<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _____ to _____ .
Commission File No. 0-147
HICKOK INCORPORATED
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Ohio 34-0288470
- ---------------------------------- ----------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
10514 Dupont Avenue; Cleveland, Ohio 44108
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (216) 541-8060
- -------------------------------------------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to the
filing requirements for the past 90 days.
Yes [ X ] No [ ]
As of MAY 15, 2000, 744,884 Hickok Incorporated Class A Common
Shares and 454,866 Class B Common Shares were outstanding.
<PAGE> 2
FORM 10-Q
PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS:
HICKOK INCORPORATED
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31,
----------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales
Product Sales $ 4,013,571 $ 4,229,911 $ 9,137,963 $ 7,752,478
Service Sales 382,212 350,762 638,439 642,621
----------- ----------- ----------- -----------
Total Net Sales 4,395,783 4,580,673 9,776,402 8,395,099
Costs and Expenses:
Cost of Product Sold 2,210,939 2,662,524 5,038,208 4,776,185
Cost of Service Sold 234,692 254,135 444,065 435,453
Product Development 753,172 682,594 1,461,805 1,358,531
Operating Expenses 1,428,945 1,338,261 2,716,583 2,577,836
Interest Charges 9,485 15,397 24,432 33,310
Other (Income) Expense 27,097 (13,730) 11,465 (35,634)
----------- ----------- ----------- -----------
4,664,330 4,939,181 9,696,558 9,145,681
----------- ----------- ----------- -----------
Income (Loss) before
Income Taxes (268,547) (358,508) 79,844 (750,582)
Income (Recovery of)
Income Taxes (94,100) (132,700) 27,900 (277,700)
----------- ----------- ----------- -----------
Net Income (Loss) $ (174,447) $ (225,808) $ 51,944 $ (472,882)
=========== =========== =========== ===========
Earnings per Common Share:
- --------------------------
Net Income (Loss) $ (.15) $ (.18) $ .04 $ (.39)
=========== =========== =========== ===========
Earnings per Common Share
Assuming Dilution:
- -------------------------
Net Income (Loss) $ (.15) $ (.18) $ .04 $ (.39)
=========== =========== =========== ===========
Dividends per Share $ .10 $ .15 $ .10 $ .15
=========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
(2)
<PAGE> 3
HICKOK INCORPORATED
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30, March 31,
2000 1999 1999
----------- ----------- -----------
(Unaudited) (Note) (Unaudited)
<S> <C> <C> <C>
Assets
- ------
Current Assets
- --------------
Cash and Cash Equivalents $ 438,411 $ 533,579 $ 562,607
Trade Accounts Receivable - Net 3,098,711 3,377,291 2,679,770
Inventories 5,886,646 5,708,098 5,790,256
Deferred Income Taxes 315,900 315,900 196,000
Prepaid Expenses 95,793 51,569 72,752
Refundable Income Taxes 199,624 199,624 171,663
----------- ----------- -----------
Total Current Assets 10,035,085 10,186,061 9,473,048
-------------------- ----------- ----------- -----------
Property, Plant and Equipment
- -----------------------------
Land 229,089 229,089 226,738
Buildings 1,565,021 1,565,021 1,541,245
Machinery and Equipment 4,317,051 3,973,241 4,170,802
----------- ----------- -----------
6,111,161 5,767,351 5,938,785
Less: Allowance for Depreciation 3,816,127 3,542,098 3,638,611
----------- ----------- -----------
Total Property - Net 2,295,034 2,225,253 2,300,174
-------------------- ----------- ----------- -----------
Other Assets
- ------------
Goodwill - Net of Amortization 1,856,058 1,833,324 1,887,430
Deferred Charges - Net of Amortization 23,152 35,752 43,194
Deposits 1,750 1,750 3,226
----------- ----------- -----------
Total Other Assets 1,880,960 1,870,826 1,933,850
------------------ ----------- ----------- -----------
Total Assets $14,211,079 $14,282,140 $13,707,072
============ =========== =========== ===========
</TABLE>
NOTE: Amounts derived from audited financial statements previously filed with
the Securities and Exchange Commission.
See Notes to Consolidated Financial Statements.
