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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from Not Applicable to Not Applicable
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Commission file number 0-147
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HICKOK INCORPORATED
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(Exact name of registrant as specified in its charter)
Ohio 34-0288470
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10514 Dupont Avenue, Cleveland, Ohio 44108
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 541-8060
-----------------------------
Securities registered
pursuant to Section
12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Shares, $1.00 par value
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No[ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of December 8, 2000, the Registrant had 762,884 voting shares of
Class A Common Stock outstanding and 454,866 voting shares of Class B Common
Stock outstanding. As of such date, non-affiliates held 710,953 shares of Class
A Common Stock and 233,098 shares of Class B Common Stock. As of December 8,
2000, based on the closing price of $3.50 per Class A Common Share on the Nasdaq
Small Cap Market, the aggregate market value of the Class A Common Stock held by
such non-affiliates was approximately $2,488,335. There is no trading market in
the shares of Class B Common Stock.
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Documents Incorporated by Reference:
PART OF FORM 10-K DOCUMENT INCORPORATED BY REFERENCE
----------------- ----------------------------------
Part III (Items 10, 11, Portions of the Registrant's Definitive
12 and 13) Proxy Statement to be used in connection
with its Annual Meeting of Shareholders to
be held on February 21, 2001.
Except as otherwise stated, the information contained in this Form 10-K
is as of September 30, 2000.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Hickok Incorporated was organized in 1915 as an Ohio corporation, and
first offered its securities to the public in 1959. Except as otherwise stated,
the terms "Company" or "Hickok" as used herein mean Hickok Incorporated and its
two wholly-owned subsidiaries.
In February 1995 the shareholders approved a change in the Company's
name to Hickok Incorporated from The Hickok Electrical Instrument Company. The
former name was not representative of the Company's current products and markets
and may have conveyed an inaccurate image of the Company to customers, prospects
and investors.
Hickok develops and manufactures products used by companies in the
transportation industry. Primary markets served are automotive, aircraft, and
locomotive with sales to both original equipment manufacturers (OEM's) and to
the aftermarket.
For many years the Company sold precision indicating instruments for
aircraft, locomotive and general industrial applications. Within the past ten
years the Company has used this expertise to develop and manufacture electronic
diagnostic equipment used by automotive technicians in the automotive market.
This is now the Company's largest business segment.
The Company's first major product in the automotive diagnostic market
was the New Generation Star ("NGS") tester sold to Ford Motor Company. The
product was introduced in the early 1990's and was very successful though it
resulted in Hickok becoming very dependent on a single customer. Product and
customer diversification efforts were initiated in 1993 to reduce this
dependence. Acquisitions were used as the primary solution.
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The Company has made three acquisitions in the last seven fiscal years
as part of a strategic program to expand both its customer base and its product
line utilizing its existing expertise. A new product primarily for the
automotive market was added in February, 1994 when the Company acquired the
fastening systems business from Allen-Bradley Company, Inc. The fastening
business provides computerized equipment to control tools that tighten threaded
fasteners on cars, trucks, locomotives and heavy equipment to provide high
quality threading applications. General Motors is the primary customer for the
Company's fastening systems products. The fastening systems business was fully
integrated into Hickok's operations by June, 1994.
In January, 1996 the Company added new products and customers within
the instrumentation area with the acquisition of the Beacon Gage Division of
Maradyne Corporation. Beacon Gage manufactures specialty pressure gauges for
railroads and transit cars. The gauge business was fully integrated into
Hickok's operations by May, 1996.
In February, 1998 the Company added new products and customers within
the automotive aftermarket with the acquisition of Waekon Industries, a
privately owned company in Kirkwood, Pennsylvania. Waekon manufacturers a
variety of testing equipment used by automotive technicians. The Waekon name has
become the trademark used by the Company to market its products to the
automotive aftermarket. For cost reduction purposes the Company closed its
manufacturing facility in Kirkwood, Pennsylvania in July 2000 and moved all
production of Waekon products to the Company's manufacturing facility in
Greenwood, Mississippi. The Company incurred a restructuring charge of $434,015
but expects to recoup that cost by the end of fiscal 2001.
The Company's operations are currently concentrated in the United
States. Sales are primarily to domestic customers although the Company also
makes sales to international customers on a world-wide basis. The Company began
to establish international representation in the sales and service area during
fiscal 1995.
OPERATING SEGMENT INFORMATION
The Company's operations are combined into two reportable business
segments: 1) indicators and gauges and 2) automotive diagnostic tools and
equipment. Reference is made to "Segment and Related Information" on pages 16
and 17 of the Independent Auditors' Report, which is incorporated herein by
reference, for financial information relating to operating segments.
INDICATORS AND GAUGES
For over fifty years the Company has specialized in developing and
manufacturing precision indicating instruments used in aircraft, locomotives and
other applications. Within the aircraft market, instruments are sold primarily
to manufacturers of business and pleasure aircraft. Within the locomotive
market, indicators are sold to both original equipment manufacturers and to
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operators of railroad equipment. The Company added pressure gauges to its
offerings to locomotive customers in 1996. Indicators and gauges represented
approximately 14% of the Company's sales for both fiscal 2000 and fiscal 1999.
New product development in fiscal 2000 involved the process of
certifying the DIGILOG series of instruments with the FAA. This instrument line
is a combination analog/digital indicator for the aircraft market which has the
potential to provide a a favorable impact in sales in the indicator business
segment beginning in late fiscal 2001. Cost of certification is anticipated to
be under $50,000 and completion is targeted for the second quarter of fiscal
2001.
AUTOMOTIVE DIAGNOSTIC TOOLS AND EQUIPMENT
In the late 1980's the Company began designing and marketing
instruments used to diagnose problems and to support the servicing of automotive
electronic systems. These products were initially sold to Ford Motor Company but
are now sold direct to Ford dealerships and to the aftermarket using jobbers,
wholesalers and wagon distributors. The Company increased its aftermarket
business with the acquisition in February, 1998 of Waekon Industries which
manufactures a variety of testing equipment used by automotive technicians. The
acquisition added new distribution sources and significant new products for the
aftermarket. The aftermarket currently accounts for approximately 29% of
automotive diagnostic and specialty tool sales, the same as in fiscal 1999. As a
whole, automotive diagnostic tools and equipment represented approximately 86%
of the Company's sales for both fiscal 2000 and fiscal 1999.
The fastening control system is one of the automotive products sold by
the Company. The product resulted from the acquisition of the fastening systems
business from Allen-Bradley in February, 1994. Fastening instrumentation is used
to monitor and control pneumatic and electric tools that tighten threaded
fasteners so as to provide high quality threading applications. The equipment,
especially large networked systems, has been historically sold primarily to
General Motors. With the introduction of products such as the pulse tool control
and Windows based user station software the Company is attempting to expand its
customer base to include tool manufacturers and other car, truck and farm
equipment manufacturers. Initial orders from customers other than General Motors
are expected in early fiscal 2001.
The automotive diagnostic equipment business segment requires a steady
flow of new products in order for the segment to grow and prosper. This could
consist of entirely new products, upgrading existing products, or simply changes
in packaging or design of existing products. During fiscal 2000 the following
major products were either in development or were introduced to the market. The
Wheel Speed Sensor was introduced in early fiscal 2000. This electronic
diagnostic tool is used to test a vehicle's ABS braking system. A repair grade
and an inspection grade Gas Tank Tester were also introduced in mid-fiscal 2000.
These products are used by repair automotive technicians and by state inspection
facilities to check the leak rate on automobile gas tanks. Improved Gas Cap
Testers were also introduced. These testers quickly check the leak rate of gas
caps for inspection or maintenance purposes.
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The Flash Kit, an accessory for the NGS Tester, was introduced in late
fiscal 2000. The unit reprograms a Ford automobile's PCM (Powertrain Control
Module) which is the "brain" of the car. PCM updates are released periodically
by Ford to improve engine performance. Aftermarket technicians who have an NGS
unit are the primary buyers of the Flash Kit since it puts them on an equal
basis with Ford dealer technicians. Speed Control is an existing accessory that
was upgraded in fiscal 2000. This accessory assists automobile technicians in
diagnosing problems with electronic speed control devices in Ford automobiles.
A locksmith version of the NGS Tester was introduced in early fiscal
2000 and now accounts for about 20% of all NGS sales. The unit is used by
locksmiths to reprogram a Ford's PCM whenever a replacement key is required.
During fiscal 2000 several fastening system products were introduced
into the market. The pulse tool control is an exciting product as it represents
a technological advancement in controlling and calibrating a pulse nut running
tool. A pulse tool is ergonomically more user friendly than other nut running
tools because it eliminates torque reaction. Windows based user station software
was also introduced and a $500,000 initial order was received with shipment in
the first quarter of fiscal 2000. This product has been well received since it
is easier to use and requires less training than its DOS based predecessor. It
can be used with tool controls other than Hickok's.
SOURCES AND AVAILABILITY OF RAW MATERIALS
Raw materials essential to the business are acquired primarily from a
large number of U. S. manufacturers. Materials acquired from the electronic
components industry include transistors, integrated circuits, resistors,
capacitors, switches, potentiometers and fabricated metal or plastic parts. In
general, the required materials are available, if ordered with sufficient lead
times, from multiple sources at current prices.
IMPORTANCE OF PATENTS, LICENSES, FRANCHISES, TRADEMARKS AND CONCESSIONS
The Company presently has several patents and patent applications which
relate to certain of its products. It does not consider that any one patent or
group of patents is material to the conduct of its business as a whole and
believes that its position in the industry is dependent upon its present level
of engineering skill, research, production techniques and service rather than
upon its ownership of patents. Other than the name "Hickok" and "Waekon", the
Company does not have any material licenses, trademarks, franchises or
concessions.
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SEASONALITY
The Company does not believe there is any significant seasonality
affecting its business, except to the extent that shipments of certain products
are dependent upon customer release dates. Operating results can fluctuate
widely from quarter to quarter as orders for products within the automotive
equipment segment can be large and subject to customer release. There were no
such orders in either of the past two fiscal years.
