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 March 31, 2001
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)
3500 JFK Parkway Suite 202 Ft. Collins, CO 80525
(Address of principal executive offices, including zip code)
(970) 207-1100
(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
- ------------------- at August 10, 2001
Common stock -----------------------------
$0.01 Par Value 5,553,827
W-W CAPITAL CORPORATION
Index
PART I FINANCIAL INFORMATION PAGE NO.
- ------ --------------------- --------
Item 1 Balance Sheets
March 31, 2001 and June 30, 2000 1
Statements of Income
Three and Nine Months Ended
March 31, 2001 and 2000 3
Statements of Cash Flows
Nine Months Ended
March 31, 2001 and 2000 5
Notes to Financial Statements 7
Independent Accountants Report 10
Item 2 Management's Discussion and Analysis
of Financial Condition and Results
of Operations 11
PART II OTHER INFORMATION
- ------- -----------------
Item 1 LEGAL PROCEEDINGS 14
Item 2 CHANGES IN SECURITIES 14
Item 3 DEFAULTS UPON SENIOR SECURITIES 14
Item 4 SUBMISSION OF MATTERS TO VOTE OF
SECURITY HOLDERS 14
Item 5 OTHER INFORMATION 14
Item 6 EXHIBITS AND REPORT ON FORM 8-K 14
SIGNATURES 15
Part 1-FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
- -----------------------------
W-W CAPITAL CORPORATION
-----------------------
Balance Sheets
March 31 June 30,
2001 2000
---- ----
(Unaudited)
Assets
- ------
Current assets:
Cash $ 306,122 $ 313,898
----------- -----------
Trade accounts receivable 1,985,196 1,439,179
Less allowance for doubtful accounts (38,000) (38,000)
----------- -----------
Net accounts receivable 1,947,196 1,401,179
----------- -----------
Accounts receivable, other 35,313 41,439
Inventories:
Raw materials 619,145 563,123
Work-in-process 365,168 388,056
Finished goods 994,779 829,408
----------- -----------
Total inventories 1,979,092 1,780,587
----------- -----------
Prepaid expenses 62,398 22,097
Current portion of notes receivable
from related parties 554 507
Deferred income tax asset 92,000 92,000
----------- -----------
Total current assets 4,422,675 3,651,707
----------- -----------
Property and equipment, at cost 3,518,830 3,223,938
Less accumulated depreciation
and amortization (2,274,223) (2,134,658)
----------- -----------
Net property and equipment 1,244,607 1,089,280
----------- -----------
Other Assets:
Long-term notes receivable from
related parties, net of current portion 21,073 21,627
Loan Acquisition Costs-Net of
accumulated amortization of $38,966
at March 31, 2001 and $25,142 at
June 30, 2000 10,747 24,571
Equipment deposits 175,000 --
Net assets of discontinued operations -- 1,854,098
Other assets 7,387 10,454
----------- -----------
Total other assets 214,207 1,910,750
----------- -----------
TOTAL ASSETS $ 5,881,489 $ 6,651,737
=========== ===========
(Continued on following page)
See accompanying notes to financial statements.
