SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: July 27, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-15046
Westerbeke Corporation
----------------------
(Exact name of registrant as specified in its charter)
Delaware 04-1925880
-------- ----------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification No.)
Avon Industrial Park, Avon, Massachusetts 02322
- - ----------------------------------------- -----
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (508) 588-7700
No Change
---------
(Former name, former address
and former fiscal year if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at
July 27, 1996
----- --------------
Common Stock, $.01 par value 2,078.850
WESTERBEKE CORPORATION AND SUBSIDIARY
INDEX
Page
Part I - Financial Information
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets as of July 27, 1996 and
October 28, 1995 3
Consolidated Statements of Operations for the three
months ended July 27, 1996 and July 29, 1995 4
Consolidated Statements of Operations for the nine
months ended July 27, 1996 and July 29, 1995 5
Consolidated Statements of Cash Flows for the nine
months ended July 27, 1996 and July 29, 1995 6
Notes to Consolidated Financial Statements 7-8
Item 2 -
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-10
Part II - Other Information 11
Signatures 12
WESTERBEKE CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 27, October 28,
1996 1995
-------- -----------
(Unaudited) (Derived from
ASSETS Audited Financial
Statements)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 878,800 $ 1,322,200
Accounts receivable, net of allowance for
doubtful accounts of $60,400 and $60,500,
respectively 2,581,300 1,541,400
Inventories (Note 2) 4,264,700 4,313,500
Prepaid expenses and other assets 152,800 134,100
Deferred income taxes 316,200 316,200
-------------------------
Total current assets 8,193,800 7,627,400
Property, plant and equipment, net 1,789,700 1,594,900
Other assets, net 1,124,500 1,140,800
Investments in marketable securities 779,700 486,100
Note receivable - related party 139,900 149,400
-------------------------
$12,027,600 $10,998,600
=========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving line of credit $ 315,000 $ -
Current portion of long-term debt 23,000 22,100
Current portion of obligations under
capital leases - 12,700
Accounts payable 1,518,300 1,077,600
Accrued expenses and other liabilities 400,100 380,400
Accrued income taxes - 226,300
-------------------------
Total current liabilities 2,256,400 1,719,100
-------------------------
Deferred income taxes 144,200 144,200
Long-term debt, net of current portion 27,300 44,700
-------------------------
171,500 188,900
-------------------------
Stockholders' equity:
Common stock, $.01 par value; authorized
5,000,000 shares; issued and outstanding
2,078,550 shares at July 27, 1996 and
2,064,650 at October 28, 1995. 21,200 20,600
Additional paid-in-capital 5,959,800 5,902,100
Unrealized gain on marketable securities 91,800 71,200
Treasury Stock, 44,400 shares at cost (133,200) -
Retained earnings 3,660,100 3,096,700
-------------------------
Total stockholders' equity 9,599,700 9,090,600
-------------------------
$12,027,600 $10,998,600
=========================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
WESTERBEKE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
---------------------
July 27, July 29,
1996 1995
-------- --------
(Unaudited)
<S> <C> <C>
Net sales $5,927,800 $4,879,200
Cost of sales 4,505,700 3,792,300
-----------------------
Gross profit 1,422,100 1,086,900
Selling, general and administrative expense 629,800 607,600
Research and development expense 264,300 155,900
-----------------------
Income from operations 528,000 323,400
Interest income, net 300 11,300
-----------------------
Income before income taxes 528,300 334,700
Provision for income taxes 221,900 134,800
-----------------------
Net income $ 306,400 $ 199,900
=======================
Net income per share $ 0.14 $ 0.09
=======================
Weighted average common and common equivalents
shares outstanding 2,254,871 2,249,284
=======================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
WESTERBEKE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Ended
------------------------
July 27, July 29,
1996 1995
-------- --------
(Unaudited)
<S> <C> <C>
Net sales $15,392,700 $14,429,500
Cost of sales 11,909,600 11,171,200
---------------------------
Gross profit 3,483,100 3,258,300
Selling, general and administrative expense 1,898,800 1,874,200
Research and development expense 668,500 537,100
---------------------------
Income from operations 915,800 847,000
Interest income, net 44,400 34,000
---------------------------
Income before income taxes 960,200 881,000
Provision for income taxes 396,800 354,200
---------------------------
Net income $ 563,400 $ 526,800
===========================
Net income per share $ 0.25 $ 0.23
===========================
Weighted average common and common equivalents
shares outstanding 2,256,330 2,251,265
===========================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
WESTERBEKE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
------------------------
July 27, July 29,
1996 1995
-------- --------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 563,400 $ 526,800
Reconciliation of net income to net cash
provided (used) by operating activities:
Depreciation and amortization 302,200 303,700
Deferred income taxes - (2,000)
Changes in operating assets and liabilities:
Accounts receivable (1,040,000) (289,600)
Inventories 48,800 (732,300)
