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: January 22, 2000
----------------
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 March 1, 2000
---------------------------- --------------
Common Stock, $.01 par value 1,917,812
WESTERBEKE CORPORATION AND SUBSIDIARY
INDEX
Page
Part I - Financial Information
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets as
of January 22, 2000 and
October 23, 1999 3
Consolidated Statements of
Operations for the three
months ended January 22, 2000
and January 23, 1999 4
Consolidated Statements of
Cash Flows for the three
months ended January 22, 2000
and January 23, 1999 5
Notes to Consolidated
Financial Statements 6-8
Item 2 -
Management's Discussion and
Analysis of Financial Condition
and Results of Operations 9-11
Item 3 -
Quantitative and Qualitative Disclosures
About Market Risk 12
Part II - Other Information 13
Signatures 14
WESTERBEKE CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 22, October 23,
2000 1999
--------------------------
(Unaudited) Audited
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 177,200 $ 1,739,300
Accounts receivable, net of allowance for
doubtful accounts of $59,200 3,680,400 2,502,100
Inventories (Note 2) 7,875,100 5,640,200
Prepaid expenses and other assets 593,100 476,900
Prepaid income taxes - 35,600
Deferred income taxes 577,900 577,900
--------------------------
Total current assets 12,903,700 10,972,000
--------------------------
Property, plant and equipment, net 2,180,900 2,027,300
Other assets, net 2,198,500 2,199,400
Investments in marketable securities 88,400 91,400
Note receivable - related party 87,800 93,400
--------------------------
$17,459,300 $15,383,500
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 193,400 $ 192,900
Revolving demand note payable 400,000 -
Accounts payable 3,216,600 2,248,700
Accrued income taxes 146,700 -
Accrued expenses and other liabilities 1,175,600 914,000
--------------------------
Total current liabilities 5,132,300 3,355,600
--------------------------
Deferred income taxes 4,300 13,600
Deferred compensation 424,500 409,200
Long-term debt, net of current portion 177,900 224,500
--------------------------
Total liabilities 5,739,000 4,002,900
--------------------------
Stockholders' equity:
Common stock, $.01 par value; authorized
5,000,000 shares; issued 2,185,950 shares 21,900 21,900
Additional paid-in-capital 6,025,300 6,025,300
Accumulated other comprehensive income
(Note 3) 3,200 16,900
Retained earnings 6,425,900 6,072,500
--------------------------
12,476,300 12,136,600
Less - Treasury shares 268,138 at cost 756,000 756,000
--------------------------
Total stockholders' equity 11,720,300 11,380,600
--------------------------
$17,459,300 $15,383,500
==========================
</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
-------------------------
January 22, January 23,
2000 1999
-------------------------
(Unaudited)
<S> <C> <C>
Net sales $8,791,100 $5,446,800
Cost of sales 6,641,500 4,490,800
------------------------
Gross profit 2,149,600 956,000
Selling, general and administrative expense 1,203,700 818,300
Research and development expense 348,500 327,400
------------------------
Income (loss) from operations 597,400 (189,700)
Interest and dividend income, net 8,900 36,200
Other expenses, net 10,400 30,700
------------------------
Income (loss) before income taxes 595,900 (184,200)
Provision for income taxes (benefit) 242,500 (73,700)
------------------------
Net income (loss) $ 353,400 $ (110,500)
========================
Income (loss) per common share, basic $ .18 $ (.06)
========================
Income (loss) per common share, diluted $ .17 $ (.06)
========================
Weighted average common shares, basic 1,917,812 1,917,812
========================
Weighted average common shares, diluted 2,049,559 1,917,812
========================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
WESTERBEKE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
January 22, January 23,
2000 1999
--------------------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 353,400 $ (110,500)
Reconciliation of net income (loss) to net cash
used by operating activities:
Depreciation and amortization 109,800 114,800
Deferred income taxes (9,300) 65,900
Changes in operating assets and liabilities:
Accounts receivable (1,178,300) (49,900)
Inventories (2,234,900) (969,100)
Prepaid expenses and other assets (116,200) (39,700)
Other assets (1,700) (23,700)
Accounts payable 967,900 138,900
Accrued expenses and other liabilities 261,600 161,800
Deferred compensation 15,300 17,500
Income taxes 182,300 (185,200)
-------------------------
Net cash used by operating activities (1,650,100) (879,200)
-------------------------
Cash flows used in investing activities:
Purchase of property, plant and equipment (260,800) (80,900)
Proceeds from payment of note receivable -
related party 5,600 2,600
Proceeds from sale of marketable securities (10,700) (108,300)