(3)
<PAGE> 4
FORM 10-Q
<TABLE>
<CAPTION>
March 31, September 30, March 31,
2000 1999 1999
(Unaudited) (Note) (Unaudited)
----------- ----------- ---------
<S> <C> <C> <C>
Liabilities
- -----------
Current Liabilities
- -------------------
Short-term Financing $ 650,000 $ 100,000 $ --
Current Portion of Long-Term Debt 102,071 132,616 134,729
Trade Accounts Payable 414,365 682,950 463,519
Accrued Payroll & Related Expenses 506,021 440,107 457,606
Accrued Expenses 191,161 180,481 132,783
Accrued Income Taxes 204,371 176,757 --
----------- ----------- -----------
Total Current Liabilities 2,067,989 1,712,911 1,188,637
------------------------- ----------- ----------- -----------
Deferred Income Taxes 41,500 41,500 165,000
- --------------------- ----------- ----------- -----------
Long-term Debt 59,820 417,928 448,345
- --------------------- ----------- ----------- -----------
Stockholders' Equity
- --------------------
Class A, $1.00 par value;
authorized 3,750,000 shares;
744,884 shares outstanding
excluding 9,586 shares in treasury 744,884 744,884 744,884
Class B, $1.00 par value;
authorized 1,000,000 shares;
454,866 shares outstanding
excluding 20,667 shares in treasury 454,866 454,866 454,866
Contributed Capital 948,803 943,803 948,803
Retained Earnings 9,893,217 9,961,248 9,756,537
----------- ----------- -----------
Total Stockholders' Equity 12,041,770 12,109,801 11,905,090
-------------------------- ----------- ----------- -----------
Total Liabilities and
Stockholders' Equity $14,211,079 $14,282,140 $13,707,072
===================== =========== =========== ===========
</TABLE>
(4)
<PAGE> 5
HICKOK INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Cash received from customers $ 10,054,982 $ 8,413,341
Cash paid to suppliers and employees (9,723,098) (9,013,364)
Interest paid (9,202) (58,781)
Interest received 9,751 21,548
Income taxes (paid) refunded (286) 124,962
------------ ------------
Net Cash Provided by (Used In)
Operating Activities 332,147 (512,294)
Cash Flows from Investing Activities:
Capital expenditures (394,395) (217,261)
Decrease in deposits -- 1,124
Payments for business purchased (Net) (78,192) --
Proceeds on sale of assets 3,900 --
------------ ------------
Net Cash Used in Investing
Activities (468,687) (216,137)
Cash Flows from Financing Activities:
Change in short-term borrowing 519,455 (27,033)
Decrease in long-term financing (358,108) (101,130)
Sale of Class A shares under option -- 5,850
Dividends paid (119,975) (179,963)
------------ ------------
Net Cash Provided By (Used in)
Financing Activities 41,372 (302,276)
------------ ------------
Net increase (decrease) in cash and
cash equivalents (95,168) (1,030,707)
Cash and cash equivalents at beginning
of year 533,579 1,593,314
------------ ------------
Cash and cash equivalents at end
of second quarter $ 438,411 $ 562,607
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
(5)
<PAGE> 6
FORM 10-Q
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Reconciliation of Net Income (Loss) to Net
Cash Provided by Operating Activities:
Net Income (Loss) $ 51,944 $(472,882)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 353,826 429,388
Non-cash compensation charge
related to stock options -- 1,150
Loss of disposal of assets 34,946 --
Changes in assets and liabilities:
Decrease (Increase) in accounts
receivable 278,580 18,242
Decrease (Increase) in inventories (178,548) 101,833
Decrease (Increase) in prepaid
expenses (44,224) (33,950)
Decrease in refundable income
taxes -- 10,149
Increase (Decrease) in trade
accounts payable (268,585) (192,783)
Increase (Decrease) in accrued
payroll and related expenses 65,914 (147,033)
Increase (Decrease) in accrued
expenses 10,680 (64,120)
Increase (Decrease) in accrued
income taxes 27,614 (162,288)
--------- ---------
Total Adjustments 280,203 (39,412)
--------- ---------
Net Cash Provided by (Used In)
Operating Activities $ 332,147 $(512,294)
========= =========
</TABLE>
(6)
<PAGE> 7
FORM 10-Q
HICKOK INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 2000
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and six-month periods ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the year
ended September 30, 2000. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended September 30,
1999.
2. INVENTORIES
Inventories are valued at the lower of cost or market and consist of
the following:
<TABLE>
<CAPTION>
March 31, Sept. 30, March 31,
2000 1999 1999
----------- ----------- ----------
<S> <C> <C> <C>
Components $ 2,780,306 $ 3,336,853 $ 3,287,010
Work-in-Process 1,806,584 1,408,952 1,325,117
Finished Product 1,299,756 962,293 1,178,129
----------- ----------- -----------
$ 5,886,646 $ 5,708,098 $ 5,790,256
=========== =========== ===========
</TABLE>
3. CAPITAL STOCK, TREASURY STOCK, CONTRIBUTED CAPITAL AND STOCK OPTIONS
Under the Company's Key Employees Stock Option Plans (collectively the
"Employee Plans"), incentive stock options, in general, are exercisable
for up to ten years, at an exercise price of not less than the market
price on the date the option is granted. Non-qualified stock options may
be granted at such exercise price and such other terms and conditions as
the Compensation Committee of the Board of Directors may determine. No
options may be granted at a price less than $2.925. Options for 134,300
Class A shares were outstanding at March 31, 2000 (106,500 shares at
September 30, 1999 and 113,600 shares at March 31, 1999) at prices
ranging from $2.925 to $17.25 per share. Options for 27,800 shares and
23,000 shares were granted during the three month periods ended December
31, 1999 and December 31, 1998 respectively, at a price of $5.00 and
$7.125 per share respectively, and all options are exercisable.