1
W-W CAPITAL CORPORATION
-----------------------
Balance Sheets, Continued
March 31, June 30,
2001 2000
---- ----
(Unaudited)
Liabilities
- -----------
Current Liabilities:
Accounts Payable $ 1,406,733 $ 1,285,816
Accrued property taxes 19,081 16,995
Accrued payroll and related taxes 183,931 209,819
Accrued interest payable 43,010 15,076
Accrued income taxes, current 42,417 36,000
Current portion of long-term notes payable 221,000 361,000
Current portion of capital lease obligations 24,000 23,000
Other current liabilities 110,330 76,546
----------- -----------
Total current liabilities 2,050,502 2,024,252
----------- -----------
Other Liabilities:
Long-term notes payable, net of current portion 3,125,372 1,452,992
Long-term capital lease obligations, net
of current portion 250,561 68,426
Deferred income tax liability 106,000 106,000
Negative goodwill, net of accumulated
amortization of $2,538 at March 31,
2001 and $781 at June 30, 2000 44,315 46,072
----------- -----------
Total other liabilities 3,526,248 1,673,490
----------- -----------
TOTAL LIABILITIES 5,576,750 3,697,742
----------- -----------
Stockholders' Equity
- --------------------
Preferred stock: $10.00 par value, 400,000 shares
authorized -- --
Common stock, $0.01 par value, 15,000,000
shares authorized; 5,553,827 shares issued
and outstanding at March 31, 2001 and
5,540,661 at June 30, 2000 55,538 55,406
Capital in excess of par value 3,305,533 3,304,629
Accumulated Deficit (242,317) (357,134)
----------- -----------
3,118,754 3,002,901
Less 3,534,263 shares of treasury stock at cost at
March 31, 2001 and 120,264 at June 30, 2000 (2,814,015) (48,906)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 304,739 2,953,995
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 5,881,489 $ 6,651,737
=========== ===========
See accompanying notes to financial statements.
2
W-W CAPITAL CORPORATION
-----------------------
Statements of Income
(Unaudited)
Three Months Ended Nine Months Ended
March 31 March 31,
-------- ---------
2001 2000 2001 2000
---- ---- ---- ----
Net Sales $ 3,445,016 $ 3,031,950 $ 10,348,242 $ 8,432,082
Cost of goods sold 2,724,056 2,346,312 8,353,188 6,653,161
------------ ------------ ------------ ------------
Gross profit 720,960 685,638 1,995,054 1,778,921
------------ ------------ ------------ ------------
Operating expenses:
Selling expenses 270,209 261,518 753,087 735,169
General and administrative expenses 321,235 222,872 995,272 594,970
------------ ------------ ------------ ------------
Total operating expenses 591,444 484,390 1,748,359 1,330,139
------------ ------------ ------------ ------------
Operating earnings 129,516 201,248 246,695 448,782
------------ ------------ ------------ ------------
Other income (expenses):
Interest income 8,544 7,620 23,871 14,016
Interest expense (84,025) (42,416) (197,287) (122,228)
Gain on sale of assets 34,634 -- 72,434 --
Other income (expense), net 1,807 3,262 20,704 9,372
------------ ------------ ------------ ------------
Total other income (expense) (39,040) (31,534) (80,278) (98,840)
------------ ------------ ------------ ------------
Earnings before income taxes 90,476 169,714 166,417 349,942
Income taxes from continuing operations 35,819 84,000 59,819 84,000
------------ ------------ ------------ ------------
Net earnings from continuing operations 54,657 85,714 106,598 265,942
------------ ------------ ------------ ------------
Discontinued operations:
Earnings from operations of Titan
Industries disposed of (net of
income taxes of $16,000 at three
and nine months ended March 31,
2000 and $59,000 at nine months
ended March 31, 2001) -- 60,290 88,219 52,562
Loss on disposal of Titan Industries -- -- 80,000 --
------------ ------------ ------------ ------------
Net earnings from discontinued operations -- 60,290 8,219 52,562
------------ ------------ ------------ ------------
Net earnings $ 54,657 $ 146,004 $ 114,817 $ 318,504
============ ============ ============ ============
(Continued on following page)
See accompanying notes to financial statements.
3
W-W CAPITAL CORPORATION
-----------------------
Statements of Income, Continued
(Unaudited)
Three Months Ended Nine Months Ended
March 31 March 31,
-------- ---------
2001 2000 2001 2000
---- ---- ---- ----
Earnings per common share:
Basic
Earnings from continuing operations $ 0.01 $ 0.02 $ 0.02 $ 0.05
Earnings from discontinued operations 0.00 0.01 0.02 0.01
Loss on disposal of Titan Industries 0.00 0.00 (0.02) 0.00
------------- ------------- ------------- -------------
Net earnings $ 0.01 $ 0.03 $ 0.02 $ 0.06
============= ============= ============= =============
Weighted average number of common
shares 5,553,827 5,540,661 5,545,050 5,540,661
Diluted
Earnings from continuing operations $ 0.01 $ 0.02 $ 0.02 $ 0.05
Earnings from discontinued operations 0.00 0.01 0.02 0.01
Loss on disposal of Titan Industries 0.00 0.00 (0.02) 0.00
------------- ------------- ------------- -------------
Net earnings $ 0.01 $ 0.03 $ 0.02 $ 0.06
============= ============= ============= =============
Weighted average number of common
shares 5,553,827 5,540,661 5,545,050 5,540,661
See accompanying notes to financial statements.
