 $ (.41)
============ ============ ============ ==============
Dividends per Share $ .10 $ .20 $ .10 $ .20
============ ============ ============ ==============
</TABLE>
See Notes to Consolidated Financial Statements.
(2)
<PAGE> 3
<TABLE>
<CAPTION>
HICKOK INCORPORATED
CONSOLIDATED BALANCE SHEETS
June 30, September 30, June 30,
1998 1997 1997
---------- ---------- ---------
(Unaudited) (Note) (Unaudited)
<S> <C> <C> <C>
Assets
- ------
Current Assets
- --------------
Cash and Cash Equivalents $ 1,819,806 $ 2,668,345 $ 1,422,214
Trade Accounts Receivable - Net 2,210,565 3,312,988 2,309,478
Inventories 5,748,631 4,884,401 4,579,093
Prepaid and Deferred Expenses 270,476 231,121 166,965
Refundable Income Taxes -- -- 575,001
---------- ---------- ---------
Total Current Assets 10,049,478 11,096,855 9,052,751
-------------------- ---------- ---------- ---------
Property, Plant and Equipment
- -----------------------------
Land 199,611 199,611 196,611
Buildings 1,516,940 1,410,141 1,472,050
Machinery and Equipment 3,915,168 3,813,873 3,755,190
---------- ---------- ---------
5,631,719 5,423,625 5,423,851
Less: Allowance for Depreciation 3,240,463 3,129,290 3,174,734
---------- ---------- ---------
Total Property - Net 2,391,256 2,294,335 2,249,117
-------------------- ---------- ---------- ---------
Other Assets
- ------------
Goodwill - Net of Amortization 1,973,143 224,889 229,515
Deferred Charges - Net of Amortization 101,388 115,988 135,635
Deposits 1,936 4,350 8,844
---------- ---------- ---------
Total Other Assets 2,076,467 345,227 373,994
------------------ ---------- ---------- ---------
Total Assets $14,517,201 $13,736,417 $11,675,862
============ =========== =========== ===========
</TABLE>
NOTE: Amounts derived from audited financial statements previously filed with
the Securities and Exchange Commission.
See Notes to Consolidated Financial Statements.
(3)
<PAGE> 4
FORM 10-Q
<TABLE>
<CAPTION>
June 30, September 30, June 30,
1998 1997 1997
----------- ------------ -----------
(Unaudited) (Note) (Unaudited)
<S> <C> <C> <C>
Liabilities
- -----------
Current Liabilities
- -------------------
Short-term Financing $ -- $ -- $ --
Current Portion of Long-term Debt 161,762 63,550 --
Trade Accounts Payable 458,902 657,285 242,019
Accrued Payroll & Related Expenses 423,291 422,772 450,415
Accrued Expenses 174,615 131,662 305,972
Customer Deposits 55,110 237,587 --
Accrued Income Taxes 102,744 305,400 --
----------- ----------- -----------
Total Current Liabilities 1,376,424 1,818,256 998,406
------------------------- ----------- ----------- -----------
Deferred Income Taxes 174,000 174,000 176,000
- --------------------- ----------- ----------- -----------
Long-term Debt 564,747 127,101 --
- -------------- ----------- ----------- -----------
Stockholders' Equity
- --------------------
Class A, $1.00 par value;
authorized 3,750,000 shares;
742,884 shares outstanding(740,984 shares
at September 30, 1997 and 738,984 shares
at June 30, 1997) excluding 9,586 shares
in treasury 742,884 740,984 738,984
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 943,803 926,603 921,316
Retained Earnings 10,260,477 9,494,607 8,386,290
----------- ----------- -----------
Total Stockholders' Equity 12,402,030 11,617,060 10,501,456
-------------------------- ----------- ----------- -----------
Total Liabilities and
Stockholders' Equity $14,517,201 $13,736,417 $11,675,862
==================== =========== =========== ===========
</TABLE>
(4)
<PAGE> 5
<TABLE>
<CAPTION>
HICKOK INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30,
(Unaudited)
1998 1997
------------ -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Cash received from customers $ 17,340,019 $ 16,892,296
Cash paid to suppliers and employees (14,695,138) (13,964,704)
Interest paid (21,245) (14,956)
Interest received 77,081 39,379
Income taxes paid (722,657) (12,000)
------------ ------------
Net Cash Provided by
Operating Activities 1,978,060 2,940,015