Prepaid expenses and other assets (18,700) (24,100)
Accounts payable 440,800 (3,900)
Accrued expenses and other liabilities 19,800 112,600
Accrued income taxes (226,300) 103,200
----------------------------
Net cash provided (used) by operating
activities 90,000 (5,600)
----------------------------
Cash flows from investing activities:
Purchase of property, plant and equipment (480,900) (231,300)
Proceeds from payment of note receivable -
related party 9,500 7,800
Investment in marketable securities, net (272,900) (237,900)
----------------------------
Net cash used in investing activities (744,300) (461,400)
----------------------------
Cash flows from financing activities:
Proceeds from revolving line of credit 315,000 -
Proceeds from exercise of employee stock
options 58,300 3,100
Purchase of treasury stock (133,200) -
Principal payments on long-term debt and
capital lease obligations (29,200) (76,500)
----------------------------
Net cash provided (used) in financing
activities 210,900 (73,400)
----------------------------
Decrease in cash and cash equivalents (443,400) (540,400)
Cash and cash equivalents, beginning of period 1,322,200 1,727,600
----------------------------
Cash and cash equivalents, end of period $ 878,800 $ 1,187,200
============================
Supplemental cash flow disclosures:
Interest paid $ 12,400 $ 4,200
Taxes paid $ 622,800 $ 166,200
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
WESTERBEKE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies:
-------------------------------------------
A. Financial Statements
-------------------------
The condensed consolidated financial statements included herein have
been prepared by Westerbeke Corporation ("the Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. While certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations, the Company believes that the disclosures
made herein are adequate to make the information presented not
misleading. It is recommended that these condensed statements be read
in conjunction with the consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended October 28, 1995.
In the opinion of the Company, all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial
position of Westerbeke Corporation and Subsidiary as of July 27, 1996,
the results of their operations for the three and nine months ended
July 27, 1996 and July 29, 1995, and the cash flows for the nine months
then ended, have been included.
B. Basis of Presentation
--------------------------
The condensed consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, Westerbeke International,
Inc. (a Foreign Sales Corporation). All significant intercompany
transactions and accounts have been eliminated. Westerbeke
International, Inc., has been inactive since fiscal year 1987.
2. Inventories
-----------
The Company uses the last-in, first-out (LIFO) method to value
inventory.
Inventories are comprised of the following:
<TABLE>
<CAPTION>
July 27, October 28,
1996 1995
-------- -----------
<S> <C> <C>
Raw materials $3,513,700 $3,319,000
Work-in-process 293,800 322,700
Finished goods 457,200 671,800
-----------------------
$4,264,700 $4,313,500
=======================
</TABLE>
The Company has estimated both the year-end inventory levels and the
inflation/deflation which will occur during the fiscal year.
The Company anticipates an increase in its LIFO valuation account as of
October 26, 1996. Accordingly, the Company has recorded an increase of
$40,000, on a pro rata basis, in the LIFO reserve during the first nine
months of fiscal 1996. During the first nine months of 1995, the
Company recorded, on a pro rata basis, an increase of $100,000 in the
LIFO reserve. Inventories would have been $1,244,000 higher at July 27,
1996 and $1,204,000 higher as of October 28, 1995, if the weighted-
average first-in, first-out (FIFO) method had been used. Inventory cost
determination on the FIFO method approximates replacement or current
cost.
Item 2 - Management's Discussion and Analysis
Of Financial Condition and Results Of Operations
Results of Operations -
- - -----------------------
Net sales increased by $1,048,600, or 21%, during the third quarter of fiscal
1996 and increased $963,200 or 7% for the first nine months of fiscal 1996 as
compared to the same periods in fiscal 1995. The increase in net sales for
the third quarter and the first nine months of fiscal 1996 is primarily
attributable to higher unit volume of the Company's marine generator products.
Gross profit increased $335,200, or 31% during the third quarter and increased
$224,800 or 7% for the first nine months of fiscal 1996 as compared to the
same periods in fiscal 1995. As a percentage of net sales, gross profit
increased to 24% during the third quarter of fiscal year 1996, as compared to
22% for the third quarter of fiscal 1995, and remained at 23% for the nine
months ended July 27, 1996 and July 29, 1995, respectively. The increase as a
percentage of net sales during the third quarter of fiscal 1996 is primarily
attributable to lower material costs when compared to the same period during
fiscal 1995.
Operating expenses increased $130,600 or 17% for the third quarter and
$156,000 or 6% in the first nine months of fiscal 1996, as compared to the
same periods in fiscal 1995. Research and development costs have increased
due to the addition of personnel and higher costs related to achieving
compliance with federal and state emission requirements. Selling and
administrative expenses have increased primarily due to higher costs
associated with increased advertising and marketing promotion.
