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 May 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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<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
May 31, November 30,
2000 1999
(Unaudited) (Audited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 435,812 $ 512,490
Trading securities - at market 18,285 1,151
Accounts receivable - less allowance for doubtful
accounts of $1,000 13,414 29,670
Inventories 46,448 76,994
Prepaid expenses 24,092 21,698
Prepaid income taxes 9,680 5,348
U.S. Government securities 29,488 523,158
Total current assets 577,219 1,170,509
Property, plant and equipment - at cost 1,046,840 1,011,338
Less accumulated depreciation 851,207 830,981
195,633 180,357
Other assets
U.S. Government securities 444,016 -
Available-for-sale securities - 9,000
Security deposit 1,700 1,700
Total other assets 445,716 10,700
Total $1,218,568 $1,361,566
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities
Accounts payable and accrued expenses $ 79,797 $ 113,049
Customer deposits 9,168 26,657
Income taxes payable - 368
Total current liabilities 88,965 140,074
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 638,716 693,147
Unrealized gain on marketable
equity securities - 9,000
1,769,340 1,832,771
Less treasury stock - at cost - 236,739 and
226,767 shares, respectively 639,737 611,279
Total stockholders' equity 1,129,603 1,221,492
Total $1,218,568 $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 Six months ended
May 31, May 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net sales $ 247,773 $ 293,054 $ 478,750 $ 519,052
Cost and expenses
Cost of sales 166,822 169,915 346,968 322,063
Selling, general and
administrative 126,282 114,376 237,006 223,170
Recovery of bad debts - (1,472) - (1,472)
293,104 282,819 583,974 543,761
Operating income
(loss) (45,331) 10,235 (105,224) (24,709)
Other income
Investment income 27,486 10,150 50,793 27,279
Gain on sale of assets - - - 8,256
27,486 10,150 50,793 35,535
Income (loss) before
provision for
income taxes (17,845) 20,385 (54,431) 10,826
Provision for income taxes - 3,080 - 5,260
Net income (loss) (17,845) 17,305 (54,431) 5,566
Other comprehensive income, net
of income tax on unrealized
holding gains (9,000) - (9,000) -
Comprehensive income
(loss) $ (26,845) $ 17,305 $ (63,431)$ 5,566
Earnings per common share $ (.07) $ .07 $ (.22) $.02
Weighted average number of
common shares outstanding 241,570 251,043 244,651 252,726
</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>
Six months ended
May 31,
2000 1999
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ (54,431) $ 5,566
Items not requiring the current use of cash
Depreciation 20,226 17,191
Amortization of bond premium and discount (723) 2,313
Recovery of bad debts - (1,472)
Gain on sale of assets - (8,256)
Changes in items affecting operations
Investment in trading securities (17,134) 174,004
Accounts receivable 16,256 4,274
Inventories 30,546 14,639
Prepaid expenses (2,394) (8,134)
Prepaid income taxes (4,332) 3,437
Accounts payable and accrued expenses (33,252) (49,999)
Customer deposits (17,489) (17,760)
Income taxes payable (368) (6)
Net cash provided (used) by
operating activities (63,095) 135,797
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 (35,502) (42,468)
Net cash provided (used) by investing
activities 14,875 (29,968)
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 (76,678) 81,231
Cash and cash equivalents - beginning 512,490 389,846
Cash and cash equivalents - end $ 435,812 $ 471,077
Supplemental Cash Flows Information
Cash payments (refunds) for income taxes$ 4,700 $ (1,829)
</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
MAY 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 May 31, 2000, and
results of operations and cash flows for the quarters ended May 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 $ 29,488 $ - $ 173 $ 29,515
U.S. Government securities
- maturing October 31,
2001 29,867 - 242 29,625
U.S. Government securities
- maturing January 31,
2002 414,149 - 2,523 411,626
$ 473,504 $ - $ 2,938 $ 470,766
Included in trading securities are the following:
Estimated Carrying
Description Cost Fair value Amount
Equity securities $ 16,501 $ 18,285 $ 18,285
The change in net unrealized holding gain on trading securities that has
been included in earnings during the period amount to $1,784 (2000) and $1,159
(1999).
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WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2000
(NOTE C) - An analysis of inventories is as follows:
May 31, November 30,
2000 1999
(Unaudited) (Audited)
Raw materials $ 20,132 $ 41,958
Work-in-process 4,298 12,495
Finished goods 22,018 22,541
$ 46,448 $ 76,994
(NOTE D) - The provision for income taxes consists solely of state and local
taxes. The provision for income taxes has been reduced by approximately $835
during the six months ended May 31, 1999, 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)
decreased by $542,181 to $488,254 at May 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 $63,095. This resulted
primarily from a net loss of $54,431, a decrease in accounts payable and
accrued expenses of $33,252, a decrease in customer deposits of $17,489, and a
decrease in investment in trading securities of $17,134, offset primarily by a
decrease in inventories of $30,546 and a decrease in accounts receivable of
$16,256. The Company purchased stock for its treasury in the amount of $28,458
and equipment in the amount of $35,502.
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 six months ended May 31, 2000 (the "Current Period")
decreased to $478,750 as compared to sales of $519,052 in the six months ended
May 31, 1999 (the "1999 Period"), as a result of a sales volume decrease at
Kelly Color. Sales for the three months ended May 31, 2000 (the "Current
Quarter") decreased to $247,773 as compared to $293,054 in the quarter ended
May 31, 1999 (the "1999 Quarter"), due to a decrease in Kelly Color sales
volume.
In the Current Period and Current Quarter, cost of sales as a percentage
of sales ("COS") were 72.5% and 67.3%, respectively, as compared to COS of
62.0% and 58.0% in the 1999 Period and 1999 Quarter, respectively. These
increases were 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 Period and Current Quarter,
selling, general and administrative expenses net of recovery of bad debts were
49.5% and 51.0%, respectively, as a percentage of sales, as compared to 42.7%
and 38.5%, 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 $50,793 in the Current Period and
$27,486 in the Current Quarter, as compared to $27,279 and $10,150 in the 1999
Period and 1999 Quarter, respectively.
In the Current Period, the Company had a net loss before provision for
income taxes of $54,431 as compared to net income of $10,826 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 $17,845 as compared to net
income of $20,385 in the 1999 Quarter, as previously described. Provision for
income taxes in Fiscal 1999 consists solely of state and local taxes. In the
Current Period, loss per share was $.22 as compared to earnings per share of
$.02 in the 1999 Period. In the Current Quarter, there was a loss per share of
$.07 as compared to earnings per share of $.07 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: July 13, 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