(7)
<PAGE> 8
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
Options for 2,000 Class A shares were exercised at $2.925 per share
during the first quarter period ended December 31, 1998 and resulted in
non-cash compensation to the optionee of $1,150. Options for 1,000 shares
and 4,000 shares were cancelled during the three month periods ended
March 31, 1999 and December 31, 1998 respectively.
No other options were granted, exercised or cancelled during the three or
six month periods presented under the Employee Plans.
The Company's Outside Directors Stock Option Plans (collectively the
"Directors Plans"), provide for the automatic grant of options to
purchase up to 45,000 shares of Class A Common Stock to members of the
Board of Directors who are not employees of the Company, at the fair
market value on the date of grant. Options for 42,000 Class A shares were
outstanding at March 31, 2000 (36,000 shares at September 30, 1999 and
March 31, 1999) at prices ranging from $7.125 to $18.00 per share.
Options for 6,000 shares were granted under the Directors Plans during
each of the three month periods ended March 31, 2000 and March 31, 1999,
at a price of $8.50 and $7.125 per share respectively. Options for 6,000
Class A shares expired during the three month period ended March 31,
1999. All outstanding options under the Directors Plans become fully
exercisable on February 25, 2003.
Unissued shares of Class A common stock (631,166 shares) are reserved for
the share-for-share conversion rights of the Class B common stock and
stock options under the Employee Plans and the Directors Plans.
The Company declared a $.10 per share special dividend on its Class A and
Class B common shares on February 23, 2000 payable March 31, 2000 to
shareholders of record March 15, 2000. A special dividend of $.15 per
share on Class A and Class B common shares, payable January 22, 1999 to
shareholders of record January 4, 1999, was declared on December 9, 1998.
(8)
<PAGE> 9
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
4. EARNINGS PER COMMON SHARE
Earnings per common share are based on the provisions of FAS Statement No.
128, "Earnings per Share." Accordingly, the adoption of this statement did
not affect the Company's results of operations, financial position or
liquidity. The effects of applying FAS No. 128 on earnings per share and
required reconciliations are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
MARCH 31, MARCH 31,
----------------------------- ------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income (Loss) available
to common stockholders $ (174,447) $ (225,808) $ 51,994 $ (472,882)
Shares denominator 1,199,750 1,199,750 1,199,750 1,199,080
Per share amount $ (.15) $ (.18) $ .04 $ (.39)
=========== =========== =========== ===========
EFFECT OF DILUTIVE
SECURITIES
Average shares
outstanding 1,199,750 1,199,750 1,199,750 1,199,080
Stock options -- -- 6,929 --
----------- ----------- ----------- -----------
1,199,750 1,199,750 1,206,679 1,199,080
DILUTED EARNINGS PER SHARE
Income (Loss) available
to common stockholders $ (174,447) $ (225,808) $ 51,944 $ (472,882)
Per share amount $ (.15) $ (.18) $ .04 $ (.39)
=========== =========== =========== ===========
</TABLE>
Options to purchase 176,300 and 149,600 shares of common stock during the second
quarter of fiscal 2000 and the second quarter of fiscal 1999, respectively, at
prices ranging from $2.925 to $18.00 per share were outstanding but were not
included in the computation of diluted earnings per share because the option's
effect was antidilutive or the exercise price was greater than the average
market price of the common share.
During the six month period of fiscal 2000 and the six month period of fiscal
1999 options to purchase 130,500 and 149,600 shares of common stock,
respectively, at prices ranging from $2.925 to $18.00 per share were outstanding
but were not included in the computation of diluted earnings per share because
the option's effect was antidilutive or the exercise price was greater than the
average market price of the common shares.
(9)
<PAGE> 10
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
5. PURCHASE
On February 17, 1998, the Company purchased certain assets of Waekon
Industries, Inc. which has been accounted for under the purchase method
of accounting. The Company initially paid $2,221,302 for the assets
consisting of accounts receivable ($504,282), inventory ($719,244),
prepaid and other assets ($42,786), machinery and equipment ($380,100),
assumption of current liabilities ($425,895), and goodwill
($1,000,785). The Company also recorded as goodwill closing costs
related to the purchase ($205,216) and the present value of an earn out
contract ($585,892). In December 1999 the Company renegotiated and
accelerated the terms of the future earn out contract incurring an
additional amount due of $78,192 deemed to be additional purchase price
and recorded as an increase in goodwill. The revised earn out balance
($61,943) has been classified as a current liability at March 31, 2000.
