<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the Fiscal Year ended
November 30, 1999.
Commission File No. 0-5418
WALKER INTERNATIONAL INDUSTRIES, INC.
(Name of Small Business Issuer in its Charter)
Delaware 13-2637172
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4 Ken-Anthony Plaza, So. Lake Boulevard, Mahopac, New York 10541
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number: (914) 628-9404
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value, $.10 per share
(Title of Class)
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 past
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.
X Yes No
Check if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained herein, and will not be contained
herein, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-KSB or any amendment to this Form 10-KSB [X]
Issuer's revenues for the fiscal year ended November 30, 1999
were $1,117,305.
The aggregate market value of the Registrant's Common Stock held
by non-affiliates of the Registrant as of February 18, 2000 was
approximately $363,628. On such date, the average of the closing
bid and asked prices of the Common Stock, as quoted by the
National Association of Securities Dealers, Inc. on its OTC
Electronic Bulletin Board was $3.125.
The Registrant had 243,771 shares of Common Stock outstanding as
of February 18, 2000.
Transitional Small Business Disclosure Format (check one):
Yes_____ No X
<PAGE>
Item 1. Description of Business
General
Walker International Industries, Inc. (the "Registrant" or
the "Company") was organized under the laws of the State of
Delaware under the name Walker Color, Inc. on September 29, 1967.
During the fiscal year ended November 30, 1999, the Company
engaged in film processing through its subsidiary Kelly Color
Laboratories, Inc. based in North Carolina. The Kelly Color
division processes photographs, generally for professional
photographers, principally through mail orders.
The Company has historically had a license with Macy's
department store, in New York City, to take portraits of children
with Santa Claus during the Christmas season. On June 9, 1998,
the Company was advised by Macy's Department Store that it would
not continue to utilize the services of the Company's Department
Store division (the "Division"). Since the Macy's license constituted
substantially all of the business of the Division, the Division did not
operate in fiscal 1999.
Marketing
Marketing for the Company's photography processing work is
done through advertising in trade journals and direct
solicitation of photographers. The Company markets its
photography processing services to photographers throughout the
United States. However, due to the location of its Kelly Color
division in North Carolina, the film processing business, in
general, is concentrated in the southeastern portion of the
United States.
Sources of Raw Material
The Company procures a substantial portion of its film,
photographic paper and laboratory equipment and chemicals from
the Eastman Kodak Company. The Company has no contractual
relationship with the Eastman Kodak Company to continue to supply
such materials. It considers its relationship with that company
to be satisfactory and believes its present sources of supplies
are adequate to meet its needs for the foreseeable future. The
Company believes that such supplies are available from
alternative sources at comparable prices.
Macy's License
On June 9, 1998, the Company was advised by Macy s Department
Store that it would not continue to utilize the services of the
Company s Department Store Photography division. This activity
constituted substantially all of the Division s business. Based on
Fiscal 1998 results, the Company estimates its net profit was adversely
affected by approximately $60,000 in 1999.
Customers
For the fiscal year ended November 30, 1999, there was no
one customer of the Company which accounted for more than 10% of
the Company's total photography business or upon whom the Company
is dependent for material portions of its sales, revenues or
earnings.
Competitive Conditions
The Company's photography business is highly competitive.
There are a large number of professional photographic
laboratories offering services similar to those offered by the
Company in the areas where the Company carries on its photography
business.
Employees
As of February 18, 1999, the Company employed approximately
20 persons.
Inactive Subsidiary
During 1997, the Company organized a subsidiary in Delaware
named Walker Capital Management Corporation with the expectation that
the subsidiary would organize a private fund and render investment
advisory services to the fund. In that regard, the subsidiary
engaged the services of an individual and agreed to issue options
to purchase 50,000 shares of the Company's common stock to such
person at the then current market for such stock. The Company
decided not to proceed with the foregoing venture and did not issue
the options described above. The Company dissolved Walker Capital
Management Corporation in February, 1999.
Item 2. Description of Property
The Company's executive offices are located at 4 Ken-Anthony
Plaza, South Lake Boulevard, Mahopac, New York 10541. These
offices contain approximately 650 square feet and are leased by
the Company from an unaffiliated third party for a monthly rental
of $1,500. The lease expires in May 2001.