Net interest income decreased $11,000 during the third quarter and increased
$10,400 for the first nine months of fiscal 1996 as compared to the same
periods in fiscal 1995. The decrease in the third quarter is primarily due to
increases in interest expense associated with the revolving line of credit
entered into on January 23, 1996. The increase in the first nine months of
fiscal 1996 is due to dividends received from the Company's marketable
securities offset by the previously mentioned increase in interest expense and
lower interest income due to lower invested cash balances during fiscal 1996.
For the third quarter ended July 27, 1996, the Company reported net income of
$306,400, compared to a net income of $199,900 for the same period in fiscal
1995. For the nine months ended July 27, 1996, the Company reported net
income of $536,400 as compared to net income of $526,800 for the nine months
ended July 29, 1995. The increase in net income for the third quarter of
fiscal 1996 and the nine months ended July 27, 1996 is primarily attributable
to higher unit volume during the periods when compared to the same periods in
1995.
WESTERBEKE CORPORATION AND SUBSIDIARY
Liquidity and Capital Resources
- - -------------------------------
During the first nine months of fiscal 1996, net cash provided by
operations was $90,000, compared to net cash used by operations of $5,600 for
the first nine months in fiscal 1995. The increase in cash flow from
operations is primarily attributable to increases in accounts payable and
decreases in inventory balances for the nine month period ended July 27, 1996,
as compared to the same period in fiscal 1995. These amounts are offset by an
increase in accounts receivable as a result of higher sales. Increases in
accounts payable is the result of the timing of cash disbursements for the
period. The decrease in inventories is directly attributable to the increase
in unit sales during the period.
During the nine months ended July 27, 1996, the Company purchased
property, plant and equipment of $480,900. The purchases were primarily for
design and analysis equipment to be used in development of new Company
products. The Company plans to spend approximately $200,000 more on emission
testing equipment during the remainder of the year.
On June 4, 1992, the Company entered into a $3,000,000 line of credit
agreement (the "Credit Agreement") with State Street Bank and Trust Company,
collateralized by all inventory and receivables of the Company. At July 27,
1996, the Company had approximately $2,812,500 in unused borrowing capacity
under the Credit Agreement and approximately $187,500 committed to cover the
Company's reimbursement obligations under certain letters of credit. The
Credit Agreement expires on March 31, 1997.
On January 23, 1996, the Company entered into a $500,000 revolving line
of credit agreement (the "Revolving Line of Credit") and term loan facility
(the "Term Loan") with State Street Bank and Trust Company, collateralized
by various emission testing and product development equipment to be
purchased and subject to working capital and equity covenants. At July 27,
1996 the Company had borrowed $315,000 under the Revolving Line of Credit. On
July 31, 1996 the Revolving Line of Credit terminated and automatically
converted into a five year Term Loan in the principal amount of $315,000,
bearing a fixed interest rate of 8.96%.
Management believes cash flow from operations and borrowings available
under the Credit Agreement and the Revolving Line of Credit will provide for
working capital needs, principal payments on long-term debt, and capital and
operating leases through fiscal 1996.
Domestic inflation is not expected to have a material impact on the
Company's operations.
The cost of engine blocks and other components is subject to foreign
currency fluctuations (primarily the Japanese yen). Exchange rate
fluctuations have had a minimal impact on the Company during the first
three fiscal quarters of 1996.
Part II. Other Information
Item 1 Legal Proceedings
None to report
Item 2 Changes in Securities
None to report
Item 3 Default Upon Senior Securities
None to report
Item 4 Submissions of Matters to a Vote of Security Holders
None to report
Item 5 Other Information
None to report
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibit 27 Financial Data Schedule for the nine months
ended July 27, 1996
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during
the period covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WESTERBEKE CORPORATION
(Registrant)
Dated September 4, 1996 /s/ John H. Westerbeke, Jr.
John H. Westerbeke, Jr.
Chairman and President
Dated September 4, 1996 /s/ Carleton F. Bryant III
Carleton F. Bryant III
Executive Vice President
and Principal Financial
and Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000796502
<NAME> WESTERBEKE CORP.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-26-1996
<PERIOD-END> JUL-27-1996
<CASH> 878,800
<SECURITIES> 0
<RECEIVABLES> 2,581,000
<ALLOWANCES> 60,400
<INVENTORY> 4,264,700
<CURRENT-ASSETS> 8,193,800
<PP&E> 4,865,700
<DEPRECIATION> 3,076,000
<TOTAL-ASSETS> 12,027,600
<CURRENT-LIABILITIES> 2,256,400
<BONDS> 0
0
0
<COMMON> 21,200
<OTHER-SE> 9,578,500
<TOTAL-LIABILITY-AND-EQUITY> 12,027,600
<SALES> 15,392,700
<TOTAL-REVENUES> 15,392,700
<CGS> 11,909,600
<TOTAL-COSTS> 11,909,600
<OTHER-EXPENSES> 2,567,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,400
<INCOME-PRETAX> 960,200
<INCOME-TAX> 396,800
<INCOME-CONTINUING> 563,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 563,400
<EPS-PRIMARY> .25
<EPS-DILUTED> 0
</TABLE>