Goodwill is being amortized over 20 years.
6. 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 1999 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 of 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 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.
(10)
<PAGE> 11
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
INFORMATION BY INDUSTRY SEGMENT IS SET FORTH BELOW:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
-------------------------------- -------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
NET REVENUE
<S> <C> <C> <C> <C>
Indicators and Gauges $ 657,015 $ 683,720 $ 1,188,977 $ 1,292,018
Automotive Diagnostic Tools
and Equipment 3,738,768 3,896,953 8,587,425 7,103,081
------------ ------------ ------------ ------------
$ 4,395,783 $ 4,580,673 $ 9,776,402 $ 8,395,099
============ ============ ============ ============
INCOME (LOSS) FROM OPERATIONS
Indicators and Gauges $ 176,733 $ 167,403 $ 272,486 $ 282,225
Automotive Diagnostic Tools
and Equipment 298,036 289,440 1,235,912 575,363
General Corporate Expenses (743,316) (815,351) (1,428,554) (1,608,170)
------------ ------------ ------------ ------------
$ (268,547) $ (358,508) $ 79,844 $ (750,582)
============ ============ ============ ============
ASSET INFORMATION
Indicators and Gauges $ 1,287,980 $ 1,413,370
Automotive Diagnostic Tools
and Equipment 9,734,094 9,270,096
Corporate 3,189,005 3,023,606
------------ -------------
$ 14,211,079 $ 13,707,072
============ =============
GEOGRAPHICAL INFORMATION
Included in the consolidated
financial statements are
the following amounts related to
geographical locations:
REVENUE:
United States $ 3,967,784 $ 4,383,397 $ 9,212,770 $ 7,871,049
Canada 82,942 142,855 163,636 347,669
Other foreign countries 345,057 54,421 399,996 176,381
------------ ------------ ------------ -------------
$ 4,395,783 $ 4,580,673 $ 9,776,402 $ 8,395,099
============ ============ ============ =============
</TABLE>
(11)
<PAGE> 12
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations, Second Quarter (January 1, 2000 through March 31, 2000
Fiscal 2000 Compared to Second Quarter Fiscal 1999
- -------------------------------------------------------------------------------
REPORTABLE SEGMENT INFORMATION
The Company has determined that it has two reportable segments: 1) indicators
and gauges and 2) automotive related diagnostic tools and equipment. The
indicators and gauges 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. Revenue in this segment was $657,015 and $683,720 for the
second quarter of fiscal 2000 and fiscal 1999, respectively and $1,188,977 and
$1,292,018 for the first six months of fiscal 2000 and fiscal 1999,
respectively. The automotive diagnostic tools and equipment segment consists
primarily of products designed and manufactured to support the servicing of
automotive electronic systems. These products are sold both directly to the end
user and to the aftermarket using a variety of distribution methods. 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. Revenue in this segment was $3,738,768 and $3,896,953 for the second
quarter of fiscal 2000 and fiscal 1999, respectively and $8,587,425 and
$7,103,081 for the first six months of fiscal 2000 and fiscal 1999,
respectively.
RESULTS OF OPERATIONS
Product sales for the quarter ended March 31, 2000 were $4,013,571 versus
$4,229,911 for the quarter ended March 31, 1999. The 5.1% decrease in product
sales in the current quarter was volume related and due primarily to a decrease
in automotive diagnostic sales to the aftermarket. The company anticipates that
the level of product sales experienced in the second quarter is expected to
increase modestly in the third and fourth quarters of the fiscal year based on
current quote and order levels within the company's automotive product segment.
Service sales for the quarter ended March 31, 2000 were $382,212 versus $350,762
for the quarter ended March 31, 1999. The current level of service sales is
expected to continue for the balance of the fiscal year.
Cost of product sold in the second quarter of fiscal 2000 was $2,210,939 or
55.1% of product sales as compared to $2,662,524 or 62.9% of product sales in
the second quarter of 1999. This decrease in the cost of product sold percentage
was due primarily to a change in product mix. The current cost of product sold
percentage is anticipated to increase slightly during the balance of the fiscal
year due to a change in product mix.
(12)
<PAGE> 13
FORM 10-Q
Cost of service sold for the quarter ended March 31, 2000 was $234,692 or 61.4%
of service sales as compared to $254,135 or 72.4% of service sales in the
quarter ended March 31, 1999. The dollar decrease was due to improved pricing
related to a change in product mix.
Product development expenses were $753,172 in the second quarter of fiscal 2000
or 18.8% of product sales as compared to $682,594 or 16.1% of product sales in
the second quarter of fiscal 1999. The percentage increase is due to a 5%
decrease in product sales and to a 10% increase in product development
expenditures related to higher expenses on several products in the final stages
of development. The level of expenditures incurred during the second quarter of
fiscal 2000 is expected to decrease slightly in the last two quarters of fiscal
2000.
