1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
/XX/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 30, 1997
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
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COMMISSION FILE NUMBER: 0-19717
WPI GROUP, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW HAMPSHIRE 02-0218767
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1155 ELM STREET, MANCHESTER, NEW HAMPSHIRE 03101
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (603) 627-3500
(FORMER NAME, FORMER ADDRESS, AND FORMER FISCAL
YEAR, IF CHANGED SINCE LAST REPORT)
CHECK 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 PAST 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
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
CHECK WHETHER THE REGISTRANT FILED ALL DOCUMENTS AND REPORTS REQUIRED TO BE
FILED BY SECTION 12, 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 AFTER
THE DISTRIBUTION OF SECURITIES UNDER A PLAN CONFIRMED BY THE COURT. YES NO
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APPLICABLE ONLY TO CORPORATE ISSUERS:
STATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON
EQUITY, AS OF THE LATEST PRACTICABLE DATE:
CLASS OUTSTANDING AS OF APRIL 25, 1997
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COMMON STOCK, PAR VALUE $.01 5,980,867 SHARES
2
WPI GROUP, INC.
INDEX
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PART I - FINANCIAL INFORMATION PAGE NO.
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Item 1. Consolidated Financial Statements
Consolidated Balance Sheets 3
- March 30, 1997 and September 29, 1996
Consolidated Statements of Income 4
- Three months ended March 30, 1997 and March 31, 1996
- Six months ended March 30, 1997 and March 31, 1996
Consolidated Statements of Cash Flows 5
- Six months ended March 30, 1997 and March 31, 1996
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and 8
Results of Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
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WPI GROUP, INC.
CONSOLIDATED BALANCE SHEETS
September 29, March 30,
1996 1997
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(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 206,829 $ 84,719
Accounts receivable - net of allowance for doubtful accounts of
$244,300 and $304,000 respectively 10,881,315 9,272,179
Accounts receivable - other 1,618,873 269,165
Inventories 7,068,496 7,858,055
Prepaid expenses and other current assets 230,509 772,649
Prepaid income taxes 1,103,840 1,103,840
Refundable income taxes 547,750 621,825
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Total current assets 21,657,612 19,982,432
PROPERTY, PLANT AND EQUIPMENT
at cost less accumulated depreciation 9,447,758 9,713,807
OTHER ASSETS 19,569,574 19,785,258
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$50,674,944 $49,481,497
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,265,217 $ 3,055,075
Accrued expenses 3,464,164 2,060,116
Accrued income taxes 1,772,630 330,059
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Total current liabilities 9,502,011 5,445,250
NOTE PAYABLE TO BANK 18,650,000 19,542,000
NON-COMPETE AGREEMENT 20,000 --
DEFERRED INCOME TAXES 1,954,287 1,951,533
COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; authorized
20,000,000 shares, issued 5,947,922
and 5,978,367 respectively 59,479 59,784
Additional paid-in capital 13,658,604 13,817,711
Retained earnings 6,815,801 8,453,675
Cumulative foreign currency translation adjustments 14,762 211,544
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Total stockholders' equity 20,548,646 22,542,714
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$50,674,944 $49,481,497
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See notes to financial statements
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WPI GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
March 31, March 30, March 31, March 30,
1996 1997 1996 1997
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NET SALES $10,741,866 $14,222,033 $20,348,169 $28,330,852
COST OF GOODS SOLD 6,386,905 8,518,690 12,193,158 17,047,939
----------- ----------- ----------- -----------
GROSS PROFIT 4,354,961 5,703,343 8,155,011 11,282,913
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Research and new product development 766,734 1,035,392 1,433,881 1,965,150
Selling, general and administration 2,547,390 3,255,627 4,849,316 6,367,951
----------- ----------- ----------- -----------
Total operating expense 3,314,124 4,291,019 6,283,197 8,333,101
----------- ----------- ----------- -----------
OPERATING INCOME 1,040,837 1,412,324 1,871,814 2,949,812
OTHER INCOME (EXPENSE) (131,707) (126,701) (180,304) (505,938)
----------- ----------- ----------- -----------
INCOME BEFORE PROVISION
FOR INCOME TAXES 909,130 1,285,623 1,691,510 2,443,874
PROVISION FOR INCOME TAXES 301,000 424,000 567,000 806,000
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NET INCOME $ 608,130 $ 861,623 $ 1,124,510 $ 1,637,874
=========== =========== =========== ===========
NET INCOME PER WEIGHTED
AVERAGE NUMBER OF
COMMON SHARES $ 0.10 $ 0.14 $ 0.19 $ 0.27
=========== =========== =========== ===========
Weighted Average Common Shares
and Equivalent Outstanding 6,005,628 6,187,474 5,929,266 6,169,747
=========== =========== =========== ===========
See notes to financial statements
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WPI GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
March 31, March 30,
1996 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,124,510 $ 1,637,874
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Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 861,683 1,438,022
Changes in current assets and liabilities net of effects
of acquisition:
Accounts receivable (1,252,236) 1,609,136
Accounts receivable - other (3,103,868) 1,349,708
Inventories (1,371,573) (789,559)
Prepaid expenses and other current assets 160,793 (616,215)
Accounts payable 2,960,894 (1,210,142)
Accrued expenses (71,466) (889,998)
Accrued income taxes 162,930 (1,442,571)
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Total adjustments (1,652,843) (551,619)
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Net cash provided by (used in) operating activities (528,333) 1,086,255
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CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in notes payable 4,582,225 892,000
Decrease in long-term liabilities (3,145,000) (22,754)
Proceeds from issuance of common stock 27,286 41,174
Proceeds from exercise of stock options 105,613 70,238
Tax benefit on exercise of non-statutory options -- 48,000
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Net cash provided by financial activities 1,570,124 1,028,658
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (436,056) (953,940)
Payment of accrued acquisition costs (195,110) (514,050)
Increase in other assets (160,913) (965,815)
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Net cash used for investing activities (792,079) (2,433,805)
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EFFECT OF FOREIGN CURRENCY TRANSLATION ON CASH -- 196,782
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 249,712 (122,110)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 29,664 206,829
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CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 279,376 $ 84,719
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SUPPLEMENTAL DISCLOSURE OF CASH
INFORMATION:
Income taxes paid $ 405,070 $ 1,210,000
Interest paid 201,258 682,967
See notes to financial statements
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6
WPI GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING ACTIVITIES:
Six Months Ended
March 31, March 30,
1996 1997
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On November 10, 1995 the Company acquired the
common stock of Micro Processor Systems, Inc.
