FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarterly Period Ended September 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-17757
W-W CAPITAL CORPORATION
(exact name of Registrant as specified in its charter)
Nevada 93-0967457
(State or other jurisdiction of (IRS Employer Identi-
incorporation or organization) fication Number)
11990 Grant Street, Suite 400, Northglenn, CO 80233
(Address of principal executive offices, including zip code)
(303) 452-5000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, 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 the filing
requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether Registrant has filed all documents and reports
required to be filed by
Sections 12, 13 or 15 (d) of the Securities Exchange Act of 1934 subsequent to
the distribution of
securities under a plan confirmed by a court.
Yes No NOT APPLICABLE x
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the
latest practicable date.
Title of Each Class Number of Shares
Outstanding
Common stock at November 7, 1995
$0.01 Par Value 5,530,661
W-W CAPITAL CORPORATION
Index
PART I FINANCIAL INFORMATION PAGE NO.
Item 1 Balance Sheets
September 30, 1995 and June 30, 1995 1
Statements of Operations
Three Months Ended
September 30, 1995 and 1994 3
Statements of Cash Flows
Three Months Ended
September 30, 1995 and 1994 4
Notes to Financial Statements 6
Item 2 Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9
PART II OTHER INFORMATION
Item 1 LEGAL PROCEEDINGS 13
Item 2 CHANGES IN SECURITIES 13
Item 3 DEFAULTS UPON SENIOR SECURITIES 13
Item 4 SUBMISSION OF MATTERS TO VOTE OF
SECURITY HOLDERS 13
Item 5 OTHER INFORMATION 13
Item 6 EXHIBITS AND REPORT ON FORM 8-K 13
SIGNATURES 14
Part 1-FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
W-W CAPITAL CORPORATION
Balance Sheet
September 30, June 30,
1995 1995
Assets (Unaudited)
Current assets:
Cash $ 5,522 $ 124,458
Trade accounts receivable 2,532,314 1,913,949
Less allowance for doubtful ( 197,008 ) ( 197,008)
accounts
Net accounts receivable 2,335,306 1,716,941
Accounts receivable, other 26,150 18,574
Accounts receivable, employee 2,768 6,946
Accounts receivable, 101,415 100,114
related party
Inventories:
Raw materials 417,508 417,094
Work-in-process 171,616 206,817
Finished goods 2,647,419 2,827,991
Total inventories 3,236,543 3,451,902
Deferred taxes 118,348 118,350
Prepaid expenses 33,364 72,961
Current portion of 43,210 48,310
notes receivable
Total current assets 5,902,626 5,658,556
Property and equipment, at cost 4,347,631 4,327,267
Less accumulated depreciation
and amortization ( 1,626,853 ) ( 1,525,737 )
Net property and equipment 2,720,778 2,801,530
Other Assets:
Long-term notes receivable from
stockholders, net of
current portion 22,378 34,869
Long-term notes receivable from
parties, other affiliated
entities and related
net of current portion 23,374 23,027
Real Estate held for resale 374,280 373,960
Accounts and notes
receivable, other 537,951 539,151
Covenant not to compete, net of
accumulated amortization 28,442 35,268
Other assets 88,418 81,156
Total other assets 1,074,843 1,087,431
TOTAL ASSETS $ 9,698,247 $ 9,547,517
Continued on following page
See accompanying notes to financial statements.
W-W CAPITAL CORPORATION
Balance Sheet, Continued
September 30, June 30,
1995 1995
(Unaudited)
Liabilities
Current Liabilities:
Accounts Payable $ 2,321,505 $ 2,143,658
Revolving credit note
payable to Bank 1,811,613 1,662,613
Accrued property taxes 42,650 31,892
Accrued payroll and
related taxes 147,787 128,317
Accrued interest payable 25,903 30,656
Accrued commissions 166,936 165,327
Current portion of
long-term payables 341,213 354,710
Current portion of notes
payable to related parties 35,125 35,125
Other current liabilities 24,961 22,450
Total current liabilities 4,917,693 4,574,748
Other Liabilities:
Long-term note payable to
financial institutions net of
current portion1, 625,279 1,692,624
Deferred taxes 79,246 102,585
Other Long-term liabilities 28,646 35,521
Total other Liabilities 1,733,171 1,830,730
TOTAL LIABILITIES 6,650,864 6,405,478
Stockholders' Equity
Common stock: $.01 par value
15,000,000 shares authorized
5,530,661 shares issued and
outstanding at September 30,
1995, and June 30, 1995,
respectively 55,306 55,306
Capital in excess of par value 3,304,099 3,304,099
Accumulated Deficit ( 293,116 ) ( 198,460 )
3,066,289 3,160,945
Less 20,264 shares of treasury
stock at cost ( 18,906 ) ( 18,906 )
TOTAL STOCKHOLDERS' EQUITY 3,047,383 3,142,039
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 9,698,247 $ 9,547,517
See accompanying notes to financial statements.
