SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For Quarter Ended Commission File
August 31, 1996 No. 0-5418
WALKER INTERNATIONAL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2637172
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4 Ken-Anthony Plaza, South Lake Blvd., Mahopac, New York 10541
(Address of principal executive offices) (Zip Code)
(914) 628-9404
Registrant's telephone number, including area code
N/A
(Former name, former address and former fiscal year
if changed since last report)
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
The number of shares of Common Stock outstanding, par value $.10
per share, as of October 10, 1996 was 298,081.
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<TABLE>
PART I - FINANCIAL INFORMATION
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
August 31, November 30,
1996 1995
(Unaudited) (Audited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 302,465 $ 332,467
Investment securities 611,259 589,391
Accounts receivable - less allowance
for doubtful accounts of $2,000 and
$4,999, respectively 14,584 17,635
Inventories 46,895 49,956
Prepaid expenses 29,255 23,579
Prepaid income taxes 2,110 2,507
Total current assets 1,006,568 1,015,535
Property, plant and equipment -
at cost 948,928 969,211
Less accumulated depreciation 761,980 765,446
186,948 203,765
Other
Investment securities 99,000 99,000
Security deposit 1,700 1,700
Intangibles - 643
Total other assets 100,700 101,343
Total $ 1,294,216 $ 1,320,643
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities
Accounts payable and accrued expenses $ 141,307 $ 201,853
Customer deposits 7,799 18,259
Income taxes payable 1,301 257
Total current liabilities 150,407 220,369
Stockholders' equity
Common stock, $.10 par value, authorized
1,000,000 shares, issued 489,310 shares 48,931 48,931
Additional paid-in capital 1,118,880 1,118,880
Retained earnings 499,798 456,263
1,667,609 1,624,074
Less treasury stock - at cost
- 191,229 shares 523,800 523,800
Total stockholders' equity 1,143,809 1,100,274
Total $ 1,294,216 $ 1,320,643
</TABLE>
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<TABLE>
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three months ended Nine months ended
August 31, August 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Sales $ 252,527 $ 267,491 $1,116,006 $1,135,823
Cost of sales 154,549 172,937 544,684 562,865
Gross profit 97,978 94,554 571,322 572,958
Selling, general and
administrative
expenses 121,674 117,348 570,301 581,382
(23,696) (22,794) 1,021 (8,424)
Other income
(deductions)
Realized holding
gain (loss) (1,628) 15,492 3,653 27,488
Unrealized holding gain 836 2,152 241 -
Interest and dividends 11,883 11,137 33,719 32,577
Gain on sale of
equipment - - 10,200 250
11,091 28,781 47,813 60,315
Income (loss) before
provision for income
taxes and cumulative
effect of accounting
change (12,605) 5,987 48,834 51,891
Provision for
income taxes (1,009) (725) 5,299 949
Income (loss) before
cumulative effect of
accounting change (11,596) 6,712 43,535 50,942
Cumulative effect of
accounting change - - - 10,281
Net income (loss) (11,596) 6,712 43,535 61,223
Income (loss) per common
share:
Income (loss) before
cumulative effect of
accounting change $(.04) $ .02 $ .15 $ .17
Cumulative effect of
accounting change - - - .03
Net income (loss)
per common share $(.04) $ .02 $ .15 $ .20
Weighted average number
of common shares
outstanding 298,081 299,664 298,081 308,978
</TABLE>
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<TABLE>
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<CAPTION>
Nine months ended
August 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities
Net income $ 43,535 $ 61,223
Items not requiring the current use of
cash
Cumulative effect of accounting change - (10,281)
Gain on sale of equipment (10,200) (250)
Depreciation 26,223 20,700
Amortization of goodwill 643 770
Deferred compensation (7,331) (9,367)
Changes in items affecting operations
Investment in trading securities (23,974) (90,378)
Accounts receivable 3,051 42,577
Inventories 3,061 5,647
Prepaid expenses (5,676) (9,442)
Prepaid income taxes 397 (1,250)
Accounts payable and accrued expenses (53,215) 13,853