One of the Company's subsidiaries, Kelly Color Laboratories,
Inc., owns the land and the building located at 513 East Union
Street, Morganton, North Carolina. The building contains
approximately 15,000 square feet of space, housing the
subsidiary's offices, photographic laboratory, shipping and
storage areas. This property is not subject to any mortgage or
other encumbrance.
The Company believes that its facilities are adequate for
the foreseeable future.
Item 3. Legal Proceedings
The Company is not involved in any legal proceeding which
may be deemed to be material to the financial condition of the
Company.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for Common Equity and Related Stockholder
Matters
(a) The Company's Common Stock is traded in the
over-the-counter market and is quoted through the OTC Electronic
Bulletin Board, maintained by the National Association of
Securities Dealers, Inc., under the symbol WINT. The following
table sets forth the high and low bid quotations for the
Company's Common Stock for each fiscal quarter during the last
two years:
1999 High Bid Low Bid
1st Fiscal Quarter $3.25 $3.00
2nd Fiscal Quarter $3.25 $3.00
3rd Fiscal Quarter $3.00 $2.50
4th Fiscal Quarter $2.75 $2.50
1998 High Bid Low Bid
1st Fiscal Quarter $3.00 $2.75
2nd Fiscal Quarter $3.00 $2.75
3rd Fiscal Quarter $3.00 $2.875
4th Fiscal Quarter $3.00 $3.00
The above quotations represent prices between dealers and
do not include retail markups, markdowns or commissions, nor do
they represent actual transactions.
(b) As of February 18, 2000, there were 219 record holders
of the Company's Common Stock.
(c) During the two fiscal years ended November 30, 1999 and
November 30, 1998, the Company did not declare or pay any cash
dividends to its shareholders. The Company is not a party to any
loan agreement or other document which places restrictions on the
payment of cash dividends by the Company. Unless corporate
earnings are sufficient to justify the payment of cash dividends,
the Company does not anticipate paying any cash dividends in the
foreseeable future.
Item 6. Management's Discussion and Analysis or Plan of
Operation
Financial Condition and Liquidity
The Company's liquidity (current assets minus current liabilities)
increased by $437,803 to $1,030,435 at November 30, 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 $464,965 maturing during the ensuing fiscal year which were
previously reflected in long-term assets.
Cash provided by operating activities amounted to $179,644. This resulted
primarily from a decrease in investment in trading securities of $179,322,
depreciation (a non-cash item) of $36,783, and net income of $17,780, offset
in part by a decrease in accounts payable and accrued expenses of $32,315, and
an increase in inventories of 12,594. The Company purchased equipment in the
amount of $66,467 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
Net sales for the year ended November 30, 1999 ("Fiscal 1999") were
$1,117,305 representing a decrease of $292,446 from sales in the comparable
period in 1998 ("Fiscal 1998"). 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.
In Fiscal 1999, cost of sales as a percentage of sales ("COS") were
63.4%, as compared to COS of 50.7% in Fiscal 1998, 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 Fiscal 1999, selling, general and administrative expenses net of recovery
of bad debts were 41.6% as a percentage of sales as compared to 51.0% in
Fiscal 1998, due primarily to the curtailed operations of the
Department Stores.
The Company earned investment income of $74,699 in Fiscal 1999 as
compared to $109,397 in Fiscal 1998. Included in investment income during
Fiscal 1998 was a gain of $32,620 realized on the sale of a security
previously classified as available-for-sale.
In Fiscal 1999, the Company had income before provision for income taxes
of $26,518 as compared to $84,764 in Fiscal 1998, primarily due to the
curtailed operations of the Department Stores and a decrease in investment
income. Provision for income taxes in Fiscal 1999 and Fiscal 1998 consists of
state and local taxes on subsidiary earnings. The provision for income taxes
has been reduced by $8,383 in Fiscal 1999 and $27,841 in Fiscal 1998, which
represents the benefit of the federal net operating loss carryforward for
which a valuation reserve had been previously provided. In Fiscal 1999, net
income per share was $.07 compared to $.28 in Fiscal 1998.
Item 7. Financial Statements
The financial information required by this Item 7 begins on
page F-1 of this Report, following Part III hereof.
Item 8. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
The Company has not changed its accountants within the
twenty-four month period prior to November 30, 1999.
