U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
Commission File No. 0-5418
WALKER INTERNATIONAL INDUSTRIES, INC.
(Exact name of Small Business Issuer as specified in its charter)
Delaware 13-2637172
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
880 South Lake Blvd., Mahopac, New York 10541
(Address of principal executive offices) (Zip Code)
(845) 628-9404
Issuer's telephone number, including area code
N/A
(Former name, former address and former fiscal year
if changed since last report)
The number of shares of Common Stock outstanding, par value $.10
per share, as of July 12, 2001 was 233,271.
Transitional Small Business Disclosure Format (check one):
Yes No X
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
May 31, November 30,
2001 2000
(Unaudited) (Audited)
Current assets
Cash and cash equivalents $ 404,797 $ 542,118
Trading securities - at market 83,900 -
U.S. Government securities 444,627 29,915
Accounts receivable - less allowance for doubtful
accounts of $1,000 26,882 25,935
Inventories 49,619 51,850
Prepaid expenses 30,185 18,903
Prepaid income taxes 5,246 3,386
Total current assets 1,045,256 672,107
Property, plant and equipment - at cost 1,057,539 1,052,840
Less accumulated depreciation 889,515 871,734
168,024 181,106
Other assets
U.S. Government securities - 414,416
Security deposit 725 1,700
Total other assets 725 416,116
Total $1,214,005 $1,269,329
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 76,521 $ 88,285
Customer deposits 7,925 15,529
Total current liabilities 84,446 103,814
Stockholders' equity
Common stock, $.10 par value, authorized
1,000,000 shares, issued 477,810 shares 47,781
47,781
Additional paid-in capital 1,082,843 1,082,843
Retained earnings 657,766 674,628
1,788,390 1,805,252
Less treasury stock - at cost - 244,539 and
236,739 shares, respectively 658,831 639,737
Total stockholders' equity 1,129,559 1,165,515
Total $1,214,005 $1,269,329
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
Three months ended Six months ended
May 31, May 31,
2001 2000 2001 2000
Net sales $ 286,187 $ 247,773 $ 497,790$ 478,750
Cost and expenses
Cost of sales 172,101 166,822 336,852 346,968
Selling, general and
administrative 115,564 126,282 228,493 237,006
287,665 293,104 565,345 583,974
Operating loss (1,478) (45,331) (67,555) (105,224)
Investment income 26,195 27,486 51,632 50,793
Income (loss) before
provision for
income taxes 24,717 (17,845) (15,923) (54,431)
Provision for income taxes 939 - 939 -
Net income (loss) 23,778 (17,845) (16,862) (54,431)
Other comprehensive income, net
of income tax on unrealized
holding gains - (9,000) - (9,000)
Comprehensive income
(loss) $ 23,778 $ (26,845) $ (16,862)$ (63,431)
Earnings (loss) per
common share $ .10 $ (.07) $ (.07)$ (.22)
Weighted average number of
common shares outstanding 235,919 241,570 237,890 244,651
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Six months ended
May 31,
2001 2000
Cash flows from operating activities
Net loss $ (16,862) $ (54,431)
Items not requiring the current use of cash
Depreciation 17,781 20,226
Amortization of bond premium and discount (296) (723)
Changes in items affecting operations
Investment in trading securities (83,900) (17,134)
Accounts receivable (947) 16,256
Inventories 2,231 30,546
Prepaid expenses (11,282) (2,394)
Prepaid income taxes (1,860) (4,332)
Security deposit 975 -
Accounts payable and accrued expenses (11,764) (33,252)
Customer deposits (7,604) (17,489)
Income taxes payable - (368)
Net cash used by operating activities (113,528) (63,095)
Cash flows from investing activities
Proceeds from held to maturity securities - 494,200
Purchase of held to maturity securities - (443,823)
Payments for purchase of equipment (4,699) (35,502)
Net cash provided (used) by investing
activities (4,699) 14,875
Cash flows from financing activities
Acquisition of common stock for treasury (19,094) (28,458)
Net cash used by financing activities (19,094) (28,458)
Net decrease in cash and
cash equivalents (137,321) (76,678)
Cash and cash equivalents - beginning 542,118 512,490
Cash and cash equivalents - end $ 404,797 $ 435,812
Supplemental Cash Flows Information
Cash payments for income taxes $ 2,799 $ 4,700
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001
(NOTE A) - The accompanying consolidated financial statements
are prepared on the basis of generally accepted accounting
principles. In the opinion of the management of Walker
International Industries, Inc. and Subsidiaries, all adjustments
are of a normal recurring nature and have been reflected for a
fair presentation of the unaudited balance sheet as of
May 31, 2001, and results of operations and cash flows for the
quarters ended May 31, 2001 and 2000. The operating results
for the periods are not necessarily indicative of the results
to be expected for the entire year.
