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 August 31, 1999
[ ] 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 October 13, 1999 was 251,043.
Transitional Small Business Disclosure Format (check one):
Yes No X
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<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
August 31, November 30,
1999 1998
(Unaudited) (Audited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 454,811 $ 389,846
Trading securities - at market 10,742 179,001
Accounts receivable - less allowance for
doubtful accounts of $1,000 12,127 23,030
Inventories 58,568 64,400
Prepaid expenses 28,539 17,478
Prepaid income taxes 6,149 7,349
U.S. Government securities 545,856 79,264
Total current assets 1,116,792 760,368
Property, plant and equipment - at cost 999,245 978,825
Less accumulated depreciation 820,878 823,908
178,367 154,917
Other assets
U.S. Government securities - 470,061
Available-for-sale securities 18,000 18,000
Security deposit 1,700 1,700
Total other assets 19,700 489,761
Total $1,314,859 $1,405,046
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities
Accounts payable and accrued expenses $ 106,743 $ 145,364
Customer deposits 5,071 22,366
Income taxes payable - 6
Total current liabilities 111,814 167,736
Stockholders' equity
Common stock, $.10 par value, authorized
1,000,000 shares, issued 477,810 shares 47,781 47,781
Additional paid-in capital 1,082,843 1,082,843
Retained earnings 665,700 675,367
Unrealized gain on marketable equity
securities 18,000 18,000
1,814,324 1,823,991
Less treasury stock - at cost - 226,767 shares
and 218,701 shares, respectively 611,279 586,681
Total stockholders' equity 1,203,045 1,237,310
Total $1,314,859 $1,405,046
</TABLE>
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<TABLE>
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WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three months ended Nine months ended
August 31, August 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales $ 277,569 $ 277,200 $ 796,621 $1,099,480
Costs and expenses
Cost of sales 186,785 156,330 508,848 533,136
Selling, general and
administrative 115,898 124,349 339,068 574,822
Recovery of bad debts - - (1,472) (1,222)
302,683 280,679 846,444 1,106,736
Operating loss (25,114) (3,479) (49,823) (7,256)
Other income
Investment income 10,244 6,540 37,523 92,814
Gain on sale of assets - - 8,256 -
10,244 6,540 45,779 92,814
Income (loss) before
provision for
income taxes (14,870) 3,061 (4,044) 85,558
Provision for income taxes 363 2,318 5,623 9,471
Net income (loss)$ (15,233) $ 743 $ (9,667)$ 76,087
Earnings per common share $ (.06) $ .00 $ (.04) $ .28
Weighted average number of common
shares outstanding 251,043 263,495 252,161 269,512
</TABLE>
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<TABLE>
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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,
1999 1998
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ (9,667) $ 76,087
Items not requiring the current use of cash
Depreciation 26,679 26,463
Amortization of bond premium and discount 3,469 (1,389)
Gain on sale of available-for-sale securities - (32,620 )
Recovery of bad debts (1,472) (1,222)
Gain on sale of assets (8,256) -
Changes in items affecting operations
Investment in trading securities 169,731 147,964
Accounts receivable 10,903 7,533
Inventories 5,832 (590)
Prepaid expenses (11,061) (623)
Prepaid income taxes 1,200 (3,310)
Accounts payable and accrued expenses (38,621) (55,643)
Customer deposits (17,295) (8,715)
Income taxes payable (6) (8,213)
Net cash provided by operating
activities 131,436 145,722
Cash flows from investing activities
Proceeds from sale of assets 12,500 -
Purchase of U.S. Government securities - (79,407)
Proceeds from sale of available-for-sale
securities - 131,620
Payments for purchase of equipment (54,373) (36,406)
Net cash provided (used) by investing
activities (41,873) 15,807
Cash flows from financing activities
Acquisition of common stock for treasury (24,598) (47,869)
Net cash used by financing activities (24,598) (47,869)
Net increase in cash and cash
equivalents 64,965 113,660
Cash and cash equivalents - beginning 389,846 349,568
Cash and cash equivalents - end $ 454,811 $ 463,228
Supplemental Cash Flows Information
Cash payments for income taxes $ 4,429 $ 19,962
</TABLE>
Supplemental Schedule of Noncash Operating Activity
During 1999 and 1998, the Company received, in lieu of cash, investment
securities with a value of $1,472 and $1,222, respectively, to satisfy a
previously written off accounts receivable.
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1999
(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 August 31, 1999, and
results of operations and cash flows for the periods ended August 31, 1999 and
1998. The operating results for the periods are not necessarily indicative of
the results to be expected for the entire year.
(NOTE B) - INVESTMENT SECURITIES
Included in held-to-maturity securities are the following:
Gross unrealized Estimated
Description Cost Gains Losses Fair Value
U.S. Government securities-
maturing October 31,
1999 $ 79,048 $ 35 $ - $ 79,013
U.S. Government securities-
maturing January 2000 466,808 - 1,415 465,393
$ 545,856 $ 35 $ 1,415 $ 544,406
Included in available-for-sale securities are the following:
Carrying
Description Cost Fair value Amount
Charter Pacific Bank Warrants $ - $ 18,000 $ 18,000
Included in trading securities are the following:
Estimated Carrying
Description Cost Fair value Amount
Equity securities $ 12,162 $ 10,742 $ 10,742
The change in net unrealized holding loss on trading securities that has
been included in earnings during the period amount to $(2,716) (1999) and
$(4,485) (1998).