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange
Act
The Directors and executive officers of the Company are as
follows:
Positions and Has served as
Offices Director
Name Age with Registrant Continuously Since
Peter Walker 53 President, CEO 1973
and Chairman
Richard Norris 53 Vice-President, 1981
Secretary, Treasurer
and a Director
Charles Snow 67 Director 1976
All of the foregoing persons were elected as Directors for
a term of one year, or until their successors are duly elected
and qualified. There are no arrangements or understandings
between any Director and any other person(s) pursuant to which a
Director was selected as a Director.
The foregoing Officers are elected for terms of one year,
or until their successors are duly elected and qualified or until
terminated by action of the Board of Directors.
There are no relationships by blood, marriage, or adoption
(not more remote than first cousin) between any Director or
Executive Officer of the Company.
Business Experience
Peter Walker, President, Chief Executive Officer and
Chairman, assumed his position as President in 1984 and as
Chairman in 1987. Prior to 1984 and beginning in 1977, Mr.
Walker was Executive Vice-President, Secretary and a Director of
the Company. Previously, Mr. Walker was Vice-President of the
Company. Mr. Walker is responsible for acquisitions and
operations. For more than five years previously, Mr. Walker had
principal duties in retail sales management.
Richard Norris has been a Vice-President of the Company
since 1983, Treasurer of the Company since 1977 and Secretary
since 1984. Prior thereto he was employed in the Company's
financial department for more than 5 years as Assistant
Treasurer, Controller and Assistant Controller.
Charles Snow, a principal of the law firm of Snow Becker
Krauss P.C., general counsel to the Company, has been engaged in
the practice of law for more than 30 years.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's Officers, Directors and persons who own
more than ten percent of a registered class of the Company's
equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. These
reporting persons are required by regulation to furnish the
Company with copies of all Section 16(a) forms they file. Based
solely on the Company's copies of such forms received or written
representations from certain reporting persons that no Form 5's
were required for those persons, the Company believes that,
during the time period from December 1, 1998 through November 30,
1999, all filing requirements applicable to its officers,
directors and greater-than-ten-percent beneficial owners were
complied with.
Item 10. Executive Compensation
Summary Compensation Table
The following table sets forth all compensation awarded to,
earned by, or paid for all services rendered to the Company, a
small business issuer, during the fiscal years ended November 30,
1999, 1998 and 1997, by the Company's Chief Executive Officer,
who was the Company's only executive officer whose total
compensation exceeded $100,000 in those years.
Annual Compensation
Name and
Principal Position Year Salary($) Bonus($)
Peter Walker, Chief 1999 $100,000 $10,000
Executive Officer and 1998 110,000 10,000
Director 1997 110,000 10,000
The Company did not grant any stock options, nor were any
options exercised, during the fiscal year ended November 30,
1999. The Company has no long-term incentive plan awards.
Directors Fees
Directors currently receive no cash compensation for
serving on the Board of Directors other than reimbursement of
reasonable expenses incurred in attending meetings.
Item 11. Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth, as of February 18, 2000,
certain information concerning those persons known to the Company
to be the beneficial owners of more than five percent of the
Common Stock of the Company, the number of shares of Common Stock
of the Company owned by all Directors of the Company,
individually, and by all Directors and executive officers of the
Company as a group:
Name and Address Amount and Nature of Percent of
Beneficial Owners Beneficial Ownership(1) Class(2)
Peter Walker(3) 121,939(4) 50.0%
Richard Norris(3) 3,320 1.4%
Charles Snow 2,151 .9%
605 Third Avenue
New York, NY 10158
Peter Walker as Trustee of 72,562(5) 29.8%
The Robert Walker Life
Insurance Trust(3)
All Officers and Directors
as a Group (Three Persons) 127,410(4) 52.3%
_________________________________
(1) Unless otherwise noted, all shares are beneficially owned
and the sole voting and investment power is held by the persons
indicated.
(2) Based on 243,771 shares outstanding as of February 18, 2000.
(3) The address of this person is c/o the Company, 4 Ken-Anthony
Plaza, South Lake Boulevard, Mahopac, New York 10541.
(4) Includes the following Shares as to which Peter Walker
disclaims beneficial ownership to the extent such shares are held
for the benefit of Richard Walker: (a) 72,562 Shares held in
trust for the benefit of Peter Walker and Richard Walker, equally
under the Robert Walker Life Insurance Trust, as to which Peter
Walker serves as trustee; and (b) 16,500 Shares held in trust for the benefit
of Peter Walker, as to which Peter Walker serves as trustee.
