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
May 31, 1997 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 July 11, 1997 was 274,111.
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<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
May 31, November 30,
1997 1996
(Unaudited) (Audited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 218,526 $ 286,188
Investment securities 223,300 166,787
Accounts receivable - less allowance for doubtful
accounts of $2,000 14,232 11,304
Inventories 49,304 59,118
Prepaid expenses 20,495 22,154
Prepaid income taxes 3,212 843
Total current assets 529,069 546,394
Property, plant and equipment - at cost 956,226 949,718
Less accumulated depreciation 786,615 770,800
169,611 178,918
Other assets
Investment securities 517,362 516,483
Other investments - at cost 99,000 99,000
Other assets 1,700 1,700
Total other assets 618,062 617,183
Total $1,316,742 $1,342,495
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities
Accounts payable and accrued expenses $ 118,795 $ 167,016
Customer deposits 4,337 15,286
Income taxes payable 8,264 3,725
Total current liabilities 131,396 186,027
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 593,535 531,789
1,761,346 1,699,600
Less treasury stock - at cost - 215,199 shares and
200,599 shares, respectively 576,000 543,132
Total stockholders' equity 1,185,346 1,156,468
Total $1,316,742 $1,342,495
</TABLE>
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<TABLE>
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three months ended Six months ended
May 31, May 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Sales and other income
Net sales $ 254,892 $ 284,869 $ 796,687 $ 863,479
Investment income 37,208 13,213 63,498 26,522
Gain on sale of equipment - - - 10,200
292,100 298,082 860,185 900,201
Costs and expenses
Cost of sales 175,090 183,024 372,122 390,135
Selling, general and
administrative 119,107 120,361 417,701 453,197
Recovery of bad debts (986) (4,570) (2,637) (4,570)
293,211 298,815 787,186 838,762
Income (loss) before
provision for income
taxes (1,111) (733) 72,999 61,439
Provision for income taxes (846) (601) 11,253 6,308
Net income (loss)$ (265) $ (132) $ 61,746 $ 55,131
Earnings per common share $ - $ - $ .22 $ .19
Weighted average number of common
shares outstanding 274,972 298,081 278,398 298,081
</TABLE>
<PAGE>
<TABLE>
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<CAPTION>
Six months ended
May 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities
Net income $ 61,746 $ 55,131
Items not requiring the current use of cash
Gain on sale of equipment - (10,200)
Depreciation 15,815 17,482
Amortization of goodwill - 513
Unrealized (gain) loss on trading securities(10,080) 595
Deferred compensation - (7,331)
Recovery of bad debts (2,637) (4,571)
Changes in items affecting operations
Investment in trading securities (43,796) (41,532)
Accounts receivable (2,928) 10,529
Inventories 9,814 (487)
Prepaid expenses 1,659 (1,565)
Prepaid income taxes (2,369) 577
Accounts payable and accrued expenses (48,221) (50,791)
Customer deposits (10,949) (11,017)
Income taxes payable 4,539 3,815
Net cash used by operating activities (27,407) (38,852)
Cash flows from investing activities
Amortization of bond (discount) premium (879) 1,404
Proceeds from sale of equipment - 10,200
Payment for purchase of equipment (6,508) (9,405)
Net cash provided (used) by investing
activities (7,387) 2,199
Cash flows from financing activities
Acquisition of common stock for treasury (32,868) -
Net cash used by financing activities (32,868) -
Net decrease in cash and cash
equivalents (67,662) (36,653)
Cash and cash equivalents - beginning 286,188 332,467
Cash and cash equivalents - end $ 218,526 $ 295,814
</TABLE>
Supplemental Cash Flows Information
Cash payments for income taxes $ 9,083 $ 1,995
Supplemental Schedule of Noncash Operating Activity
During 1997 and 1996, the Company received, in lieu of cash, investment
securities with a value of $2,637 and $4,571, respectively, to satisfy an
accounts receivable.
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1997
(NOTE A) - The accompanying consolidated financial statements are prepared
on the basis of generally accepted accounting principles. In the opinion of
the management of Walker International Industries, Inc. and Subsidiaries, all
adjustments are of a normal recurring nature and have been reflected for a
fair presentation of the unaudited balance sheet as of May 31, 1997, and
results of operations and cash flows for the quarters ended May 31, 1997 and
1996. Certain amounts from the previous year have been reclassified to
conform with the 1997 presentation. The operating results for the periods are
not necessarily indicative of the results to be expected for the entire year.