W-W CAPITAL CORPORATION
Statements of Operations
(Unaudited)
Three Months Ended
September 30,
____________________________________________
1995 1994
Net Sales $ 4,067,632 $ 4,320,411
Cost of goods sold 3,372,234 3,491,497
Gross profit 695,398 828,914
Operating expenses:
Selling expenses 353,561 331,807
General and administrative
expenses 401,224 369,867
Total operating expenses 754,785 701,674
Operating (loss) earnings ( 59,387 ) 127,240
Other income (expense):
Interest income 35,769 17,517
Interest expense ( 101,819 ) ( 81,684 )
Gain (Loss) on sale of assets - 3,000
Other income (expense), net 7,442 20,558
Total other income (expense) ( 58,608 ) ( 40,609 )
(Loss) Earnings before
income taxes ( 117,995 ) 86,631
Provision for deferred
income taxes ( 23,339 ) 10,408
Net (loss) earnings $ ( 94,656 ) $ 76,223
(Loss) Earnings per common share: $ ( .02 ) $ .01
Weighted average number of
common shares outstanding 5,530,661 5,419,115
See accompanying notes to financial statements.
W-W CAPITAL CORPORATION
Statement of Cash Flows
(Unaudited)
Three Months Ended
September 30,
________________________________________________
1995 1994
Cash flows from operating activities:
Net (loss) earnings $ ( 94,656 ) $ 76,223
Adjustments to reconcile net
earnings to net cash provided by
(used in) operating activities:
Depreciation and amortization 109,300 92,773
Loss (Gain) on property and equipment - ( 3,000 )
Provisions for loss on accounts
and notes receivable - 35,000
Interest income added to notes
receivable - affiliates 347 -
Deferred income taxes ( 23,339 ) 10,408
Other ( 3,302 ) -
Changes in assets and liabilities:
Accounts receivable ( 618,365 ) ( 347,893 )
Inventories 215,359 400,338
Other current and non-current assets 22,013 ( 36,237 )
Accounts payable 177,847 ( 167,611 )
Accrued expenses
and other current liabilities 29,595 ( 102,380 )
Net cash (used in) provided
by operating activities ( 185,201 ) ( 42,379 )
Cash flows from investing activities:
Increase in real estate
held for sale ( 320 ) -
Purchase of property and equipment ( 20,364 ) ( 206,847 )
Proceeds from other notes receivable 13,200 ( 32,812 )
Proceeds from stockholders'
notes receivable 5,591 5,312
Net cash (used in) provided
by investing activities (1,893 ) ( 234,347 )
(Continued on following page)
W-W CAPITAL CORPORATION
Statement of Cash Flows, Continued
(Unaudited)
Three Months Ended
September 30,
1995 1994
Cash flows from financing activities:
Proceeds from lines of credit 149,000 148,160
Payments on notes payable to financial
institutions and government entities ( 85,542 ) ( 37,607 )
Payments on notes payable to affiliates - ( 2,775 )
Proceeds from notes payable 4,700 204,643
Net cash provided by (used in)
financing activities 68,158 312,421
Net (decrease) increase in cash ( 118,936 ) 35,695
Cash at beginning of period 124,458 52,944
Cash at end of period 5,522 88,639
Supplement schedule of non cash investing
and financing activities - -
Supplemental disclosures of cash flow
information:
Cash paid during the period for interest 105,942 79,295
See accompanying notes to financial statements.
W-W CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements include the accounts of W W
Capital
Corporation (the Company) and its three wholly-owned subsidiaries W-W
Manufacturing
Co., Inc., Titan Industries, Inc., and Eagle Enterprises, Inc. All
significant intercompany
accounts and transactions have been eliminated.
The accompanying unaudited financial statements have been prepared in
accordance
with generally accepted accounting principles for interim financial
information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not
include all
information and footnotes necessary for a fair presentation of financial
position, results of
operations and changes in cash flows in conformity with generally accepted
accounting
principles for full-year financial statements. However, except as disclosed
herein, there has
been no material change in the information disclosed in the notes to W W
Capital
Corporation's financial statements included in its Annual Report on Form 10-K
for the year
ended June 30, 1995. In the opinion of management, all adjustments
(consisting of normal
recurring accrual basis adjustments) considered necessary for a fair
presentation have been
reflected in the accompanying financial statements. Operating results for the
three month
period ended September 30, 1995, are not necessarily indicative of the result
that may be
expected for the year ended June 30, 1996.
