<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 QSB
(Mark One)
/XX/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30,1996
/ / 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: 0-19717
WPI GROUP, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
<TABLE>
<S> <C>
NEW HAMPSHIRE 02-0218767
- ------------------------------------------------------------------ ---------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
1155 Elm Street, Manchester, New Hampshire 03101
- -------------------------------------------------------- ---------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Issuer's telephone number including area code: (603) 627-3500
_______________________________________________________________________________
(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 past 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 ______
Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years:
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Yes ______ No _______
Applicable only to corporate issuers:
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Class Outstanding as of August 1 , 1996
----- ---------------------------------
Common stock, par value $.01 5,926,789 shares
Transitional Small Business Disclosure Format (check one); Yes _______
No X
<PAGE> 2
WPI GROUP, INC.
INDEX
PAGE NO.
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets 3
- June 30, 1996 and September 24, 1995
Consolidated Statements of Income 4
- Three months ended June 30,1996 and June 25, 1995
- Nine months ended June 30,1996 and June 25, 1995
Consolidated Statements of Cash Flows
- Nine months ended June 30,1996 and June 25, 1995 5
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition 8
and Results of Operations
PART II. - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
</TABLE>
- 2 -
<PAGE> 3
WPI GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 24, June 30,
1995 (1) 1996
------------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 29,664 $ 176,570
Accounts receivable - net of allowance for
doubtful accounts of $217,000 and $335,145
respectively 4,490,477 9,131,732
Accounts receivable - other 146,145 3,376,177
Inventories 3,748,601 6,170,370
Prepaid expenses and other current assets 118,607 192,225
Prepaid income taxes 505,000 505,000
Refundable income taxes 101,093 --
----------- -----------
Total current assets 9,139,587 19,552,074
PROPERTY, PLANT AND EQUIPMENT
at cost less accumulated depreciation 6,857,475 7,350,165
OTHER ASSETS, net 6,383,275 9,060,312
----------- -----------
$22,380,337 $35,962,551
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,484,470 $ 3,702,315
Accrued expenses 1,029,424 2,267,478
Accrued income taxes -- 306,409
----------- -----------
Total current liabilities 2,513,894 6,276,202
NOTE PAYABLE TO BANK 1,123,308 8,625,000
NON-COMPETE AGREEMENT 65,000 30,000
DEFERRED INCOME TAXES 1,367,000 1,367,000
COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; authorized
20,000,000 shares, issued 5,687,850
and 5,926,759 respectively. 56,878 59,268
Additional paid-in capital 12,959,646 13,534,884
Retained earnings 4,294,611 6,070,197
----------- -----------
Total stockholders equity 17,311,135 19,664,349
----------- -----------
$22,380,337 $35,962,551
=========== ===========
</TABLE>
(1) Derived from WPI Group, Inc.'s audited September 24, 1995 financial
statements.
See notes to financial statements
- 3 -
<PAGE> 4
WPI GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 25, June 30, June 25, June 30,
1995 1996 1995 1996
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $7,054,323 $12,655,422 $18,265,111 $33,003,591
COST OF GOODS SOLD 4,225,249 7,892,902 11,177,450 20,086,060
---------- ----------- ----------- -----------
GROSS PROFIT 2,829,074 4,762,520 7,087,661 12,917,531
---------- ----------- ----------- -----------
OPERATING EXPENSES:
Research and new product
development 420,749 1,038,104 1,091,946 2,471,985
Selling, general and
administration 1,787,943 2,727,647 4,844,662 7,576,963
---------- ----------- ----------- -----------
Total operating expense 2,208,692 3,765,751 5,936,608 10,048,948
---------- ----------- ----------- -----------
OPERATING INCOME 620,382 996,769 1,151,053 2,868,583
---------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest income 2,361 3,984 14,905 15,067
Miscellaneous income 4,993 18,457 49,791 77,896
Interest expense (54,899) (100,134) (79,317) (350,960)
---------- ----------- ----------- -----------
INCOME BEFORE PROVISION FOR
INCOME TAXES 572,837 919,076 1,136,432 2,610,586
PROVISION FOR INCOME TAXES 217,000 268,000 431,000 835,000
---------- ----------- ----------- -----------
NET INCOME $ 355,837 $ 651,076 $ 705,432 $ 1,775,586
========== =========== =========== ===========
NET INCOME PER WEIGHTED
AVERAGE NUMBER
OF COMMON SHARES -