PRACTICES RELATIVE TO WORKING CAPITAL ITEMS
The nature of the Company's business requires it to maintain sufficient
levels of inventory to meet rapid delivery requirements of customers. The
Company provides its customers with payment terms prevalent in the industry.
DEPENDENCE UPON SINGLE OR FEW CUSTOMERS
During the fiscal year ended September 30, 2000, sales to Ford and
General Motors Corporation accounted for approximately 34% and 9% respectively
of the consolidated sales of the Company. This compares with 32% and 13%
respectively during the prior fiscal year. The Company has no long-term
contractual relationships with either Ford or General Motors, and the loss of
business from either one without a corresponding increase in business from new
or existing customers would have a material adverse effect on the Company.
BACKLOG
At September 30, 2000, the unshipped customer order backlog totaled
$4,640,000 in contrast to $3,652,000 at September 30, 1999 and $2,493,000 at
September 30, 1998. The increase in fiscal 2000 is due to higher orders for
indicators and gauges of $260,000 and for automotive diagnostic products of
$650,000. The increase in fiscal 1999 is due entirely to an increase in orders
for automotive diagnostic equipment and components.
GOVERNMENT CONTRACT RENEGOTIATION
No major portion of the business is open to renegotiation of profits or
termination of contracts or subcontracts at the election of the Government. The
amount of revenue derived from Government contracts is currently minimal and not
material.
COMPETITIVE CONDITIONS
The Company is engaged in a highly competitive industry and faces
competition from domestic and international firms. Several of the Company's
competitors have greater financial resources and larger sales organizations than
the Company. Competition with respect to the Company's diagnostic tool business
arises from the existence of a number of other significant
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manufacturers in the field, such as Snap-On, SPX Corporation, Hewlett-Packard,
GenRad and Vetronix which dominate the total available market in terms of total
sales. With regard to fastening systems products, competition comes from both
companies that make the equipment to control fastening tools and from tool
makers themselves. Specific companies include Beta Tech, Atlas Copco, and
Stanley. The instrumentation industry is composed primarily of companies which
specialize in the production of particular items as compared to a full line of
instruments. The Company believes that its competitive position in this field is
in the area of smaller, specialized products, an area in which the Company has
operated since 1915 and in which the Company has established itself
competitively by offering high-quality, high-performance products in comparison
to high-volume, mass-produced items.
RESEARCH AND DEVELOPMENT ACTIVITIES
The Company expensed as incurred product development costs of
$2,740,315 in fiscal 2000, $2,805,592 in 1999, and $3,028,011 in 1998. These
expenditures included engineering product support and development of manuals for
both of the Company's business segments.
COMPLIANCE WITH ENVIRONMENTAL PROVISIONS
The Company's capital expenditures, earnings and competitive position
are not materially affected by compliance with federal, state and local
environmental provisions which have been enacted or adopted to regulate the
distribution of materials into the environment.
NUMBER OF PERSONS EMPLOYED
Total employment by the Company at September 30, 2000 was 223
employees. None of the employees are represented by a union. The Company
considers its relations with its employees to be good.
FINANCIAL INFORMATION CONCERNING FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES
During the fiscal year ended September 30, 2000, all manufacturing,
research and development and administrative operations were conducted in the
United States. Revenues derived from export sales approximated $1,304,000 in
2000, $871,000 in 1999, and $627,000 in 1998. Shipments to Canada make up the
majority of export sales.
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ITEM 2. DESCRIPTION OF PROPERTIES
As of December 1, 2000, the Company had facilities in the United States
as shown below:
<TABLE>
<CAPTION>
Owned or
LOCATION SIZE DESCRIPTION LEASED
--------- ------- ----------- ------
<S> <C> <C> <C>
Cleveland, 37,000 Two-story brick construction; Owned
Ohio sq. ft. used for corporate administrative
headquarters, marketing and product
development with limited manufacturing.
Greenwood, 63,000 One-story modern concrete block Leased, with annual
Mississippi sq. ft. construction; used for manufacturing renewal options
instruments, test equipment, and fastening extending through 2061.
systems products.
Kirkwood, 19,600 Two, single story, metal and concrete Leased with optional
Pennsylvania sq. ft. block buildings, not currently used. renewal through 2008
</TABLE>
The Company closed the Kirkwood facility on July 14, 2000 and moved all
manufacturing to its Greenwood, Mississippi facility. Management believes that
the Cleveland and Greenwood facilities are adequate to provide for current and
anticipated business.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
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ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANT*
The following is a list of the executive officers of the Company as of
September 30, 2000. The executive officers are elected each year and serve at
the pleasure of the Board of Directors. Mr. Robert Bauman was elected Chairman
by the Board of Directors in July 1993. He has been President since 1991. For at
least five years prior to 1991 he held the office of Vice President. Mr.
Nowakowski was elected Vice President, Finance and Chief Financial Officer by
the Board of Directors in December, 1993. He joined the Company in July, 1993
and for at least five years prior to 1993 was a Vice President with Huntington
National Bank in Cleveland, Ohio. Mr. Thomas Bauman was elected Vice President,
Sales by the Board of Directors in May, 1999. He joined the Company in April,
1998.
<TABLE>
<CAPTION>
OFFICE OFFICER AGE
------ ------- ---
<S> <C> <C>
Chairman, President and Robert L. Bauman 60
Chief Executive Officer
Vice President, Finance Eugene T. Nowakowski 56
and Chief Financial Officer
Vice President, Sales Thomas F. Bauman 57
</TABLE>
*The description of Executive Officers called for in this Item is
included pursuant to Instruction 3 to Section (b) of Item 401 of
Regulation S-K.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
a) MARKET INFORMATION
The Registrant's Class A Common Shares are traded on The Nasdaq Small
Cap Market under the symbol HICKA. There is no market for the Registrant's Class
B Common Shares.
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The following table sets forth the range of high and low closing prices for the
Registrant's Class A Common Shares for the periods indicated, which prices
reflect inter-dealer prices without retail markup, markdown or commissions. Data
was supplied by Nasdaq.
<TABLE>
<CAPTION>
PRICES FOR THE YEARS ENDED:
---------------------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
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HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter 7 3/8 5 9 6 3/8
Second Quarter 9 1/4 5 3/4 8 6 3/4
Third Quarter 6 7/8 4 3/4 7 3/4 7 3/8
Fourth Quarter 6 3 7/8 8 7 3/8
</TABLE>
b) HOLDERS
As of December 8, 2000, there were approximately 511 holders of record
of the Company's outstanding Class A Common Shares and 5 holders of record of
the Company's outstanding Class B Common Shares.
c) DIVIDENDS
In fiscal 2000 the Company paid a special dividend of $.10 per share on
its Class A and Class B Common Shares on March 31, 2000. In fiscal 1999 the
Company paid a special dividend of $.15 per share on its Class A and Class B
Common Shares, on January 22, 1999. In fiscal 1998 the Company paid a special
dividend of $.10 per share on its Class A and Class B Shares on January 23,
1998. The declaration and payment of future dividends is restricted, under
certain circumstances, by the provisions of the Company's bank credit agreement.
Such restriction is not expected to materially limit the Company's ability to
pay dividends in the future, if declared. In addition, pursuant to the Company's
Amended Articles of Incorporation, no dividends may be paid on Class B Common
Shares until cash dividends of ten cents per share per fiscal year are paid on
Class A Common Shares. Any determination to pay cash dividends in the future
will be at the discretion of the Board of Directors after taking into account
various factors, including the Company's financial condition, results of
operations and current and anticipated cash needs.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30
--------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(In Thousands of Dollars, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net Sales $18,275 $18,827 $20,768 $21,159 $26,171
======= ======= ======= ======= =======
Net Income (Loss) $ (411) $ (268) $ 1,034 $ 605 $ 960
======= ======= ======= ======= =======
Working Capital $ 7,923 $ 8,473 $ 8,818 $ 9,279 $ 8,625
======= ======= ======= ======= =======
Total Assets $13,767 $14,282 $15,047 $13,736 $13,981
======= ======= ======= ======= =======
Long-term Debt $ 156 $ 418 $ 549 $ 127 --
======= ======= ======= ======= =======
Total Stockholders' Equity $11,642 $12,110 $12,551 $11,617 $11,235
======= ======= ======= ======= =======
Net Income (Loss) Per Share $ (.34) $ (.22) $ .86 $ .51 $ .80
======= ======= ======= ======= =======
Dividends Declared
Per Share:
Class A $ .10 $ .15 $ .10 $ .20 $ .10
Class B $ .10 $ .15 $ .10 $ .20 $ .10
Stockholders' Equity
Per Share: $ 9.56 $ 10.09 $ 10.48 $ 9.71 $ 9.42
Return on Sales (2.2%) (1.4%) 5.0% 2.9% 3.7%
Return on Assets (2.9%) (1.8%) 7.2% 4.4% 6.3%
Return on Equity (3.5%) (2.2%) 8.6% 5.3% 8.9%
Closing Stock Price $ 4.50 $ 7.56 $ 6.88 $ 8.25 $ 12.50
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
Until the mid 1980's Hickok was known primarily for its ability to
develop and manufacture high technology, precision indicating instruments for
business and pleasure aircraft, locomotive and general industrial applications.
This reputation was enhanced because of the Company's capabilities in the design
and implementation of electronics circuitry. In recent years the Company has
applied this expertise toward the development of electronic diagnostic equipment
used in the automotive industry. The Company's first major diagnostic tool was
introduced in the early 1990's and sold direct to Ford Motor Company. That tool,
and all the other diagnostic tools sold by the Company, are now distributed
through various aftermarket channels. The Company currently generates
approximately 29% of its revenue from designing and manufacturing diagnostic
tools for the automotive aftermarket. These tools enable automotive service
technicians to identify problems in the rapidly increasing number of electronics
systems in automobiles.