Operating expenses in the most recent quarter were $1,428,945 or 32.5% of total
sales versus $1,338,261 or 29.2% of total sales for the same period a year ago.
Most of the dollar increase represents higher marketing expenses applicable to
automotive product sales to the aftermarket. The current level of operating
expenses is anticipated to decrease slightly in the third and fourth quarters of
the fiscal year due to cost containment.
Interest expense was $9,485 in the second quarter of fiscal 2000, as compared to
$15,397 in the second quarter of fiscal 1999. This decrease was due primarily to
a reduction in long term debt associated with the Waekon acquisition in February
1998. The current level of interest expense will continue for the remainder of
fiscal 2000.
Other expense of $27,097 compares with other income of $13,730 in the same
quarter last year. The difference is due to a $34,946 loss on the disposal of
equipment in the second quarter of fiscal 2000.
The net loss in the second quarter of fiscal 2000 was $174,447 as compared with
a net loss of $225,808 in fiscal 1999. This change was primarily due to an
improvement in gross product margin due to a change in product mix, offset, in
part, by increases in product development and operating expense.
Unshipped customer orders as of March 31, 2000 were $5,734,000 versus $3,861,000
at March 31, 1999. The primary reason for the increase reflects higher orders
for automotive diagnostic sub assemblies from a Tier 1 supplier to a large
automotive OEM. The company anticipates that most of the increase in backlog
will be shipped in the second half of fiscal 2000.
RESULTS OF OPERATIONS, SIX MONTHS ENDED MARCH 31, 2000
COMPARED TO SIX MONTHS ENDED MARCH 31, 1999
Product sales for the six months ended March 31, 2000 were $9,137,963 versus
$7,752,478 for the same period in fiscal 1999. The increase is volume related
and due entirely to higher sales of automotive diagnostic products in the first
three months of fiscal 2000.
(13)
<PAGE> 14
FORM 10-Q
The current level of product sales is anticipated to increase modestly over the
last six months of the fiscal year based on current quote and order levels
within the Company's automotive product segment.
Service sales for the six months ended March 31, 2000 were $638,439 compared
with $642,621 for the same period in fiscal 1999. The current level of service
sales is expected to continue for the balance of the fiscal year.
Cost of product sold was $5,038,208 or 55.1% of product sales as compared to
$4,776,185 or 61.6% of product sales for the six months ended March 31, 1999.
This decrease in the cost of product sold percentage was due to a change in
product mix and to operating efficiencies realized at the manufacturing level
due to a 18% increase in product sales. The cost of product sold percentage
should increase slightly in the second half of the fiscal year due to a change
in product mix.
Cost of service sold was $444,065 or 69.6% of service sales compared with
$435,453 or 67.8% of service sales for the six months ended March 31, 1999.
Product development expenses were $1,461,805 or 16.0% of product sales as
compared to $1,358,531 or 17.5% of product sales for the six months ended March
31, 1999. The percentage decrease is due to a 18% increase in product sales. The
current level of product development expenditures is expected to decrease
slightly in the second half of the fiscal year.
Operating expenses were $2,716,583 for the six months ended March 31, 2000 or
27.8% of total sales versus $2,577,836 or 30.7% of total sales for the six
months ended March 31, 1999. Most of the dollar increase represents higher
marketing expenses applicable to automotive product sales to the aftermarket.
Interest expense was $24,432 for the six months ended March 31, 2000, and
$33,310 for the same period in 1999. This decrease was due to a reduction in
long term debt associated with the Waekon acquisition in February 1998. The
current level of interest expense will continue for the remainder of fiscal
2000.
Other expense of $11,465 compares with other income of $35,634 in the same
period last year. The difference is due to a reduction in interest income on
short term investments and to a $34,946 loss on the disposal of equipment in the
second quarter of fiscal 2000.
Net income for the six months ended March 31, 2000 was $51,944 compared with a
net loss of $472,882 for the six months ended March 31, 1999. The change was due
primarily to an increase in automotive diagnostic product sales and to an
improvement in gross product margin due to a change in product mix and to
operating efficiencies at the manufacturing level.
(14)
<PAGE> 15
FORM 10-Q
LIQUIDITY AND CAPITAL RESOURCES
Total current assets were $10,035,085, $10,186,061 and $9,473,048 at March 31,
2000, September 30, 1999 and March 31, 1999, respectively. The increase from
March to March was due primarily to a $418,941 increase in accounts receivable
and, to a lesser extent, to a $96,390 increase in inventory. The increase in
receivables was due to lower than normal payments from customers as of the end
of the current quarter and was entirely made up within the first two weeks of
April 2000. Inventory was up due to an anticipated increase in shipments in the
third fiscal quarter. Between September 1999 and March 2000 current assets
decreased by $150,976 due to a reduction in cash and accounts receivable,
proceeds of which were used, in part, to reduce trade payables.
