FORM 10-Q/a1
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, 1997
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
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(State or other jurisdiction of (IRS Employer Identi-
incorporation or organization) fication Number)
3500 JFK Parkway, Suite 202, Ft. Collins, CO
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80525 (Address of principal executive offices, including zip code)
(970) 207-1100
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(Registrant's telephone number, including area code)
Not Applicable
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(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 10, 1997
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$0.01 Par Value 5,540,661
W-W CAPITAL CORPORATION
Index
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PART I FINANCIAL INFORMATION PAGE NO.
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Item 1 Balance Sheets
September 30, 1997 and June 30, 1997 1
Statements of Operations
Three Months Ended
September 30, 1997 and 1996 3
Statements of Cash Flows
Three Months Ended
September 30, 1997 and 1996 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
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Item 2 CHANGES IN SECURITIES 13
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Item 3 DEFAULTS UPON SENIOR SECURITIES 13
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Item 4 SUBMISSION OF MATTERS TO VOTE OF
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SECURITY HOLDERS 13
Item 5 OTHER INFORMATION 13
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Item 6 EXHIBITS AND REPORT ON FORM 8-K 13
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SIGNATURES 14
Part 1-FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
W-W CAPITAL CORPORATION
Balance Sheet
September 30, June 30,
1997 1997
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(Unaudited)
Assets
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Current assets:
Cash ...................................... $ 149,637 $ 357,373
Trade accounts receivable ................. 2,341,105 2,160,991
Less allowance for doubtful accounts ...... (134,000) (134,000)
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Net accounts receivable ............... 2,207,105 2,026,991
Accounts receivable, related party ........ 168,407 167,572
Accounts receivable, other ................ 15,449 13,321
Inventories:
Raw materials ........................... 403,571 461,311
Work-in-process ......................... 188,890 188,890
Finished goods .......................... 2,611,215 2,690,955
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Total inventories ..................... 3,203,676 3,341,156
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Prepaid expenses .......................... 63,330 15,984
Current portion of notes receivable
from related parties .................. 2,596 9,286
Current portion of notes receivable, other 4,683 6,549
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Total current assets .................. 5,814,783 5,938,232
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Property and equipment, at cost ................ 4,598,947 4,553,214
Less accumulated depreciation
and amortization .......................... (2,353,404) (2,256,851)
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Net property and equipment ............ 2,245,543 2,296,363
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Other Assets:
Real Estate held for resale ............... 381,035 381,035
Long-term notes receivable from
related parties, net of current portion 23,028 23,028
Long-term notes receivable, other, net
of allowance for doubtful accounts
of $10,000 and current portion ........ 9,753 9,753
Other assets .............................. 28,485 30,682
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Total other assets .................... 442,301 444,498
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TOTAL ASSETS .......................... $8,502,727 $8,679,093
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Continued on following page
See accompanying notes to financial statements.