(5) The beneficiaries of the Robert Walker Life Insurance Trust
are Peter Walker (45,000 shares) and Richard Walker (27,562 shares).
Peter Walker, as Trustee, has voting power over said Shares held in trust.
Item 12. Certain Relationships and Related Transactions
The Company has retained the law firm of Snow Becker Krauss
P.C., of which Charles Snow, a Director of the Company, is a
principal.
Item 13. Exhibits, List and Reports on Form 8-K.
(a) Exhibits
3.1 Certificate of Incorporation of Walker Color, Inc.
dated September 20, 1967 and Amendment thereto dated
July 30, 1968 (incorporated herein by reference from
Exhibit 3(a) to Registrant's Registration Statement of
Form S-1, File No. 2-300002.)
3.2 By-Laws of Walker Color, Inc. (incorporated herein by
reference from Exhibit 3(b) to Registrant's
Registration Statement on Form S-1,
File No. 2-300002.).
3.3 Excerpt from minutes of Board of Directors meeting of
January 25, 1980, amending the By-Laws of Walker Color,
Inc. (incorporated herein by reference from Exhibit 3.3
to Registrant's Annual Report on Form 10-K for the
fiscal year ended November 30, 1981.)
11.1 Statement re: calculation of per share earnings.
21.1 List of subsidiaries of Registrant.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
None.
<PAGE>
Walker International Industries, Inc.
Index to Consolidated Financial Statements
Page
Report of Independent Certified Public
Accountants F-1
Consolidated Balance Sheet as of
November 30, 1999 F-2
Consolidated Statements of Income and
Comprehensive Income for each of the two
years in the period ended November 30, 1999 F-3
Consolidated Statements of Stockholders'
Equity for each of the two years in
the period ended November 30, 1999 F-4
Consolidated Statements of Cash Flows
for each of the two years in the
period ended November 30, 1999 F-5
Notes to Consolidated Financial Statements F-7
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Shareholders and Board of Directors
Walker International Industries, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Walker
International Industries, Inc. and Subsidiaries as of November 30, 1999, and
the related consolidated statements of income and comprehensive income,
stockholders' equity and cash flows for the years ended November 30, 1999 and
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Walker International Industries, Inc. and Subsidiaries as of November 30,
1999, and the consolidated results of its operations and its cash flows for
the years ended November 30, 1999 and 1998, in conformity with generally
accepted accounting principles.
Kofler, Levenstein, Romanotto & Co., P.C.
Certified Public Accountants
Rockville Centre, New York
January 5, 2000
F-1
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<TABLE>
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
NOVEMBER 30, 1999
ASSETS
<CAPTION>
<S> <C>
Current assets
Cash and cash equivalents $ 512,490
Trading securities 1,151
Accounts receivable - less allowance for doubtful
accounts of $1,000 29,670
Inventories 76,994
Prepaid expenses 21,698
Prepaid income taxes 5,348
U.S. Government securities 523,158
Total current assets 1,170,509
Property, plant and equipment - at cost 1,011,338
Less accumulated depreciation 830,981
180,357
Other assets
Available-for-sale securities 9,000
Security deposit 1,700
Total other assets 10,700
Total $1,361,566
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
Current liabilities
Accounts payable and accrued expenses $ 113,049
Customer deposits 26,657
Income taxes payable 368
Total current liabilities 140,074
Stockholders' equity
Common stock, $.10 par value, authorized
1,000,000 shares, issued 477,810 shares 47,781
Additional paid-in capital 1,082,843
Retained earnings 693,147
Accumulated other comprehensive income 9,000
1,832,771
Less treasury stock - at cost - 226,767 shares 611,279
Total stockholders' equity 1,221,492
Total $1,361,566
</TABLE>
F-2
<PAGE>
<TABLE>
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<CAPTION>
Years ended November 30,
1999 1998
<S> <C> <C>
Net sales $1,117,305 $1,409,751
Costs and expenses
Cost of sales 708,442 714,903
Selling, general and administrative 466,772 720,703
Recovery of bad debts (1,472) (1,222)
1,173,742 1,434,384
Operating loss (56,437) (24,633)
Other income
Gain on sale of equipment 8,256 -
Investment income 74,699 109,397
82,955 109,397
Income before provision for income taxes 26,518 84,764
Provision for income taxes 8,738 10,981
Net income 17,780 73,783
Other comprehensive income, net of $0 income tax
Unrealized loss on available-for-sale