4
W-W CAPITAL CORPORATION
-----------------------
Statements of Cash Flows
(Unaudited)
Nine Months Ended
March 31,
---------
2001 2000
---- ----
Cash flows from operating activities:
Net earnings $ 114,817 $ 318,504
Adjustments to reconcile net earnings to net
cash provided by (used in) operating
activities:
Earnings from discontinued operations (43,511) (68,562)
Depreciation and amortization 153,389 143,586
Gain on sale of property and equipment (72,434) --
Provision for doubtful accounts receivable 725 20,752
Amortization of negative goodwill (1,757) (222)
Change in assets and liabilities:
Accounts receivable (546,742) (146,712)
Inventories (213,284) (268,917)
Other current and non-current assets (31,108) (79,298)
Accounts payable 118,196 249,931
Accrued expenses and other current liabilities 44,333 169,161
--------- ---------
Net cash provided by (used in)
operating activities (477,376) 338,223
--------- ---------
Cash flows from investing activities:
Proceeds from sale of property and equipment 72,434 --
Purchase of property and equipment (254,495) (45,736)
Proceeds from stockholders' notes receivable 507 466
Cash acquired in acquisition of subsidiary -- 14,988
--------- ---------
Net cash used in investing activities $(181,554) $ (30,282)
--------- ---------
(Continued on following page)
See accompanying notes to financial statements
5
W-W CAPITAL CORPORATION
-----------------------
Statements of Cash Flows, Continued
(Unaudited)
Nine Months Ended
March 31,
---------
2001 2000
---- ----
Cash flows from financing activities:
Payments on notes payable, financial
institutions and government entities $(8,818,756) $(7,886,803)
Proceeds from notes payable 9,385,739 7,566,187
Payments on capital leases (16,865) (12,777)
Proceeds from leases payable 200,000 --
Proceeds from the exercise of stock options 1,036 --
Repurchases of common stock (100,000) --
----------- -----------
Net cash provided by (used in) financing
activities 651,154 (333,393)
----------- -----------
Net decrease in cash (7,776) (25,452)
Cash at beginning of period 313,898 170,252
----------- -----------
Cash at end of period $ 306,122 $ 144,800
=========== ===========
Supplemental disclosures of cash flow for
continuing operations:
Cash paid during the period for interest $ 167,457 $ 118,162
Installment loans to acquire property and equipment $ 40,397 $ --
Installment loans used for deposits on purchase
of property and equipment $ 175,000 $ --
Installment loans used for the repurchase of
common stock $ 750,000 $ --
Cash paid during the period for income taxes $ 67,685 $ --
See accompanying notes to financial statements.
6
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.
In January 2001, the Company sold its water and environmental product
segment, Titan Industries, Inc.. The Company's consolidated financial statements
have been restated to reflect the segment as a discontinued operation for all
periods presented.
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, 2000. 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 and nine month periods ended March
31, 2001, are not necessarily indicative of the result that may be expected for
the year ended June 30, 2001
NOTE 2 - NET BASIC EARNINGS PER SHARE
- -------------------------------------
The net basic earnings 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 and nine 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,
2000, included in its Annual Report on Form 10-K for the nature and type of
related party transactions.