(NOTE B) - INVESTMENT SECURITIES
Included in held-to-maturity securities are the following:
Gross
Unrealized Estimated
Description Cost Gains Fair Value
Held-to-Maturity
U.S. Government securities -
maturing October 31, 2001 $ 29,961 $ 311 $ 30,272
U.S. Government securities -
maturing January 31, 2002 414,666 6,949 421,615
$ 444,627 $ 7,260 $ 451,887
Included in trading securities are the following:
Estimated Carrying
Description Cost Fair Value Amount
Equity securities $ 78,176 $ 83,900 $ 83,900
The change in net unrealized holding gain on trading securities
that has been included in earnings during the period amount to $5,724
(2001) and $1,784 (2000).
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001
(NOTE C) - An analysis of inventories is as follows:
May 31, November 30,
2001 2000
(Unaudited) (Audited)
Raw materials $ 25,342 $ 24,594
Work-in-process 3,465 7,279
Finished goods 20,812 19,977
$ 49,619 $ 51,850
(NOTE D) - The provision for income taxes consists solely of state
and local taxes. The provision for income taxes has been reduced by
approximately $3,567 during the six months ended May 31, 2001, which
represents the benefit of the federal net operating loss carryforward
for which a valuation reserve had been previously provided.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition and Liquidity
The Company's working capital (current assets minus current
liabilities) increased by $392,517 to $960,810 at May 31, 2001,
as compared to $568,293 at November 30, 2000. This increase is
primarily the result of a reclassification of U.S. government
securities from Other Assets to Current Assets, due to their
maturation in less than one year from May 31, 2001. The net
amount of the securities reclassified was $414,416. This was
primarily offset by the use of cash for operating activities and
the purchase of stock for the Company treasury as described below.
Net cash used by operating activities amounted to $113,528. This
resulted primarily from an increase in investment in trading
securities, a net loss, a decrease in accounts payable and accrued
expenses, and an increase in prepaid expenses, offset in part by
depreciation, a non-cash expense. The Company purchased 7,800 shares
of its common stock for its treasury for the amount of $19,094.
At the end of May, the Company moved its administrative offices to
a smaller space. Since the move was local, moving cost was minimal.
The Company anticipates that the move will result in reduced occupancy
expense of approximately $6,000 in the current fiscal year.
The Company deems its present facilities and equipment to be adequate
for its immediate needs and it has no material commitments for capital
expenditures. The Company believes its present liquidity is adequate
for its current and long-term needs.
Results of Operations
Total sales for the six months ended May 31, 2001 (the "Current
Period") increased by $19,040, or 4.0%, as compared to sales in the
six months ended May 31, 2000 (the "2000 Period"). Sales for the
three months ended May 31, 2001 (the "Current Quarter") increased
by $38,414, or 15.5%, as compared to the quarter ended May 31, 2000
(the "2000 Quarter"). Both increases were due to an increase
in Kelly Color sales volume. No assurance can be given that similar
increases can be obtained for the remainder of the fiscal year.
In the Current Period and Current Quarter, cost of sales as a
percentage of sales ("COS") were 67.7% and 60.1%, respectively, as
compared to COS of 72.5% and 67.3% in the 2000 Period and Quarter,
respectively. These decreases were due in part to lower materials
costs. Also, fixed components of overhead were better absorbed as
a result of increased sales volume. In the Current Period and
Current Quarter, selling, general and administrative expenses were
45.9% and 40.4%, respectively, as a percentage of sales, as
compared to 49.5% and 51.0%, respectively, in the 2000 Period and
Quarter, due primarily to better absorption of fixed costs resulting
from increased sales in the Current Period and Current Quarter.
The Company earned investment income of $51,632 in the Current Period
and $26,195 in the Current Quarter, as compared to $50,793 and $27,486
in the 2000 Period and Quarter, respectively.
In the Current Period, the Company had a net loss before
provision for income taxes of $15,923 as compared to a net loss of
$54,431 in the 2000 Period, primarily due to factors previously
mentioned. In the Current Quarter, the Company had net income before
provision for income taxes of $24,717 as compared to a net loss of
$17,845 in the 2000 Quarter. Increased sales and reduced overhead
rates at Kelly Color were primarily responsible for this increase in
income.
Provision for income taxes in Fiscal 2001 consists solely of state
and local taxes.
In the Current Period, loss per share was $.07 as compared to $.22
in the 2000 Period. In the Current Quarter, there were earnings per
share of $.10 as compared to a loss per share of $.07 in the 2000
Quarter.
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K.
A. EXHIBITS
None.
B. REPORTS ON FORM 8-K
None.
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: July 13, 2001
WALKER INTERNATIONAL
INDUSTRIES, INC.
By:/s/ Peter Walker
Peter Walker
President
By:/s/ Richard Norris
Richard Norris
Vice President
(Principal Financial and
Accounting Officer)