Customer deposits (10,460) (15,744)
Income taxes payable 1,044 (201)
Net cash provided (used) by
operating activities (32,902) 7,857
Cash flows from investing activities
Purchase of held-to-maturity securities - (124,991)
Maturity of held-to-maturity securities - 127,000
Amortization of bond premium 2,106 385
Proceeds from sale of equipment 10,200 250
Purchase of non-marketable security - (99,000)
Payment for purchase of equipment (9,406) (50,508)
Net cash provided (used) by
investing activities 2,900 (146,864)
Cash flows from financing activities
Acquisition of common stock for treasury - (44,988)
Net cash used by
financing activities - (44,988)
Net decrease in cash and
cash equivalents (30,002) (183,995)
Cash and cash equivalents - beginning 332,467 387,211
Cash and cash equivalents - end $ 302,465 $ 203,216
</TABLE>
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WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS ENDED AUGUST 31, 1996 AND 1995
Supplemental Cash Flows Information
Net cash provided by operating activities reflects cash payments
for income taxes as follows:
Nine months ended
August 31,
1996 1995
Income taxes paid $ 3,200 $ 2,400
During 1996 and 1995, the Company recovered, in lieu of cash,
investment securities with a value of $6,503 and $12,097,
respectively, to satisfy an accounts receivable.
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1996
(NOTE 1) - The accompanying consolidated financial statements
are prepared on the basis of generally accepted accounting principles.
In the opinion of the management of Walker International Industries,
Inc. and Subsidiaries, all adjustments are of a normal recurring
nature and have been reflected for a fair presentation of the
unaudited balance sheet as of August 31, 1996 and results of
operations and cash flows for the periods ended August 31, 1996 and
1995, respectively. The operating results for the periods are not
necessarily indicative of the results to be expected for the entire
year.
(NOTE 2) - On December 1, 1994, the Company adopted SFAS No.
115, "Accounting for Certain Investments in Debt and Equity
Securities." Under this statement, trading and available-for-sale
debt and equity securities are reported in the statement of income.
Held-to-maturity debt securities are reported at amortized cost. The
difference between cost and carrying value for trading securities
is reported in the statements of operations. The difference between
carrying value and cost for available-for-sale securities is carried
as a separate component of stockholders' equity.
(NOTE 3) - Included in short-term investment securities at
August 31, 1996, are the following:
Estimated Carrying
Description Cost Fair Value Amount
Held-to-Maturity
U S Government securities $ 510,702 $ 511,628 $ 510,702
Trading
Equity securities 100,316 100,557 100,557
$ 611,018 $ 612,185 $ 611,259
The change in net unrealized holding gain on trading securities
that has been included in earnings during the period amount to $241.
(NOTE 4) - An analysis of inventories is as follows:
August 31, November 30,
1996 1995
(Unaudited) (Audited)
Raw materials $ 23,087 $ 19,459
Work-in-process 3,656 8,559
Finished goods 20,152 21,938
$ 46,895 $ 49,956
(NOTE 5) - The provision for income taxes consists solely of
state and local taxes. The provision for income taxes has been reduced
by approximately $6,500 during the nine months ended August 31, 1996
and $10,300 during the nine months ended August 31, 1995 which
represents the benefit of the federal net operating loss
carryforward for which a valuation reserve had been previously
provided.
<PAGE>
WALKER INTERNATIONAL INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Financial Condition and Liquidity
The Company's liquidity (current assets minus current
liabilities) increased by $60,995 to $856,161 at August 31, 1996, as
compared to $795,166 at November 30, 1995. Cash used by operating
activities amounted to $32,902. This resulted primarily from a
decrease in accounts payable and accrued expenses of $53,215, an
increase in investment in trading securities of $23,974, and a
decrease in customer deposits of $10,460, offset in part by net income
of $43,535 and depreciation of $26,223.