7
A summary of the related party transactions that effect the Company's
statement of operations for the three and nine months ended March 31, 2001 and
2000, respectively, is as follows:
Three Months Ended Nine Months Ended
March 31, March 31,
--------- ---------
Transactions with
- -----------------
Related parties 2001 2000 2001 2000
- --------------- ---- ---- ---- ----
Rent Expense $ 15,000 $ 15,000 $ 45,000 $ 40,000
NOTE 4 - CREDIT AGREEMENT
- -------------------------
During March 2001, the Company extended the maturity date of the revolving
notes payable credit agreement with Wells Fargo Bank through October 2004.
Borrowing base limitations and loan agreement covenants remain unchanged.
NOTE 5 - DISCONTINUED OPERATION
- -------------------------------
On January 5, 2001, the Shareholders of the Company voted to sell its water
and environmental product segment, Titan Industries, Inc., to certain
shareholders of the Company in exchange for 3,390,399 shares, or approximately
61.2%, of the common stock of the Company. In addition to giving up its interest
in Titan, the Company also contributed to the capital of Titan the sum of
$850,000 used to equalize the value of the consideration being exchanged. The
sale is being accounted for as a treasury stock transaction and the estimated
loss on disposal is the result of professional fees attributable to the
transaction. The accompanying financial statements have been restated to conform
to discontinued operations treatment for all historical periods presented.
The operating results of the discontinued operation is as follows:
Six Months Ended
December 31,
------------
2000 1999
---- ----
Net Sales $ 4,699,336 $ 4,071,064
=========== ===========
Earnings (loss) before
provision for income taxes $ 147,219 $ (7,728)
Provision for income taxes 59,000 --
----------- -----------
Earnings (loss) from
discontinued operations $ 88,219 $ (7,728)
=========== ===========
8
Assets and liabilities of the discontinued operation is summarized as
follows:
December 31, June 30,
2000 2000
---- ----
Cash $ 105,473 $ 96,986
Receivables 1,258,184 1,579,784
Inventories 2,551,495 2,537,367
Prepaid expenses 18,151 30,540
Deferred taxes 22,000 22,000
---------- ----------
Current assets of discontinued
operations 3,955,303 4,266,677
---------- ----------
Net property and equipment 909,224 870,047
---------- ----------
Accounts payable 1,405,448 1,731,932
Accrued liabilities 181,004 138,494
Short-term debt 1,065,000 57,000
---------- ----------
Current liabilities of discontinued
operations 2,651,452 1,927,426
---------- ----------
Long-term debt 290,466 1,330,200
Deferred taxes 25,000 25,000
---------- ----------
Non-current liabilities of
discontinued operations 315,466 1,355,200
---------- ----------
Net assets of discontinued operations $1,897,609 $1,854,098
========== ==========
During January 2001, the Company entered into an informal loan agreement
with an affiliated investment group to borrow $1,000,000. 2,448,000 shares of
the Company's outstanding common stock collateralize the loan. Loan proceeds of
$750,000 were used to fund the capital contribution to Titan Industries, Inc.
The informal note agreement is tentatively scheduled to mature in January 2011
and bears interest at 12%. The note is payable with one payment consisting
exclusively of twelve month's interest on the second anniversary date, and
beginning on the third anniversary date, annual installments of $125,000 plus
all unpaid interest.
NOTE 6 - SUBSEQUENT EVENT
- -------------------------
During April 2001, The Company started leasing its new facility in Thomas,
Oklahoma under a capital lease obligation. As a result, the Company will
capitalize the building and land for $1,046,380 and the building will be
amortized over 30 years.
9
Independent Accountant's Report
- -------------------------------
Board of Directors and Stockholders
W-W Capital Corporation
Fort Collins, Colorado
We have reviewed the accompanying balance sheets, statements of operations,
and cash flows of W-W Capital Corporation and consolidated subsidiaries as of
March 31, 2001, and for the three month and nine month periods then ended. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
BROCK AND COMPANY, CPAs, P.C.