(NOTE B) - The following is a summary of held-to-maturity securities, all of
which mature at November 30, 1998:
Gross unrealized Estimated
Description Cost Gains Losses Fair Value
Held-to-Maturity
U S Government securities$ 517,362 $ - $ 4,220 $ 513,142
Included in short-term investment securities at May 31, 1997, are the
following:
Estimated Carrying
Description Cost Fair Value Amount
Trading equity securities $ 209,424 $ 223,300 $ 223,300
The change in net unrealized holding loss on trading securities that has
been included in earnings during the period amount to a gain of $10,080 (1997)
and a loss of $595 (1996).
(NOTE C) - An analysis of inventories is as follows:
May 31, November 30,
1997 1996
Raw materials $ 21,430 $ 30,408
Work-in-process 2,033 7,166
Finished goods 25,841 21,544
$ 49,304 $ 59,118
(NOTE D) - The provision for income taxes consists solely of state and local
taxes. The provision for income taxes has been reduced by approximately
$10,500 during the six months ended May 31, 1997, and $8,800 during the six
months ended May 31, 1996, 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS
Financial Condition and Liquidity
The Company's liquidity (current assets minus current liabilities)
increased by $37,306 to $397,673 at May 31, 1997, as compared to $360,367 at
November 30, 1996. Cash used by operating activities amounted to $27,407. This
resulted primarily from an increase in investment in trading securities of
$43,796 and a decrease in accounts payable and accrued expenses of $48,221,
offset in part by net income of $61,746.
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 six months ended May 31, 1997 (the "Current Period")
decreased to $796,687 as compared to sales of $863,479 in the six months ended
May 31, 1996 (the "1996 Period"), as a result of sales volume decreases in the
Department Store and Kelly Color subsidiaries. Sales for the three months
ended May 31, 1997 (the "Current Quarter") decreased to $254,892 as compared
to $284,869 in the quarter ended May 31, 1996 (the "1996 Quarter"), due to a
decrease in Kelly Color sales volume.
In the Current Period, cost of sales as a percentage of sales ("COS")
were 46.7%, slightly higher than the COS of 45.2% in the 1996 Period. In the
Current Quarter, COS was 68.7% as compared to 64.2% in the 1996 Quarter. This
increase was primarily due to reduced absorption of labor costs as a result of
decreased sales. Cost percentages 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 52.4% as compared to 52.5% in the 1996 Period. In the
Current Quarter, selling, general and administrative expenses as a percentage
of sales were 46.7% as compared to 42.3% in the 1996 Quarter. This was due
primarily to reduced cost absorption resulting from lower sales. There was
investment income of $63,498 in the Current Period and $37,208 in the Current
Quarter, principally resulting from short-term trading activities directed by
company personnel. The Company has formed a subsidiary for the purpose of
privately offering investment management services to one or more funds
utilizing the skills and practices developed by the Company in its own
trading.
In the Current Period, the Company had net income before income taxes of
$72,999 as compared to $61,439 in the 1996 Period, primarily due to increases
in investment income which were offset in part by reduced profits resulting
from lower sales. In the Current Quarter, the Company incurred a net loss
before income taxes of $1,111 as compared to a loss of $733 in the 1996
Quarter. Provision for income taxes in the Current Period consists of state
and local taxes. The provision for income taxes has been reduced by
approximately $10,500 in the Current Period and $8,800 in the 1996 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 $.22 as compared to $.19 in the 1996
comparable Period.
<PAGE>
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K.
A. EXHIBITS
27.1 Financial Data Schedule
B. 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: July 14, 1997
WALKER INTERNATIONAL
INDUSTRIES, INC.
By:/s/ Peter Walker
Peter Walker
President
By:/s/ Richard Norris
Richard Norris
Vice President
(Principal Financial and
Accounting Officer)
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> MAY-31-1997
<CASH> 218526
<SECURITIES> 223300
<RECEIVABLES> 16232
<ALLOWANCES> (2000)
<INVENTORY> 49304
<CURRENT-ASSETS> 529069
<PP&E> 956226
<DEPRECIATION> (786615)
<TOTAL-ASSETS> 1316742
<CURRENT-LIABILITIES> 131396
<BONDS> 0
<COMMON> 48931
0
0
<OTHER-SE> 1136415
<TOTAL-LIABILITY-AND-EQUITY> 1316742
<SALES> 796687
<TOTAL-REVENUES> 860185
<CGS> 372122
<TOTAL-COSTS> 787186
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 72999
<INCOME-TAX> 11253
<INCOME-CONTINUING> 61746
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61746
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