Working capital as of March 31, 2000 amounted to $7,967,096. This compares to
$8,284,411 a year earlier. Current assets were 4.9 times current liabilities and
total cash and receivables were 1.7 times current liabilities. These ratios
compare to 8.0 and 2.7, respectively, at March 31, 1999
Internally generated funds were $332,147 during the six months ended March 31,
2000 and were not adequate to fund the Company's primary non-operating cash
requirements consisting of capital expenditures of $394,395 and long-term debt
payments of $358,108. The shortfall was made up primarily by an increase in
short term financing. Management of the Company believes that cash and cash
equivalents, together with funds anticipated to be generated by operations and
funds available under the Company's credit agreement, will provide the liquidity
necessary to support its current and anticipated capital expenditures through
the end of fiscal 2000.
Shareholders' equity during the six months ended March 31, 2000 decreased by
$68,031 ($.06 per share) resulting from net income of $51,944 less a $119,975
payment of dividends.
In February 2000 the Company renewed its credit agreement with its financial
lender. The agreement expires in February 2001 and provides for a revolving
credit facility of $5,000,000 with interest at the bank's prime commercial rate
with a LIBOR option and is unsecured. The Company remains in compliance with its
loan covenants.
YEAR 2000 READINESS DISCLOSURE
In late fiscal 1997 the Company began its review of Year 2000 issues with
emphasis placed on information technology systems software and hardware. During
fiscal 1998 the Company expanded its review to include non-information
technology systems and the readiness of key third parties, primarily suppliers
and customers. The Company used internal resources to make its assessment. The
Company determined that its primary information systems software and hardware
were not Year 2000 compliant and decided to replace non-compliant equipment and
software. Training and testing occurred throughout all of fiscal 1998.
(15)
<PAGE> 16
FORM 10-Q
Installation began in early fiscal 1999 and has been completed. The system is
functioning properly. The Company's review of non-information technology systems
and the readiness of key third parties is complete. Based on assessment efforts
to date, the Company has yet to experience any significant problems internally
or with suppliers and customers in connection with Year 2000 compliance.
Nevertheless, additional dates in the future exist which could potentially cause
computer system failures. Failure of our internal computer systems or software,
or of systems maintained by third parties such as suppliers, customers, public
utilities and the government, to operate properly with regard to the Year 2000
and thereafter could result in a material adverse effect on the Company's
business and operating results. 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. Though
the Company does not expect a material adverse impact on operations, contingency
plans are completed. Such plans primarily involve the use of alternative
suppliers and transportation vendors. Costs associated with the Company's
assessment and remediation of Year 2000 issues are not expected to be 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 significant third parties with whom the Company does business to
provide products and services in the Year 2000 and beyond.
ITEM 3 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. There were no
material changes in the Company's exposure to market risk from September 30,
1999.
(16)
<PAGE> 17
FORM 10-Q
PART II. OTHER INFORMATION
- ---------------------------
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
At the Company's Annual Meeting of Shareholders held on February 23, 2000, the
following individuals were elected to the Board of Directors:
<TABLE>
<CAPTION>
VOTES FOR VOTES WITHHELD
<S> <C> <C>
Robert L. Bauman 1,681,511 4,398
Harry J. Fallon 1,681,911 3,998
T. Harold Hudson 1,681,511 4,398
James T. Martin 1,681,471 4,438
Michael L. Miller 1,681,511 4,398
James Moreland 1,681,971 3,938
Janet H. Slade 1,681,511 4,398
</TABLE>
For information on how the votes have been tabulated for the above matter, see
the Company's definitive Proxy Statement used in connection with the Annual
Meeting of Shareholders held on February 23, 2000.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K:
--------------------------------
a) The following exhibits are included herein: (10) Third Amendment to Loan
Agreement, dated February 15, 2000 by and between the Company and Huntington
National Bank. (11) Statement re: Computation of earnings per share. (27)
Financial Data Schedule
b) The Company did not file any reports on Form 8-K during the three months
ended March 31, 2000.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date May 15, 2000 HICKOK INCORPORATED
(Registrant)
/s/ E. T. Nowakowski
E. T. Nowakowski, Chief Financial Officer
(17)
<PAGE> 1
Exhibit 10
THIRD AMENDMENT TO LOAN AGREEMENT
THIS THIRD AMENDMENT TO LOAN AGREEMENT (the "Third Amendment") is made
this 15th day of February, 2000, at Cleveland, Ohio, by and among THE HUNTINGTON
NATIONAL BANK ("Bank"), whose principal office is located at 917 Euclid Avenue,
Cleveland, Ohio 44115, HICKOK INCORPORATED, whose address is 10514 Dupont
Avenue, Cleveland, Ohio 44108 ("Borrower"), and SUPREME ELECTRONICS CORP., whose
address is 10514 Dupont Avenue, Cleveland, Ohio 44108 ("Guarantor").