securities 9,000 4,500
Total comprehensive income $ 8,780 $ 69,283
Earnings per common share $.07 $.28
Weighted average number of common shares
outstanding 251,884 266,918
</TABLE>
F-3
<PAGE>
<TABLE>
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
TWO YEARS ENDED NOVEMBER 30, 1999
<CAPTION>
Common
Stock Accumulated
$.10 Capital in Other Total
Par Excess of Retained Comprehensive Treasury Stock Stockholders'
Value Par Value Earnings Income Shares Cost Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance -
December 1,
1997 $ 48,931 $1,118,880 $ 601,584 $ 22,500 215,199 $(576,000) $1,215,895
Acquisition of
common stock
for treasury 15,002 (47,868) (47,868)
Treasury stock
retired (1,150) (36,037) (11,500) 37,187
Comprehensive
income
Net income
for year 73,783 73,783
Unrealized loss
on available-
for-sale
securities (4,500) (4,500)
Balance -
November 30,
1998 47,781 1,082,843 675,367 18,000 218,701 (586,681) 1,237,310
Acquisition of
common stock
for treasury 8,066 (24,598) (24,598)
Comprehensive
income
Net income
for year 17,780 17,780
Unrealized loss
on available-
for-sale
securities (9,000) (9,000)
Balance -
November 30,
1999 $ 47,781 $1,082,843 $ 693,147 $ 9,000 226,767$ (611,279) $1,221,492
The number of common shares issued was 477,810 as of November 30, 1999 and
1998.
</TABLE>
F-4
<PAGE>
<TABLE>
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<CAPTION>
Years ended November 30,
1999 1998
<S> <C> <C>
Cash flows from operating activities
Net income $ 17,780 $ 73,783
Items not requiring the current use of cash
Depreciation 36,783 35,285
Amortization of bond premium and discount 4,602 (1,945)
Gain on sale of available-for-sale securities - (32,620)
Recovery of bad debts (1,472) (1,222)
Gain on sale of equipment (8,256) -
Changes in items affecting operations
Investment in trading securities 179,322 (31,037)
Accounts receivable (6,640) (5,933)
Inventories (12,594) (2,480)
Prepaid expenses (4,220) 4,383
Prepaid income taxes 2,001 (6,574)
Accounts payable and accrued expenses (32,315) (10,321)
Customer deposits 4,291 9,615
Income taxes payable 362 (8,675)
Net cash provided by operating
activities 179,644 22,259
Cash flows from investing activities
Proceeds from sale of equipment 12,500 -
Proceeds from sale of
available-for-sale securities - 131,620
Payments for purchase of equipment (66,467) (36,407)
Purchase of held-to-maturity securities (57,435) (549,326)
Maturity of held-to-maturity securities 79,000 520,000
Net cash provided (used) by investing
activities (32,402) 65,887
Cash flows from financing activities
Acquisition of common stock for treasury (24,598) (47,868)
Net cash used by financing activities (24,598) (47,868)
Net increase in cash and
cash equivalents 122,644 40,278
Cash and cash equivalents - beginning 389,846 349,568
Cash and cash equivalents - end $ 512,490 $ 389,846
</TABLE>
F-5
<PAGE>
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
TWO YEARS ENDED NOVEMBER 30, 1999
Supplemental Cash Flow Information
Net cash provided by operating activities reflects cash payments for
income taxes of approximately $8,900 in 1999 and $24,500 in 1998.
Supplemental Schedule of Non-Cash 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.
F-6
<PAGE>
(NOTE A) - ACCOUNTING POLICIES
Organization - Walker International Industries, Inc. (the Company) is engaged
in the business of film processing. Through December 1997, the Company
maintained a portrait studio under a licensing agreement with a national
retailer.
Principles of Consolidation - The consolidated financial statements include
the accounts of the Company and all its wholly-owned subsidiaries. All
material intercompany transactions and balances have been eliminated in
consolidation.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure for contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents - The Company considers all highly-liquid debt
instruments with a maturity of three months or less when purchased to be cash
equivalents.
Investment Securities - The Company has adopted Statement of Financial
Accounting Standards No. 115 (FAS 115), "Accounting for Certain Investments in
Debt and Equity Securities," which creates classification categories for such
investments, based on the nature of the securities and the intent and
investment goals of the Company. Under FAS 115, management determines the
appropriate classification of debt and equity securities at the time of
purchase as either held-to-maturity, trading, or available-for-sale and
reevaluates such designation as of each balance sheet date.
