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, 2000
[ ] 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 July 13, 2000 was 241,071.
Transitional Small Business Disclosure Format (check one):
Yes No X
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
August 31, November 30,
2000 1999
(Unaudited) (Audited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 443,116 $ 512,490
Trading securities - at market 3,839 1,151
Accounts receivable - less allowance for doubtful
accounts of $1,000 6,083 29,670
Inventories 52,195 76,994
Prepaid expenses 23,346 21,698
Prepaid income taxes 9,680 5,348
U.S. Government securities 29,872 523,158
Total current assets 568,131 1,170,509
Property, plant and equipment - at cost 1,052,840 1,011,338
Less accumulated depreciation 861,546 830,981
191,294 180,357
Other assets
U.S. Government securities 444,182 -
Available-for-sale securities - 9,000
Security deposit 1,700 1,700
Total other assets 445,882 10,700
Total $1,205,307 $1,361,566
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities
Accounts payable and accrued expenses $ 75,854 $ 113,049
Customer deposits 5,923 26,657
Income taxes payable - 368
Total current liabilities 81,777 140,074
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 632,643 693,147
Unrealized gain on marketable
equity securities - 9,000
1,763,267 1,832,771
Less treasury stock - at cost - 236,739 and
226,767 shares, respectively 639,737 611,279
Total stockholders' equity 1,123,530 1,221,492
Total $1,205,307 $1,361,566
</TABLE>
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<TABLE>
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
<CAPTION>
Three months ended Nine months ended
August 31, August 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net sales $ 266,426 $ 277,569 $ 745,176 $ 796,621
,
Cost and expenses
Cost of sales 176,115 186,785 523,083 508,848
Selling, general and
administrative 115,600 115,898 352,606 339,068
Recovery of bad debts - - - (1,472)
291,715 302,683 875,689 846,444
Operating loss (25,289) (25,114) (130,513) (49,823)
Other income
Investment income 19,216 10,244 70,009 37,523
Gain on sale of assets - - - 8,256
19,216 10,244 70,009 45,779
Loss before
provision for
income taxes (6,073) (14,870) (60,504) (4,044)
Provision for income taxes - 363 - 5,623
Net income (loss) (6,073) (15,233) (60,504) (9,667)
Other comprehensive income, net
of income tax on unrealized
holding gains - - (9,000) -
Comprehensive
loss $ (6,073) $ (15,233) $ (69,504)$ (9,667)
Loss per common share $ (.03) $ (.06) $ (.29) $ (.04)
Weighted average number of
common shares outstanding 241,071 251,043 243,454 252,161
</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,
2000 1999
<S> <C> <C>
Cash flows from operating activities
Net loss $ (60,504) $ (9,667)
Items not requiring the current use of cash
Depreciation 30,565 26,679
Amortization of bond premium and discount (1,273) 3,469
Recovery of bad debts - (1,472)
Gain on sale of assets - (8,256)
Changes in items affecting operations
Investment in trading securities (2,688) 169,731
Accounts receivable 23,587 10,903
Inventories 24,799 5,832
Prepaid expenses (1,648) (11,061)
Prepaid income taxes (4,332) 1,200
Accounts payable and accrued expenses (37,195) (38,621)
Customer deposits (20,734) (17,295)
Income taxes payable (368) (6)
Net cash provided (used) by
operating activities (49,791) 131,436
Cash flows from investing activities
Proceeds from sale of assets - 12,500
Proceeds from held to maturity securities 494,200 -
Purchase of held to maturity securities (443,823) -
Payments for purchase of equipment (41,502) (54,373)
Net cash provided (used) by investing
activities 8,875 (41,873)
Cash flows from financing activities
Acquisition of common stock for treasury (28,458) (24,598)
Net cash used by financing activities (28,458) (24,598)
Net increase (decrease) in cash
and cash equivalents (69,374) 64,965
Cash and cash equivalents - beginning 512,490 389,846
Cash and cash equivalents - end $ 443,116 $ 454,811
Supplemental Cash Flows Information
Cash payments (refunds) for income taxes$ 4,700 $ 4,429
</TABLE>
Supplemental Schedule of Noncash Operating Activity
During 1999, the Company received, in lieu of cash, investment securities
with a value of $1,472 to satisfy a previously written off accounts
receivable.