Cash Flows from Investing Activities:
Capital expenditures (277,009) (350,363)
Deferred charges -- (82,500)
Decrease in deposits 2,514 4,900
Proceeds on sale of assets 29,257 30,000
Psyments for business purchased (Net) (2,426,518) --
Net Cash Used in Investing
Activities (2,671,756) (397,963)
Cash Flows from Financing Activities:
Change in short-term borrowing -- (1,375,000)
Decrease in long-term financing (50,034) --
Sale of Class A shares under option 14,816 6,920
Dividends paid (119,625) (238,570)
------------ ------------
Net Cash Used in
Financing Activities (154,843) (1,606,650)
Net increase (decrease) in cash and
cash equivalents (848,539) 935,402
Cash and cash equivalents at beginning
of year 2,668,345 486,812
------------ ------------
Cash and cash equivalents at end
of third quarter $ 1,819,806 $ 1,422,214
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
(5)
<PAGE> 6
FORM 10-Q
<TABLE>
<CAPTION>
1998 1997
------------ -------------
<S> <C> <C>
Reconciliation of Net Income (Loss) to Net
Cash Provided by Operating Activities:
Net Income (Loss) $ 885,495 $ (503,000)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 618,249 572,241
Non-cash compensation charge
related to stock options 4,284 1,080
Loss (Gain) on disposal of assets 10,759 (11,116)
Changes in assets and liabilities:
Decrease (Increase) in accounts
receivable 1,606,705 3,048,156
Decrease (Increase) in inventories (144,986) 333,765
Decrease (Increase) in prepaid
expenses (36,507) (304,742)
Increase (Decrease) in trade
accounts payable (567,473) (118,124)
Increase (Decrease) in accrued
payroll and related expenses (36,286) (319,185)
Increase (Decrease) in accrued
expenses (159,524) 240,940
Increase (Decrease) in accrued
income taxes (202,656) --
Total Adjustments 1,092,565 3,443,015
----------- -----------
Net Cash Provided by
Operating Activities $ 1,978,060 $ 2,940,015
=========== ===========
</TABLE>
(6)
<PAGE> 7
FORM 10-Q
HICKOK INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
JUNE 30, 1998
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 nine-month periods ended June 30, 1998 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 footnotes thereto 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>
June 30, Sept. 30, June 30,
1998 1997 1997
----------- ----------- -----------
<S> <C> <C> <C>
Components $ 3,136,971 $ 2,482,194 $ 2,349,524
Work-in-Process 1,336,227 1,268,995 964,386
Finished Product 1,275,433 1,133,212 1,265,183
----------- ----------- ----------
$ 5,748,631 $ 4,884,401 $ 4,579,093
=========== =========== ===========
</TABLE>
3. Capital Stock, Treasury Stock, Contributed Capital and Stock Options
--------------------------------------------------------------------
On December 11, 1997 the Board of Directors adopted and shareholders
subsequently approved at the Company's Annual Meeting held on
February 25, 1998, the 1997 Key Employees Stock Option Plan.
Under the Company's Key Employees Stock Option Plan adopted in 1989,
the 1995 Key Employees Stock Option Plan and the 1997 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
98,300 Class A shares were outstanding at June 30, 1998 (78,400
shares at September 30, 1997 and 80,400 shares at June 30, 1997)at
prices ranging from $2.925 to $17.25 per share. Options for 24,000
shares and 27,550 shares were granted during the three month period
ended December 31, 1997 and December 31, 1996 respectively, at a
price of $10.50 and $10.75 per share respectively, all options are
exercisable.
(7)
<PAGE> 8
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
During the third quarter period ended June 30, 1998, options for
1,500 Class A shares were exercised at prices ranging from $6.92 to
$8.31 per share resulting in non-cash compensation to the optionees
of $3,480. During the third quarter period ended June 30, 1997 no
options were exercised. Options for 100 shares of Class A shares were
cancelled during the three month period ended June 30, 1998.
