U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
Commission File No. 0-5418
WALKER INTERNATIONAL INDUSTRIES, INC.
(Exact name of Small Business Issuer 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
Issuer's telephone number, including area code
N/A
(Former name, former address and former fiscal year
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act 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 April 13, 1998 was 270,611.
Transitional Small Business Disclosure Format (check one):
Yes No X
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
February 28, November 30,
1998 1997
(Unaudited) (Audited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 456,126 $ 349,568
Trading securities - at market 3,000 146,742
Accounts receivable - less allowance for doubtful
accounts of $1,000 33,849 17,097
Inventories 56,354 61,920
Prepaid expenses 15,955 21,861
Prepaid income taxes 2,294 775
U.S. Government securities 518,540 518,054
Total current assets 1,086,118 1,116,017
Property, plant and equipment - at cost 988,424 956,226
Less accumulated depreciation 811,147 802,431
177,277 153,795
Available-for-sale securities - at market 121,500 121,500
Security deposit 1,700 1,700
Total $1,386,595 $1,393,012
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities
Accounts payable and accrued expenses $ 111,457 $ 155,685
Customer deposits 8,144 12,751
Income taxes payable 3,748 8,681
Total current liabilities 123,349 177,117
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 648,935 601,584
Unrealized gain on marketable equity
securities 22,500 22,500
1,839,246 1,791,895
Less treasury stock - at cost -
215,199 shares 576,000 576,000
Total stockholders' equity 1,263,246 1,215,895
Total $1,386,595 $1,393,012
</TABLE>
<PAGE>
<TABLE> <PAGE>
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three months ended
February 28,
1998 1997
<S> <C> <C>
Net sales $ 552,406 $ 541,795
Costs and expenses
Cost of sales 201,382 197,032
Selling, general and administrative 334,115 298,594
Recovery of bad debts - (1,651)
535,497 493,975
Operating income 16,909 47,820
Investment income 37,218 26,290
Income before provision for
income taxes 54,127 74,110
Provision for income taxes 6,776 12,099
Net income $ 47,351 $ 62,011
Earnings per common share $ .17 $ .22
Weighted average number of common shares
outstanding 274,111 281,900
</TABLE>
<PAGE>
TABLE
<PAGE>
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<CAPTION>
Three months ended
February 28,
1998 1997
<S> <C> <C>
Cash flows from operating activities
Net income $ 47,351 $ 62,011
Items not requiring the current use of cash
Depreciation 8,716 7,856
Amortization of bond premium and discount (486) (440)
Recoveries of bad debts - (1,651)
Changes in items affecting operations
Investment in trading securities 143,742 8,009
Accounts receivable (16,752) (1,290)
Inventories 5,566 6,030
Prepaid expenses 5,906 2,088
Prepaid income taxes (1,519) (189)
Accounts payable and accrued expenses (44,228) (63,288)
Customer deposits (4,607) (11,921)
Income taxes payable (4,933) 6,287
Net cash provided by operating 138,756 13,502
activities
Cash flows from investing activities
Payments for purchase of equipment (32,198) (4,438)
Net cash used by investing activities (32,198) (4,438)
Cash flows from financing activities
Acquisition of common stock for treasury - (30,150)
Net cash used by financing activities - (30,150)
Net increase (decrease) in cash
and cash equivalents 106,558 (21,086)
Cash and cash equivalents - beginning 349,568 286,188
Cash and cash equivalents - end $ 456,126 $ 265,102
Supplemental Cash Flow Information
Cash payments for income taxes $ 13,228 $ 6,001
</TABLE>
Supplemental Schedule of Noncash Operating Activity
During the quarter ended February 28, 1997, the Company received, in lieu
of cash, investment securities with a value of $1,651 to satisfy a previously
written off accounts receivable.
<PAGE>
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1998
(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 February 28, 1998, and
results of operations and cash flows for the quarters ended February 28, 1998
and 1997. The operating results for the periods are not necessarily
indicative of the results to be expected for the entire year.
(NOTE B) - INVESTMENT SECURITIES
The following is a summary of held-to-maturity securities:
Gross Unrealized Estimated
Cost Gains Losses Fair Value
U.S. Government
Securities - maturing
November 30, 1998 $ 518,540 $ 306 $ - $ 518,846
Included in available-for sale securities are the following:
Estimated Carrying
Description Cost Fair Value Amount
Charter Pacific Bank
Common Stock $ 99,000 $ 121,500 $ 121,500
The change in net unrealized holding gain on trading securities that has
been included in earnings during the period amount to a loss of $4,317 (1998)
and a loss of $2,373 (1997).
(NOTE C) - An analysis of inventories is as follows:
February 28, November 30,
1998 1997
Raw materials $ 25,134 $ 27,674
Work-in-process 3,818 5,977
Finished goods 27,402 28,269
$ 56,354 $ 61,920
(NOTE D) - The provision for income taxes consists solely of state and local
taxes.
<PAGE>
WALKER INTERNATIONAL INDUSTRIES, INC.
ITEM 2. 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 $23,869 to $962,769 at February 28, 1998, as compared to $938,900 at
November 30, 1997. Cash provided by operating activities amounted to $138,756,
resulting primarily from a decrease in the value of trading securities of
$143,742 and net income of $47,351, offset primarily by decreases in accounts
payable and accrued expenses of $44,228, and increases in accounts receivable
of $16,752. The Company purchased equipment in the amount of $32,198.
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. The Company carries no long-term debt.
Results of Operations
Total sales for the quarter ended February 28, 1998 (the "1998 Quarter") were
$552,406, representing an increase in sales of $10,611 compared to the
Company's total sales of $541,795 in the quarter ended February 28, 1997 (the
"1997 Quarter"). Increased sales volume in the Company's Kelly Color
subsidiary was offset in part by slight decreases in sales volume in the
Department Store Photography subsidiary.
Cost of sales as a percentage of sales were 36.5% in the 1998 Quarter as
compared to 36.4% in the 1997 Quarter. Selling, general and administrative
expenses net of recovery of bad debts increased to 60.5% of sales in the 1998
Quarter as compared to 54.8% in the 1997 Quarter primarily due to increases in
payroll and other expenses in the Department Store Photography subsidiary.
The Company showed net income of $47,351 in the 1998 Quarter as compared to
$62,011 in the 1997 Quarter. Reduced profitability was primarily due to
increased selling, general and administrative expenses, which were offset in
part by increases in investment income. Provision for income taxes in the 1998
Quarter consists of state and local taxes. Income per share was $.17 in the
1998 Quarter, as compared to $.22 in the 1997 Quarter.
<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
In accordance with the requirements of the Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: April 13, 1998
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> 3-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> FEB-28-1998
<CASH> 456126
<SECURITIES> 3000
<RECEIVABLES> 34849
<ALLOWANCES> (1000)
<INVENTORY> 56354
<CURRENT-ASSETS> 1086118
<PP&E> 988424
<DEPRECIATION> (811147)
<TOTAL-ASSETS> 1386595
<CURRENT-LIABILITIES> 123349
<BONDS> 0
<COMMON> 48931
0
0
<OTHER-SE> 1214315
<TOTAL-LIABILITY-AND-EQUITY> 1386595
<SALES> 552406
<TOTAL-REVENUES> 589624
<CGS> 201382
<TOTAL-COSTS> 535497
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 54127
<INCOME-TAX> 6776
<INCOME-CONTINUING> 47351
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47351
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
