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 26, 1997
-----------------
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.
Outstanding at
Class August 29, 1997
----- ---------------
Common Stock, $.01 par value 1,864,812
<PAGE>
WESTERBEKE CORPORATION AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I - Financial Information
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets as of July 26, 1997 and
October 26, 1996 3
Consolidated Statements of Operations for the three
months ended July 26, 1997 and July 27, 1996 4
Consolidated Statements of Operations for the nine
months ended July 26, 1997 and July 27, 1996 5
Consolidated Statements of Cash Flows for the nine
months ended July 26, 1997 and July 27, 1996 6
Notes to Consolidated Financial Statements 7-8
Item 2 -
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-11
Part II - Other Information 12
Signatures 13
</TABLE>
<PAGE> 2
WESTERBEKE CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 26, October 26,
1997 1996
------------ -----------------
(Unaudited) (Derived from
Audited Financial
Statements)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 154,800 $ 200,500
Accounts receivable, net of allowance for doubtful accounts
of $62,800 and $60,700, respectively 3,327,900 2,318,500
Inventories (Note 2) 6,214,300 5,428,000
Prepaid expenses and other assets 215,600 249,000
Deferred income taxes 439,400 439,400
------------------------------
Total current assets 10,352,000 8,635,400
Property, plant and equipment, net 2,137,400 1,782,300
Other assets, net 1,416,300 1,204,600
Investments in marketable securities 1,403,500 922,300
Note receivable - related party 126,400 136,600
------------------------------
$ 15,435,600 $ 12,681,200
==============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 184,300 $ 123,400
Current portion of capital leases 31,100 -
Revolving demand note payable 1,320,000 -
Accounts payable 2,356,700 1,630,300
Accrued expenses and other liabilities 653,900 557,400
Accrued income taxes 36,300 8,900
------------------------------
Total current liabilities 4,582,300 2,320,000
------------------------------
Deferred income taxes 123,900 123,900
Deferred compensation 109,300 -
Obligations under capital leases 118,600 -
Long-term debt, net of current portion 537,900 396,300
------------------------------
889,700 520,200
------------------------------
Stockholders' equity:
Common stock, $.01 par value; authorized 5,000,000 shares;
issued 2,132,950 shares at July 26, 1997 and 2,122,950
at October 26, 1996 21,300 21,200
Additional paid-in-capital 5,971,000 5,959,800
Unrealized gain on marketable securities 206,100 159,100
Retained earnings 4,521,200 3,834,100
------------------------------
10,719,600 9,974,200
Less - Treasury shares at cost, 268,138 at July 26, 1997
and 44,400 at October 26, 1996 756,000 133,200
------------------------------
Total stockholders' equity 9,963,600 9,841,000
------------------------------
$ 15,435,600 $ 12,681,200
==============================
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
<PAGE> 3
WESTERBEKE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
July 26, July 27,
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
Net sales $ 6,816,900 $ 5,927,800
Cost of sales 5,154,700 4,505,700
--------------------------
Gross profit 1,662,200 1,422,100
Selling, general and administrative expense 799,500 629,800
Research and development expense 305,000 264,300
--------------------------
Income from operations 557,700 528,000
Interest expense (income), net 37,700 (300)
--------------------------
Income before income taxes 520,000 528,300
Provision for income taxes 209,900 221,900
--------------------------
Net income $ 310,100 $ 306,400
==========================
Income per share:
Net income per share $ 0.15 $ 0.14
==========================
Weighted average common and common equivalents
shares outstanding 2,060,514 2,254,871
==========================
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE> 4
WESTERBEKE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------
July 26, July 27,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Net sales $ 18,986,200 $ 15,392,700
Cost of sales 14,604,100 11,909,600
-----------------------------
Gross profit 4,382,100 3,483,100
Selling, general and administrative expense 2,403,800 1,898,800
Research and development expense 776,300 668,500
-----------------------------
Income from operations 1,202,000 915,800
Interest expense (income), net 37,500 (44,400)
-----------------------------
Income before income taxes 1,164,500 960,200
Provision for income taxes 477,400 396,800
-----------------------------
Net income $ 687,100 $ 563,400
=============================
Income per share:
Net income per share $ 0.34 $ 0.25
=============================
Weighted average common and common equivalents
shares outstanding 2,049,727 2,256,330
=============================
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE> 5
WESTERBEKE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------
July 26, July 27,
1997 1996
------------ -----------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 687,100 $ 563,400
Reconciliation of net income to net cash provided (used)
by operating activities:
Depreciation and amortization 317,300 302,200
Deferred income taxes - -
Changes in operating assets and liabilities:
Accounts receivable (1,009,400) (1,040,000)
Inventories (786,300) 48,800
Prepaid expenses and other assets 33,400 (18,700)
Other assets (228,000) -
Accounts payable 726,400 440,800
Accrued expenses and other liabilities 96,500 19,800
Deferred compensation 109,300 -
Income taxes payable 27,400 (226,300)
---------------------------
Net cash provided (used) by operating activities (26,300) 90,000
---------------------------
Cash flows from investing activities:
Purchase of property, plant and equipment (481,300) (480,900)
Proceeds from payment of note receivable - related party 10,200 9,500
Investment in marketable securities, net (434,200) (272,900)
---------------------------
Net cash used in investing activities (905,300) (744,300)
---------------------------
Cash flows from financing activities:
Proceeds from revolving line of credit 300,000 315,000
Net borrowings under revolving demand note 1,320,000 -
Proceeds from exercise of employee stock options 11,300 58,300
Purchase of treasury stock (622,800) (133,200)
Principal payments on long-term debt and capital lease
obligations (122,600) (29,200)
---------------------------
Net cash provided in financing activities 885,900 210,900
---------------------------
Decrease in cash and cash equivalents (45,700) (443,400)
Cash and cash equivalents, beginning of period 200,500 1,322,200
---------------------------
Cash and cash equivalents, end of period $ 154,800 $ 878,800
===========================
Supplemental cash flow disclosures:
Interest paid $ 90,800 $ 12,400
Income taxes paid $ 574,000 $ 622,800
Supplemental disclosures of non-cash flow items:
Increase in unrealized gains on marketable securities $ 47,000 $ 20,600
Equipment purchase under capital lease $ 175,000 -
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE> 6
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 are 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 26, 1996.