1
W-W CAPITAL CORPORATION
Balance Sheet, Continued
September 30, June 30,
1997 1997
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(Unaudited)
Liabilities
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Current Liabilities:
Accounts Payable .............................. $1,879,506 $2,232,990
Revolving credit note payable to Bank ......... 1,834,000 1,834,000
Accrued property taxes ........................ 40,795 34,442
Accrued payroll and related taxes ............. 191,154 184,569
Accrued interest payable ...................... 3,860 12,344
Accrued commissions related party ............. 150,000 150,000
Current portion of long-term payables ......... 1,120,673 1,144,949
Current portion of notes payable to
related parties ............................. 25,633 27,069
Current portion of capital lease obligation ... 9,578 9,889
Other current liabilities ..................... 19,178 18,777
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Total current liabilities ................. 5,274,377 5,649,029
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Other Liabilities:
Long-term note payable to financial
institutions net of current portion ......... 545,294 575,390
Long-term capital lease obligation,
net of current portion ...................... -- 1,684
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Total other Liabilities ................... 545,294 577,074
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TOTAL LIABILITIES ......................... 5,819,671 6,226,103
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Stockholders' Equity
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Common stock: $.01 par value 15,000,000
shares authorized 5,540,661 shares
issued and outstanding at September
30, 1997, and June 30, 1997, respectively ... 55,406 55,406
Capital in excess of par value ................ 3,304,629 3,304,629
Retained earnings (deficit) ................... (658,073) ( 888,139)
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2,701,962 2,471,896
Less 20,264 shares of treasury stock at
cost ........................................ ( 18,906) ( 18,906)
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TOTAL STOCKHOLDERS' EQUITY ................ 2,683,056 2,452,990
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ...................... $8,502,727 $8,679,093
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See accompanying notes to financial statements
2
W-W CAPITAL CORPORATION
Statements of Operations
(Unaudited)
Three Months Ended
September 30,
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1997 1996
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Net Sales .............................. $4,181,579 $3,812,848
Cost of goods sold ..................... 3,269,215 3,053,686
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Gross profit ........................... 912,364 759,162
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Operating expenses:
Selling expenses .................. 295,140 278,430
General and administrative expenses 347,666 358,035
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Total operating expenses ...... 642,806 636,465
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Operating earnings (loss) ..... 269,458 122,697
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Other income (expense):
Interest income ................... 24,161 18,887
Interest expense .................. ( 84,627) ( 95,305)
Gain (loss) on sale of assets ..... -- 386
Other income (expense), net ....... 20,974 6,162
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Total other income (expense) .. ( 39,492) ( 69,870)
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Earnings (loss) before income taxes 230,066 52,827
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Provision for deferred income taxes .... -- --
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Net earnings (loss) ............... $ 230,066 $ 52,827
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Earnings (loss) per common share: ...... $ .04 $ .01
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Weighted average number of
common shares outstanding .............. 5,549,544 5,530,661
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See accompanying notes to financial statements.
3
W-W CAPITAL CORPORATION
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Statement of Cash Flows
(Unaudited)
Three Months Ended
September 30,
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1997 1996
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Cash flows from operating activities:
Net earnings (loss) ............................. $230,066 $ 52,827
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization ................... 98,751 100,367
Loss (gain) on property and equipment ........... -- (386)
Deferred income taxes ........................... -- --
Other ........................................... -- --
Changes in assets and liabilities:
Accounts receivable ............................. (180,114) (155,952)
Inventories ..................................... 137,480 102,548
Other current and non-current assets ............ ( 50,308) ( 52,450)
Accounts payable ................................ (353,484) 35,548
Accrued expenses
and other current liabilities ............... 4,854 14,258
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Net cash provided by (used in) operating
activities ............................. (112,755) 96,760
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Cash flows from investing activities:
Increase in real estate held for sale ........... -- ( 660)
Purchase of property and equipment .............. (45,733) ( 25,205)
Proceeds from other notes receivable ............ 1,866 2,347
Proceeds from stockholders' notes receivable .... 6,689 6,161
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Net cash provided by (used in) investing
activities ............................. ( 37,178) ( 17,357)
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(Continued on following page)
4
W-W CAPITAL CORPORATION
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Statement of Cash Flows, Continued
(Unaudited)
Three Months Ended
September 30,
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1997 1996
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Cash flows from financing activities:
Proceeds from lines of credit ............... $ -- $ --
Payments on notes payable to financial
institutions and government entities .... ( 75,768) ( 85,574)
Payments on notes payable to affiliates ..... ( 1,435) ( 1,299)
Proceeds from notes payable ................. 19,400 34,156
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Net cash provided by (used in) financing
activities .............................. ( 57,803) ( 49,717)
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Net increase (decrease) in cash ............ (207,736) 29,686
Cash at beginning of period ................. 357,373 131,022
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Cash at end of period ................... $149,637 $160,708
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Supplemental disclosures of cash flow information:
Cash paid during the period for interest .... $ 93,110 $ 98,307
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5
See accompanying notes to financial statements.