During the second quarter period ended March 31, 1998, options for
400 Class A shares were exercised at prices ranging from $6.92 to
$8.31 per share resulting in non-cash compensation to the optionee of
$804. During the second quarter period ended March 31, 1997, options
for 1,000 Class A shares were exercised at a price of $6.92 per share
resulting in non-cash compensation to the optionee of $1,080. Options
for 2,100 shares of Class A shares were cancelled during the three
month period ended March 31, 1998.
No other options were granted, exercised or cancelled during the
periods presented under the Employee Plans.
On December 11, 1997 the Board of Directors adopted, and shareholders
subsequently approved at the Company's Annual Meeting held on
February 25, 1998, the 1997 Outside Directors Stock Option Plan.
The Company's 1995 Outside Directors Stock Option Plan and the 1997
Outside Directors Stock Option Plan (collectively the "Directors
Plans"), provide for the automatic grant of options to purchase up to
51,000 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 30,000 Class A shares were
outstanding at June 30, 1998 (24,000 shares at September 30, 1997 and
June 30, 1997) at prices ranging from $8.50 to $18.00 per share.
Options for 6,000 shares were granted under the Directors Plans
during each of the three month periods ended March 31, 1998 and March
31, 1997, at a price of $12.25 and $18.00 per share respectively. All
outstanding options under the 1995 Outside Directors Stock Option
Plan become fully exercisable on February 23, 2000. All outstanding
options under the 1997 Outside Directors Stock Option Plan become
fully exercisable on February 25, 2001.
Unissued shares of Class A common stock (583,166 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 Plans.
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 on
December 13, 1996.
(8)
<PAGE> 9
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
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 Nine Months Ended
June 30, June 30,
------------------------------- --------------------------------
1998 1997 1998 1997
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income (Loss) available
to common stockholders $ 57,440 $ (236,290) $ 885,495 $ (503,000)
Shares denominator 1,196,695 1,193,850 1,196,217 1,193,238
Per share amount $ .05 $ (.20) $ .74 $ (.42)
=========== =========== =========== ===========
EFFECT OF DILUTIVE
SECURITIES
Average shares
outstanding 1,196,695 1,193,850 1,196,217 1,193,238
Stock options 23,064 18,858 23,064 19,407
----------- ----------- ----------- -----------
1,219,759 1,212,708 1,219,281 1,212,645
DILUTED EARNINGS PER SHARE
Income (Loss) available
to common stockholders $ 57,440 $ (236,290) $ 885,495 $ (503,000)
Per share amount $ .05 $ (.19) $ .73 $ (.41)
=========== =========== =========== ===========
</TABLE>
Options to purchase 41,250 and 63,600 shares of common stock during
the third quarter of fiscal 1998 and the third quarter of fiscal
1997, respectively, at prices ranging from $10.75 to $18.00 per share
were outstanding 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 share.
For the nine month periods ended June 30, 1998 and 1997 options to
purchase 41,250 and 63,600 shares of common stock, respectively, at
prices ranging from $10.75 to $18.00 per share were outstanding 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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
5. Purchase
--------
On February 17, 1998, the Company purchased certain assets of Waekon
Industries, Inc. for $2,221,302 which has been accounted for under
the purchase method of accounting. The purchase consisted of accounts
receivable ($504,282), inventory ($719,244), prepaid and other assets
($42,786), machinery and equipment ($380,100), assumption of current
liabilities ($425,895), and goodwill ($1,000,785). The Company has
also incurred and recorded as goodwill closing costs related to the
purchase ($205,216) as well as the present value of a five year earn
out contract ($585,892). Goodwill is being amortized over 20 years.
Pro forma effects of the Waekon Industries, Inc. purchase on fiscal
1997 operations were reported in Unaudited Consolidated Pro Forma
Condensed Financial Statements included with Form 8-K/A dated
February 17, 1998. The following pro forma data summarizes the
results of operations of the Company for the twelve months ended
September 30, 1997 and for the nine months ended June 30, 1998,
assuming Waekon was acquired at the beginning of each period
presented. In preparing the pro forma data, adjustments have been
made to conform Waekon's accounting policies to those of the Company
and to reflect purchase accounting adjustments and interest expense.