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 26, 1997, the results
of their operations for the three and nine months ended July 26, 1997 and
July 27, 1996, 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.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Financial Accounting Standard No. 128, "Earnings per Share" (FAS 128).
FAS 128 supersedes Accounting Principles Board Opinion No. 15 and
specifies the computation, presentation and disclosure requirements for
earnings per share. FAS 128 is effective for financial Statements for
both interim and annual periods ending after December 15, 1997 and early
application is not permitted. Accordingly, the Company will apply FAS 128
for the quarter ended January 24, 1998 and restate prior period
information as required under the statement. The Company does not expect
the adoption of FAS 128 to have a material impact on reported earnings
per share.
In June 1997, the FASB issued Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" and No. 131, "Disclosure about Segments
of an Enterprise and Related Information," which are effective for fiscal
years beginning after December 15, 1997. The Company is currently
evaluating the effects of these new standards.
Continued
<PAGE> 7
WESTERBEKE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
2. Inventories
-----------
The Company uses the last-in, first-out (LIFO) method to value inventory.
Inventories are comprised of the following:
<TABLE>
<CAPTION>
July 26, October 26,
1997 1996
----------- -----------
<S> <C> <C>
Raw materials $ 5,028,400 $ 4,563,900
Work-in-process 628,800 354,100
Finished goods 557,100 510,000
---------------------------
$ 6,214,300 $ 5,428,000
===========================
</TABLE>
The Company has estimated both the year-end inventory levels and the
inflation/deflation that will occur during the fiscal year.
The Company anticipates an increase in its LIFO valuation account as of
October 25, 1997. Accordingly, the Company has recorded an increase of
$45,000, on a pro rata basis, in the LIFO reserve during the first nine
months of fiscal 1997. During the first nine months of 1996, the Company
recorded, on a pro rata basis, an increase of $40,000 in the LIFO
reserve. Inventories would have been $1,190,600 higher at July 26, 1997
and $1,145,600 higher as of October 26, 1996, if the first- in, first-out
(FIFO) method had been used. Inventory cost determination on the FIFO
method approximates replacement or current cost.
<PAGE> 8
Item 2 - Management's Discussion and Analysis
Of Financial Condition and Results Of Operations
Results of Operations -
- -----------------------
Net sales increased by $889,100, or 15%, during the third quarter of fiscal
1997 and increased $3,593,500 or 23% for the first nine months of fiscal 1997,
as compared to the same periods in fiscal 1996. The increase in third quarter
net sales is primarily attributable to higher unit volume of the Company's
marine generator products and higher spare parts revenues. The increase in net
sales for the first nine months of fiscal 1997 is primarily the result of
higher unit volume of the Company's propulsion engine products and generator
sets as well as higher spare parts revenues.
Gross profit increased $240,100 or 17% during the third quarter and increased
$899,000 or 26% for the first nine months of fiscal 1997, as compared to the
same periods in fiscal 1996. As a percentage of net sales, gross profit was 24%
during the third quarter of fiscal year 1997 as well as fiscal 1996, and
remained constant at 23% for the nine months ended July 26, 1997 compared to
the same period ended July 27, 1996.
Operating expenses increased $210,400 or 24% for the third quarter and $612,800
or 24% for the first nine months of fiscal 1997, as compared to the same
periods in fiscal 1996. Research and development costs have increased due to
the addition of personnel and higher costs related to achieving compliance with
federal and state exhaust emission requirements. Selling and administrative
expenses have increased primarily due to higher advertising, marketing,
warranty and personnel costs.