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WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2000
(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, 2000, and
results of operations and cash flows for the quarters ended August 31, 2000
and 1999. 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
Held-to-Maturity
U.S. Government securities
- maturing October 12,
2000 $ 29,872 $ - $ 116 $ 29,756
U.S. Government securities
- maturing October 31,
2001 29,891 - 69 29,822
U.S. Government securities
- maturing January 31,
2002 414,291 190 - 414,481
$ 474,054 $ 190 $ 185 $ 474,059
Included in trading securities are the following:
Estimated Carrying
Description Cost Fair value Amount
Equity securities $ 2,401 $ 3,839 $ 3,839
The change in net unrealized holding gain on trading securities that has
been included in earnings during the period amount to $1,760 (2000) and
$(2,716) (1999).
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WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2000
(NOTE C) - An analysis of inventories is as follows:
August 31, November 30,
2000 1999
(Unaudited) (Audited)
Raw materials $ 26,686 $ 41,958
Work-in-process 2,777 12,495
Finished goods 22,732 22,541
$ 52,195 $ 76,994
(NOTE D) - The provision for income taxes consists solely of state and local
taxes.
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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)
decreased by $544,081 to $486,354 at August 31, 2000, as compared to
$1,030,435 at November 30, 1999. This decrease is primarily the result of the
purchase of U.S. Government securities with a maturation period of more than
one year. These securities are reflected in Other Assets, whereas the
securities they replaced, which matured in January, 2000, were reflected in
Current Assets. Additional decreases in liquidity resulted from purchases of
stock for the Company treasury and equipment as described below.
Net cash used by operating activities amounted to $49,791. This resulted
primarily from: (i) a net loss of $60,504; (ii) a decrease in accounts
payable; (iii) accrued expenses of $37,195; and (iv) a decrease in customer
deposits of $20,734. Net cash used by operating activities was offset
primarily by: (i) depreciation, a noncash charge, of $30,565; (ii) a decrease
in inventories of $24,799, and (iii) a decrease in accounts receivable of
$23,587. The Company purchased stock for its treasury in the amount of $28,458
and equipment in the amount of $41,502.
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, 2000 (the "Current
Period") decreased to $745,176 as compared to sales of $796,621 in the nine
months ended August 31, 1999 (the "1999 Period"), as a result of a sales
volume decrease at Kelly Color. Sales for the three months ended August
31, 2000 (the "Current Quarter") decreased to $266,426 as compared to $277,569
in the quarter ended August 31, 1999 (the "1999 Quarter"), due to a decrease
in Kelly Color sales volume. In the Current Period, cost of sales as a
percentage of sales ("COS") was 70.2% as compared to COS of 63.9% in the 1999
Period. This increase was due in part to higher labor and materials costs.
There were also increases in fixed components of overhead that were not
absorbed as a result of reduced sales volume. In the Current Quarter, COS was
66.1% as compared to a COS of 67.3% in the 1999 Quarter. In the Current Period
and Current Quarter, selling, general and administrative expenses net of
recovery of bad debts were 47.3% and 43.4%, respectively, as a percentage of
sales, as compared to 42.4% and 41.8%, respectively, in the 1999 Period and
Quarter, due primarily to moderate increases in fixed costs that could not be
absorbed by reduced sales. The Company earned investment income of $70,009 in
the Current Period and $19,216 in the Current Quarter, as compared to $37,523
and $10,244 in the 1999 Period and 1999 Quarter, respectively.
In the Current Period, the Company had a net loss before provision for
income taxes of $60,504 as compared to net loss of $4,044 in the 1999 Period,
primarily due to reduced profits at Kelly Color, offset in part by an increase
in investment income. In the Current Quarter, the Company had a net loss
before provision for income taxes of $6,073 as compared to a net loss of
$14,870 in the 1999 Quarter. Provision for income taxes in the Current Period
and Current Quarter consists solely of state and local taxes. In the Current
Period, loss per share was $.29 as compared to $.04 in the 1999 Period. In the
Current Quarter, there was a loss per share of $.03 as compared to $.06 in the
1999 Quarter.
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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.
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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 12, 2000
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