NOTE 2 - NET EARNINGS PER SHARE
The net earnings (loss) per share amount included in the accompanying
statement of
operations have been computed using the weighted average number of shares of
common
stock outstanding and the dilative effect, if any, of common stock equivalents
existing during
the applicable three month periods.
NOTE 3 - RELATED PARTY TRANSACTION
The Company has a number of related party transactions. See the
footnotes to W W
Capital Corporation financial statements for the year ended June 30, 1995,
included in its
Annual Report on Form 10-K for the nature and type of related party
transactions.
The related party transactions include sales commission paid to
Agri-Sales Associates
which had entered into a sales and marketing agreement with the Company. The
former
owner of Eagle Enterprises is also the principal owner of Agri-Sales and
holder of the
Company's restricted common stock, as more fully discussed in the Annual
Report on Form
10-K for the year ended June 30, 1995.
A summary of the related party transactions that effect the Company's
statement of
operations for the three months ended September 30, 1995, and 1994,
respectively, is as
follows:
Three Months Ended
September 30,
Transactions with
Related Parties 1995 1994
Rent expense 15,000 15,000
Interest income 1,841 2,222
Interest expense 878 2,047
Commission expense 0 165,966
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of
Operations.
The business of the Company is carried on within two segments by a number
of
operating units. The livestock handling equipment segment is composed of W-W
Manufacturing (W-W Manufacturing) and Eagle Enterprises (Eagle), and the water
and
environmental product segment is represented by Titan Industries (Titan).
(A) Analysis of Results of Operations
The Company has a net loss of $94,656, for the quarter ended September
30, 1995,
as compared to a net earnings of $76,223 in 1994.
Net sales decreased to $ 4,067,632 for the three months ended September
30, 1995,
compared to $ 4,320,141 for 1994. The following table represents actual
sales by segment
group.
Sales by segment group:
Three Months Ended
September 30
1995 1994
Livestock Handling Equipment 2,269,313 2,397,806
Water and Environmental Products 1,798,319 1,922,605
Total Net Sales 4,067,632 4,320,411
The sales in the water and environmental product segment decreased $124,286
or 6.5%
as compared to corresponding period in 1995. This decrease can be attributed
to the wet
weather conditions in the midwest during the spring and summer period having
an effect on
the water supplies aspect of the business. Cut backs by governmental agencies
has had a
affect on sales of the various environmental products produce by the Company.
The
Company has concentrated its efforts to establish new distributors and
manufacturer's
representatives on both the east and west coasts to expand its market area so
that weather and
economics in a certain area will not have a major impact on sales.
During the quarter ended September 30, 1995, sales in the livestock handling
equipment
segment declined $128,493 or 6.5%. The decline in sales are due to a concern
in the cattle
industry about beef prices, and the extreme hot weather experienced all across
the United
States, thereby, creating a weaker demand for the traditional W-W
Manufacturing equipment.
A decline in sales was felt most strongly in the first month of the quarter
but improved as
the Company moved into its stronger fall selling season. During the quarter
ended
September 30, 1995, W-W Manufacturing had a special order which accounted for
approximately $533,000 of the total sales in this segment. This sale helped
offset the decline
in sales orders from regular customers. The Company can expect sales in the
livestock
handling equipment to remain soft as long as beef prices remain low and some
experts in the
cattle industry predict beef prices to remain low for the next twelve to
eighteen months.
However, during this period the Company is taking steps to maintain and gain
market share
by expanding its sales and marketing efforts to the upper midwest and western
United States
areas that have not been traditionally strong markets for the Company in the
past.
Historically, W-W Manufacturing has sold its equipment to the larger
ranchers and not to
smaller operators because along with higher quality and durability comes
higher prices.
Therefore, smaller operators opted for lower priced equipment because the size
of their herd,
they could not justify the price for W-W Manufacturing equipment. In order to
meet the
needs of the smaller price conscious operator, the Company has designed a new
line of
quality equipment which will be priced lower than the traditional equipment.
Additionally,
the Company expects to reintroduce a line of feed equipment and gates during
the late second
or early third quarter of fiscal 1996. It is expected that these new products
will help gain
market share in the south and southeast, because those regions have a larger
number of small
operators.
