UNITED STATES 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 August 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)
(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 outstanding shares of Common Stock, par value $.10
per share, as of October 12, 2001 was 231,271.
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
August 31, November 30,
2001 2000
(Unaudited) (Audited)
Current assets
Cash and cash equivalents $ 433,285 $ 542,118
Accounts receivable - less allowance for doubtful
accounts of $1,000 13,525 25,935
Inventories 49,552 51,850
Prepaid expenses 23,329 18,903
Prepaid income taxes 5,785 3,386
U.S. Government securities 444,777 29,915
Total current assets 970,253 672,107
Property, plant and equipment - at cost 1,089,679 1,052,840
Less accumulated depreciation 900,816 871,734
188,863 181,106
Other assets
U.S. Government securities - 414,416
Security deposit 725 1,700
Total other assets 725 416,116
Total $1,159,841 $1,269,329
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 75,044 $ 88,285
Customer deposits 5,247 15,529
Total current liabilities 80,291 103,814
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 613,257 674,628
1,743,881 1,805,252
Less treasury stock - at cost - 246,539 shares
and 236,739 shares, respectively 664,331 639,737
Total stockholders' equity 1,079,550 1,165,515
Total $1,159,841 $1,269,329
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
Three months ended Nine months ended
August 31, August 31,
2001 2000 2001 2000
Net sales $ 255,044 $ 266,426 $ 752,834 $ 745,176
Costs and expenses
Cost of sales 172,934 176,115 509,786 523,083
Selling, general and
administrative 129,192 115,600 357,685 352,606
302,126 291,715 867,471 875,689
Operating loss (47,082) (25,289) (114,637) (130,513)
Investment income 2,034 19,216 53,666 70,009
Loss before
provision for
income taxes (45,048) (6,073) (60,971) (60,504)
Provision for income taxes (539) - 400 -
Net loss (44,509) (6,073) (61,371) (60,504)
Other comprehensive income, net
of income tax on unrealized
holding gains - - - (9,000)
Comprehensive
loss $ (44,509) $ (6,073)$ (61,371) $ (69,504)
Loss per common share $ (.20) $ (.03) $ (.26) $ (.29)
Weighted average number of common
shares outstanding 231,401 241,071 235,711 243,454
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Nine months ended
August 31,
2001 2000
Cash flows from operating activities
Net loss $ (61,371) $ (60,504)
Items not requiring the current use of cash
Depreciation 29,082 30,565
Amortization of bond premium and discount (446) (1,273)
Changes in items affecting operations
Investment in trading securities - (2,688)
Accounts receivable 12,410 23,587
Inventories 2,298 24,799
Prepaid expenses (4,426) (1,648)
Prepaid income taxes (2,399) (4,332)
Security deposit 975 -
Accounts payable and accrued expenses (13,241) (37,195)
Customer deposits (10,282) (20,734)
Income taxes payable - (368)
Net cash used by operating activities (47,400) (49,791)
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 (36,839) (41,502)
Net cash provided (used) by investing (36,839) 8,875
activities
Cash flows from financing activities
Acquisition of common stock for treasury (24,594) (28,458)
Net cash used by financing activities (24,594) (28,458)
Net decrease in cash and
cash equivalents (108,833) (69,374)
Cash and cash equivalents - beginning 542,118 512,490
Cash and cash equivalents - end $ 433,285 $ 443,116
Supplemental Cash Flows Information
Cash payments for income taxes $ 2,799 $ 4,700
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 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 August 31, 2001, and results of operations and cash flows
for the quarters ended August 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 $ 29,984 $ 129 $ 30,113
U.S. Government securities -
maturing January 31, 2002 414,791 5,006 419,797
$ 444,775 $ 5,135 $ 449,910
The change in net unrealized holding loss on trading securities that
has been included in earnings during the period amount to $1,760 in
2000.
(NOTE C) - An analysis of inventories is as follows:
August 31, November 30,
2001 2000
(Unaudited) (Audited)
Raw materials $ 27,261 $ 24,594
Work-in-process 2,460 7,279
Finished goods 19,831 19,977
$ 49,552 $ 51,850
(NOTE D) - The provision for income taxes consists solely of state and
local taxes.
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 $321,669 to $889,962 at August 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
August 31, 2001. The net amount of the U.S. Government securities
reclassified was $414,416. The increase in working capital was offset in
part by the use of cash for operating activities, the purchase of stock
for the Company treasury, and the purchase of equipment, all as
described below.
Net cash used by operating activities amounted to $47,400. This resulted
primarily from a net loss, a decrease in accounts payable and accrued
expenses, and a decrease in customer deposits, offset in part by
depreciation, a non-cash expense, and a decrease in accounts
receivable. The Company also purchased 9,800 shares of its common stock
for its treasury at a cost of $24,594, and purchased equipment in the
amount of $36,839.
At the end of May, the Company moved its administrative offices to a
smaller, more efficient 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 needs.
Results of Operations
Net sales for the three months ended August 31, 2001 (the "Current
Quarter") decreased by $11,382, or 4.3%, as compared to the quarter
ended August 31, 2000 (the "2000 Quarter"). Net sales for the nine
months ended August 31, 2001 (the "Current Period") increased by $7,658,
or 1.0%, as compared to sales in the nine months ended August 31, 2000
(the "2000 Period"). Though sales volume for the Company's operating
subsidiary, Kelly Color Laboratories, Inc., decreased during the Current
Quarter due to recessional factors, its sales volume for the Current
Period remains slightly higher. No assurance can be given that similar
Current Period increases can be obtained for the remainder of the fiscal
year.
In the Current Quarter and Current Period, cost of sales as a
percentage of sales ("COS") were 67.8% and 67.7%, respectively, as
compared to COS of 66.1% and 70.2% in the 2000 Period and 2000 Quarter,
respectively. The slight increase in the Current Quarter is primarily
attributable to a lesser rate of absorption of fixed components of
overhead resulting from lower sales. The decrease in COS in the Current
Period is due in part to lower materials costs, and to better absorption
of fixed overhead components. In the Current Quarter, selling, general
and administrative expenses as a percentage of sales ("SG&A") were 50.7%
as compared to 43.4% in the 2000 Quarter, due primarily to lower
absorption of fixed costs resulting from minimal increases in sales in
the Current Quarter. In the Current Period, SG&A were 47.5% as compared
to 47.3% in the 2000 Period.
The Company earned investment income of $2,034 in the Current Quarter
and $53,666 in the Current Period, as compared to $19,216 and $70,009 in
the 2000 Quarter and Period, respectively.
In the Current Quarter and Current Period, the Company had net
losses before provision for income taxes of $45,048 and $60,971,
respectively, as compared to net losses of $6,073 and $60,504 in the
2000 Quarter and Period, respectively, and losses per share were $.20
and $.26, respectively, as compared to $.03 and $.29 in the 2000 Quarter
and Period, all primarily due to factors previously mentioned.
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: October 15, 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)