<TABLE>
<CAPTION>
Twelve Months Nine Months
Ended Ended
September 30, 1997 June 30, 1998
------------------ -------------
<S> <C> <C>
Net Sales $ 26,032,266 $17,774,612
============ ===========
Net Income $ 709,584 $ 969,701
============ ===========
Net Income per Common Share $ .59 $ .81
============ ===========
</TABLE>
The pro forma information does not purport to be indicative of the
results of operations which would have actually been obtained if the
acquisition had occurred on the dates indicated or the results of
operations which will be reported in the future.
(10)
<PAGE> 11
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations, Third Quarter (April 1, 1998 through June 30, 1998)
Fiscal 1998 Compared to Third Quarter Fiscal 1997
-----------------------------------------------------------------------------
Product sales for the quarter ended June 30, 1998 were $4,644,415 versus
$3,257,499 for the quarter ended June 30, 1997. The 42.6% increase in product
sales in the current quarter is volume related and due primarily to a
$1,487,000 increase in automotive diagnostic sales of which $772,000
represents sales of products produced by Waekon Industries which was acquired
on February 17, 1998. The Company anticipates that the current amount of
product sales experienced in the third quarter will remain at that level in
the fourth quarter.
Service sales for the quarter ended June 30, 1998 were $279,378 versus
$1,092,001 for the quarter ended June 30, 1997. 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 business segment. The current level of service sales is
expected to continue for the balance of the fiscal year.
Cost of product sold in the third quarter of fiscal 1998 was $2,383,197 or
51.3% of product sales as compared to $2,083,002 or 63.9% of product sales in
the third quarter of 1997. This decrease in the cost of product sold
percentage was due primarily to a change in product mix. The current cost of
products sold percentage is anticipated to increase slightly during the fourth
quarter of the fiscal year due to a change in product mix.
Cost of service sold for the quarter ended June 30, 1998 was $266,146 or 95.3%
of service sales as compared to $907,927 or 83.1% of service sales in the
quarter ended June 30, 1997. This increase in the cost of services sold
percentage was due to an increase in material costs applicable to repair
services billed in the third quarter. The cost of services sold percentage is
expected to improve in the fourth quarter of the current fiscal year due to an
improvement in product mix.
Product development expenses were $795,307 in the third quarter of fiscal 1998
or 17.1% of product sales as compared to $848,340 or 26.0% of product sales in
the third quarter of fiscal 1997. The percentage decrease is due to 6%
decrease in product development expenses combined with a 43% increase in
product sales. The level of expenditures incurred during the third quarter of
fiscal 1998 is expected to continue in the fourth quarter.
Operating expenses in the most recent quarter were $1,390,677 or 28.2% of
total sales versus $917,604 or 21.1% of total sales for the same period a year
ago. Approximately 60% of the dollar increase ($289,000) represents marketing
and administrative expenses for Waekon Industries which was acquired on
February 17, 1998. An additional 22% of the dollar increase ($102,000)
represents a bonus accrual which was absent in last year's third quarter due
to losses. The current level of operating expenses is expected to continue for
the balance of the fiscal year.
Interest expense was $20,382 in the third quarter of fiscal 1998, as compared
to $2,171 in the second quarter of fiscal 1997. This increase was due
primarily to an increase in long term debt associated with the Waekon
acquisition on February 17, 1998. The current level of interest expense will
continue for the remainder of fiscal 1998.
(11)
<PAGE> 12
FORM 10-Q
Other income of $22,956 in the current quarter compares with $34,454 in the same
quarter last year. The reduction is due to lower interest income on a reduced
level of short-term cash investments.
Net income in the third quarter of fiscal 1998 was $57,440 which compared with a
net loss of $236,290 in fiscal 1997. This improvement was due to an increase in
product sales and to an increase in gross product margin.