Gross profit margins decreased from 19.18% in 1994 to 17.09% in 1995 on an
overall
Company basis. The gross profit margin in the livestock handling equipment
decreased from
18.86% in 1994 to 17.99% in 1995. This decline is principally a result of
lower gross profit
margin on "specials" which accounted for approximately 23.4% of total sales in
the livestock
handling equipment segment during the quarter. Eagle continued to show
improvement in
its operating results. Eagle had a operating loss of $97,452 during the
quarter ended
September 30, 1995 as compared to an operating loss of $171,115 in
corresponding quarter
in 1994. Product sales shipped out of the Eagle manufacturing facility
totaled $587,915 in
1995. Management has estimated Eagle's breakeven point to be approximately
$200,000 to
$225,000 in shipments per month. It is anticipated that Eagle's shipments
will increase as
production of the reintroduced feed equipment, gates and new lower priced
cattle handling
equipment starts, during the late second or early third quarter of fiscal
1996. These new
products will be targeted for the market area Eagle supplies.
Gross profit margins in the water and environmental product segment
decreased from
19.6% in 1994 to 15.97% in 1995. This decline corresponds to higher
depreciation and
other costs associated with the new manufacturing facility which was completed
in December
1994. Presently, this facility is not being utilized to its fullest capacity
due to sluggish sales.
The selling expenses as a percent of sales increased to 8.69% in 1995 as
compared to
7.67% in 1994. The increase is a function of the cost of the establishing
sales force in the
livestock handling equipment segment, while sales have declined. The Company
has been
successful in new establishing new dealers and distributors in areas where the
Company has
not had a strong presence. It is anticipated that as cattle prices improve
and the new dealers
and distributors reduce their inventories, that they will start ordering W-W
livestock handling
equipment.
General and administrative expenses increased $31,406 in 1995 as compared to
1994.
This increase is a combination of higher legal fees involving lawsuits and
higher corporate
travel costs incurred. Corporate management has spent a majority of their
time assisting
management of the subsidiaries in developing new product lines, sales force
and marketing
plans.
Interest expense increased $20,135 during the quarter ended September 30,
1995, as
compared to the corresponding quarter in the prior year. This increase can be
attributed to
increase in borrowing on the lines of credit and interest incurred on the
funds borrowed to
build Titan's new facility which was completed in December 1994. Inflation
has not had a
significant effect on operations in the recent years because of the relatively
modest rate of
price increases in the United States.
(B) Liquidity and Capital Resources
The Company used $185,201 cash in operating activities in 1995 as compared
to $42,372
in 1994. This was the result of an increase of $618,365 in accounts
receivable. The
majority of this increase related to the $533,000 receivable on "specials"
shipped at the end
of the quarter, which was collected in full in October. Even though inventory
levels have
declined since June 30, 1995, management feels that additional reductions can
be made
without effecting sales. As the Company continues to reduce inventory,
liquidity will
improve and management expectes, corresponding reduction in debt and interest
expense.
The Company is currently in the process of renewing its banking arrangements
with its
primary lender on terms similar to which is presently in effect. Currently
Eagle is in
violation of certain loan covenants with both First American National Bank and
Bank IV,
Kansas due to prior net operating losses. Management has discussed these
violations with
the Banks and neither Bank indicated that they would accelerate payment of the
respective
loans.
During the quarter ended September 30, 1995, the Company made capital
additions of
$20,364 down from $206,487 in 1994. W-W Manufacturing is currently in
discussions with
the City of Dodge City, Kansas regarding the issuance of $1,400,000 of
Industrial Revenue
Bonds. Said proceeds would be used to acquire the Dodge City Manufacturing
facility and
provide funds for additions, improvements and remodeling. Under the terms of
the
indenture, W-W Manufacturing would lease the facility from the City of Dodge
City for
monthly pro-rata amounts sufficient to pay all principal and interest due on
said bonds. W-
W Manufacturing has an option to purchase property at any time for an amount
equal to full
amount required to pay-in-full or redeem all outstanding bonds plus $10.00.
Subsequent to September 30, 1995, the Company received approximately $80,000
as
payment toward principal and interest on its note receivable in the amount of
$440,218. This
note received as part of the proceeds from the December 1994 sale of real
estate. These
payments and future payments received will be used primarily to reduce debt,
thereby,
improving liquidity.
Management believes with net cash provided from operations, available lines
of credit
and the Company's ability to obtain additional long-term financing, the
Company will have
adequate sources to meet its current obligations.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Not Applicable Pursuant to the requirements of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
W W CAPITAL CORPORATION
(Registrant)
Dated: November 17, 1995 By:________________________________
Robert W. Claar, Chief Financial Officer
Dated: November 17, 1995 By:________________________________
Steve D. Zamzow, President & CEO
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto
duly authorized.
W W CAPITAL CORPORATION
(Registrant)
Dated: November 17, 1995 By: /s/ Robert W. Claar
Robert W. Claar, Chief Financial Officer
Dated: November 17, 1995 By: /s/ Steve D. Zamzow
Steve D. Zamzow, President & CEO