(MPSI) and subsidiary for $1 in cash plus the
assumption of agreed upon liabilities:
Fair value of assets acquired $ 7,398,285 $
--
Cash paid and expenses incurred of $510,001 (510,001) --
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Liabilities assumed $ 6,888,284 $
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See notes to financial statements
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial statements for the three months and six months ended March
30, 1997 and March 31, 1996 are unaudited and include all adjustments
which, in the opinion of management, are necessary to present fairly the
results of operations for the periods then ended. All such adjustments are
of a normal recurring nature. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Form 10-KSB filed with the Securities and Exchange Commission
(File No. 0-19717), which included financial statements for the years ended
September 29, 1996 and September 24, 1995.
The results of the Company's operations for any interim period are not
necessarily indicative of the results of the Company's operations for any
other interim period or for a full fiscal year.
2. INVENTORIES
Inventory consists of: September 29, March 30,
1996 1997
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Raw Materials $4,360,602 $4,452,218
Work in Process 1,986,821 2,524,540
Finished Goods 721,073 881,297
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Total $7,068,496 $7,858,055
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis by management is provided to identify
certain significant factors that affected the Company's financial position
and operating results during the periods included in the accompanying
financial statements.
RESULTS OF OPERATIONS
Net sales of $14.2 million for the second quarter of fiscal 1997 increased
32.4 percent from sales of $10.7 million for the second quarter of fiscal
1996. The increase was primarily due to improved sales in our targeted
markets and the acquisition of Oyster Terminals, Ltd.. For the first six
months of fiscal 1997 the company reported sales of $28.3 million, 39.2
percent higher than the sales of $20.3 million for the first six months of
fiscal 1996.
Cost of sales of $8.5 million for the second quarter of fiscal 1997
resulted in a gross profit of 40.1 percent, compared to a gross profit of
40.5 percent for the same period of fiscal 1996. Cost of sales of $17.0
million for the first six months of fiscal 1997 resulted in a gross profit
of 39.8 percent, compared to a gross profit of 40.1 percent for the same
period of fiscal 1996. Total gross profit for the three and six months
increased due to the higher revenues discussed above.
As a percentage of sales, selling, general and administrative expenditures
were 22.9 and 23.7 percent for the quarters and 22.5 and 23.8 percent of
the six month periods ended March 30, 1997 and March 31, 1996,
respectively. Actual expenditures increased due to the acquisitions
discussed above. Research and new product development expenses were 7.3
percent of sales for the quarter and 6.9 percent of sales for the six
months ended March 30, 1997, compared to 7.1 and 7.1 percent of sales for
the same three and six month periods in fiscal 1996. Actual expenditures
increased slightly due to the acquisition discussed above.
Income before provision for income taxes of $2.4 million for the six months
ended March 30, 1997 increased 44.5 percent compared to $1.7 million for
the six months ended March 31, 1996. The increase is primarily due to
improved sales.
The effective income tax rate for fiscal 1997 is estimated at 33 percent
year-to-date compared to 34 percent for fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $14.5 million at March 30, 1997 compared
to $12.2 million at September 29, 1996. Cash flow provided from operations
and financing activities was approximately $2.1 million for the six months
ended March 30, 1997. This inflow amount was offset by the cash flow used
in investing activities of approximately $2.4 million for the six months
ended March 30, 1997.
The Company's management believes it has sufficient working capital to meet
its liquidity needs.
As of March 30, 1997, the Company had no material commitments for capital
expenditures.
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WPI GROUP, INC.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
4.1 Revolving Line of Credit Promissory Note dated February
27, 1997, replacement to Revolving Line of Credit
Promissory Note dated July 12, 1996.
4.2 Third Amendment dated February 27, 1997 to Commercial
Loan Agreement dated October 24, 1995.
27 Financial Data Schedule for six months ended March 30,
1997. (This exhibit is filed electronically and not
included with printed copies of this form.)
B. Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf by the undersigned
thereunto duly authorized.
WPI GROUP, INC.
(Registrant)
Date: May 8, 1997 By:/s/Dennis M. Deegan
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Dennis M. Deegan
President and
Chief Operating Officer
Date: May 8, 1997 By:/s/John W. Powers
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John W. Powers
Vice President and
Chief Financial Officer
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