Unshipped customer orders as of June 30, 1998 were $2,671,000 versus
$7,894,000 at June 30, 1997. The decrease was due to timing differences on
orders for automotive diagnostic products ($1,400,000) and to lower orders for
fastening systems products ($1,700,000). In addition, $2,100,000 of the
decrease was due to the termination of a contact in late fiscal 1997 to
provide diagnostic services to Ford Motor Company. The contract was not
renewed because Ford consolidated suppliers in this business segment. The
shortfall in orders for fastening products will not be made up in the last
quarter of the fiscal year. The decrease in backlog for automotive products
has been offset by a comparable increase in orders received and shipped in the
first nine months of fiscal 1998.
Results of Operations, Nine Months Ended June 30, 1998
Compared to Nine Months Ended June 30, 1997
---------------------------------------------------------
Product sales for the nine months ended June 30, 1998 were $14,857,747 versus
$10,650,052 for the same period in fiscal 1997. The increase is volume related
due primarily to a $3,679,000 increase in sales of automotive diagnostic
products of which $1,337,000 represents sales of products produced by Waekon
Industries which was acquired on February 17, 1998.
Service sales for the nine months ended June 30, 1998 were $875,567 compared
with $3,193,638 for the same period in fiscal 1997. The reduction was entirely
volume related due primarily 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 business segment.
Cost of product sold was $8,084,319 or 54.4% of product sales as compared to
$6,739,871 or 63.3% of product sales for the nine months ended June 30, 1997.
This change in the cost of product sold percentage was due to a change in
product mix.
Cost of service sold was $644,092 or 73.6% of service sales compared with
$2,770,085 or 86.7% of service sales for the nine months ended June 30, 1997.
This improvement in the cost of services sold percentage is primarily 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 $2,304,960 or 15.5% of product sales as
compared to $2,524,110 or 23.7% of product sales for the nine months ended
June 30, 1997. The percentage decrease is due to a 9% decrease in product
development expenses combined with a 40% increase in product sales.
(12)
<PAGE> 13
FORM 10-Q
Operating expenses were $3,364,624 for the nine months ended June 30, 1998 or
21.4% of total sales versus $2,679,922 or 19.4% of total sales for the nine
months ended June 30, 1997. Approximately 64% of the dollar increase
($438,000) represents marketing and administrative expenses for Waekon
Industries which was acquired on February 17, 1998. An additional 15% of the
dollar increase ($102,000) represents a bonus accrual which was absent in last
year's nine month period due to losses.
Interest expense was $39,732 for the nine months ended June 30, 1998, and $6,546
for the same period in 1997. This increase was due to additional long-term debt
associated with the Waekon acquisition on February 17, 1998.
Other income of $109,908 increased $31,914 compared with the same period last
year due primarily to an increase in interest income caused by a higher level of
short-term cash investments.
Net income for the nine months ended June 30, 1998 was $885,495 or 5.6% of
total sales compared with a net loss of $503,000 for the nine months ended
June 30, 1997. The improvement was due primarily to an increase in product
sales and to an improvement in gross product margin.
Liquidity and Capital Resources
------------------------------------
Total current assets were $10,049,478, $11,096,855 and $9,052,751 at June 30,
1998, September 30, 1997 and June 30, 1997, respectively. The increase from
June to June was due primarily to an increase in inventory to support higher
product sales. Approximately 60% of the inventory increase was the result of
the acquisition of Waekon Industries in February, 1998 which was structured as
an asset purchase. Between September, 1997 and June 1998 current assets
dropped by approximately $1.1 million due primarily to a $2 million reduction
in cash and receivables offset by a $900,000 increase in inventory. The
decrease in cash of approximately $900,000 occurred due to the acquisition of
Waekon Industries. Receivables were down approximately $1.1 million due to
lower sales in the current quarter. Inventory was up due to the aforementioned
Waekon acquisition.
Working capital as of June 30, 1998 amounted to $8,673,054. This compares to
$8,054,345 a year earlier. Current assets were 7.3 times current liabilities
and total cash and receivables were 2.9 times current liabilities. These
ratios compare to 9.1 and 3.7, respectively, at June 30, 1997.
Internally generated funds of $1,978,060 during the nine months ended June 30,
1998 were adequate to fund the Company's primary non-operating cash
requirement consisting of capital expenditures which amounted to $277,009.
