FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarterly Period Ended September 30, 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 No. 0-17757
W-W CAPITAL CORPORATION
(exact name of Registrant as specified in its charter)
Nevada 93-0967457
(State or other jurisdiction of (IRS Employer Identi-
incorporation or organization) fication Number)
3500 JFK Parkway Suite 202 Ft. Collins, CO 80525
(Address of principal executive offices, including zip code)
(970) 207-1100
(Registrant's telephone number, including area code)
Not Applicable
(Former name, 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 required to file such reports), and (2) has been subject to the filing
requirements for the past 90 days. Yes _X_ No __
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether Registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15 (d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.
Yes ___ No ___ NOT APPLICABLE _X_
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.
Title of Each Class Number of Shares Outstanding
------------------- at December 28, 2000
Common stock ---------------------------------
$0.01 Par Value 5,540,661
<PAGE>
W-W CAPITAL CORPORATION
Index
-----
PART I FINANCIAL INFORMATION PAGE NO.
------ --------------------- --------
Item 1 Balance Sheets
------ September 30, 2000 and June 30, 2000 1
Statements of Income
Three Months Ended
September 30, 2000 and 1999 3
Statements of Cash Flows
Three Months Ended
September 30, 2000 and 1999 4
Notes to Financial Statements 6
Independent Accountant's Report 8
Item 2 Management's Discussion and Analysis
------ of Financial Condition and Results
of Operations 9
PART II OTHER INFORMATION
------- -----------------
Item 1 LEGAL PROCEEDINGS 12
------
Item 2 CHANGES IN SECURITIES 12
------
Item 3 DEFAULTS UPON SENIOR SECURITIES 12
------
Item 4 SUBMISSION OF MATTERS TO VOTE OF
------
SECURITY HOLDERS 12
Item 5 OTHER INFORMATION 12
------
Item 6 EXHIBITS AND REPORT ON FORM 8-K 12
------
SIGNATURES 13
<PAGE>
Part 1-FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
-----------------------------
<TABLE>
<CAPTION>
W-W CAPITAL CORPORATION
-----------------------
Balance Sheets
September 30, June 30,
2000 2000
---- ----
(Unaudited)
<S> <C> <C>
Assets
------
Current assets:
Cash $ 571,549 $ 410,883
----------- -----------
Trade accounts receivable 2,690,367 2,778,734
Less allowance for doubtful accounts (88,000) (88,000)
----------- -----------
Net accounts receivable 2,602,367 2,690,734
----------- -----------
Accounts receivable, other 67,728 42,789
Inventories:
Raw materials 603,123 563,123
Work-in-process 428,056 388,056
Finished goods 3,340,805 3,366,775
----------- -----------
Total inventories 4,371,984 4,317,954
----------- -----------
Prepaid expenses 87,701 35,914
Current portion of notes receivable
from related parties 554 507
Deferred income tax asset 114,000 114,000
----------- -----------
Total current assets 7,815,883 7,612,781
----------- -----------
Property and equipment, at cost: 4,964,066 4,817,913
Less accumulated depreciation
and amortization (2,920,946) (2,858,586)
----------- -----------
Net property and equipment 2,043,120 1,959,327
----------- -----------
Other Assets:
Long-term notes receivable from
related parties, net of current portion 21,073 21,627
Loan Acquisition Costs--Net of
accumulated amortization of $50,404
at September 30, 2000 and $42,661
at June 30, 2000 33,551 41,294
Other assets 9,121 10,455
----------- -----------
Total other assets 63,745 73,376
----------- -----------
TOTAL ASSETS $ 9,922,748 $ 9,645,484
=========== ===========
</TABLE>
(Continued on following page)
See accompanying notes to financial statements.