Trading securities are valued at estimated fair value and include
securities which the Company acquires and sells with the anticipation of
generating short-term profits. Debt securities are classified as
held-to-maturity when the Company has the positive intent and ability to hold
the securities to maturity. Held-to-maturity securities are stated at
amortized cost, adjusted for amortization of premiums and discounts to
maturity. Such amortization is included in interest income.
Available-for-sale securities are carried at fair value, with unrealized
gains and losses, net of tax, reported as other comprehensive income.
Realized gains and losses on securities available-for-sale are included in
other income and, when applicable, are reported as a reclassification
adjustment, net on taxes, in other comprehensive income.
Dividends on equity securities are recorded in income based on payment
dates. Interest is recognized when earned. Realized gains and losses are
determined on the basis of specific identification.
F-7
<PAGE>
(NOTE A) - ACCOUNTING POLICIES (Continued)
Inventories - Inventories are valued at the lower of cost determined on a
first-in, first-out basis or market.
Property, Plant and Equipment - Property, plant and equipment are stated at
cost. Significant replacements and betterments are charged to the property,
plant and equipment accounts, while maintenance and repairs which do not
improve or extend the life of the assets are charged to expense as incurred.
When items are disposed of, the cost and accumulated depreciation are
eliminated from the accounts and any net gain or loss is included in income.
For financial reporting purposes, depreciation is calculated on both the
straight-line and accelerated methods over the estimated useful lives of the
building (33 to 45 years), machinery and other equipment (3 to 10 years) and
leasehold improvements (term of lease). Accelerated depreciation methods are
generally used for income tax purposes.
Income Taxes - The Company accounts for income taxes under Statement No. 109
of the Financial Accounting Standards Board. The pronouncement requires that
deferred income taxes be provided, based upon currently enacted tax rates, for
temporary differences in the recognition of assets and liabilities on the
financial statements and for income tax purposes.
Revenue Recognition - Revenue from the processing of film and the sale of
photographic portraits is recognized at the time of shipment to the customer.
Advertising - The Company follows the policy of charging the cost of
advertising to expense as incurred.
Financial Instruments - The following methods and assumptions were used by the
Company to estimate the fair values of financial instruments as disclosed
herein:
Cash and cash equivalents: The carrying amount approximates fair value
because of the short period to maturity of the instruments.
Investment securities: For both trading securities and available-for-sale
securities, the carrying amounts approximate fair value, which is based on
quoted market prices.
Earnings per Common Share - Earnings per common share are computed by dividing
net income for the year by the weighted average number of common shares
outstanding during the year.
Comprehensive Income - The Company has adopted statement of Financial
Accounting Standards No. 130, (FAS 130) "Reporting Comprehensive Income".
Comprehensive income is the total of (1) net income plus (2) all other changes
in net assets arising from nonowner sources, which are referred to as other
comprehensive income. The Company has presented a statement of income that
includes other comprehensive income. An analysis of changes in components of
accumulated other comprehensive income is presented in the statement of
stockholders' equity.
F-8
<PAGE>
(NOTE B) - CONCENTRATIONS OF RISK
The Company's film processing business is concentrated in the southeastern
United States. Customers normally pay for processing in advance of the
Company performing the service.
The Company does not have a concentration of available sources of supply
materials, labor, services or other rights that, if suddenly eliminated, could
severely impact its operations.
Management does not believe significant credit risk exists at November 30,
1999.
(NOTE C) - INVESTMENT SECURITIES
Included in held-to-maturity securities are the following:
Gross
Unrealized Estimated
Description Cost Losses Fair Value
U.S. Government securities -
maturing October 31, 2000 $ 57,435 $ 319 $ 57,116
U.S. Government securities -
maturing January 2000 465,723 758 464,965
$ 523,158 $ 1,077 $ 522,081
Included in available-for-sale securities are the following:
Estimated Carrying
Description Cost Fair Value Amount
Charter Pacific Bank Warrants $ - $ 9,000 $ 9,000
Included in trading securities are the following:
Estimated Carrying
Description Cost Fair Value Amount
Equity securities $ 1,472 $ 1,151 $ 1,151
F-9
<PAGE>
(NOTE D) - FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company has a number of financial instruments. The Company estimates
that the fair value of all financial instruments at November 30, 1999, does
not differ materially from the aggregate carrying values of its financial
instruments recorded in the accompanying balance sheet. The estimated fair
value amounts have been determined by the Company using available market
information and appropriate valuation methodologies. Considerable judgment is
necessarily required in interpreting market data to develop the estimates of
fair value, and, accordingly, the estimates are not necessarily indicative of
the amounts that the Company could realize in a current market exchange.