<PAGE>
<PAGE>
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1999
(NOTE C) - An analysis of inventories is as follows:
August 31, November 30,
1999 1998
(Unaudited) (Audited)
Raw materials $ 32,505 $ 27,345
Work-in-process 2,377 10,484
Finished goods 23,686 26,571
$ 58,568 $ 64,400
(NOTE D) - The provision for income taxes consists solely of state and local
taxes. The provision for income taxes has been reduced by approximately
$17,500 during the nine months ended August 31, 1998, which represents the
benefit of the federal net operating loss carryforward for which a valuation
reserve had been previously provided.
<PAGE>
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 $412,346 to $1,004,978 at August 31, 1999, as compared to $592,632 at
November 30, 1998. This increase is primarily the result of the inclusion in
Current Assets of U.S. Government Securities with a carrying value of $466,808
maturing during the ensuing fiscal year which were previously reflected in
long-term assets. Net cash provided by operating activities amounted to
$131,436. This resulted primarily from a decrease in investment in trading
securities of $169,731, depreciation (a non-cash item) of $26,679, and a
reduction in accounts receivable of $10,903, offset in part by a decrease in
accounts payable and accrued expenses of $38,621, a decrease in customer
deposits of $17,295, an increase in prepaid expenses of $11,061, and a net
loss of $9,667. The Company purchased equipment in the amount of $54,373 and
common stock for its treasury in the amount of $24,598.
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, 1999 (the "Current Period")
decreased to $796,621 as compared to sales of $1,099,480 in the nine months
ended August 31, 1998 (the "1998 Period"). This decrease resulted primarily
from the discontinuance of operations by the Department Store Photography
division (the "Department Stores"), which was offset somewhat by a sales
volume increase at Kelly Color. Sales for the three months ended August 31,
1999 (the "Current Quarter") increased slightly to $277,569 as compared to
$277,200 in the quarter ended August 31, 1998 (the "1998 Quarter").
In the Current Period, cost of sales as a percentage of sales ("COS") were
63.9%, as compared to COS of 48.5% in the 1998 Period, primarily due to the
curtailed operations of the Department Stores. Since Kelly Color is primarily
a manufacturing company, its COS as a percentage of sales is considerably
higher than those of the Department Stores, primarily a retail company. In the
Current Quarter, COS was 67.3% as compared to 56.4% in the 1998 Quarter. This
increase was primarily due to increased labor costs, inflationary factors, and
reduced absorption of rising costs resulting from virtually unchanged sales at
Kelly Color.
In the Current Period, selling, general and administrative expenses net of
recovery of bad debts were 42.4% as a percentage of sales as compared to 52.2%
in the 1998 Period, due primarily to the curtailed operations of the
Department Stores. In the Current Quarter, selling, general and administrative
expenses net of recovery of bad debts were 41.8% as a percentage of sales as
compared to 44.9% in the 1998 Quarter, due primarily to cost-control measures
instituted by the Company at the beginning of 1999 that included voluntary
reductions in officers' salaries.
The Company earned investment income of $37,523 in the Current Period and
$10,244 in the Current Quarter, as compared to $92,814 and $6,540 in the 1998
Period and 1998 Quarter, respectively. Included in investment income during
the 1998 Period was a gain of $32,620 realized on the sale of a security
previously classified as available-for-sale.
In the Current Period, the Company had net losses before provision for income
taxes of $4,044 as compared to net income of $85,558 in the 1998 Period,
primarily due to the curtailed operations of the Department Stores and a
decrease in investment income. In the Current Quarter, the Company had net
losses before provision for income taxes of $14,870 as compared to net income
of $3,061 in the 1998 Quarter. This decrease was due primarily to cost
increases at Kelly Color as previously described. Provision for income taxes
in the Current Period consists of state and local taxes on subsidiary
earnings. The provision for income taxes has been reduced by approximately
$17,500 in the 1998 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, loss per share was $(.04) as compared to
earnings of $.28 in the 1998 Period. In the Current Quarter, loss per share
was $(.06) as compared to earnings of $.00 in the 1998 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: October 13, 1999
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> 9-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-END> AUG-31-1999
<CASH> 454811
<SECURITIES> 556598
<RECEIVABLES> 13127
<ALLOWANCES> (1000)
<INVENTORY> 58568
<CURRENT-ASSETS> 1116792
<PP&E> 999245
<DEPRECIATION> (820878)
<TOTAL-ASSETS> 1314859
<CURRENT-LIABILITIES> 111814
<BONDS> 0
<COMMON> 47781
0
0
<OTHER-SE> 1155264
<TOTAL-LIABILITY-AND-EQUITY> 1314859
<SALES> 796621
<TOTAL-REVENUES> 842400
<CGS> 508848
<TOTAL-COSTS> 846444
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4044)
<INCOME-TAX> 5623
<INCOME-CONTINUING> (9667)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9667)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