W-W CAPITAL CORPORATION
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NOTES TO FINANCIAL STATEMENTS
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NOTE 1 - BASIS OF PRESENTATION
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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, 1997. 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,
1997, are not necessarily indicative of the result that may be expected for the
year ended June 30, 1998.
NOTE 2 - NET EARNINGS PER SHARE
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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 dilutive effect, if any, of common
stock equivalents existing during the applicable three month periods.
NOTE 3 - RELATED PARTY TRANSACTION
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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, 1997, included in its Annual Report on Form 10-K for the nature and
type of related party transactions.
6
A summary of the related party transactions that effect the Company's
statement of operations for the three months ended September 30, 1997 and 1996,
respectively, is as follows:
September 30,
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Transactions with
Related Parties 1997 1996
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Rent expense ............................. $15,000 $15,000
Interest income .......................... $ 211 $ 739
Interest expense ......................... $ 665 $ 801
ITEM 2. Management's Discussion and Analysis of Financial Condition and
- ------- Results of Operations.
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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 earning of $230,066, for the quarter ended
September 30, 1997, as compared to a net earnings of $52,827 in 1996.
Net sales increased to $4,181,579 for the three months ended September
30, 1997, compared to $3,812,848 for 1996. The following table represents actual
sales by segment group.
Sales by segment group:
Three Months Ended
September 30
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Increase
1997 1996 (Decrease)
---- ---- ----------
Livestock Handling Equipment ... $2,363,522 $1,937,912 $ 425,610
Water and Environmental Products 1,818,057 1,874,936 ( 56,879)
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Total Net Sales ........... $4,181,579 $3,812,848 $ 368,731
========== ========== ==========
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The increase in livestock equipment sales is attributed to high
distributor/dealer demand for all traditional equipment. Sales increased at
Eagle to $573,405 for the first three months ended September 30, 1997 compared
to $522,684 during the same period of 1997. Sales at W-W Manufacturing increased
from $1,327,788 to $1,688,372 or an increase of $360,584 during the three months
ended September 30, 1997. As beef prices and market conditions continue to
remain strong, sales in all areas continue to increase. The new panel and feed
equipment lines continue to improve, livestock systems and cattle working areas
remain strong and hydraulic chute sales have reached all time levels. The
Company is presently working on other new products to be introduced during the
spring market. As conditions continue to be strong, the expansion into new
market and products during the down turn of 1995 and 1996 is proving to be a
sound decision. New distributions established in the east, west and southwest
continue to show strong demand for all products.
While sales decreased slightly in the water and environmental products segment,
sales of Company manufactured products showed strong improvement. Sales continue
to go well in standard flush joint PVC screen and casing, and slotted
high-density polyethylene pipe introduced in fiscal 1996 and also has continued
to gain strength in the horizontal drilling market.
Titan's Ver-ta Slot product continues to show strong acceptance. This product
was developed for heavier wall applications found in landfills, highway
construction, and various mining applications. Vertical slotted openings are
available in various diameters, schedules and types of pipe. The Company has
developed the Ver-ta Slot for all applications and material including belled
end, gasket end, plain end or flush joint material.
Another new product gaining market acceptance is Titan's Combo-buried Pressure
Tank. This tank offers many advanced features over competitor's tanks including
strength, convenience of installation, and simplified operation. With the
introduction of the Enviorflex well screen, Titan again leads the way with an
innovative well screen that's a cost effective way to prevent sedimentation in
horizontal remidation wells. This screen offers strength and high performance
not found in other screens. This screen can be used for ground water, extraction
applications, and solid vapor extraction wells. These and other new products
being developed will help Titan maintain its reputation as the "ultimate
supplier" of water and well products.