Net interest expense increased $38,000 during the third quarter and increased
$81,900 for the first nine months of fiscal 1997, as compared to the same
periods in fiscal 1996. The increase in interest expense in the third quarter
and the nine months ended July 26, 1997 is primarily due to interest expense
incurred on the line of credit and term loans with State Street Bank and Trust
Company.
For the third quarter ended July 26, 1997, the Company reported net income of
$310,100, compared to a net income of $306,400 for the same period in fiscal
1996. For the nine months ended July 26, 1997, the Company reported net income
of $687,100, as compared to net income of $563,400 for the nine months ended
July 27, 1996. The increase in net income for the third quarter and for the
nine months of fiscal 1997 is primarily attributable to the increase in net
sales for the period.
<PAGE> 9
WESTERBEKE CORPORATION AND SUBSIDIARY
Liquidity and Capital Resources
- -------------------------------
During the first nine months of fiscal 1997, net cash used by operations was
$26,300, compared to net cash provided by operations of $90,000 for the first
nine months in fiscal 1996. The decrease in cash flow from operations is
primarily attributable to increases in inventory and accounts receivable offset
partially by an increase in accounts payable for the nine-month period ended
July 26, 1997, as compared to the same period in fiscal 1996. The rise in
inventories is primarily attributable to the increased demand and the timing of
engine purchase order receipts. The rise in accounts receivable is attributable
to the increase in net sales for the period ended July 26, 1997.
During the nine months ended July 26, 1997, the Company purchased property,
plant and equipment of $481,300. The Company plans to spend approximately
$60,000 more on equipment during the remainder of the year.
The Company has a $4,000,000 Credit Agreement (the "Credit Agreement") with
State Street Bank and Trust Company, collateralized by inventory, accounts
receivable and general intangibles. The amount of the facility available under
the Credit Agreement was increased on April 25, 1997 from $3,000,000 to
$4,000,000. At July 26, 1997, the Company had $1,320,000 in outstanding
borrowings under the Credit Agreement and approximately $499,600 committed to
cover the Company's reimbursement obligations under certain letters of credit.
The Credit Agreement expires on March 31, 1998.
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 with
State Street Bank and Trust Company, collateralized by various emission testing
and product development equipment and subject to working capital and equity
covenants. On July 31, 1996, the Revolving Line of Credit terminated and
automatically converted into a five-year term loan in the principal amount of
$491,600 bearing a fixed interest rate of 8.96%. At July 26, 1997, the
outstanding principal amount was approximately $400,000.
On April 25, 1997, the Company entered into a $300,000 revolving line of credit
agreement (the "1997 Revolving Line of Credit") and term loan facility with
State Street Bank and Trust Company, collateralized by various items of
emission testing and product development equipment and subject to working
capital and equity covenants. On June 30, 1997, the 1997 Revolving Line of
Credit terminated and automatically converted into a five-year term loan
bearing a fixed interest rate of 8.75%. At July 26, 1997, the outstanding
principal amount was approximately $295,000.
<PAGE> 10
Management believes cash flow from operations and borrowings available under
the Credit Agreement will provide for working capital needs, principal payments
on long-term debt, and capital and operating leases through fiscal 1997.
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 1997.
<PAGE> 11
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 26, 1997
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
period covered by this report.
<PAGE> 12
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 2, 1997 /s/ John H. Westerbeke, Jr.
------------------- -------------------------------------
John H. Westerbeke, Jr.
Chairman of the Board, President
and Principal Executive Officer
Dated September 2, 1997 /s/ Carleton F. Bryant III
------------------- -------------------------------------
Carleton F. Bryant III
Executive Vice President, Chief
Operating Officer and Principal
Financial and Accounting Officer
<PAGE> 13
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000796502
<NAME> WESTERBEKE CORP.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-25-1997
<PERIOD-END> JUL-26-1997
<CASH> 154,800
<SECURITIES> 0
<RECEIVABLES> 3,327,900
<ALLOWANCES> 62,800
<INVENTORY> 6,214,300
<CURRENT-ASSETS> 10,352,000
<PP&E> 5,611,400
<DEPRECIATION> 3,474,000
<TOTAL-ASSETS> 15,435,600
<CURRENT-LIABILITIES> 4,582,300
<BONDS> 0
0
0
<COMMON> 21,300
<OTHER-SE> 9,942,300
<TOTAL-LIABILITY-AND-EQUITY> 15,435,600
<SALES> 18,986,200
<TOTAL-REVENUES> 18,986,200
<CGS> 14,604,100
<TOTAL-COSTS> 14,604,100
<OTHER-EXPENSES> 3,180,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104,800
<INCOME-PRETAX> 1,164,500
<INCOME-TAX> 477,400
<INCOME-CONTINUING> 687,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 687,100
<EPS-PRIMARY> .34
<EPS-DILUTED> 0
</TABLE>
