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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 Q
(Mark One)
/XX/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---- EXCHANGE ACT OF 1934
For the quarterly period ended December 29, 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.
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(Exact name of registrant as specified in its charter)
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<S> <C>
NEW HAMPSHIRE 02-0218767
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
1155 ELM STREET, MANCHESTER, NEW HAMPSHIRE 03101
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number including area code: (603) 627-3500
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(Former name, former address, and former fiscal year, if changed since last
report)
Check 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 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
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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 Securities Exchange Act of 1934 after
the distribution of securities under a plan confirmed by the 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 January 23, 1997
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Common Stock, par value $.01 5,975,962 shares
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WPI GROUP, INC.
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INDEX
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PAGE NO.
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PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets 3
- December 29,1996 and September 29,1996
Consolidated Statements of Income 4
- Three months ended December 29,1996 and December 31,1995
Consolidated Statements of Cash Flows 5
- Three months ended December 29,1996 and December 31,1995
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and 8
Results of Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
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WPI GROUP, INC.
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CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 29, December 29,
1996 1996
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(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 206,829 $ 95,090
Accounts receivable - net of allowance for doubtful accounts of
$244,300 and $274,900 respectively 10,881,315 8,668,714
Accounts receivable - other 1,618,873 736,070
Inventories 7,068,496 7,205,510
Prepaid expenses and other current assets 230,509 476,457
Prepaid income taxes 1,103,840 1,103,840
Refundable income taxes 547,750 592,095
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Total current assets 21,657,612 18,877,776
PROPERTY, PLANT AND EQUIPMENT
at cost less accumulated depreciation 9,447,758 9,509,133
OTHER ASSETS 19,569,574 19,480,115
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$50,674,944 $47,867,024
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,265,217 $ 3,355,870
Accrued expenses 3,464,164 1,719,787
Accrued income taxes 1,772,630 1,354,646
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Total current liabilities 9,502,011 6,430,303
NOTE PAYABLE TO BANK 18,650,000 17,910,000
NON-COMPETE AGREEMENT 20,000 20,000
DEFERRED INCOME TAXES 1,954,287 1,952,012
COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; authorized
20,000,000 shares, issued 5,947,922
and 5,954,962 respectively 59,479 59,549
Additional paid-in capital 13,658,604 13,691,707
Retained earnings 6,815,801 7,592,052
Cumulative foreign currency translation adjustments 14,762 211,401
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Total stockholders' equity 20,548,646 21,554,709
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$50,674,944 $47,867,024
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See notes to financial statements
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WPI GROUP, INC.
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CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended
December 31, December 29,
1995 1996
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<S> <C> <C>
NET SALES $9,606,303 $14,108,819
COST OF GOODS SOLD 5,806,253 8,529,249
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GROSS PROFIT 3,800,050 5,579,570
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OPERATING EXPENSES:
Research and new product development 667,147 929,758
Selling, general and administration 2,301,926 3,112,324
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Total operating expenses 2,969,073 4,042,082
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OPERATING INCOME 830,977 1,537,488
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OTHER INCOME (EXPENSE) (48,597) (379,237)
INCOME BEFORE PROVISION FOR
INCOME TAXES 782,380 1,158,251
PROVISION FOR INCOME TAXES 266,000 382,000
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NET INCOME $ 516,380 $ 776,251
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NET INCOME PER WEIGHTED AVERAGE
NUMBER OF COMMON SHARES $ 0.09 $ 0.13
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Weighted Average Common Shares and
Equivalents Outstanding 5,854,879 6,114,649
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See notes to financial statements
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WPI GROUP, INC.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ended
December 31, December 29,
1995 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 516,380 $ 776,251
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Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 415,908 664,158
Changes in current assets and liabilities net of effects
of acquisitions:
Accounts receivable (211,186) 2,212,601
Accounts receivable - other 16,179 882,803
Inventories (343,044) (137,014)
Prepaid expenses and other current assets 76,851 (290,293)
Accounts payable (198,741) (909,347)
Accrued expenses (202,151) (1,429,487)
Accrued income taxes 267,000 (417,984)
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Total adjustments (179,184) 575,437
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Net cash provided by operating activities 337,196 1,351,688
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CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in notes payable 3,442,423 (740,000)
Decrease in long-term liabilities (3,145,000) (2,275)
Proceeds from issuance of common stock 18,331 21,673
Proceeds from exercise of stock options -- 11,500
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Net cash provided by (used in) financing activities 315,754 (709,102)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (245,705) (396,870)
Payments of accrued acquisition costs (20,847) (314,890)
(Increase) Decrease in other assets 27,595 (239,204)
Acquisition of Micro Processor Systems, Inc.