1
<PAGE>
<TABLE>
<CAPTION>
W-W CAPITAL CORPORATION
-----------------------
Balance Sheets, Continued
September 30, June 30,
2000 2000
---- ----
(Unaudited)
<S> <C> <C>
Liabilities
-----------
Current Liabilities:
Accounts Payable $ 2,931,297 $ 2,728,867
Accrued property taxes 38,751 30,254
Accrued payroll and related taxes 249,781 303,280
Accrued interest payable 26,459 26,203
Accrued income taxes, current 102,300 45,000
Current portion of long-term notes payable 417,000 418,000
Current portion of capital lease obligations 23,000 23,000
Other current liabilities 162,149 88,195
----------- -----------
Total current liabilities 3,950,737 3,662,799
----------- -----------
Other Liabilities:
Long-term notes payable, net of current portion 2,624,236 2,783,192
Long-term capital lease obligations, net
of current portion 62,927 68,426
Deferred income tax liability 131,000 131,000
Negative goodwill, net of accumulated
amortization of $1,366 at September 30, 2000
and $781 at June 30, 2000 45,487 46,072
----------- -----------
Total other liabilities 2,863,650 3,028,690
----------- -----------
TOTAL LIABILITIES 6,814,387 6,691,489
----------- -----------
Stockholders' Equity
--------------------
Preferred stock: $10.00 par value,
400,000 shares authorized -- --
Common stock, $0.01 par value, 15,000,000
shares authorized; 5,540,661 shares issued
and outstanding at September 30, 2000
and June 30, 2000 55,406 55,406
Capital in excess of par value 3,304,629 3,304,629
Accumulated Deficit (202,768) (357,134)
----------- -----------
3,157,267 3,002,901
Less 120,264 shares of treasury stock at cost (48,906) (48,906)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 3,108,361 2,953,995
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 9,922,748 $ 9,645,484
=========== ===========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
W-W CAPITAL CORPORATION
-----------------------
Statements of Income
(Unaudited)
Three Months Ended
September 30,
-------------
2000 1999
---- ----
<S> <C> <C>
Net sales $ 6,112,497 $ 4,985,387
Cost of goods sold 4,925,961 4,014,330
----------- -----------
Gross profit 1,186,536 971,057
----------- -----------
Operating expenses:
Selling expenses 378,988 360,479
General and administrative expenses 503,987 373,099
----------- -----------
Total operating expenses 882,975 733,578
----------- -----------
Operating earnings 303,561 237,479
----------- -----------
Other income (expenses):
Interest income 20,900 16,989
Interest expense (99,455) (73,409)
Gain on sale of assets 27,300 --
Other income (expense), net (5,940) 2,017
----------- -----------
Total other income (expense) (57,195) (54,403)
----------- -----------
Earnings before income taxes 246,366 183,076
Income taxes 92,000 --
----------- -----------
Net earnings $ 154,366 $ 183,076
=========== ===========
Earnings per common share
Basic
Net earnings $ .03 $ .03
Weighted average number of
common shares 5,540,661 5,540,661
Diluted
Net earnings $ .03 $ .03
Weighted average number of
common shares 5,540,661 5,540,661
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
W-W CAPITAL CORPORATION
-----------------------
Statements of Cash Flows
(Unaudited)
Three Months Ended
September 30,
-------------
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 154,366 $ 183,076
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 70,103 77,968
Provision for doubtful accounts receivable -- 5,000
Gain on sale of property and equipment (27,300) --
Amortization of negative goodwill 585 --
Change in assets and liabilities:
Accounts receivable 88,367 (317,335)
Inventories (54,030) (210,329)
Other current and non-current assets (75,392) (37,395)
Accounts payable 202,430 111,662
Accrued expenses and other current liabilities 86,508 81,535
--------- ---------
Net cash provided by (used in)
operating activities 444,467 (105,818)
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment (86,644) (28,971)
Proceeds from sale of property and equipment 27,300 --
Proceeds from stockholders' notes receivable 507 --
--------- ---------
Net cash used in investing activities $ (58,837) $ (28,971)
--------- ---------
</TABLE>
(Continued on following page)
4
<PAGE>
<TABLE>
<CAPTION>
W-W CAPITAL CORPORATION
-----------------------
Statements of Cash Flows, Continued
(Unaudited)
Three Months Ended
September 30,
-------------
2000 1999
---- ----
<S> <C> <C>
Cash flows from financing activities:
Payments on notes payable, financial
institutions and government entities (4,928,134) (4,171,566)
Proceeds from notes payable 4,708,669 4,322,094
Payment on capital leases (5,499) (3,961)
----------- -----------
Net cash provided by (used in)
financing activities (224,964) 146,567
----------- -----------
Net increase in cash 160,666 11,778
Cash at beginning of period 410,883 311,491
----------- -----------
Cash at end of period $ 571,549 $ 323,269
=========== ===========
Supplemental disclosures of cash flow Information:
Cash paid during the period for interest $ 96,819 $ 71,062
Installment loans to acquire property
and equipment $ 59,509 $ --
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
W-W CAPITAL CORPORATION
-----------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTE 1 - BASIS OF PRESENTATION
------------------------------
The accompanying unaudited financial statements include the accounts of W-W
Capital Corporation (the Company) and its three wholly owned subsidiaries W-W
Manufacturing Co., Inc., Titan Industries, Inc., and Eagle Enterprises, Inc. All
significant intercompany accounts and transactions have been eliminated.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. They do not include all information and footnotes necessary for a fair
presentation of financial position, results of operations and changes in cash
flows in conformity with generally accepted accounting principles for full-year
financial statements. However, except as disclosed herein, there has been no
material change in the information disclosed in the notes to W-W Capital
Corporation's financial statements included in its Annual Report on Form 10-K
for the year ended June 30, 2000. In the opinion of management, all adjustments
(consisting of normal recurring accrual basis adjustments) considered necessary
for a fair presentation have been reflected in the accompanying financial
statements. Operating results for the three month period ended September 30,
2000, are not necessarily indicative of the results that may be expected for the
year ended June 30, 2001.
NOTE 2 - NET BASIC EARNINGS PER SHARE
-------------------------------------
The net basic earnings per share amount included in the accompanying
statements of income have been computed using the weighted-average number of
shares of common stock outstanding and the dilative effect, if any, of common
stock equivalents existing during the applicable three month period.
NOTE 3 - RELATED PARTY TRANSACTION
----------------------------------
The Company has a number of related party transactions. See the footnotes
to W-W Capital Corporation financial statements for the year ended June 30,
2000, included in its Annual Report on Form 10-K for the nature and type of
related party transactions.
6
<PAGE>
A summary of the related party transactions that effect the Company's
statements of income for the three months ended September 30, 2000 and 1999,
respectively, is as follows:
Three Months Ended
September 30,
-------------
Transactions with
Related parties 2000 1999
--------------- ---- ----
Rent expense $15,000 $15,000
Interest expense $ 165 $ 349
7
<PAGE>
Independent Accountant's Report
-------------------------------
Board of Directors and Stockholders
W-W Capital Corporation
Fort Collins, Colorado
We have reviewed the accompanying balance sheets, statements of
operations, and cash flows of W-W Capital Corporation and consolidated
subsidiaries as of September 30, 2000, and for the period then ended. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
BROCK AND COMPANY, CPAs, P.C.
Fort Collins, Colorado
December 5, 2000
8
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
------------------------------------------------------------------------
The business of the Company is carried on within two segments by a
number of operating units. The livestock handling equipment segment is composed
of W-W Manufacturing (W-W Manufacturing), Eagle Enterprises (Eagle), and W-W
Paul Scales (Paul), and the water and environmental product segment is
represented by Titan Industries (Titan).
(A) Analysis of Results of Operations
---------------------------------
The Company had net earnings, after taxes of $92,000, of $154,366 for
the three month period ended September 30, 2000, as compared to net earnings of
$183,076 in 1999 where taxes were not a factor due to the use of a net operating
loss carry forward.