RECITALS
--------
A. The Borrower and Bank entered into a Restated Loan Agreement
dated as of February 28, 1977 (the "Loan Agreement") and a
First Amendment to Loan Agreement dated as of February 18,
1998 (the "First Amendment) and a Second Amendment to Loan
Agreement dated as of February 26, 1999 (the "Second
Amendment"), pursuant to which Bank agreed to make available
to the Borrower a loan of up to $5,000,000.00. Capitalized
terms used herein and not otherwise defined shall have the
meanings assigned to them in the Loan Agreement.
B. The Borrower has requested certain amendments to the Loan
Agreements.
C. As a material inducement to Bank and to make the amendments to
the loan herein contemplated, Guarantor for good and valuable
consideration is willing to deliver to Bank an acknowledgement
of the continuing Guaranty Unlimited.
D. Bank is willing to make the amendments and modifications to
the loan herein described, upon the terms, covenants and
conditions herein set forth, and in reliance upon the
representations and warranties of Borrower herein contained.
NOW, THEREFORE, in consideration of the foregoing Recitals, the terms,
covenants and conditions hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
1 AMENDMENTS, The third sentence of Section 2.1 is hereby further modified and
amended to extend the maturity date of the Loan and the Revolving Note to
February 28, 2001.
2 BORROWER'S REPRESENTATIONS, WARRANTIES AND EVENTS OF DEFAULT.
2.1 REPRESENTATIONS AND WARRANTIES
2.1.1. Except as amended hereby, the terms, provisions,
conditions and agreements of the Loan Agreement and
the First and Second Amendments to Loan Agreement are
hereby ratified and confirmed and shall remain in
full force and effect. Borrower expressly
acknowledges that this Third Amendment shall not
constitute a novation or waiver. Each and every
representation and warranty of the Borrower set forth
in the Loan Agreement and the First and Second
Amendments to Loan Agreement is hereby confirmed and
ratified in all material respects and such
representations and warranties shall be deemed to
have been made and undertaken as of the date of this
Third Amendment as well as at the time they were made
and undertaken.
<PAGE> 2
Exhibit 10
2.1.2. The Borrower further represents and warrants that:
2.1.2.1 No Event of Default now exists or will exist
immediately following the execution hereof or after
giving effect to the transactions contemplated
hereby.
2.1.2.2 All necessary corporate or shareholder actions on the
part of the Borrower to authorize the execution,
delivery and performance of this Third Amendment, the
Third Modification and Amendment to the Revolving
Credit Note and all other documents or instruments
required pursuant hereto or thereto have been taken;
this Third Amendment, the Third Modification and
Amendment to the Revolving Credit Note and each such
other document or instrument have been duly and
validly executed and delivered and are legally
binding and binding upon the parties thereto and
enforceable in accordance with their respective
terms, except to the extent that the enforceability
thereof may be limited by bankruptcy, insolvency or
like laws or by general equitable principals.
2.1.2.3. The execution, delivery and performance of this Third
Amendment, the Third Modification and Amendment to
the Revolving Credit Note and all other documents or
instruments required pursuant hereto or thereto, and
all actions and transactions contemplated hereby and
thereby will not (A) violate, be in conflict with,
result in a breach of or constitute (with due notice
or lapse of time or both) a default under (1) any
provision of the Articles of Incorporation, Code of
Regulations or Bylaws of the Borrower, (2) any
arbitration award or any order of any court or of
any other governmental agency or authority, (3) any
license, permit or authorization granted to the
Borrower or under which the borrower operates, or
(4) any applicable law, rule, order or regulation,
indenture, agreement or other instrument to which
the Borrower is a party or by which the Borrower
or any of its properties is bound and which has not
been waived or consented to, or (B) result in the
creation or imposition of any lien, charge or
encumbrance of any nature whatsoever, except as
expressly permitted in the Loan Agreement, upon any
of the properties of the Borrower.
2.1.2.4. No consent, approval or authorization of, or filing,
registration or qualification with, any governmental
authority or any other person or entity is required
to be obtained by the Borrower in connection with
the execution, delivery or performance of this Third
Amendment, the Third Modification and Amendment to
the Revolving Credit Note or any document or
instrument required in connection herewith or
therewith which as not already been obtained or
completed.
3 AFFIRMATION AND AGREEMENT OF THE BORROWERS AND THE GUARANTOR. The Borrower and
the Guarantor have executed this Third Amendment to consent to the Loan
Agreement made pursuant hereto.