Gross margins continue to show improvement in all companies showing an increase
for the three months ended September 30, 1997, to 21.8% compared to 20.0% in
1996. The gross profit margin in the livestock handling equipment segment
increased slightly from 23.0% to 23.2%. This increase, while only slight,
continues to improve as Eagle improves manufacturing efficiencies. Profits in
the livestock segment continue to improve. Eagle had an operating profit of
$47,581.68 during the quarter ended September 30, 1997, as compared to an
operating profit of $25,447 in the corresponding quarter in 1996. Operating
profits improved at W-W Manufacturing to $97,360.14 during the quarter ended
September 30, 1997, as compared to an operating profit of $7,170 in the
corresponding quarter of 1996.
8
Gross profit margins in the water and environmental segment increased from 16.8%
in 1996, to 20.0% in 1997. This increase is due to the increase in sales of the
manufactured products which are at higher profit margins. Profits in the water
and environmental segment continued to improve even though sales were slightly
lower. Profits increased to $89,525 during the three months ended September 30,
1997, compared to $55,750 for the same period in 1996.
Selling expenses as a percent of sales continued to decline during the quarter
ended September 30, 1997 to 7.1% compared to 7.3% in 1996. The Company will
monitor selling costs, continue to expand its distributor/dealer base and
promote products to the end user.
General and administrative expenses declined $10,369 during the quarter ended
September 30, 1997 and as a percentage of sales declined to 8.3% from 9.4% in
the corresponding quarter of 1996. The decrease is attributable to cost cuts
taken at the corporate office and lower legal expense due to the settlement of
various lawsuits.
Interest expense continues to decline as overall borrowing is reduced. Interest
expense decreased to $84,627 during the first quarter ended September 30, 1997,
compared to $95,305 during the same period of 1996.
(B) Liquidity and Capital Resources
-------------------------------
The Company generated profits of $230,066 during the quarter ended September 30,
1997, compared to $52,827 for the same quarter of 1996. Cash flow from
operations continued to improve during the quarter to $328,817, compared to
$153,194 during the same quarter of 1996.
Cash flow was used in operations to substantially reduce accounts payable and
bank debt. The Company will continue to improve cash flow and reduce debt and
interest expense. Cash was also used to carry increases in accounts receivable.
The improvement in cash flow will continue to improve as the Company generates
profits. Management will continue to monitor inventory levels, improve
receivable collections, reduce cost and improve manufacturing efficiencies to
insure adequate working capital. As of the time of this report, the Company was
in final stages of negotiating to sell its 95 acres of real estate in Mansfield,
Texas. The Company had been negotiating on a joint venture development but an
adequate partner has not been found at this time. It was determined that if a
fair price could be offered for the land, the Company would sell the property
and apply the proceeds to reduce bank debt.
The Company is currently renewing bank lines-of-credit with its primary lender
through January of 1998. These loans were only renewed by the lender for a short
term period due to operating losses of 1996. However, with the strong
improvement by the Company in profits and cash flow, several banks have shown
high interest in doing business with the Company. With the profits generated
9
during the last two quarters, all loan covenants have been complied with. It is
anticipated that new lines-of-credit will be in place by spring of 1998 with our
existing lenders or arrangements will be made with new financial institutions.
Management has discussed the various loan violations with our current banks and
neither bank has indicated they would accelerate any payment on the respective
loans.
Management believes with cash flow provided from operations, available
lines-of-credit and the Company's ability to sell its real estate holdings, the
Company will have adequate sources to meet its current obligations.
10
PART II
OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
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Not Applicable
ITEM 2. CHANGES IN SECURITIES
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Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
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Not Applicable
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
- ------- --------------------------------------------------
Not Applicable
ITEM 5. OTHER INFORMATION
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Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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Exhibit 27 Financial Data Schedule
11
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 11, 1997 By: /s/ Steve Zamzow
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Steve Zamzow, President & CEO
Dated: November 11, 1997 By: /s/ Dianne Gano
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Dianne Gano, Controller
12