Until the end of fiscal 1997 the Company also generated about 15% of
its revenue from developing diagnostic strategies and assisting in supporting
the overall diagnostic system for Ford Motor Company. At the end of fiscal 1997
the Company was no longer providing this service since its contract was not
renewed because Ford consolidated suppliers in this area. The Company has
elected not to pursue similar activities in the future.
Approximately seven years ago the Company initiated a strategy to use
existing expertise to diversify its customer base and add new products within
its various product classes. The strategy has been implemented using
acquisitions and building a market oriented organization.
In February, 1998 the Company significantly increased its automotive
aftermarket business with the acquisition of Waekon Industries, a privately
owned company in Kirkwood, Pennsylvania. Sales of aftermarket products now
account for 29% of automotive diagnostic and specialty tool sales, the same as
in fiscal 1999. Waekon manufactures a variety of automotive diagnostic equipment
and specialty tools used by automotive technicians. The acquisition cost
$2,221,302 and was recorded as an asset purchase. Because of its positive
position in the industry, the Waekon name has become the trademark used by the
Company to market its products to the automotive aftermarket.
In July, 2000 the Company closed its manufacturing facility in
Kirkwood, Pennsylvania and moved production of Waekon products to the Company's
facility in Greenwood, Mississippi. The Company incurred a restructuring charge
of $434,015 but expects to achieve annual cost savings of approximately $600,000
as a result of the decision.
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The timing of order releases in the Company's automotive diagnostic
equipment business can cause wide fluctuations in the Company's operating
results, particularly on a quarter-to-quarter basis. Orders for such equipment
can be large, are subject to customer release, and may result in substantial
variations in quarterly sales and earnings. There were no large orders of this
nature in either of the past two fiscal years. The primary reason for this was
the Company's efforts in recent years to diversify its customer base. However,
in future years the introduction of new products could result in a significant
increase in order levels which may result in substantial variations in quarterly
sales and earnings. The Company is not aware of any seasonal factors which could
cause a similar variation in quarterly operating results.
Short-term earnings also can be affected by levels of expenditures for
product development. Introduction of new automotive diagnostic products to the
aftermarket on a regular basis is very important for the ongoing success of this
business segment. Consequently, expenditures for product development have been
and will continue to be significant to the Company's operations.
The Company's order backlog as of September 30, 2000 totaled
$4,640,000 as compared to $3,652,000 as of September 30, 1999 and $2,493,000 as
of September 30, 1998 The increase in fiscal 2000 is due to higher orders for
indicators and gauges of $260,000 and for fastening control products of
$650,000. Most of the backlog at September 30, 2000 is expected to be shipped by
the end of the current fiscal year. The increase in fiscal 1999 was due to
higher orders for automotive diagnostic equipment and components.
REPORTABLE SEGMENT INFORMATION
The Company adopted effective September 30, 1999 Financial Accounting
Standards No. 131, Disclosures about Segments of an Enterprise and Related
Information. The Standard requires segment information disclosures based on how
management evaluates operating performance and resource allocations.
The Company has determined that it has two reportable segments: 1)
indicators and gauges and 2) automotive related diagnostic tools and equipment.
INDICATORS AND GAUGES
This segment consists of products manufactured and sold primarily to
companies in the aircraft and locomotive industry. Within the aircraft market,
the primary customers are those companies that manufacture business and pleasure
aircraft. Within the locomotive market, indictors and gauges are sold to both
original equipment manufacturers and to operators of railroad equipment.
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AUTOMOTIVE DIAGNOSTIC TOOLS AND EQUIPMENT
This segment consists primarily of products designed and manufactured
to support the servicing of automotive electronic systems. These products are
sold both direct and to the aftermarket using a variety of distribution methods.
The acquisition of Waekon Industries in 1998 added significant new products and
distribution sources for the aftermarket. Included in this segment are fastening
control products used primarily by a large automobile manufacturer to monitor
and control the nut running process in an assembly plant. This equipment
provides high quality threading applications. The product was added in fiscal
1994 when the Company acquired the fastening systems business from Allen-Bradley
Company.
RESULTS OF OPERATIONS
Sales for the fiscal year ended September 30, 2000 declined to
$18,274,626, a decrease of approximately 3% from fiscal 1999 sales. This
decrease in sales was volume-driven and attributable primarily to lower product
sales of approximately $532,000, Service revenue was essentially unchanged in
fiscal 2000 versus fiscal 1999. The reduction in product sales occurred in the
automotive diagnostic equipment segment, primarily sales to OEM accounts as the
Company continues to emphasize its aftermarket business. Aftermarket sales were
unchanged in fiscal 2000 for several reasons. Sales of emissions products were
negatively impacted as several states delayed implementation of gas cap and gas
tank testing for at least a year. Introduction of the Flash Kit, which was
expected to be a significant revenue generator, was delayed until late fiscal
2000 resulting in minimal impact on fiscal 2000 sales. The company anticipates
that overall product sales will increase approximately 10% in fiscal 2001
primarily due to an increase in sales of automotive aftermarket products based
on higher orders already booked and the market's positive reception to existing
product offerings. The current level of service revenue is expected to increase
approximately 20% based on new programs and price increases planned for fiscal
2001.
Sales for the fiscal year ended September 30, 1999 declined slightly to
$18,826,827, a decrease of approximately 9% from fiscal 1998 sales. This
decrease in sales was primarily volume-driven and attributable to lower product
sales of approximately $2,161,000, or 11%, offset by a $220,000 or 19% increase
in service revenue. Service revenue was up due to an increase in billable
repairs on automotive products. The reduction in product sales occurred in the
first six months of fiscal 1999 primarily in the automotive diagnostic and
fastening systems product classes. Sales of automotive diagnostic products in
fiscal 1999 dropped by $707,000 or 7% due to a $2,031,000 or 20% reduction in
OEM sales offset by a $1,324,000 or 49% increase in automotive product sales to
the aftermarket. Sales of fastening systems products dropped by $899,000 or 32%
due to a continued reduction in orders from General Motors for large networked
systems.
Cost of products sold in fiscal 2000 was $9,423,727 or 55.8% of net
product sales. In fiscal 1999 cost of products sold was $10,606,454 or 60.9% of
net product sales. Cost of products sold during fiscal 1998 was $10,678,809 or
54.5% of net product sales. The decrease
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in the percentage of cost of products sold applicable to product sales between
fiscal 2000 and fiscal 1999 was due to a change in product mix and to operating
efficiencies realized at the manufacturing level. The increase in the percentage
of cost of products sold between fiscal 1999 and fiscal 1998 was due primarily
to product mix as sales of lower margin automotive diagnostic products to the
aftermarket and other markets represented a larger proportion of total product
sales. The cost of products sold percentage should increase slightly in fiscal
2001 due to a change in product mix.
Cost of services sold in fiscal 2000 was $1,087,177 or 78.6% of net
service sales. Cost of services sold during fiscal 1999 was $935,231 or 66.7% of
net service sales. Cost of services sold during fiscal 1998 was $885,731 or
74.9% of net service sales. The increase in the cost of services sold as a
percentage of net service sales between fiscal 2000 and fiscal 1999 is primarily
due to a change in product mix and a slight increase in warranty repair charges.
The reduction in the cost of services sold percentage between fiscal 1999 and
fiscal 1998 was due to volume related operating efficiencies. The percentage of
cost of services sold relative to net service sales is expected to improve
slightly in fiscal 2001.
Product development expenditures in fiscal 2000 were $2,740,315 which
was 2% lower than expenditures of $2,805,592 in fiscal 1999. This decrease
reflects efficiencies resulting from ongoing technology improvements in
engineering systems and procedures. Product development expenditures in fiscal
1999 were $2,805,592 which was 7% lower than fiscal 1998 expenditures of
$3,028,214. This decrease was due to a reduction in engineering and development
expenditures on products completed or nearing completion in fiscal 1999 such as
the Gas Cap and Gas Tank Testers and the pulse tool control. It is anticipated
that the amount spent on product development in fiscal 2001 will be slightly
lower than the amount spent in fiscal 2000 due to operating efficiencies while
continuing to support the ongoing need to develop a steady flow of new
diagnostic products for the automotive aftermarket.
Marketing and administrative expenses amounted to $5,357,063 which was
29.3% of net sales in fiscal 2000; $5,106,577 or 27.1% of net sales in fiscal
1999; and $4,824,995, or 23.2% of net sales in fiscal 1998. Expenditures in
fiscal 2000 were 5% higher than fiscal 1999 due to an increase in commissions
and royalties associated with certain aftermarket product sales. Expenditures in
fiscal 1999 were 6% higher than fiscal 1998 due to the inclusion of Waekon for a
full twelve months. The Company anticipates that marketing and administrative
expenses will remain unchanged in fiscal 2001 due to cost containment measures
already in place.
Interest charges were $60,367 in fiscal 2000 compared with $68,171 in
fiscal 1999 and $58,908 in fiscal 1998. The decrease in interest charges in
fiscal 2000 compared to fiscal 1999 was due to a reduction in long term debt
incurred with the Waekon acquisition in February, 1998. The increase in interest
charges in fiscal 1999 compared to fiscal 1998 was due to the inclusion for all
of fiscal 1999 of long-term debt associated with the Waekon acquisition.
15
<PAGE> 16
In fiscal 2000, a restructuring charge of $434,015 was recorded due to
the closing in July, 2000 of the Company's manufacturing facility in Kirkwood,
Pennsylvania. These charges were composed of $228,375 (including $22,500
relating to the current fiscal year) of future lease payments, $111,750 of
losses on the abandonment of the plant facility and equipment and $93,890 of
employee severance and related expenses. The Company expects to realize pre-tax
operating cost savings of approximately $600,000 annually as the facility in
Greenwood, Mississippi has taken over all manufacturing formerly performed in
Kirkwood.