The Company deems its present facilities and equipment to be
adequate for its immediate needs and it has no material commitments
for capital expenditures. The Company believes its present liquidity
is adequate for its current and long-term needs.
Results of Operations
Total sales for the nine months ended August 31, 1996 (the
"Current Period") decreased to $1,116,606 as compared to sales of
$1,135,823 in the nine months ended August 31, 1995. A sales volume
decrease in the Department Store subsidiary was offset in part by
volume increases at Kelly Color. Sales for the three months ended
August 31, 1996 (the "Current Quarter") decreased to $252,527 as
compared to $267,491 in the quarter ended August 31, 1995,
due to a decrease in Kelly Color sales volume.
In the Current Period, cost of sales as a percentage of sales
("COS") were 48.8%, slightly lower than the COS of 49.6% in the 1995
comparable period. In the Current Quarter, COS was 61.2% as compared
to 64.7% in the 1995 comparable period. These decreases were
primarily due to maintenance of labor costs and improved operating
efficiencies. Costs were higher in the Current Quarter as compared to
the Current Period due to the absence of more profitable seasonal
sales in the Department Store subsidiary that occur only in the fiscal
quarter ended February 28th. This trend occurred in the prior fiscal
year as well.
In the Current Period, selling, general and administrative
expenses as a percentage of sales were 51.1% as compared to 51.2% in
the 1995 comparable periods. In the Current Quarter, selling, general
and administrative expenses as a percentage of sales were 48.2% as
compared to 43.9% in the 1995 comparable quarter. This was due to
slightly higher fixed costs and reduced cost absorption resulting from
lower sales.
In the Current Period, the Company had net income after income
taxes and before cumulative effect of accounting change of $43,535 as
compared to $50,942 in the prior year's comparable period, primarily
due to sales volume decreases. In the Current Quarter, the
Company incurred a net loss of $11,596 as compared to a profit of
$6,712 in the 1995 comparable quarter, primarily for reasons already
mentioned. Provision for income taxes in the Current Period consists
of state and local taxes on Department Store earnings. The provision
for income taxes has been reduced by approximately $6,500 in the
Current Period and $10,300 in last year's comparable period which
represents the benefit of the federal net operating loss carryforward
for which a valuation reserve had been previously provided. In the
Current Period, earnings per share were $.15 after income taxes and
before cumulative effect of accounting change, as compared to $.17 in
the 1995 comparable Period. There was a loss per share of $.04
in the Current Quarter, as compared to a profit of $.02 in last year's
comparable quarter.
On December 1, 1994, the Company adopted FASB Statement No. 115
"Accounting for Certain Investments in Debt and Equity Securities."
Gross unrealized losses on held-to-maturity securities of $10,281 are
reflected as the cumulative effect of accounting change in the 1995
Period.
<PAGE>
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf of the undersigned thereunto duly
authorized.
Dated: October 10, 1996
WALKER INTERNATIONAL
INDUSTRIES, INC.
By:/s/ Peter Walker
Peter Walker
President
By:/s/ Richard Norris
Richard Norris
Vice President
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> AUG-31-1996
<CASH> 302465
<SECURITIES> 611259
<RECEIVABLES> 14584
<ALLOWANCES> (2000)
<INVENTORY> 46895
<CURRENT-ASSETS> 1006568
<PP&E> 948928
<DEPRECIATION> (761980)
<TOTAL-ASSETS> 1294216
<CURRENT-LIABILITIES> 150407
<BONDS> 0
<COMMON> 48931
0
0
<OTHER-SE> 1094878
<TOTAL-LIABILITY-AND-EQUITY> 1294216
<SALES> 1116006
<TOTAL-REVENUES> 1163819
<CGS> 544684
<TOTAL-COSTS> 1114985
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 48834
<INCOME-TAX> 5299
<INCOME-CONTINUING> 43535
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43535
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