PRIMARY AND FULLY
DILUTED $ .06 $ .11 $ .12 $ .30
========== =========== =========== ===========
Weighted Average Common
Shares and Equivalents
Outstanding 5,810,338 6,066,953 5,812,099 5,973,851
========== =========== =========== ===========
</TABLE>
See notes to financial statements
-4-
<PAGE> 5
WPI GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------
June 25, June 30,
1995 1996
---------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 705,432 $ 1,775,586
----------- ------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 912,963 1,326,503
Changes in current assets and liabilities
net of assets acquired
Accounts receivable (742,671) (2,905,084)
Accounts receivable - other 53,796 (3,230,032)
Inventories (1,585,353) (495,814)
Prepaid expenses and other current assets (114,062) 124,387
Accounts payable 665,313 1,307,575
Accrued expenses (132,163) 234,910
Accrued income taxes 393,216 306,409
----------- -----------
Total adjustments (548,961) (3,331,146)
=========== ===========
Net cash provided by (used in)
operating activities 156,471 (1,555,560)
=========== ===========
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable 1,271,946 5,582,225
Decrease in long-term liabilities (42,500) (3,180,000)
Proceeds from issuance of common stock 8,621 42,297
Proceeds from exercise of stock options 3,883 535,331
Repurchase of common stock, options and
warrants (375,369) --
----------- -----------
Net cash provided by financing activities 866,581 2,979,853
=========== ===========
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (737,256) (643,564)
Payments of Micro Processor Systems, Inc.
accrued acquisition costs, net of cash received -- (190,646)
Payments of Termiflex accrued acquisition costs (37,025) --
Payments of MicroPalm accrued acquisition costs (637,022) (122,856)
Increase in other assets (217,835) (320,321)
----------- -----------
Net cash used for investing activities (1,629,138) (1,277,387)
=========== ===========
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (606,086) 146,906
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 644,926 29,664
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 38,840 $ 176,570
----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Income taxes paid 25,000 479,591
Interest paid 68,072 368,347
</TABLE>
See notes to financial statements
-5-
<PAGE> 6
WPI GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING ACTIVITIES:
<TABLE>
<CAPTION>
Nine Months Ended
June 25, June 30,
1995 1996
--------------------------
<S> <C> <C>
On November 10, 1995 the Company acquired the
common stock of Micro Processor Systems, Inc. (MPSI)
and subsidiary for $1 in cash plus the assumption of
agreed upon liabilities:
Fair value of assets acquired $ - $7,398,285
Cash paid and expenses incurred of $510,001 - (510,001)
-------- ----------
Liabilities assumed $ - $6,888,284
======== ==========
</TABLE>
See notes to financial statements
-6-
<PAGE> 7
WPI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial statements for the three months and nine months ended June
30, 1996 and June 25, 1995 are unaudited and include all adjustments which,
in the opinion of management, are necessary to present fairly the results
of operations for the periods then ended. All such adjustments are of a
normal recurring nature. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Form 10-KSB filed with the Securities and Exchange Commission
(File No. 0-19717), which included financial statements for the years ended
September 24, 1995 and September 25, 1994.
The results of the Company's operations for any interim period are not
necessarily indicative of the results of the Company's operations for any
other interim period or for a full fiscal year.
2. INVENTORIES
<TABLE>
<CAPTION>
Inventory consists of: September June
24, 1995 30, 1996
---------- ----------
<S> <C> <C>
Raw Materials $2,703,790 $4,063,546
Work in Process 828,769 1,452,761
Finished Goods 216,042 654,063
---------- ----------
Total $3,748,601 $6,170,370
========== ==========
</TABLE>
3. ACQUISITION
The following summarized, unaudited proforma results of operations for the
nine months ended June 25, 1995 and June 30, 1996, assume the acquisition
of Micro Processor Systems, Inc. occurred as of the beginning of
respective periods (dollars in thousands except per share amounts).
<TABLE>
<CAPTION>
June June
25, 1995 30, 1996
--------- ---------
<S> <C> <C>
Pro-Forma Net Sales $ 27,657 $ 34,087
Pro-Forma Net Income 229 1,182
Pro-Forma Net Income Per Common Share .04 .20
Pro-Forma Weighted Average Common Shares
And Equivalents, Outstanding 5,812 5,974
</TABLE>
The unaudited proforma results are not necessarily indicative of either
actual results of operations that would have occurred had the acquisition
been made at beginning of fiscal 1995 or future results.