Other expense of $6,366 in fiscal 2000 compares with other income of
$51,527 in fiscal 1999. The change was primarily due to losses on fixed asset
disposals. Other income of $51,527 in fiscal 1999 and $145,642 in fiscal 1998,
consisted of interest income on short-term investments and discounts on
purchases.
Income taxes in fiscal 2000 were a negative $423,800 which represents a
recovery of income taxes at a 50.8% effective tax rate. In fiscal 1999 income
taxes were a negative $375,500 which represents a recovery of income taxes at a
58.3% effective tax rate. The recovery rate in both fiscal 2000 and fiscal 1999
exceeded the normal tax rate of 37% due to the recognition of both current and
prior year research and development tax credits in an amount greater than what
was previously estimated. Income taxes in fiscal 1998 were $403,000 which
represents a 28.0% effective tax rate. The effective tax rate in fiscal 1998 was
below the normal rate also due to the recognition of research and development
tax credits in an amount greater than what was estimated at the end of the prior
year. It is anticipated that the effective tax rate in fiscal 2001 will approach
the rate experienced in fiscal 1998 due to the anticipated existence of research
and development tax credits. Management anticipates that increased sales volume,
as evidenced by the increase in order backlog, combined with operating
efficiencies due to the restructuring of the Kirkwood, Pennsylvania operation
will generate sufficient taxable income during the carryforward period to fully
realize the deferred tax benefits thereby reducing future federal income taxes
payable.
The net loss in fiscal 2000 was $410,604, or $.34 per share which was
an increase of $142,433 as compared with the net loss of $268,171, or $.22 per
share, in fiscal 1999. Net income in fiscal 1998 was $1,034,400, or $ .86 per
share. The change in fiscal 2000 versus fiscal 1999 was primarily due to a
restructuring charge of $434,015 which represented a one-time charge associated
with the decision to close the Company's manufacturing facility in Kirkwood,
Pennsylvania. The facility was closed on July 14, 2000 as a cost saving measure
and production was transferred to the Company's Greenwood, Mississippi facility.
The change in fiscal 1999 versus fiscal 1998 was due primarily to a decrease in
automotive diagnostic sales to the OEM market and a decrease in fastening
systems sales of large networked systems. These reduced sales occurred in the
first six months of fiscal 1999. In addition, there was a reduction in gross
product margin due to a change in product mix as sales of lower margin
automotive diagnostic products to the aftermarket and non OEM markets
represented a larger proportion of total product sales.
16
<PAGE> 17
LIQUIDITY AND CAPITAL RESOURCES
Current assets of $9,891,765 at September 30, 2000 were 5.0 times
current liabilities and the total of cash and receivables was 1.7 times current
liabilities. These ratios compare to 5.9 and 2.3 respectively at the end of
fiscal 1999. Total current assets were down approximately $294,000 from the
previous year end due primarily to a reduction in accounts receivable of
approximately $357,000 caused by lower sales in the last half of fiscal 2000.
Working capital at September 30, 2000 was $7,923,233 as compared to
$8,473,150 a year ago. The decrease was due a decrease in cash and in accounts
receivable totaling approximately $577,000, proceeds of which were used to fund,
in part, non-operating cash requirements.
During the fiscal year the Company's business may require an increase
in inventory of work-in-process and finished goods in order to meet anticipated
delivery schedules. Whenever there may be a requirement to increase inventory in
fiscal 2001 there will be a negative but temporary impact on liquidity. The
Company believes that internally generated funds and a $5,000,000 revolving line
of credit will provide sufficient liquidity to meet ongoing working capital
requirements.
Internally generated funds in fiscal 2000 were $220,557 and were not
adequate to fund the Company's primary non-operating cash requirements
consisting of capital expenditures of $405,703 and long-term debt payments of
$466,936. The primary reason for the negative cash flow from operations was the
net loss for the fiscal year of $410,604 and a $281,144 reduction in accounts
payable. In fiscal 1999 internally generated funds were a negative $370,925 and
were not adequate to fund the Company's primary non-operating cash requirements
consisting of capital expenditures and long-term debt payments of $460,954 and
$160,693 respectively. The primary reason for the negative cash flow from
operations was a $679,279 increase in accounts receivable. In fiscal 1998
internally generated funds were a positive $1,867,048 and were more than
adequate to fund the Company's primary non-operating cash requirements
consisting of capital expenditures of $390,290 and long-term debt payments of
$65,306. Despite an anticipated slight increase in accounts receivable in fiscal
2001 due to higher sales, the Company expects internally generated funds in
fiscal 2001 from operating activities, primarily net income, to be adequate to
fund approximately $400,000 of capital expenditures in addition to $131,000 due
on the current portion of long-term debt. Most of the capital expenditures will
be made to upgrade engineering and manufacturing equipment.
In February, 2000 the Company amended an existing credit agreement with
its financial lender. The agreement expires in February, 2001 and provides for
an unsecured revolving credit facility of $5,000,000 with interest at the prime
commercial rate with a LIBOR option and is unsecured. At September 30, 2000, the
Company had $668,000 outstanding under this loan facility and remains in
compliance with its loan covenants. The revolving credit facility is subject to
annual review by the Company's lender. Although no determination has been made
to seek
17
<PAGE> 18
renewal of the credit agreement, the Company believes that, given its current
financial condition, renewal at the existing amount may be obtained on
acceptable terms.
IMPACT OF INFLATION
In recent years, inflation has had a minimal effect on the Company
because of low rates of inflation and the Company's policy prohibiting the
acceptance of long-term fixed rate contracts without provisions permitting
adjustment for inflation.
YEAR 2000 READINESS DISCLOSURE
The Company has completed its Year 2000 remediation efforts and, since
the turn of the century, has not experienced any significant problems internally
or with suppliers and customers in connection with this event. Nevertheless,
additional dates in the future exist which could potentially cause computer
system failures. The Company's most likely worst case scenario would be a
short-term slowdown or cessation of manufacturing operations at one or more of
its facilities and a short-term inability on the part of the Company to process
orders and to deliver product to customers in a timely manner. Because the
Company has not, to date, experienced any significant problems in the Year 2000,
it does not anticipate any major impact in its operations. Costs associated with
the Company's assessment and remediation of Year 2000 issues were not material
in fiscal 2000. The Company has used cash and cash equivalents to fund such
costs.
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, and (d) the
ability of the Company to effectively make the transition from primarily serving
OEM customers to serving smaller customers in the automotive aftermarket.
18
<PAGE> 19
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain market risks from transactions that
are entered into during the normal course of business. The Company has not
entered into derivative financial instruments for trading purposes. The
Company's primary market risk exposure relates to interest rate risk. The
Company's only debt subject to interest rate risk is its revolving credit
facility. The Company has a balance of $668,000 on its revolving credit facility
at September 30, 2000, which is subject to variable rate of interest based on
the prime commercial rate with a LIBOR option. Assuming borrowings at September
30, 2000, a one-hundred basis point change in interest rates would affect the
Company's pre-tax earnings by approximately $6,700 annualized. As a result, the
Company believes that the market risk relating to interest rate movements is
minimal.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following pages contain the Financial Statements and Supplementary
Data as specified for Item 8 or Part II of Annual Report on Form 10-K.
19
<PAGE> 20
--------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
SHAREHOLDERS AND BOARD OF DIRECTORS
HICKOK INCORPORATED
CLEVELAND, OHIO
We have audited the accompanying consolidated balance sheets of HICKOK
INCORPORATED as of September 30, 2000 and 1999, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended September 30, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance that the financial statements are free from material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Hickok
Incorporated as of September 30, 2000 and 1999, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended September 30, 2000 in conformity with generally accepted accounting
principles.
/s/ MEADEN & MOORE, LTD.
MEADEN & MOORE, LTD.