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 1998 and into
fiscal 1999.
Shareholders' equity during the nine months ended June 30, 1998 increased by
$784,970 ($.66 per share) resulting primarily from a $885,495 net income less
$119,625 payment of dividends.
In February, 1998, the Company renewed its credit agreement with its financial
lender. The agreement expires in February, 1999 and 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. The Company remains in compliance
with its loan covenants.
(13)
<PAGE> 14
FORM 10-Q
Year 2000 Compliance
--------------------
The Company is in the process of installing computer hardware and software
which, among its many features, will recognize and process the year 2000 and
beyond. The cost of the new system is not expected to have a material effect
on the Company's financial statements in fiscal 1998 or in subsequent fiscal
years. The installation is expected to be completed during the first quarter
of fiscal 1999. However, if the Company experiences unexpected year 2000
compliance problems, or if its suppliers or customers experience such
problems, the consequences could result in a material adverse effect on the
Company's business, operating results and financial condition.
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 exhibits are included herein: (11) Statement re: Computation of
earnings per share. (27) Financial Data Schedule
The Company did not file any reports on Form 8-K during the three months ended
June 30, 1998.
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 August 13, 1998 HICKOK INCORPORATED
--------------- -------------------
(Registrant)
/s/ E. T. Nowakowski
-----------------------------------------
E. T. Nowakowski, Chief Financial Officer
(14)
<PAGE> 1
FORM 10-Q
EXHIBIT 11
<TABLE>
<CAPTION>
HICKOK INCORPORATED
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Three Months Ended Nine Months Ended
June 30, June 30,
------------------------------ -----------------------------
1998 1997 1998 1997
----------- --------- ---------- -----------
<S> <C> <C> <C> <C>
PRIMARY
- -------
Average shares outstanding 1,196,695 1,193,850 1,196,217 1,193,238
Net effect of dilutive
stock options - based
on the treasury stock
method using average
market price 24,440 18,858 20,122 19,407
----------- ----------- ----------- -----------
Total Shares 1,221,135 1,212,708 1,216,339 1,212,645
----------- ----------- ----------- -----------
Net Income (Loss) $ 57,440 $ (236,290) $ 885,495 $ (503,000)
=========== =========== =========== ===========
Per Share $ .05 $ (.19) $ .73 $ (.41)
=========== =========== =========== ===========
FULLY DILUTED
- -------------
Average shares outstanding 1,196,695 1,193,850 1,196,217 1,193,238
Net effect of dilutive
stock options - based
on the treasury stock
method using period-end
market price, if higher
than average market price 24,440* 18,858* 23,064 19,407*
----------- ----------- ----------- -----------
Total Shares 1,221,135 1,212,708 1,219,281 1,212,645
----------- ----------- ----------- -----------
Net Income (Loss) $ 57,440 $ (236,290) $ 885,495 $ (503,000)
=========== =========== =========== ===========
Per Share $ .05 $ (.19) $ .73 $ (.41)
=========== =========== =========== ===========
<FN>
*Period-end market price is less than average market price, use same as primary shares.
</TABLE>
(15)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 1,819,806
<SECURITIES> 0
<RECEIVABLES> 2,210,565
<ALLOWANCES> 0
<INVENTORY> 5,748,631
<CURRENT-ASSETS> 10,049,478
<PP&E> 5,631,719
<DEPRECIATION> 3,240,463
<TOTAL-ASSETS> 14,517,201
<CURRENT-LIABILITIES> 1,376,424
<BONDS> 564,747
0
0
<COMMON> 1,197,750
<OTHER-SE> 11,204,280
<TOTAL-LIABILITY-AND-EQUITY> 14,517,201
<SALES> 15,733,314
<TOTAL-REVENUES> 15,843,222
<CGS> 8,728,411
<TOTAL-COSTS> 5,669,584
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,732
<INCOME-PRETAX> 1,405,495
<INCOME-TAX> 520,000
<INCOME-CONTINUING> 885,495
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 885,495
<EPS-PRIMARY> .74
<EPS-DILUTED> .73
</TABLE>