Fort Collins, Colorado
July 2, 2001
10
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), Eagle Enterprises (Eagle) and W-W Paul Scales
(Paul), and the water and environmental product segment is represented by Titan
Industries (Titan). On January 5, 2001, the Shareholders of the Company voted to
sell Titan to certain shareholders of the Company. The accompanying financial
statements, as well as management's discussion and analysis of financial
condition and results of operations, have been stated to reflect discontinued
operations treatment for all historical periods presented.
(A) Analysis of Results of Operations
---------------------------------
The Company had net earnings from continuing operations of $106,598 for the
nine months ended March 31, 2001, as compared to $265,942 for the same period of
2000. For the three month period ended March 31, 2001, the Company had net
earnings of $54,657 as compared to $85,714 for the same period of 2000. This
loss of earnings was attributable to transition costs associated with the plant
shut down in Dodge City, Kansas and the opening of the new plant in Thomas,
Oklahoma.
Sales from continuing operations increased to $10,348,242 for the nine
months ended March 31, 2001, compared to $8,432,082 for 2000. The increase of
$1,916,160 is attributable to improved cattle prices, therefore creating strong
distributor/dealer demand, as well as the Company's efforts in the equine
(horse) equipment market and expanded product offerings in rodeo and special
product sales. The Company continues to make improvements to various existing
products and is planning on introducing some significant changes in the summer
of 2001. Sales increased at both the W-W Manufacturing and Eagle plant
locations. Sales at the W-W Manufacturing location increased slightly from
$5,806,310 to $5,909,367 for the same nine-month period of 2000 and 2001. Sales
increased at the Eagle plant to $2,707,247 for the nine months ended March 31,
2001 as compared to $2,559,620 for the same period of 2000. The Company also
realized sales from the Paul location of $1,731,628 for the nine months ended
March 31, 2001. Based on present economic conditions throughout the United
States, the Company anticipates sales to decrease during the fourth quarter of
fiscal 2001. The Company is attempting to limit the effect of the economic
slowdown by continuing to analyze existing product improvements and new product
introductions which have allowed the Company to gain acceptance with new
customers and move into markets not normally serviced by the Company. The east
coast market serviced by Eagle continues to show improvement, as this market
accepts and appreciates a higher quality of equipment, replacing the lighter
weight products previously offered. The eastern market has seen the most
significant improvements in the rodeo and equine equipment lines. The Company is
presently involved in several projects, which includes special sales to expo
centers, fairs and livestock shows, as well as projects in the international
market. The Company expects to see this area of sales improve throughout 2001.
With the completion of the new plant in Thomas, Oklahoma during the first
quarter of 2001, the Company has incurred significant costs for moving
operations from Dodge City, Kansas and the training of new employees in
Oklahoma. This increase in cost impaired profits for the third quarter of fiscal
2001 and management anticipates that the costs will impair profits throughout
the balance of fiscal 2001. The Company kept both the Dodge City and Thomas
plants operating as the move was taking place. It is anticipated that operations
will be running at full operating levels by June 30, 2001, at which time
management believes the Company will start realizing the benefits of the new
plant and the cost reductions that are anticipated with the move completed.
11
Gross margins from continuing operations decreased for the nine months
ended March 31, 2001 to 19.3% as compared to 21.1% in 2000. The decreased
margins are the result of labor, shipping and manufacturing problems in the
Dodge City facility due the closing of the plant. Many products during the nine
month period ended March 31, 2001 had to be built in Thomas, Oklahoma due to
labor shortages in Dodge City and the availability of the power coat paint
system in Thomas. These products then had to be shipped to Dodge City for
painting and then reshipped to our distributors/dealers. These extra costs,
along with other manufacturing insufficiencies in Dodge City and additional
costs associated with the start up of the new Thomas plant caused the decrease
in margins. Management expects gross margins to improve after the consolidation
of the two plants into the new facility in Thomas, Oklahoma. The move took place
during the third quarter of fiscal 2001 and operations are expected to be in
full swing by the first quarter of fiscal 2002.