4 FEES AND EXPENSES. As required under the Loan Agreement, the Borrower shall
pay a facility fee of $5,000.00 upon execution hereof, and shall reimburse the
Bank upon demand for all
<PAGE> 3
Exhibit 10
out-of-pocket costs, charges and expenses of the Bank (including
reasonable fees and disbursements of legal counsel to Bank in
connection with the preparation, negotiation, execution and delivery of
this Third Amendment and the other agreements or documents relating
hereto or required hereby).
5. REFERENCE TO LOAN AGREEMENT. Except as amended by the First and Second
Amendments to Loan Agreement and hereby, the Loan Agreement shall remain
in full force and effect and is hereby ratified and confirmed in all
respects. On and after the effectiveness of the Third Amendment to the
Loan Agreement accomplished hereby, each reference in the Loan Agreement
to "this Agreement," "hereunder," "hereof," "herein" or words of like
import, and each reference to the Loan Agreement in any Note or other
Loan Document, or other agreement, document or instrument executed and
delivered pursuant to the Loan Agreement, shall be deemed a reference to
the Loan Agreement as previously amended and amended hereby.
6 COUNTERPARTS. This Third Amendment may be executed in as many
counterparts as may be convenient, each of which when so executed shall
be deemed to be an original for all purposes, and shall become binding
when the Borrower, the Guarantor, the Bank have executed at least one
counterpart.
7 FURTHER ACTS. The parties agree to perform any further acts and to
execute and deliver any additional documents which may be reasonably
necessary to carry out the intent and provisions of this Third
Amendment.
8 BINDING EFFECT. This Third Amendment shall be binding upon and shall
inure to the benefit of the Borrower, the Guarantor, Bank and their
respective heirs, personal representatives, successors and assigns.
IN WITNESS WHEREOF, the parties have signed this Third Amendment to Loan
Agreement, intending to be legally bound thereby as of the Effective
Date.
BORROWER
HICKOK INCORPORATED
/s/ Eugene Nowakowski By: /s/ Robert L. Bauman
- ----------------------------- --------------------------------
Robert L. Bauman, President
/s/ Carmelita Jerome
- ----------------------------- THE HUNTINGTON NATIONAL BANK
Signed in the presence of:
(as to all signatures) By: Terry Correno VP
-------------------------------
/s/ Marilyn Leach
- ------------------------------
/s/ Donna L. Lanny
- ------------------------------
<PAGE> 1
FORM 10-Q
EXHIBIT 11
HICKOK INCORPORATED
STATEMENT RE: COMPUTATION OF PER COMMON SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
-------------------------- ----------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
PRIMARY
- -------
<S> <C> <C> <C> <C>
Average shares outstanding 1,199,750 1,199,750 1,199,750 1,199,080
Net effect of dilutive
stock options - based
on the treasury stock
method using average
market price - * - * 6,929 - *
--------- --------- --------- ---------
Total Shares 1,199,750 1,199,750 1,206,679 1,199,080
--------- --------- --------- ---------
Net Income (Loss) $(174,447) $(225,808) $ 51,944 $(472,882)
========= ========= ========= =========
Per Share $ (.15) $ (.18) $ .04 $ (.39)
========= ========= ========= =========
FULLY DILUTED
- -------------
Average shares outstanding 1,199,750 1,199,750 1,199,750 1,199,080
Net effect of dilutive
stock options - based
on the treasury stock
method using year-end
market price, if
higher than average
market price - * - * 6,929 - *
--------- --------- --------- ---------
Total Shares 1,199,750 1,199,750 1,206,679 1,199,080
--------- --------- --------- ---------
Net Income (Loss) $(174,447) $(225,808) $ 51,944 $(472,882)
========= ========= ========= =========
Per Share $ (.15) $ (.18) $ .04 $ (.39)
========= ========= ========= =========
</TABLE>
*Net effect of stock options was antidilutive for the period.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 438,411
<SECURITIES> 0
<RECEIVABLES> 3,098,711
<ALLOWANCES> 0
<INVENTORY> 5,886,646
<CURRENT-ASSETS> 10,035,085
<PP&E> 6,111,161
<DEPRECIATION> 3,816,127
<TOTAL-ASSETS> 14,211,079
<CURRENT-LIABILITIES> 2,067,989
<BONDS> 59,820
0
0
<COMMON> 1,199,750
<OTHER-SE> 10,842,020
<TOTAL-LIABILITY-AND-EQUITY> 14,211,079
<SALES> 9,776,402
<TOTAL-REVENUES> 9,776,402
<CGS> 5,482,273
<TOTAL-COSTS> 4,178,388
<OTHER-EXPENSES> 11,465
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,432
<INCOME-PRETAX> 79,844
<INCOME-TAX> 27,900
<INCOME-CONTINUING> 51,944
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,944
<EPS-BASIC> .04
<EPS-DILUTED> .04
</TABLE>