CERTIFIED PUBLIC ACCOUNTANTS
NOVEMBER 17, 2000
CLEVELAND, OHIO
--------------------------------------------------------------------------------
F-1
<PAGE> 21
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
HICKOK INCORPORATED
SEPTEMBER 30
ASSETS
<TABLE>
<CAPTION>
2000 1999
--------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 313,553 $ 533,579
Accounts receivable - less allowance for
doubtful accounts of $80,000 ($70,000, 1999) 3,020,754 3,377,291
Inventories-less allowance for obsolete inventory
of $255,000 ($212,000, 1999) 5,860,217 5,708,098
Deferred income taxes 400,800 315,900
Prepaid expenses 34,608 51,569
Refundable income taxes 261,833 199,624
--------------------------------
Total Current Assets 9,891,765 10,186,061
PROPERTY, PLANT AND EQUIPMENT:
Land 229,089 229,089
Buildings 1,486,845 1,565,021
Machinery and equipment 3,706,199 3,973,241
--------------------------------
5,422,133 5,767,351
Less accumulated depreciation 3,474,290 3,542,098
--------------------------------
1,947,843 2,225,253
OTHER ASSETS:
Goodwill-less accumulated amortization of $350,088
($238,569, 1999) 1,799,999 1,833,324
Deferred charges - less accumulated amortization
of $29,285 ($223,785, 1999) 10,552 35,752
Deferred income taxes 114,400 --
Deposits 2,050 1,750
--------------------------------
1,927,001 1,870,826
--------------------------------
Total Assets $13,766,609 $14,282,140
================================
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements
--------------------------------------------------------------------------------
F-2
<PAGE> 22
--------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
2000 1999
----------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Short-term financing $ 668,000 $ 100,000
Current portion of earn out and
capitalized lease payable 40,128 132,616
Trade accounts payable 401,806 682,950
Accrued payroll and related expenses 443,646 440,107
Accrued expenses 207,750 180,481
Accrued income taxes 207,202 176,757
----------------------------------
Total Current Liabilities 1,968,532 1,712,911
DEFERRED INCOME TAXES -- 41,500
LONG-TERM DEBT:
Minimum earn out and capitalized lease payable-
less current portion 43,480 417,928
Other long-term liabilities 112,375 --
----------------------------------
Total Long-Term Liabilities 155,855 417,928
STOCKHOLDERS' EQUITY:
Common shares - par value $1.00:
Class A 3,750,000 shares authorized, 772,470
shares issued; (754,470 - 1999) 762,884 744,884
Class B 1,000,000 convertible shares authorized,
475,533 shares issued 454,866 454,866
Contributed capital 1,599,598 1,554,598
Treasury shares - 9,586 Class A shares and
20,667 Class B shares (605,795) (605,795)
Retained earnings 9,430,669 9,961,248
----------------------------------
Total Stockholders' Equity 11,642,222 12,109,801
----------------------------------
Total Liabilities and Stockholders' Equity $13,766,609 $14,282,140
==================================
</TABLE>
--------------------------------------------------------------------------------
F-3
<PAGE> 23
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF INCOME
HICKOK INCORPORATED
FOR THE YEARS ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
2000 1999 1998
--------------------------------------------------------
<S> <C> <C> <C>
NET SALES
Product sales $16,891,799 $17,424,101 $19,585,276
Service sales 1,382,827 1,402,726 1,183,086
--------------------------------------------------------
Total net sales 18,274,626 18,826,827 20,768,362
COSTS AND EXPENSES:
Cost of products sold 9,423,727 10,606,454 10,678,809
Cost of services sold 1,087,177 935,231 885,731
Product development 2,740,315 2,805,592 3,028,211
Marketing and administrative
expenses 5,357,063 5,106,577 4,824,995
Interest charges 60,367 68,171 58,908
Restructuring charge 434,015 -- --
Other (income) expense 6,366 (51,527) (145,692)
--------------------------------------------------------
19,109,030 19,470,498 19,330,962
--------------------------------------------------------
Income (Loss) before Provision
for Income Taxes (834,404) (643,671) 1,437,400
PROVISION FOR (RECOVERY OF)
INCOME TAXES:
Current (183,000) (132,100) 416,000
Deferred (240,800) (243,400) (13,000)
--------------------------------------------------------
(423,800) (375,500) 403,000
--------------------------------------------------------
NET INCOME (LOSS) $ (410,604) $ (268,171) $ 1,034,400
========================================================
NET INCOME (LOSS) PER
COMMON SHARE $ (.34) $ (.22) $ .86
========================================================
WEIGHTED AVERAGE SHARES OF
COMMON STOCK OUTSTANDING 1,204,276 1,199,416 1,196,602
========================================================
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements
--------------------------------------------------------------------------------
F-4
<PAGE> 24
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
HICKOK INCORPORATED
FOR THE YEARS ENDED SEPTEMBER 30, 2000, 1999, AND 1998
<TABLE>
<CAPTION>
COMMON STOCK -
$1.00 PAR VALUE
---------------
RETAINED
EARNINGS CLASS A CLASS B
-----------------------------------------------
<S> <C> <C> <C>
Balance at September 30, 1997 $9,494,607 $740,984 $454,866
Dividend of $.10 per Class A and B shares (119,625) -- --
Sale of Class A shares under option -- 1,900 --
Net income 1,034,400 -- --
-----------------------------------------------
Balance at September 30, 1998 10,409,382 742,884 454,866
Dividend of $.15 per Class A and B shares (179,963) -- --
Sale of Class A shares under option -- 2,000 --
Net Loss (268,171) -- --
-----------------------------------------------
Balance at September 30, 1999 9,961,248 744,884 454,866
Dividend of $.10 per Class A and B shares (119,975) -- --
Sale of Class A shares under option -- 18,000 --
Net Loss (410,604) -- --
-----------------------------------------------
Balance at September 30, 2000 $9,430,669 $762,884 $454,866
===============================================
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements
--------------------------------------------------------------------------------
F-5
<PAGE> 25
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTRIBUTED TREASURY
CAPITAL SHARES TOTAL
----------------------------------------------------
<S> <S> <C> <C>
Balance at September 30, 1997 $1,532,398 $(605,795) $11,617,060
Dividend of $.10 per Class A and B shares -- -- (119,625)
Sale of Class A shares under option 17,200 -- 19,100
Net income -- -- 1,034,400
----------------------------------------------------
Balance at September 30, 1998 1,549,598 (605,795) 12,550,935
Dividend of $.15 per Class A and B shares -- -- (179,963)
Sale of Class A shares under option 5,000 -- 7,000
Net Loss -- -- (268,171)
----------------------------------------------------
Balance at September 30, 1999 1,554,598 (605,795) 12,109,801
Dividend of $.10 per Class A and B shares -- -- (119,975)
Sale of Class A shares under option 45,000 -- 63,000
Net Loss -- -- (410,604)
----------------------------------------------------
Balance at September 30, 2000 $1,599,598 $(605,795) $11,642,222
====================================================
</TABLE>
--------------------------------------------------------------------------------
F-6
<PAGE> 26
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
HICKOK INCORPORATED
FOR THE YEARS ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
2000 1999 1998
-----------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 18,631,163 $ 18,147,548 $ 21,882,134
Cash paid to suppliers and employees (18,495,372) (18,601,050) (19,341,978)
Interest paid (85,509) (71,934) (26,232)
Interest received 19,039 25,753 94,048
Income taxes (paid) refunded 151,236 128,758 (740,924)
-----------------------------------------------------------
Net Cash Provided by (Used in)
Operating Activities 220,557 (370,925) 1,867,048
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (405,703) (460,954) (390,290)
Change in deposits (300) 2,600 101
Proceeds on sale of assets 9,875 4,350 44,743
Payments for business purchased (78,194) -- (2,426,518)
-----------------------------------------------------------
Net Cash Used in Investing
Activities (474,322) (454,004) (2,771,964)
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in short-term borrowings 568,000 100,000 --
Decrease in long-term financing (466,936) (160,693) (65,306)
Sale of Class A shares under option 52,650 5,850 14,816
Dividends paid (119,975) (179,963) (119,625)
-----------------------------------------------------------
Net Cash Provided by (Used in)
Financing Activities 33,739 (234,806) (170,115)
-----------------------------------------------------------
Decrease in Cash and Cash
Equivalents (220,026) (1,059,735) (1,075,031)
Cash and Cash Equivalents at
Beginning of Year 533,579 1,593,314 2,668,345
-----------------------------------------------------------
Cash and Cash Equivalents at
End of Year $ 313,553 $ 533,579 $ 1,593,314
===========================================================
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements
--------------------------------------------------------------------------------
F-7
<PAGE> 27
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999 1998
----------------------------------------------------
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME (LOSS) TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income (Loss) $(410,604) $(268,171) $1,034,400
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Depreciation and amortization 651,870 746,919 746,804
Non-cash compensation 10,350 53,721 4,284
Loss on disposal of assets 158,087 5,710 13,346
Deferred income taxes (240,800) (243,400) (13,000)
CHANGES IN ASSETS AND LIABILITIES:
Decrease (Increase) in accounts receivable 356,537 (679,279) 1,108,772
Decrease (Increase) in
inventories (152,119) 183,991 (288,444)
Decrease (Increase) in prepaid expenses 16,961 (12,767) 3,167
Increase in refundable income taxes (62,209) (17,812) (181,812)
Increase (Decrease) in trade
accounts payable (281,144) 26,648 (370,073)
Increase (Decrease) in accrued payroll and
related expenses 3,539 (164,532) 145,062
Increase (Decrease) in other accrued
expenses and other long-term liabilities 139,644 (16,422) (192,346)
Increase (Decrease) in accrued
income taxes 30,445 14,469 (143,112)
----------------------------------------------------
Total Adjustments 631,161 (102,754) 832,648
----------------------------------------------------
Net Cash Provided by (Used in)
Operating Activities $ 220,557 $(370,925) $1,867,048
====================================================
</TABLE>
NON-CASH INVESTING AND FINANCING ACTIVITIES:
During 1999, non-cash compensation included $52,571 for equipment transferred to
a former employee.
During 1998, the Company sold equipment for $5,000. At September 30, 1998,
$1,578 of the proceeds remained in accounts receivable.
Also during 1998, the Company incurred an earn-out liability of $585,892 in
connection with the purchase of Waekon Industries, Inc.
--------------------------------------------------------------------------------
F-8
<PAGE> 28
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HICKOK INCORPORATED
SEPTEMBER 30, 2000, 1999 AND 1998
1. NATURE OF OPERATIONS
Hickok Incorporated and its wholly-owned domestic subsidiaries ("Company")
develop and manufacture products used by companies in the transportation
industry. Among the products are indicators and gauges sold to companies in
aircraft and locomotive markets. On a much larger scale, the Company
manufactures diagnostic equipment used by automotive technicians to test the
various electronic systems in automobiles. Also within the automotive segment,
the Company manufactures equipment to control the nut running process in an
assembly plant. The Company serves the automotive, locomotive and general
aviation markets predominately in North America. Sales in the Company's
principal product classes, as a percent of consolidated sales, are as follows:
<TABLE>
<CAPTION>
PRODUCT CLASSES 2000 1999 1998
--------------- --------------------------------------
<S> <C> <C> <C>
Automotive Test Equipment 73.8% 73.2% 69.2%
Fastening Systems 10.7 11.0 14.1
Indicating Instruments 14.1 13.6 13.6
Other Product Classes 1.4 2.2 3.1
--------------------------------------
Total 100.0% 100.0% 100.0%
======================================
</TABLE>
Current operating properties consist of a manufacturing plant in Greenwood,
Mississippi, and a corporate headquarters, marketing and product development
facility in Cleveland, Ohio.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of Hickok
Incorporated and its wholly-owned domestic subsidiaries since date of
acquisition. Significant intercompany transactions and balances have been
eliminated in the financial statements.