net of cash paid 106,901 --
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Net cash used for investing activities (132,056) (950,964)
EFFECT OF FOREIGN CURRENCY TRANSLATION ON CASH -- 196,639
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 520,894 (111,739)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 29,664 206,829
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 550,558 $ 95,090
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SUPPLEMENTAL DISCLOSURE OF CASH
INFORMATION:
Income taxes paid -- 362,000
Interest paid 52,824 340,690
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See notes to financial statements
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WPI GROUP, INC.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING ACTIVITIES:
<CAPTION>
Three Months Ended
December 31, December 29,
1995 1996
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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) --
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Liabilities assumed $6,888,284 $ --
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See notes to financial statements
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial statements for the three months ended December 29, 1996 and
December 31, 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
29, 1996 and September 24, 1995.
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.
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2. INVENTORIES
<CAPTION>
Inventory consists of: September December
29,1996 29,1996
<S> <C> <C>
Raw Materials $4,360,602 $4,339,348
Work in Process 1,986,821 2,032,284
Furnished Goods 721,073 833,878
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Total $7,068,496 $7,205,510
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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 $4,503,000 or 47% during the three months
ended December 29, 1996 compared to the corresponding period in the prior
year. The increase for the three month period was due primarily to improved
sales in our targeted markets and the acquisitions of Micro Processor
Systems, Inc. (MPSI) and Oyster Terminals, Ltd.
Gross profit increased approximately $1,780,000 or 47% during the three
months ended December 29, 1996 compared to the same period a year ago. As a
percentage of net sales, gross profit remained constant compared to the
same period last year at 39%. Total gross profit increased due to the
higher revenues discussed above.
Research and new product development expenses increased to approximately
$930,000 or 39% for the three months ended December 29, 1996 compared to
$667,000 a year ago. The increase was attributed to additions in
engineering staff and the acquisitions discussed above. Research and new
product development expenses were 7% of net sales for the quarters ended
December 1996 and December 1995.
Selling, general and administration expenses increased to approximately
$3,112,000 or 35% for the three month period ended December 29, 1996
compared to $2,302,000 in the first three months of fiscal 1995. This is
primarily due to higher sales commissions and the acquisitions discussed
above. As a percentage of net sales, selling, general and administration
expenses were 22% and 24% for the first quarters of fiscal 1997 and 1996,
respectively.
Income before provision for income taxes increased to approximately
$1,158,000 or 48% in the three months ended December 29, 1996 compared to
$782,000 for the same period last year. This increase is primarily due to
improved sales.
The Company's combined federal and state income tax rates, as a percentage
of pre-tax income, were 33% and 34% for the three months ended December
1996 and 1995, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of approximately $12,447,000 at December
29, 1996 compared to $12,156,000 at September 29, 1996.
The Company's management believes it has sufficient working capital to meet
its liquidity needs.
As of December 29, 1996, the Company had no material commitments for
capital expenditures.
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WPI GROUP, INC.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A . Exhibits
None
B. Reports on Form 8-K
None
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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: February 10, 1997 By: /s/Dennis M. Deegan
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Dennis M. Deegan
President and
Chief Operating Officer
Date: February 10, 1997 By: /s/Dennis M. Deegan
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Dennis M. Deegan
Principal Financial Officer
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF WPI GROUP, INC. FOR THE THREE MONTHS ENDED DECEMBER
29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-28-1997
<PERIOD-START> SEP-29-1996
<PERIOD-END> DEC-29-1996
<EXCHANGE-RATE> 1
<CASH> 95,090
<SECURITIES> 0
<RECEIVABLES> 8,943,614
<ALLOWANCES> 274,900
<INVENTORY> 7,205,510
<CURRENT-ASSETS> 18,877,776
<PP&E> 11,429,689
<DEPRECIATION> 1,920,556
<TOTAL-ASSETS> 47,867,024
<CURRENT-LIABILITIES> 6,430,303
<BONDS> 0
0
0
<COMMON> 59,549
<OTHER-SE> 21,495,160
<TOTAL-LIABILITY-AND-EQUITY> 47,867,024
<SALES> 14,108,819
<TOTAL-REVENUES> 14,108,819
<CGS> 8,529,249
<TOTAL-COSTS> 8,529,249
<OTHER-EXPENSES> 4,042,082
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 379,237
<INCOME-PRETAX> 1,158,251
<INCOME-TAX> 382,000
<INCOME-CONTINUING> 776,251
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 776,251
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
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