SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For Quarter Ended Commission File
May 31, 1996 No. 0-5418
WALKER INTERNATIONAL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2637172
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4 Ken-Anthony Plaza, South Lake Blvd., Mahopac, New York 10541
(Address of principal executive offices) (Zip Code)
(914) 628-9404
Registrant's telephone number, including area code
N/A
(Former name, former 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 such filing
requirements for the past 90 days.
Yes X No
The number of shares of Common Stock outstanding, par value $.10
per share, as of July 11, 1996 was 298,081.
PART I - FINANCIAL INFORMATION
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
May 31, November 30,
1996 1995
(Unaudited) (Audited)
Current assets
Cash and cash equivalents $ 295,814 $ 332,467
Investment securities 633,495 589,391
Accounts receivable - less allowance for
doubtful accounts of $2,000 and $4,999,
respectively 7,106 17,635
Inventories 50,443 49,956
Prepaid expenses 25,144 23,579
Prepaid income taxes 1,930 2,507
Total current assets 1,013,932 1,015,535
Property, plant and equipment - at cost 948,928 969,211
Less accumulated depreciation 753,240 765,446
195,688 203,765
Other assets
Investment securities 99,000 99,000
Security deposit 1,700 1,700
Intangibles 130 643
Total other assets 100,830 101,343
Total $1,310,450 $1,320,643
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 143,731 $ 201,853
Customer deposits 7,242 18,259
Income taxes payable 4,072 257
Total current liabilities 155,045 220,369
Stockholders' equity
Common stock, $.10 par value, authorized
1,000,000 shares, issued 489,310 shares 48,931 48,931
Additional paid-in capital 1,118,880 1,118,880
Retained earnings 511,394 456,263
1,679,205 1,624,074
Less treasury stock - at cost
- 191,229 shares 523,800 523,800
Total stockholders' equity 1,155,405 1,100,274
Total $1,310,450 $1,320,643
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Six months ended
May 31, May 31,
1996 1995 1996 1995
Sales $ 284,869 $ 261,487 $ 863,479 $ 868,332
Cost of sales 183,024 179,280 390,135 389,928
101,845 82,207 473,344 478,404
Selling, general and
administrative expenses 115,791 128,116 448,627 464,034
(13,946) (45,909) 24,717 14,370
Other income (deductions)
Realized holding gain 3,949 5,838 5,281 11,996
Unrealized holding loss (1,599) (4,822) (595) (2,152)
Interest and dividends 10,863 10,528 21,836 21,440
Gain on sale of
equipment - - 10,200 250
13,213 11,544 36,722 31,534
Income (loss) before
provision for income
taxes and cumulative
effect of accounting
change (733) (34,365) 61,439 45,904
Provision for income
taxes (601) (1,355) 6,308 1,674
Income (loss) before
cumulative effect of
accounting change (132) (33,010) 55,131 44,230
Cumulative effect of
accounting change - - - 10,281
Net income (loss)$ (132) $ (33,010) $ 55,131 $ 54,511
Income (loss) per common
share:
Income (loss) before
cumulative effect of
accounting change $ - $(.11) $ .19 $ .17
Cumulative effect of
accounting change - - - .03
Net income (loss) per
common share $ - $(.11) $ .19 $ .20
Weighted average number
of common shares
outstanding 298,081 310,442 298,081 313,686
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Six months ended
May 31,
1996 1995
Cash flows from operating activities
Net income $ 55,131 $ 54,511
Items not requiring the current use of
cash
Cumulative effect of accounting change - (10,281)
Gain on sale of equipment (10,200) (250)
Depreciation 17,482 11,378
Amortization of goodwill 513 514
Deferred compensation (7,331) (6,151)
Provision for bad debts (4,571) -
Changes in items affecting operations
Investment in trading securities (40,937) (35,531)
Accounts receivable 10,529 (16,734)
Inventories (487) 11,017
Prepaid expenses (1,565) (3,427)
Prepaid income taxes 577 (486)
Accounts payable and accrued expenses (50,791) 25,562
Customer deposits (11,017) (9,184)
Income taxes payable 3,815 (201)
Net cash provided (used) by
operating activities (38,852) 20,737
Cash flows from investing activities
Purchase of held-to-maturity securities - (124,991)
Maturity of held-to-maturity securities - 127,000
Amortization of bond premium 1,404 (411)
Proceeds from sale of equipment 10,200 250
Purchase of non-marketable security - (99,000)
Payment for purchase of equipment (9,405) (8,067)
Net cash provided (used) by
investing activities 2,199 (105,219)
Cash flows from financing activities
Acquisition of common stock for treasury - (29,380)
Net cash used by financing
activities - (29,380)
Net decrease in cash and
cash equivalents (36,653) (113,862)
Cash and cash equivalents - beginning 332,467 387,211
Cash and cash equivalents - end $ 295,814 $ 273,349
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED MAY 31, 1996 AND 1995
Supplemental Cash Flows Information
Net cash provided by operating activities reflects cash payments for income
taxes as follows:
Six months ended
May 31,
1996 1995
Income taxes paid $ 1,995 $ 2,361
During 1996 the Company received, in lieu of cash, investment securities
with a value of $4,571 to satisfy an account receivable.