Net sales increased to $6,112,497 for the three months ended September
30, 2000, compared to $4,985,387 for 1999. The following table represents actual
sales by segment group.
Sales by segment group: Three Months Ended
September 30,
-------------
Increase
2000 1999 (Decrease)
---- ---- ----------
Livestock Handling Equipment $ 3,582,142 $ 2,686,554 $ 895,588
Water and Environmental Products 2,530,355 2,298,833 231,522
--------- --------- ---------
Total Sales $ 6,112,497 $ 4,985,387 $ 1,127,110
========= ========= =========
The sales in the water and environmental product segment increased to
$2,530,355 as compared to $2,298,833 for the corresponding period of 1999. The
increase of $231,522 is attributable to strong demand for manufactured screens,
flush joint, and custom fabricated products. The water well supply aspect of the
business continues to remain competitive in pricing and margin, while the
advanced techniques developed for slotting, perforating, and threading offer the
Company tremendous opportunity for growth. The Company continues to lead the way
with innovative products used in the water, horizontal drilling, waste
treatment, and mining industries. New products introduced include Enviroflex
well screens used to solve the problem of sedimentation in horizontal wells or
drainage screens. The unique feature of the Enviroflex screen is the
installation in bore holes is safer and easier, and it can be joined in a
variety of ways. Another new innovation of the Company is the custom mega screen
product. This product is an affordable high open area plastic screen with
precision drilled round holes. The Company feels the custom nature of this
product allowing for short or long length, various hole diameters, and spacing
allows it to be used in various applications and markets. Titan's Ver-Ta-Slot
product continues to show strong acceptance. This product was developed for
heavier wall applications found in landfills, highway construction, and various
mining applications. Vertical slotted openings are available in various
diameters, schedules, and types of pipe. The Company had developed the
Ver-Ta-Slot for all applications, and material including belled end, gasket end,
plain end, or flush joint material.
9
<PAGE>
Sales in the livestock equipment segment increased $895,588 to
$3,582,142 for the three months ended September 30, 2000 compared to $2,686,554
in the same period of 1999. The increase was due to strong cattle prices,
improved market conditions, and strong acceptance of the new equine products.
The Company continues to make improvements to various existing products and is
planning on introducing some significant changes in the spring of 2001. The
Company continues to expand its market area in the upper midwest and west. The
east coast market, serviced by the Livingston, Tennessee plant, continues to
show improvements as this market continues to accept a higher quality of
equipment replacing the lighter weight products previously offered in this
market. As market conditions remain strong through the winter months and spring
of 2001, the Company expects to see improved sales in traditional cattle
products, as well as rodeo and equine product lines. Special sales to expo
centers, fairs, and livestock shows continue to improve. The Company is
presently involved with several projects in the international market and is
expected to see this area of sales improve throughout 2001.
Gross margins remained virtually the same with a slight drop from 19.5%
for the three month period ended September 30, 2000 to 19.4% for the same period
of 1999. Margins in the water and environmental product segment improved from
19.2% in 1999 to 19.3% in 2000. Margins remained constant based on the leveling
off of prices on PVC pipe and the Company's continued effort to improve higher
margin sales in the manufactured and custom fabricated products. Gross margins
on the wholesale water well products continue to be very competitive as the
Company finds ways to improve these margins with new revolutionary products.
Gross margins in the livestock equipment segment remained constant from fiscal
1999 to fiscal 2000 despite labor, shipping, and manufacturing problems in the
Dodge City facility. Many products during the quarter had to be built in
temporary production facilities in Thomas due to labor shortages in Dodge City.
These products then had to be loaded on trucks and shipped to Dodge City for
painting and then reshipped to our distributors/dealers. These extra costs,
along with other manufacturing insufficiencies in Dodge City, should have caused
a bigger drop in margins, but with the efforts of all employees, cost increases
were kept to a minimum. Management expects gross margins to improve after the
consolidation of the two plants into the new facility in Thomas, Oklahoma. It is
anticipated that the move will take place during January 2001 and operations
will be in full swing by the end of February 2001.