CONCENTRATION OF CREDIT RISK:
The Company sells its products and services primarily to customers in the United
States and to a lesser extent overseas. The Company extends normal credit terms
to its customers. Customers in the automotive industry (primarily original
equipment manufacturers) comprise 58% of outstanding receivables at September
30, 2000 (86% in 1999). Sales to two customers, each of which were in excess of
10% of total sales, approximated $6,300,000 and $1,700,000 (2000),$6,100,000 and
$2,400,000 (1999), $9,400,000 and $2,500,000 (1998). The Company establishes an
allowance for doubtful accounts based upon factors surrounding the credit risk
of specific customers, historical trends and other information.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
may affect the reported amounts of certain assets and liabilities and disclosure
of contingencies at the date of the financial statements, and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates.
REVENUE RECOGNITION:
The Company records sales as manufactured items are shipped to customers.
Revenue from development contracts is recognized as earned under terms of the
contracts. The Company warrants certain products against defects for periods
ranging primarily from 12 to 36 months. Charges against income for warranty
expense and sales returns and allowances were immaterial during each of the
three years in the period ending September 30, 2000.
--------------------------------------------------------------------------------
F-9
<PAGE> 29
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
PRODUCT DEVELOPMENT COSTS:
Product development costs, which include engineering production support, are
expensed as incurred. Research and development performed for customers
represents no more than 1% of sales in each year. The arrangements do not
include a repayment obligation by the Company.
INVENTORIES:
Inventories are valued at the lower of cost (first-in, first-out) or market and
consist of:
<TABLE>
<CAPTION>
2000 1999
------------------------------
<S> <C> <C>
Raw materials and component parts $2,950,611 $3,336,853
Work-in-process 1,821,531 1,408,952
Finished products 1,088,075 962,293
------------------------------
$5,860,217 $5,708,098
==============================
</TABLE>
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are carried at cost. Maintenance and repair costs
are expensed as incurred. Additions and betterments are capitalized.
The depreciation policy of the Company is generally as follows:
<TABLE>
<CAPTION>
CLASS METHOD RATE
--------------------------------------------------------------------
<S> <C> <C>
Buildings Straight-line 2-1/2 to 4%
Machinery and equipment Straight-line 8 to 33-1/3%
Tools and dies Straight-line 33-1/3%
</TABLE>
Depreciation, including depreciation on capitalized leases, amounted to $515,151
(2000), $593,314 (1999), and $596,878 (1998).
INTANGIBLE ASSETS:
Deferred charges represent patents and software implementation costs and are
being amortized over 3 years. Software implementation costs were incurred to
support and enhance internal information systems. Goodwill is being amortized on
a straight-line basis over 15 to 20 years. Amortization of intangibles amounted
to $136,719 (2000), $153,605 (1999) and $149,926 (1998). The Company reviews
goodwill and other intangibles for impairment when impairment indicators, such
as significant changes in market conditions, changes in product mix or
management focus, and a potential sale or disposition, arise. In most instances,
the Company will use the undiscounted cash flow method, but the market value
method is used if the Company is considering a sale or disposition.
ADVERTISING COSTS:
Advertising costs are expensed as incurred.
INCOME TAXES:
The Company records income taxes under the provisions of Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes."
INCOME PER COMMON SHARE:
Income per common share information is computed on the weighted average number
of shares outstanding during each period as disclosed in note 8.
CASH AND EQUIVALENTS:
For purposes of the Statement of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents. From time to time the Company maintains cash balances in
excess of the FDIC limits. The cash balance at September 30, 2000 amounted to
$382,107.
RECLASSIFICATIONS:
Certain prior year amounts have been reclassified to conform with current year
presentation.
--------------------------------------------------------------------------------
F-10
<PAGE> 30
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
3. SHORT-TERM FINANCING
The Company has an unsecured credit agreement of $5,000,000 which matures in
February, 2001 with interest at the bank's prime commercial rate with a LIBOR
option. The agreement includes covenants with which the Company has complied.
Selected details of short-term borrowings are as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
AMOUNT INTEREST RATE
-------- -------------
<S> <C> <C>
Balance at September 30, 2000 $668,000 9.32%
Average during 2000 $296,850 9.30%
Maximum during 2000 (month end) $703,000 9.50%
Balance at September 30, 1999 $100,000 7.88%
Average during 1999 $ 55,836 7.99%
Maximum during 1999 (month end) $475,000 7.75%
</TABLE>
4. LEASES
OPERATING:
The Company leases a facility and certain equipment under operating leases
expiring through February, 2003.
The Company's minimum commitments under operating leases are as follows:
<TABLE>
<S> <C>
2001 $54,347
2002 26,073
2003 8,265
-------
Total $88,685
=======
</TABLE>
Rental expense under these commitments was $153,465 (2000), $178,509 (1999) and
$171,176 (1998).
CAPITAL:
During 2000, the Company purchased equipment under a capital lease obligation,
replacing equipment purchased in 1997. The obligation is payable in monthly
installments of $3,344 including interest at 8.0% per year until February 2003.
The total capital lease obligation payable includes $44,954 remaining on the
equipment purchased in 1997. The balance outstanding at September 30, 2000 was
$83,608. Minimum annual lease payments under the capital lease are as follows:
<TABLE>
<S> <C>
2001 $40,128
2002 40,128
2003 11,505
91,761
Less amounts representing interest 8,153
-------
$83,608
=======
</TABLE>
The cost and accumulated depreciation of the equipment held under capital lease
at September 30, 2000 is as follows:
<TABLE>
<S> <C>
Cost $189,578
Accumulated depreciation/Amortization 74,499
--------
Book value $115,079
========
</TABLE>
A facility held under a capital lease has a net book value of $0 at September
30, 2000. Future minimum lease payments which extend through 2061 are
immaterial.
--------------------------------------------------------------------------------
F-11
<PAGE> 31
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
5. STOCK OPTIONS
Under the Company's Key Employees Stock Option Plans (collectively the "Employee
Plans") the Compensation Committee of the Board of Directors has the authority
to grant options to Key Employees to purchase up to 23,600 Class A shares, net
of granted options. The options are exercisable for up to 10 years. Incentive
stock options are available at an exercise price of not less than market price
on the date the option is granted. However, options available to an individual
owning more than 10% of the Company's Class A shares at the time of grant must
be at a price not less than 110% of the market price. Nonqualified stock options
may be issued at such exercise price and on such other terms and conditions as
the Compensation Committee may determine. No options may be granted at a price
less than $2.925. Non-cash compensation expense related to stock option plans
was $10,350 (2000), $1,150 (1999) and $4,284 (1998). All options granted under
the Employee Plans are exercisable at September 30, 2000.
The Company's Outside Directors Stock Option Plans (collectively the "Directors
Plans") provide for the automatic grant of options to purchase up to 51,000
shares (less 21,000 options which were either canceled, expired or unissued) of
Class A common stock over a five year period to members of the Board of
Directors who are not employees of the Company, at the fair market value on the
date of grant. All options granted under the Directors Plans become fully
exercisable on February 25, 2003.
Transactions involving the plans are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTION SHARES 2000 PRICE 1999 PRICE 1998 PRICE
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EMPLOYEE PLANS:
Outstanding October 1, 106,500 $ 9.14 97,600 $ 9.69 78,400 $ 9.47
Granted 27,800 5.00 23,000 7.13 24,000 10.50
Canceled -- -- (12,100) 10.72 (2,900) 11.93
Exercised (2000-$2.93 per share) (18,000) 2.93 (2,000) 2.93 (1,900) 7.80
------- ------ ------
Outstanding September 30,
(2000-$5.00 to $17.25 per share) 116,300 9.34 106,500 9.14 97,600 9.69
======= ====== ======
Exercisable September 30, 116,300 9.34 106,500 9.14 97,600 9.69
======= ====== ======
DIRECTORS PLANS:
Outstanding October 1, 36,000 $13.02 30,000 $14.20 24,000 $14.69
Granted 6,000 8.50 6,000 7.13 6,000 12.25
Canceled (12,000) 13.02 -- -- -- --
Exercised -- -- -- -- -- --
------- ------ ------
Outstanding September 30,
(2000-$7.13 to $18.00 per share) 30,000 12.07 36,000 13.02 30,000 14.20
======= ====== ======
Exercisable September 30, 20,000 13.86 24,000 15.00 18,000 15.69
======= ====== ======
</TABLE>
The Company applies APB Opinion No. 25, "Accounting for Stock Issued To
Employees" and related interpretations in accounting for its stock plans as
allowed under FAS Statement No. 123, "Accounting for Stock-Based Compensation.
"Accordingly, the adoption of this statement did not affect the Company's
results
--------------------------------------------------------------------------------
F-12
<PAGE> 32
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
of operations, financial position or liquidity. Had compensation cost for fixed
price stock options granted in 2000, 1999 and 1998 been determined consistent
with FAS 123, pro forma net income and earnings per share would have been as
follows:
<TABLE>
<CAPTION>
2000 1999 1998
------------------------------------------
<S> <C> <C> <C>
Net Income (Loss) - as reported $(410,604) $(268,171) $1,034,400
==========================================
- pro forma $(472,858) $(308,524) $ 939,672
==========================================
Net Income (Loss) per share - as reported $ (.34) $ (.22) $ .86
==========================================
- pro forma $ (.39) $ (.26) $ .79
==========================================
</TABLE>
The fair value method of accounting has not been determined for options granted
prior to October 1, 1995. The effects of applying FAS No. 123 in this pro forma
disclosure are not necessarily indicative of future amounts.
The fair value of issued stock options is estimated on the date of grant using
the Black-Scholes option pricing model. The Black-Scholes option pricing model
was originally developed for use in estimating the fair value of traded options
which have different characteristics from the Company's employee stock options.
The model is also sensitive to changes in the subjective assumptions which can
materially affect the fair value estimate. As a result, management believes that
the Black-Scholes model may not necessarily provide a reliable single measure of
the fair value of employee stock options. The following weighted-average
assumptions were used in the option pricing model for 2000, 1999 and 1998
respectively: a risk free interest rate of 5.7%, 6.0% and 5.2%; an expected life
of 6, 5 and 5 years; an expected dividend yield of 1.8%, 2.0% and 1.3%; and a
volatility factor of .15, .30 and .20.