Gross margins at the Eagle plant continue to improve as the plant
utilization continues and sales increase in the eastern market. Gross profits
improved at the Eagle plant to $478,380 or 17.7% for the nine months ended March
31, 2001 as compared to $344,504 or 13.5% for the same period of 2000.
Selling expenses from continuing operations as a percentage of sales
decreased from 8.7% in 2000 to 7.3% in 2001. Total dollars expended for selling
expense increased only $17,918 during the nine month period ended March 31,
2001. The slight increase reveals the Company's cost will remain stable while
sales continue to improve. The Company will continue its aggressive pursuit of
new markets and expanding its distributor/dealer base. Through the balance of
the fiscal year, management will continue to evaluate selling expense to find
ways to keep costs in line as a percentage of sales, as we continue to grow
markets and market share with new products.
General and administrative expense from continuing operations increased as
a percentage of sales to 9.6% as compared to 7.1% for the same period of 2000.
Overall dollars spent on general and administrative expenses increased $400,302
for the nine months ended March 31, 2001 as compared to the same period of 2000.
The increase was due to higher salaries, legal and accounting costs related to
the changes in business structure and the increase of travel costs nationwide.
The overall dollar increase was also a result of the addition of Paul by
$119,332. The Company will continue to find ways to lower general and
administrative expense through the use of centralization, job realignment, and
line-by-line expense reductions. The Company also believes that general and
administrative expenses will also decrease due to the fact that the business
structure changes were completed during the third quarter of fiscal 2001 and a
majority of the legal and accounting fees were finalized at that time.
Interest expense from continuing operations increased for the nine months
ended March 31, 2001 to $197,287 from $122,228 for the same period of 2000.
Interest expense from continuing operations for the three months ended March 31,
2001 increased to $84,025 from $42,416 for the same three-month period of 2000.
This increase is due to the rise in the prime interest rate for the first six
months of fiscal 2001 and the heavy borrowing on the revolving lines to support
the Titan split-off and manufacturing plant move. The Company maintained higher
levels of inventory while moving from Dodge City to Thomas in an effort to
maintain sales levels while in transit. As profits and cash flow increase, the
Company plans to reduce debt, thereby reducing overall interest expense.
12
(B) Liquidity and Capital Resources
-------------------------------
The Company's principal sources of liquidity are borrowings under its
credit facilities and from internally generated funds. The Company generated
funds from operations with net earnings of $114,817 and produced a traditional
cash flow from operations of $268,206. This cash flow and funds from an
operating line increase of $566,983 were used to fund the sales growth and the
resulting inventory and accounts receivable increase. The Company anticipates
keeping a high level of borrowings throughout the fourth quarter of fiscal 2001
due to the plant move from Dodge City to Thomas and the current economic
slowdown throughout the country. As the Company moves into fiscal 2002, it
anticipates that continued sales growth along with the cost saving benefits
associated with the new Thomas plant will help level off and reduce borrowings.
The Company used cash in investing activities for the purchase of new
property and equipment. Overall purchases of property and equipment increased
for the nine months ended March 31, 2001 to $254,495 from $45,736 for the same
nine months ended March 31, 2000. The increased purchases are a result of the
Company providing equipment for the new Thomas plant. Cash used in financing
activities resulted in an increase in borrowings of $651,154 for the nine months
ended March 31, 2001, and the Company anticipates overall debt to increase
slightly over the balance of fiscal 2001.
Based on current and general economic conditions, the Company anticipates a
reduction in both sales and profits for the fourth quarter of fiscal 2001. The
production plant move from Dodge City, Kansas to Thomas, Oklahoma has had a
negative effect on profitability, however management believes that the benefits
of the move will be felt throughout fiscal 2002 and thereafter. Management also
believes that with net cash provided from cash flow, available lines of credit,
and funds provided from earnings, it will have adequate sources to meet its
current obligations.
13
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
14
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: August 10, 2001 By: /s/ Steve D. Zamzow
-----------------------------------
Steve D. Zamzow, President & CEO
Dated: August 10, 2001 By: /s/ Mike Dick
-----------------------------------
Mike Dick, Controller
15