-------------------------
Net cash used in investing activities (265,900) (186,600)
-------------------------
Cash flows from financing activities:
Net borrowings under revolving demand note 400,000 1,050,000
Principal payments on long-term debt and capital
lease obligations (46,100) (48,400)
-------------------------
Net cash provided in financing activities 353,900 1,001,600
-------------------------
Decrease in cash and cash equivalents (1,562,100) (64,200)
Cash and cash equivalents, beginning of period 1,739,300 101,900
-------------------------
Cash and cash equivalents, end of period $ 177,200 $ 37,700
=========================
Supplemental cash flow disclosures:
Interest paid $ 7,700 $ 25,500
Income taxes paid $ 60,400 $ 111,500
Supplemental disclosures of non-cash items:
Increase (decrease) in unrealized gains on marketable
securities, net of income taxes $ (13,700) $ 97,700
</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 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 23,
1999.
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 January 22, 2000, the results of
their operations and the cash flows, 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.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities" (SFAS 133).
The statement requires companies to recognize all derivatives as either
assets or liabilities with the instruments measured at fair value. The
accounting for changes in fair value gains and losses depends on the
intended use of the derivative and its resulting designation. The statement
is effective for all fiscal quarters of fiscal years beginning after June
15, 2000. The Company does not believe the adoption of SFAS 133 will have a
material impact on the financial statements.
C. Earnings per Share
Basic income per common share is computed by dividing income available to
common stockholders by the weighted average number of shares outstanding for
the period. Diluted income per share reflects the maximum dilution that
would have resulted from the exercise of stock options. Diluted income per
share is computed by dividing net income by the weighted average number of
common shares and all dilutive securities, except when the effect would be
antidilutive.
<TABLE>
<CAPTION>
For the three months ended:
January 22, 2000 January 23, 1999
--------------------------------------------------------------------
Income Net Income Net
per share Shares Income per share Shares Loss
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic $ .18 1,917,812 $353,400 $(.06) 1,917,812 $(110,500)
Effect of
Stock options (.01) 131,747 - - - -
--------------------------------------------------------------------
Diluted $ .17 2,049,559 $353,400 $(.06) 1,917,812 $(110,500)
</TABLE>
2. Inventories
- ---------------
The Company uses the last-in, first-out (LIFO) method to value
inventory.
Inventories are comprised of the following:
<TABLE>
<CAPTION>
January 22, October 23,
2000 1999
-------------------------
<S> <C> <C>
Raw materials $6,111,600 $4,539,800
Work-in-process 694,500 762,400
Finished goods 1,069,000 338,000
------------------------
$7,875,100 $5,640,200
========================
</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 21, 2000. Accordingly, the Company has recorded an increase of
$22,500, on a pro rata basis, in the LIFO reserve during the first three
months of fiscal 2000. During the first three months of 1999, the Company
recorded, on a pro rata basis, an increase of $22,500 in the LIFO reserve.
Inventories would have been $1,101,100 higher at January 22, 2000 and
$1,078,600 higher as of October 23, 1999, if the first- in, first-out (FIFO)
method had been used. Inventory cost determination on the FIFO method
approximates replacement or current cost.
3. Comprehensive Income
- ------------------------
Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from nonowner sources. It includes all changes in equity
during a period except those resulting from investments by owners and
distributions to owners. The components of total comprehensive loss
resulting from unrealized gains or losses on marketable securities for the
three months ended January 22, 2000 and January 23, 1999 are as follows:
<TABLE>
<CAPTION>
2000 1999
----------------------
<S> <C> <C>
Net income (loss) $353,400 $(110,500)
Other comprehensive income (loss) (13,700) 97,700
----------------------
Comprehensive income (loss) $339,700 $ (12,800)
======================
</TABLE>
Item 2 - Management's Discussion and Analysis Of Financial
- ----------------------------------------------------------
Condition and Results Of Operations
-------------------------------------------------
Results of Operations -
- -----------------------
Net sales increased by $3,344,300 or 61%, during the first quarter of fiscal
2000 as compared to the same period in fiscal 1999. The increase in net
sales is primarily attributable to higher unit volume of the Company's
product line.