6. CAPITAL STOCK, TREASURY STOCK, AND CONTRIBUTED CAPITAL
Unissued shares of Class A common stock (601,166 and 597,366 shares in 2000 and
1999 respectively) are reserved for the share-for-share conversion rights of the
Class B common stock and stock options under the Employee Plans and the
Directors Plans (see note 5). The Class A shares have one vote per share and the
Class B shares have three votes per share, except under certain circumstances
such as voting on voluntary liquidation, sale of substantially all the assets,
etc. Dividends up to $.10 per year, noncumulative, must be paid on Class A
shares before any dividends are paid on Class B shares.
7. INCOME TAXES
A reconciliation of the provision for income taxes to the statutory Federal
income tax rate is as follows:
<TABLE>
<CAPTION>
2000 1999 1998
--------------------------------------------------
<S> <C> <C> <C>
Income (Loss) before income taxes $(834,404) $(643,671) $1,437,400
Statutory rate 34% 34% 34%
--------------------------------------------------
(283,697) (218,848) 488,716
State and local (recovery of) taxes - net (18,000) (23,200) 73,900
Permanent differences 16,300 (18,700) (13,000)
Research and development credit - net (129,200) (109,600) (105,800)
Adjustment of estimated research
and development credit - net -- (6,600) (49,500)
Other (9,203) 1,448 8,684
--------------------------------------------------
$(423,800) $(375,500) $ 403,000
==================================================
</TABLE>
--------------------------------------------------------------------------------
F-13
<PAGE> 33
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Deferred tax asset (liabilities) consist of the following:
<TABLE>
<CAPTION>
2000 1999
---------------------------
<S> <C> <C>
Current:
Inventories $ 73,600 $ 72,000
Contribution carryforward -- 25,200
Research and development credit carryforward 204,000 110,000
Accrued liabilities 123,200 108,700
---------------------------
400,800 315,900
Noncurrent:
Depreciation (150,400) (157,500)
Research and development credit carryforward 206,200 56,000
Contribution carryforward 86,000 60,000
Amortization (27,400) --
---------------------------
114,400 (41,500)
---------------------------
Total $ 515,200 $ 274,400
===========================
</TABLE>
The contribution and research and development credit carryforwards will begin to
expire in 2004 and 2019 respectively.
8. EARNINGS PER COMMON SHARE
Earnings per common share are based on the provision 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 effect
of applying FAS No. 128 on earnings per share and required reconciliations are
as follows:
<TABLE>
<CAPTION>
2000 1999 1998
----------------------------------------------------
<S> <C> <C> <C>
BASIC EARNINGS (LOSS) PER SHARE
Income (Loss) available to
common stockholders $ (410,604) $ (268,171) $1,034,400
Shares denominator 1,204,276 1,199,416 1,196,602
Per share amount $ (.34) $ (.22) $ .86
====================================================
EFFECT OF DILUTIVE SECURITIES
Average share outstanding 1,204,276 1,199,416 1,196,602
Stock options -- -- 18,073
----------------------------------------------------
1,204,276 1,199,416 1,214,675
DILUTED EARNINGS (LOSS) PER SHARE
Income (Loss) available to
common stockholders $ (410,604) $ (268,171) $1,034,400
Per share amount $ (.34) $ (.22) $ .85
====================================================
</TABLE>
--------------------------------------------------------------------------------
F-14
<PAGE> 34
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
9. EMPLOYEE BENEFIT PLANS
The Company has a formula based profit sharing bonus plan for officers and key
employees. The formula takes into account "Economic Profit" in determining the
bonus pool. The bonus distribution is determined by the Compensation Committee
of the Board of Directors after considering such factors as salary, length of
service and merit. The maximum individual distribution is 50% of the
distributee's salary. For fiscal years ended September 30, 2000, 1999 and 1998,
approximately -0-, -0-, and $73,000, respectively, were expensed.
The Company has a 401(k) Savings and Retirement Plan covering all full-time
employees. Company contributions to the plan, including matching of employee
contributions, are at the Company's discretion. For fiscal years ended September
30, 2000, 1999 and 1998, approximately $37,992, $38,217, and $30,106,
respectively, were contributed to the plan. The Company does not provide any
other post retirement benefits to its employees.
The Company has a deferred compensation plan which permits selected management
and highly compensated employees to make tax deferred contributions in the form
of salary reductions instead of, or in addition to, contributions made by them
under the 401(k) Savings and Retirement Plan. For fiscal years ended September
30, 2000, 1999 and 1998, approximately $8,000, $22,443 and $5,542 respectively,
were allocated by the participants to this plan and is included in "Accrued
Payroll and Related Expenses."
10. ACQUISITION
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 included 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 also recorded as goodwill closing costs related to the
purchase ($205,216), and the present value of a five year earn out contract
having a minimum required pay out of $585,892. In December 1999, the Company
terminated the earn out agreement in exchange for payment of the minimum earn
out liability plus an additional payment of $78,194. The $78,194 was treated as
an addition to the purchase price. Accordingly, goodwill was increased by the
amount of the payment. Goodwill is being amortized over 20 years.
11. RESTRUCTURING CHARGE
During the third quarter of fiscal 2000, the Company decided to close its
Kirkwood, Pennsylvania production facility and incorporate this operation into
its existing Greenwood, Mississippi production facility. The actual closing
occurred on July 14, 2000. In connection with this decision, the Company
recorded charges of $434,015 consisting of future lease payments ($228,375),
losses and abandonment of the plant facility and equipment ($111,750) and
employee severance and related expenses ($93,890). The decision resulted in the
termination of most of the Kirkwood workforce, approximately 30 employees.
These costs relate to the automotive diagnostic tools and equipment segment (see
note 12). The corresponding liability consists of a current portion of $91,067
which is included in accrued expenses and a long-term portion of $112,375 which
is included in other long-term liabilities.
--------------------------------------------------------------------------------
F-15
<PAGE> 35
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
12. SEGMENT AND RELATED INFORMATION
The Company has adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, which changes the way the Company reports
the information about its operating segments The information for 1998 has been
restated from the prior year's presentation in order to conform to the
current-year presentation.
The Company's four business units have separate management teams and
infrastructures that offer different products and services. The business units
have been aggregated into two reportable segments: 1.) indicators and gauges and
2.) automotive related diagnostic tools and equipment.
INDICATORS AND GAUGES
This segment consists of products manufactured and sold primarily to companies
in the aircraft and locomotive industry. Within the aircraft market, the primary
customers are those companies that manufacture business and pleasure aircraft.
Within the locomotive market, indicators and gauges are sold to both original
equipment manufacturers and to operators of railroad equipment.
AUTOMOTIVE DIAGNOSTIC TOOLS AND EQUIPMENT
This segment consists primarily of products designed and manufactured to support
the servicing automotive electronic systems. These products are sold to the
aftermarket using a variety of distribution methods. The acquisition of Waekon
Industries in 1998 added significant new products and distribution sources for
the aftermarket.
Included in this segment are fastening control products used by a large
automobile manufacturer monitor and control the nut running process in an
assembly plant. This equipment provides high quality threading applications. The
product was added in fiscal 1994 when the Company acquired the fastening systems
business from Allen-Bradley Company.
INFORMATION BY INDUSTRY SEGMENT IS SET FORTH BELOW:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30, 2000 1999 1998
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET REVENUE
Indicators and Gauges $ 2,573,469 $ 2,552,456 $ 2,815,633
Automotive Diagnostic
Tools and Equipment 15,701,157 16,274,371 17,952,729
--------------------------------------------------------
$18,274,626 $18,826,827 $20,768,362
========================================================
INCOME (LOSS) FROM OPERATIONS
Indicators and Gauges $ 454,111 $ 524,155 $ 633,931
Automotive Diagnostic
Tools and Equipment 1,870,204 1,956,984 3,669,686
General Corporate Expenses (2,724,704) (3,124,810) (2,866,217)
Restructuring Charge (434,015) -- --
--------------------------------------------------------
$ (834,404) $ (643,671) $ 1,437,400
========================================================
</TABLE>
--------------------------------------------------------------------------------
F-16
<PAGE> 36
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
ASSET INFORMATION:
<TABLE>
<CAPTION>
INDICATORS AUTOMOTIVE CORPORATE CONSOLIDATION
-----------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
2000 -Identifiable Assets $1,213,652 $9,538,127 $3,014,830 $13,766,609
1999 -Identifiable Assets $1,365,237 $9,819,539 $3,097,364 $14,282,140
1998 -Identifiable Assets $1,572,998 $9,373,488 $4,100,818 $15,047,304
</TABLE>
GEOGRAPHICAL INFORMATION
Included in the consolidated financial statements are the following amounts
related to geographic locations:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30, 2000 1999 1998
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE:
United States $16,970,977 $17,956,203 $20,141,814
Canada 415,703 579,230 444,780
Other foreign countries 887,946 291,394 181,768
-----------------------------------------------------
$18,274,626 $18,826,827 $20,768,362
=====================================================
</TABLE>
13. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
----- ------ ----- ------
<S> <C> <C> <C> <C>
NET SALES
2000 $5,380,619 $4,395,783 $4,193,247 $4,304,977
1999 3,814,426 4,580,673 5,108,853 5,322,875
GROSS PROFIT
2000 2,343,977 1,950,152 1,724,980 1,744,613
1999 1,519,447 1,664,014 1,962,670 2,139,011
NET INCOME (LOSS)
2000 226,391 (174,447) (444,857)(1) (17,691)
1999 (247,074) (225,808) 15,196 189,515
NET INCOME (LOSS) PER
COMMON SHARE
BASIC
2000 .19 (.15) (.37) (.01)
1999 (.21) (.18) .01 .16
DILUTED
2000 .19 (.15) (.37) (.01)
1999 (.21) (.18) .01 .16
</TABLE>
(1) The third quarter of 2000 includes a pre-tax expense of $434,015 for
a restructuring charge.