WALKER INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1996
(NOTE 1) - 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, 1996 and
results of operations and cash flows for the quarters ended May 31, 1996 and
1995. The operating results for the periods are not necessarily indicative of
the results to be expected for the entire year.
(NOTE 2) - On December 1, 1994, the Company adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." Under
this statement, trading and available-for-sale debt and equity securities are
reported in the statement of income. Held-to-maturity debt securities are
reported at amortized cost. The difference between cost and carrying value
for trading securities is reported in the statements of operations. The
difference between carrying value and cost for available-for-sale securities
is carried as a separate component of stockholders' equity.
(NOTE 3) - Included in short-term investment securities at May 31, 1996, are
the following:
Description Estimated
Held-to-Maturity Cost Fair Value Amount
U S Government securities $ 511,403 $ 512,896 $ 511,403
Trading
Equity securities 122,687 122,092 122,092
$ 634,090 $ 634,988 $ 633,495
The change in net unrealized holding loss on trading securities that has
been included in earnings during the period amount to $595.
(NOTE 4) - An analysis of inventories is as follows:
May 31, November 30,
1996 1995
Raw materials $ 27,102 $ 19,459
Work-in-process 3,395 8,559
Finished goods 19,946 21,938
$ 50,443 $ 49,956
(NOTE 5) - The provision for income taxes consists solely of state and local
taxes. The provision for income taxes has been reduced by approximately
$8,800 during the six months ended May 31, 1996 and $8,000 during the six
months ended May 31, 1995 which represents the benefit of the federal net
operating loss carryforward for which a valuation reserve had been
previously provided.
WALKER INTERNATIONAL INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Financial Condition and Liquidity
The Company's liquidity (current assets minus current
liabilities) increased by $63,721 to $858,887 at May 31, 1996, as
compared to $795,166 at November 30, 1995. Cash used by operating
activities amounted to $38,852. This resulted primarily from an
increase in investment in trading securities of $40,937 and a
decrease in accounts payable and accrued expenses of $50,791 offset
in part by net income of $55,131.
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, 1996 (the
"Current Period") decreased to $863,479 as compared to sales of
$868,332 in the six months ended May 31, 1995. A sales volume
decrease in the Department Store subsidiary was offset in part by
volume increases at Kelly Color. Sales for the three months ended
May 31, 1996 (the "Current Quarter") increased to $284,869 as
compared to $261,487 in the quarter ended May 31, 1995, due to an
increase in Kelly Color sales volume.
In the Current Period, cost of sales as a percentage of sales
("COS") were 45.2%, slightly higher than the COS of 44.9% in the
1995 comparable period. In the Current Quarter, COS was 64.2% as
compared to 68.6% in the 1995 comparable period. This decrease was
primarily due to better absorption of labor costs as a result of
increased sales. Costs were higher in the Current Quarter as
compared to the Current Period due to the absence of more
profitable seasonal sales in the Department Store subsidiary that
occur only in the fiscal quarter ended February 28th. This trend
occurred in the prior fiscal year as well.
In the Current Period, selling, general and administrative
expenses as a percentage of sales were 52.0% as compared to 53.4%
in the 1995 comparable periods. This decrease was primarily due to
better cost absorption resulting from higher sales, and to specific
overhead reduction measures instituted by the Company as of the
beginning of the 1995 fiscal year, some of which did not take
effect until mid-1995. In the Current Quarter, selling, general and
administrative expenses as a percentage of sales were 40.7% as
compared to 49.0% in the 1995 comparable quarter. This was due in
part to better cost absorption and overhead reduction measures as
previously mentioned. There was a realized gain on marketable
securities of $5,281 in the Current Period and $3,949 in the
Current Quarter.
In the Current Period, the Company had net income before
income taxes and cumulative effect of accounting change of $61,439
as compared to $45,904 in the prior year's comparable period,
primarily due to increased profitability resulting from higher
sales and overhead reductions. In the Current Quarter, the Company
incurred a net loss of $733 as compared to a loss of $34,365 in the
1995 comparable quarter, primarily for reasons already mentioned.
Provision for income taxes in the Current Period consists of state
and local taxes on Department Store earnings. The provision for
income taxes has been reduced by approximately $8,800 in the
Current Period and $8,000 in last year's comparable period which
represents the benefit of the federal net operating loss
carryforward for which a valuation reserve had been previously
provided. In the Current Period, earnings per share were $.19
before income taxes and cumulative effect of accounting change, as
compared to $.17 in the 1995 comparable Period. There was a loss
per share of $.00 in the Current Quarter, as compared to a loss of
$.11 in last year's comparable quarter.
On December 1, 1994, the Company adopted FASB Statement No.
115 "Accounting for Certain Investments in Debt and Equity
Securities." Gross unrealized losses on held-to-maturity
securities of $10,281 are reflected as the cumulative effect of
accounting change in the 1995 Period.
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf of the undersigned thereunto duly
authorized.
Dated: July 11, 1996
WALKER INTERNATIONAL
INDUSTRIES, INC.
By:/s/ Peter Walker
Peter Walker
President
By:/s/ Richard Norris
Richard Norris
Vice President
(Principal Financial and
Accounting Officer)