Gross profit increased $1,193,600 or 125% during the first quarter of fiscal
2000 as compared to the same period in fiscal 1999. As a percentage of net
sales, gross profit was 24% during the first quarter of fiscal 2000, as
compared to 18% during the first quarter of fiscal 1999. The increase in
the gross profit percentage is primarily attributable to the increase in net
sales attributable to favorable market conditions and a decrease in
manufacturing costs as a result of manufacturing efficiencies.
Operating expenses increased $406,500 or 35% for the first quarter of fiscal
2000 as compared to the same period in fiscal 1999. The increase is
primarily attributable to the hiring of additional personnel and related
costs to support the increase in net sales. As a percentage of net sales,
operating expenses were 18% during the first quarter of fiscal 2000, as
compared to 21% during the first quarter of fiscal 1999.
Net interest and dividend income decreased $27,300 during the first quarter
of fiscal 2000 as compared to the same period in fiscal 1999. The decrease
in interest is primarily due to a decrease in dividends earned on marketable
securities.
Other expense decreased $20,300 during the first quarter of fiscal 2000 as
compared to the same period in fiscal 1999. Other expense in both periods
is comprised of the realized loss from the sale of certain marketable
securities.
For the quarter ended January 22, 2000, the Company reported a net income of
$353,400, compared to a net loss of $110,500 for the same period in fiscal
1999. The increase in the net income is primarily attributable to the
increase in net sales and improved gross profit margins during the quarter.
WESTERBEKE CORPORATION AND SUBSIDIARY
Liquidity and Capital Resources
- -------------------------------
During the first three months of fiscal 2000, net cash used by operations
was $1,650,100, compared to $879,200 for the first three months in fiscal
1999. Net accounts receivable increased $1,178,300 during the first quarter
of fiscal 2000, as compared to an increase of $49,900 in the same period in
fiscal 1999, primarily from the increase in net sales. Net inventory
increased $1,265,800 during the first quarter of fiscal 2000, as compared to
the same period in fiscal 1999, primarily from the timing of inventory
purchases.
During the three months ended January 22, 2000, the Company purchased
machinery and equipment of $260,800. The Company plans to spend
approximately $500,000 more on equipment during the remainder of the year.
In addition, the Company has entered into an agreement to purchase a 110,000
square foot facility located in Taunton, Massachusetts. This facility will
enable the Company to consolidate its current operations into one location.
The MassDevelopment Financing Agency has approved the Company for a
$5,000,000 tax-exempt industrial revenue bond, which will be financed
through GE Capital Public Finance. The term of the loan is fifteen years at
a fixed rate of 6.46%. The purchase of the facility is scheduled for mid
April and is subject to the fulfillment of customary closing conditions.
The aggregate cost of the facility and related improvements is estimated to
be $5,000,000. The Company does not anticipate any material disruption to
its normal operation during this transition period. It is anticipated that
by the fall of 2000 the Company will be fully operating from its new
location, although there can be no assurance that delays or disruptions to
operations will not occur.
The Company has a $4,000,000 Credit Agreement with Citizens Bank of
Massachusetts, collateralized by inventory, accounts receivable and general
intangibles. The Credit Agreement was renewed on March 31, 1999, and will
expire on March 31, 2000. At January 22, 2000, the Company had $400,000 in
outstanding borrowings under the Credit Agreement and approximately $558,500
committed to cover the Company's reimbursement obligations under certain
letters of credit and bankers' acceptances. Management is in the process of
renewing the Credit Agreement and anticipates bank approval, although there
can be no assurance that the facility will be renewed.
The company's two term loans with a bank aggregate of $295,900, will be paid
in monthly installments to 2001-2002.
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
2000.
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). The value of the U.S.
dollar relative to the yen had no material effect on the cost of the
Company's products during the first quarter of fiscal 2000.