--------------------------------------------------------------------------------
F-17
<PAGE> 37
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item 10 as to the Directors of the
Company is incorporated herein by reference to the information set forth under
the caption "Information Concerning Nominees for Directors" in the Company's
definitive Proxy Statement for the Annual Meeting of Shareholders to be held on
February 21, 2001, since such Proxy Statement will be filed with the Securities
and Exchange Commission not later than 120 days after the end of the Company's
fiscal year pursuant to Regulation 14A. Information required by this Item 10 as
to the Executive Officers of the Company is included in Part I of this Annual
Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated by reference
to the information set forth under the caption "Executive Compensation" in the
Company's definitive Proxy Statement for the Annual Meeting of Shareholders to
be held on February 21, 2001, since such Proxy Statement will be filed with the
Securities and Exchange Commission not later than 120 days after the end of the
Company's fiscal year pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is incorporated by reference
to the information set forth under the captions "Principal Shareholders" and
"Share Ownership of Directors and Officers" in the Company's definitive Proxy
Statement for the Annual Meeting of Shareholders to be held on February 21,
2001, since such Proxy Statement will be filed with the Securities and Exchange
Commission not later than 120 days after the end of the Company's fiscal year
pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 13 is incorporated by reference
to the information set forth under the caption "Transactions with Management" in
the Company's definitive Proxy Statement for the Annual Meeting of Shareholders
to be held on February 21, 2001, since such Proxy Statement will be filed with
the Securities and Exchange Commission not later than 120 days after the end of
the Company's fiscal year pursuant to Regulation 14A.
20
<PAGE> 38
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON REPORT 8-K
(a) (1) FINANCIAL STATEMENTS
The following Consolidated Financial Statements of the Registrant and its
subsidiaries are included in Part II, Item 8:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.................................................F-1
Consolidated Balance Sheet - As of
September 30, 2000 and 1999...........................................F-2
Consolidated Statement of Income - Years
Ended September 30, 2000, 1999 and 1998...............................F-4
Consolidated Statement of Stockholders'
Equity - Years Ended September 30, 2000,
1999 and 1998.........................................................F-5
Consolidated Statement of Cash Flows -
Years Ended September 30, 2000, 1999
and 1998..............................................................F-7
Notes to Consolidated Financial Statements.....................................F-9
</TABLE>
(a) (2) FINANCIAL STATEMENT SCHEDULES
The following Consolidated Financial Statement Schedules of the Registrant and
its subsidiaries are included in Item 14 hereof.
<TABLE>
<CAPTION>
SEQUENTIAL PAGE
---------------
<S> <C>
Report of Independent Auditors as to Schedules...............................................45
Schedule VIII-Valuation and Qualifying Accounts..............................................46
Schedule IX-Short-term Borrowings............................................................47
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have been
omitted.
(a) (3) EXHIBITS
Reference is made to the Exhibit Index set forth herein.
(b) There were no reports filed on Form 8-K during the quarter ended September
30, 2000.
21
<PAGE> 39
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized at Cleveland, Ohio this
21st day of December, 2000.
HICKOK INCORPORATED
By: /S/ ROBERT L. BAUMAN
----------------------------
Robert L. Bauman,
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated and on the 21st day of December,
2000:
<TABLE>
<CAPTION>
SIGNATURE: TITLE
--------- -----
<S> <C>
/S/ ROBERT L. BAUMAN Chairman, President and Chief Executive Officer
------------------------------------ (Principal Executive Officer)
Robert L. Bauman
/S/ EUGENE T. NOWAKOWSKI Chief Financial Officer
------------------------------------ (Principal Financial and Accounting Officer)
Eugene T. Nowakowski
/S/ HARRY J. FALLON Director
------------------------------------
Harry J. Fallon
/S/ T. HAROLD HUDSON Director
------------------------------------
T. Harold Hudson
/S/ JAMES T. MARTIN Director
------------------------------------
James T. Martin
/S/ MICHAEL L. MILLER Director
------------------------------------
Michael L. Miller
/S/ JAMES MORELAND Director
------------------------------------
James Moreland
/S/ JANET H. SLADE Director
------------------------------------
Janet H. Slade
</TABLE>
<PAGE> 40
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO.: DOCUMENT PAGE
----------- -------- ----
<S> <C> <C>
2 Asset Purchase Agreement, dated February 6, 1998,
by and among Waekon Industries, Inc. a
Pennsylvania corporation, Peter Vinci, and Waekon
Corp., an Ohio corporation (incorporated herein by
reference to the appropriate exhibit to the
Company's Current Report on Form 8-K dated
February 17, 1998).
3(a) Articles of Incorporation and Code of Regulations.*
3(b) Amendment to Articles of Incorporation (incorporated
herein by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended September 30, 1995).
10(a) Restated Loan Agreement, dated as of February 15,
2000, by and between the Company and Huntington
National Bank (incorporated herein by reference to
the appropriate exhibit to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended
March 31, 1999).
10(b) Hickok Incorporated 1995 Key Employees Stock
Option Plan (incorporated herein by reference to
the appropriate exhibit to the Company's
Registration Statement on Form S-8 as filed with
the Commission on September 17, 1998).
10(c) Hickok Incorporated 1997 Outside Directors Stock
Option Plan (incorporated herein by reference to
the appropriate exhibit to the Company's
Registration Statement on Form S-8 as filed with
the Commission on September 17, 1998).
10(d) Hickok Incorporated 1997 Key Employees Stock
Option Plan (incorporated herein by reference to
the appropriate exhibit to the Company's
Registration Statement on Form S-8 as filed with
the Commission on September 17, 1998).
11 Computation of Net Income Per Common Share. 41
21 Subsidiaries of the Registrant. 42
23 Consent of Independent Auditors. 43
27 Financial Data Schedule 48
</TABLE>
* Reference is made to the Company's basic documents filed as Exhibits 3(a) and
3(b) to the Company's Registration Statement on Form S-1, dated September 1,
1959, as supplemented by Amendments 1 and 2 thereto, dated respectively October
15, 1959, and October 19, 1959 (the October 15, 1959 amendment containing an
Amendment to Articles of Incorporation, dated September 29, 1959) and such
exhibits are hereby incorporated by reference herein
E-1
<PAGE> 41
The following pages contain the Consolidated Financial Statement
Schedules as specified for Item 14(a)(2) of Part IV of Form 10-K.
<PAGE> 42
REPORT OF INDEPENDENT AUDITORS AS TO CONSOLIDATED SCHEDULES
-----------------------------------------------------------
To the Shareholders and Board of Directors
Hickok Incorporated
Cleveland, Ohio
We have audited the consolidated financial statements of HICKOK INCORPORATED
(the "Company") as of September 30, 2000 and 1999, and for each of the three
years in the period ended September 30, 2000, and have issued our report thereon
dated November 17, 2000; such consolidated financial statements and report are
included in Part II, Item 8 of this Form 10-K. Our audits also included the
consolidated financial statement schedules ("schedules") of the Company listed
in Item 14 (a)(2). These schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
/s/ MEADEN & MOORE, LTD.
MEADEN & MOORE, Ltd.
Certified Public Accountants
December 20, 2000
Cleveland, Ohio
<PAGE> 43
HICKOK INCORPORATED
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
------------------------------------ ---------- ---------------------------------- ---------- ---------
Additions
----------------------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Period Expenses Accounts Deductions of Period
----------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Deducted from Asset Accounts:
Year Ended September 30,1998
----------------------------------
Reserve for doubtful accounts $ 15,000 $ 25,647 (1) $ 55 (2) $ 20,702 (3) $ 20,000
Reserve for inventory obsolescence $ 78,589 $377,743 $ -- $344,310 (5) $112,022
Reserve for warranty claim (4) $ -- $ -- $ -- $ -- $ --
Year Ended September 30,1999
----------------------------------
Reserve for doubtful accounts $ 20,000 $ 56,243 (1) $20,361 (2) $ 26,604 (3) $ 70,000
Reserve for inventory obsolescence $112,022 $247,250 $ -- $147,272 (5) $212,000
Reserve for warranty claim (4) $ -- $ -- $ -- $ -- $ --
Year Ended September 30,2000
----------------------------------
Reserve for doubtful accounts $ 70,000 $ 1,721 (1) $ 7,481 (2) $ (798) (3) $ 80,000
Reserve for inventory obsolescence $212,000 $459,756 $ -- $420,286 (5) $251,470
Reserve for warranty claim $ -- $ -- $ -- $ -- $ --
</TABLE>
(1) Classified as bad debt expense.
(2) Recoveries on accounts charged off in prior years.
(3) Accounts charged off during year as uncollectible.
(4) Reserve classified as an offset to a certificate of deposit of $142,995 in
current assets which collateralized a related bank guaranteed letter of
credit which expired in February 1998.
(5) Inventory charged off during the year as obsolete.
<PAGE> 44
HICKOK INCORPORATED
SCHEDULE IX - SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
--------------------- ---------- -------- -------------- -------------- ----------------
Weighted Maximum Amount Average Amount Weighted Average
Balance at Average Outstanding Outstanding Interest Rate
Category of Aggregate End of Interest During the During the During the
Short-term Borrowings Period Rate Period Period Period (3)
--------------------- ---------- -------- -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Year Ended September 30, 1998
Note Payable to Bank (1) $ -- 8.50% $350,000 $ 14,205 (2) 9.30%
Year Ended September 30, 1999
Note Payable to Bank (1) $ -- 7.88% $637,000 $ 55,836 (2) 7.99%
Year Ended September 30, 2000
Note Payable to Bank (1) $668,000 9.32% $975,000 $296,850 (2) 9.30%
</TABLE>
(1) Note payable to bank represents borrowings under a revolving credit
facility which expires February 28, 2001.
(2) The average amount outstanding during the period was computed by dividing
the total of daily outstanding principal balances by 365.
(3) The weighted average interest rate during the period was computed by
dividing the actual interest by the average short-term debt outstanding.