Operating profit in the water and environmental products segment
decreased to $77,620 as compared to $98,227 for the same period of 1999. The
decrease is due to the income tax expense accrual of $52,000 which was not
reflected for the same period of 1999. Profits in the livestock equipment
segment increased to $135,849 for the quarter ended September 30, 2000 as
compared to $90,177 for the same period of 1999. The increase realized by this
segment was due to improved margins from special expo contracts and equine
equipment. Management anticipates profits to remain steady through the balance
of fiscal 2001 with a slump during the last half of the second quarter and first
half of the third quarter due to the movement of operations from Dodge City,
Kansas to Thomas, Oklahoma.
Selling expenses as a percentage of sales decreased slightly from 7.2%
for the three month period of September 30, 1999 as compared to 6.2% for the
same period of 2000. This decrease was due to the significant increase in sales
without the related increase in expense. The dollars expended on selling expense
increased only slightly from $360,479 for the three months ended September 30,
1999 to $378,988 for the same period of 2000, an increase of $18,509. The
Company will continue its aggressive pursuit of new markets and expanding its
distributor/dealer base.
10
<PAGE>
General and administration expenses increased from 7.5% for the quarter
ended September 30, 1999 to 8.2% for the corresponding quarter in 2000. This
increase was due to slightly higher salaries in both segments of operations and
legal and accounting costs related to the spin off of Titan. It is anticipated
that general and administrative costs will remain constant in the last half of
fiscal 2001.
Interest expense increased from $73,409 for the three months ended
September 30, 1999 to $99,455 for the same period of 2000. This increase is due
to higher interest rates in 2000 as compared to 1999. Also, borrowings by both
segments under the revolving credit facilities have increased due to larger
inventories being maintained. The Company plans on maintaining higher levels of
inventory in the livestock equipment segment while moving from Dodge City to
Thomas in an effort to maintain sales levels while shut down. After the move,
and when operations get organized in Thomas, overall inventory and borrowings
should return to normal levels.
(B) Liquidity and Capital Resources
-------------------------------
The Company's principal sources of liquidity are internally generated
funds and borrowings under its credit facilities. The Company generated funds
from operations with net earnings of $154,366 and produced a traditional cash
flow from operations of $224,469. This cash flow and funds from operating lines
were used to fund the sales growth of $1,127,110 and the resulting inventory and
accounts receivable increase. The Company used cash from investing for the
purchase and updating of new equipment. Cash used by financing activities
resulted in a net decrease in borrowings for the quarter ended September 30,
2000 of $219,465. With the increase in sales growth, the Company used its
revolving lines extensively to carry the additional inventory and accounts
receivable that came along with sales growth, but with continued profits overall
borrowings were reduced. As the Company moves further into fiscal 2001, it
anticipates continued sales growth with a leveling off of borrowings.
Based on current conditions in all operating segments and the general
economy, the Company feels that it will continually improve in both sales and
operating earnings through fiscal 2001. However, management feels that a
temporary decrease in sales and profits could result in the livestock equipment
segment during the move of operations from Dodge City, Kansas to Thomas,
Oklahoma. The Company is planning to keep the shut down to a minimum due to an
increase in inventory on hand. With the increased working capital and lines of
credit, the Company feels it has an adequate supply of liquidity to meet its
needs.
11
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
Not Applicable
ITEM 2. CHANGES IN SECURITIES
---------------------
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
Not Applicable
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
--------------------------------------------------
Not Applicable
ITEM 5. OTHER INFORMATION
-----------------
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
Exhibit 27 Financial Data Schedule
12
<PAGE>
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
W W CAPITAL CORPORATION
(Registrant)
Dated: December 28, 2000 By: /s/ Steve D. Zamzow
----------------------------------
Steve D. Zamzow, President & CEO
Dated: December 28, 2000 By: /s/ Mike Dick
----------------------------------
Mike Dick, Controller
13