Year 2000 Compliance
- --------------------
In fiscal years 1998 and 1999 the Company had developed a plan to reduce the
probability of operational difficulties due to Year 2000 related failures.
The components of the Company's plan included an assessment of internal
systems for modification and/or replacement, communication with vendors to
determine their state of readiness to maintain an uninterrupted supply of
goods and services to the Company; an evaluation of the Company's production
equipment as to its ability to function properly after the turn of the
century; an evaluation of facility related issues; and the development of a
contingency plan. As of March 1, 2000 the Company has not experienced any
Year 2000 issues.
This Quarterly Report on Form 10-Q may contain forward-looking information
about the Company. The Company is hereby setting forth statements
identifying important factors that may cause the Company's actual results to
differ materially from those set forth in any forward-looking statements
made by the Company. Some of the most significant factors include: an
unanticipated down-turn in the recreational boating industry resulting in
lower demand for the Company's products; the unanticipated loss of, or
decline in sales to, a major customer; the unanticipated loss of a major
supplier; the inability of the Company to effect required modifications of
its products to meet governmental regulations with respect to emission
standards; foreign currency fluctuations resulting in cost increases to the
Company for its foreign supplied components; and any unforeseen
inefficiencies arising from the transition to the new facility.
Accordingly, there can be no assurances that any anticipated future results
will be achieved.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
Market risk represents the risk of changes in the value of short-term
investments and financial instruments caused by fluctuations in investment
prices and interest rates.
The Company addresses market risks in accordance with established policies.
The Company's risk-management activities involve risk and uncertainties and
accordingly, results could differ materially from those projected.
Investment Price Risk
- ---------------------
The value of the Company's investment portfolio at January 22, 2000 is
stated at market value.
Interest Rate Risk
- ------------------
Due to the fact that the long-term debt will mature within three years,
management has determined that the fair value would not be materially
different from the carrying value at January 22, 2000.
Part II. Other Information
Item 1 Legal Proceedings
-------------------------
The Company has initiated arbitration with the American Arbitration
Association in New York against Daihatsu Motor Company, Ltd.
("Daihatsu") for breach of contract and other claims. The Company is
seeking damages based on Daihatsu's breach of a Component Sales
Agreement which also granted the Company rights to certain engines
including an engine Daihatsu began marketing in 1993 through a joint
venture with Briggs & Stratton Corporation. In a separate but related
case pending in the Federal District Court for the District of
Massachusetts, the Company is seeking damages from Briggs & Stratton
Corporation for tortious interference with the Company's Agreement
with Daihatsu and other related claims.
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) Exhibits
27 Financial Data Schedule for the three months ended
January 22, 2000
(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 March 6, 2000 By /s/ John H. Westerbeke, Jr.
------------- ---------------------------
John H. Westerbeke, Jr.
Chairman of the Board,
President and Principal
Executive Officer
Dated March 6, 2000 By /s/ Carleton F. Bryant III
------------- --------------------------
Carleton F. Bryant III
Executive Vice President,
Chief Operating Officer
and Principal Financial
and Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-21-2000
<PERIOD-END> JAN-22-2000
<CASH> 177,200
<SECURITIES> 0
<RECEIVABLES> 3,680,400
<ALLOWANCES> 59,200
<INVENTORY> 7,875,100
<CURRENT-ASSETS> 12,903,700
<PP&E> 6,348,600
<DEPRECIATION> 4,167,700
<TOTAL-ASSETS> 17,459,300
<CURRENT-LIABILITIES> 5,132,300
<BONDS> 0
0
0
<COMMON> 21,900
<OTHER-SE> 11,698,400
<TOTAL-LIABILITY-AND-EQUITY> 17,459,300
<SALES> 8,791,100
<TOTAL-REVENUES> 8,791,100
<CGS> 6,641,500
<TOTAL-COSTS> 6,641,500
<OTHER-EXPENSES> 1,552,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (8,900)
<INCOME-PRETAX> 595,900
<INCOME-TAX> 242,500
<INCOME-CONTINUING> 353,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 353,400
<EPS-BASIC> .18
<EPS-DILUTED> .17
</TABLE>