4. SUBSEQUENT EVENT
On July 16, 1996, the company acquired Oyster Terminals Limited of Newport,
Gwent, Wales in the United Kingdom for approximately $12 million in cash,
plus liabilities assumed of approximately $2 million.
-7-
<PAGE> 8
WPI GROUP, INC.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis by management is provided to identify
certain significant factors that affected the Company's financial position and
operating results during the periods included in the accompanying financial
statements.
RESULTS OF OPERATIONS
Net sales increased approximately $14,738,000 or 81% during the nine months
ended June 30, 1996 compared to the corresponding period in the prior year. The
increase in revenues was due primarily to internal growth through additional
sales in our targeted markets and the acquisition of Micro Processor Systems,
Inc. (MPSI).
Gross profit increased approximately $5,830,000 or 82% during the nine months
ended June 30, 1996 compared to the same period a year earlier. As a
percentage of net sales, gross profit was 39% for the nine month periods this
year and last year.
Research and new product development expenses increased to $2,472,000 for the
nine months ended June 30 , 1996 compared to $1,092,000 a year ago. The
increase was attributed to additions to engineering staff and the MPSI
acquisition.
Selling, general and administration expenses increased to $7,577,000 for the
nine months ended June 30, 1996 compared to $4,845,000 in the first nine
months of fiscal 1995. This is primarily due to higher sales commissions,
payroll and computer related costs and the MPSI acquisition .
Income before provision for income taxes increased to $2,611,000 in the nine
months ended June 30, 1996 compared to $1,136,000 for the same period last
year. This increase is due primarily to increased sales.
The Company's combined federal and state income tax rates, as a percentage of
pre-tax income, were 32% and 38% for the nine months ended June 1996 and 1995,
respectively. The reduction in 1996 reflects increased DISC benefits resulting
from increased international sales.
On December 29, 1995 the company had a fire at its Warner facility
administrative offices. Employees moved in to the new administrative offices
on March 1, 1996. In management's opinion, the company maintains adequate
aggregate insurance coverage for both property damage and business interruption
for all its facilities. The complete insurance claim has not been submitted at
this time, but the company has recorded a receivable representing various costs
to be recovered from insurance less the amount received through June 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $13,276,000 at June 30, 1996 compared to
$6,626,000 at September 24, 1995. Part of the increase in working capital was
due to increased receivables, the acquisition discussed above and borrowings
against the company's line of credit.
The Company's management believes it has sufficient working capital to meet its
liquidity needs.
- 8 -
<PAGE> 9
WPI GROUP, INC.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
Exhibit 27 - Financial Data Schedule for nine months ended June
30, 1996. (This exhibit is filed electronically
and not included with printed copies of this
form.)
B. Reports on Form 8-K
None
-9-
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf by the
undersigned thereunto duly authorized.
WPI GROUP, INC.
(Registrant)
Date: August 13 , 1996 By: /s/ Dennis M. Deegan
-----------------------------------
Dennis M. Deegan
President, and
Chief Operating Officer
Date: August 13 , 1996 By: /s/ Charles F. Johnson
-----------------------------------
Charles F. Johnson
Vice President and,
Chief Financial Officer
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF WPI GROUP, INC. FOR THE NINE MONTHS ENDED JUNE 30, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-29-1996
<PERIOD-END> JUN-30-1996
<CASH> 176,570
<SECURITIES> 0
<RECEIVABLES> 9,466,877
<ALLOWANCES> 335,145
<INVENTORY> 6,170,370
<CURRENT-ASSETS> 19,552,074
<PP&E> 9,985,328
<DEPRECIATION> 2,635,163
<TOTAL-ASSETS> 35,962,551
<CURRENT-LIABILITIES> 6,276,202
<BONDS> 0
0
0
<COMMON> 59,268
<OTHER-SE> 19,605,081
<TOTAL-LIABILITY-AND-EQUITY> 35,962,551
<SALES> 33,003,591
<TOTAL-REVENUES> 33,003,591
<CGS> 20,086,060
<TOTAL-COSTS> 20,086,060
<OTHER-EXPENSES> 10,048,948
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 350,960
<INCOME-PRETAX> 2,610,586
<INCOME-TAX> 835,000
<INCOME-CONTINUING> 1,775,586
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,775,586
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