(NOTE E) - INVENTORIES
Inventories are summarized as follows:
Raw materials $ 41,958
Work-in-process 12,495
Finished goods 22,541
$ 76,994
(NOTE F) - PROPERTY, PLANT AND EQUIPMENT
The following tabulation sets forth the major classifications of property,
plant and equipment:
Land $ 16,500
Buildings and leasehold improvements 233,141
Equipment 610,780
Office furniture and equipment 102,155
Transportation equipment 48,762
$1,011,338
(NOTE G) - INVESTMENT INCOME
The analysis of investment income is as follows:
Years ended November 30,
1999 1998
Interest and dividends $ 39,402 $ 46,442
Realized gain on sale of trading
securities 36,915 66,146
Unrealized loss on trading securities (1,618) (3,191)
$ 74,699 $ 109,397
F-10
<PAGE>
(NOTE H) - INCOME TAXES
The components of income tax expense are as follows:
Years ended November 30,
1999 1998
Current
State and local $ 8,738 $ 10,981
The components of deferred tax asset are as follows:
November 30,
1999 1998
Net operating loss carryforward $ 550,085 $ 542,580
Other 7,869 22,468
557,954 565,048
Valuation allowance (557,954) (565,048)
$ - $ -
The Company has available a net operating loss carryforward of
approximately $1,510,000 expiring from 2002 through 2009.
The provision for income taxes for each of the two years in the period
ended November 30, 1999, differs from the statutory federal income tax rate as
follows:
Years ended November 30,
1999 1998
Income tax at the statutory federal
income tax rate $ 9,016 $ 28,820
Increases (reductions) in taxes
result from the following:
State and local income taxes,
net of federal tax benefit 5,767 7,247
Benefit of operating loss
carryforward (8,383) (27,841)
Other - net 2,338 2,755
Tax provision on financial statements $ 8,738 $ 10,981
F-11
<PAGE>
(NOTE I) - COMMITMENTS AND CONTINGENCIES
The following schedule shows the composition of the total rent expense for
all operating leases except those with terms of a month or less that were not
renewed:
Years ended November 30,
1999 1998
Minimum rentals $ 18,000 $ 17,910
Contingent rentals - 84,445
$ 18,000 $ 102,355
Contingent rentals relate to a license agreement entered into on an annual
basis with a national retailer and are based on sales. This lease has been
terminated.
The Company leases office space under a lease expiring in May 2001. The
lease provides for rent escalations based upon increases in real estate taxes
and other operating expenses. The following table presents the future minimum
payments required under agreements which have initial or remaining
noncancelable terms in excess of one year:
2000 $ 18,000
2001 9,000
$ 27,000
F-12
<PAGE>
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF AVERAGE NUMBER OF SHARES OUTSTANDING
Years ended November 30,
1999 1998
Weighted average number of shares issued 477,810 484,632
Weighted average number of treasury shares 225,926 217,714
Weighted average number of shares outstanding 251,884 266,918
F-13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Dated: February 23, 2000
WALKER INTERNATIONAL INDUSTRIES, INC.
By:/s/ Peter Walker
Peter Walker, President
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Company and in the capacities and on the
dates indicated.
Name Titles Date
/s/ Peter Walker President, Chief Executive February 23, 2000
Peter Walker Officer and Chairman
(Principal Executive Officer)
/s/ Richard
Norris Vice-President, Treasurer February 23, 2000
Richard Norris Secretary and Director
(Principal Financial
and Accounting Officer)
/s/ Charles Snow Director February 23, 2000
Charles Snow
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
21.1 Subsidiaries of Registrant
27.1 Financial Data Schedule
EXHIBIT 21.1
Subsidiaries of Registrant
State of % of Voting
Name Incorporation Securities Owned
Department Store
Photography, Inc. New York 100
The Three Dimensional
Photography Corporation New York 91.39
Kelly Color
Laboratories, Inc. North Carolina 100
<PAGE>
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