-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q5GfAOcdkODUouN//XGv33AyEFERGcueMC9ymRbrGi+t6cdRQmPjbh+ElMWbS2qH 3FXTM5SFIbvrDrTAMlAdDg== 0000881771-99-000012.txt : 19990211 0000881771-99-000012.hdr.sgml : 19990211 ACCESSION NUMBER: 0000881771-99-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981227 FILED AS OF DATE: 19990210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WPI GROUP INC CENTRAL INDEX KEY: 0000881771 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COILS, TRANSFORMERS & OTHER INDUCTORS [3677] IRS NUMBER: 020218767 STATE OF INCORPORATION: NH FISCAL YEAR END: 0928 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19717 FILM NUMBER: 99527992 BUSINESS ADDRESS: STREET 1: 1155 ELM ST CITY: MANCHESTER STATE: NH ZIP: 03101 BUSINESS PHONE: 6036273500 MAIL ADDRESS: STREET 1: 1155 ELM STREET CITY: MANCHESTER STATE: NH ZIP: 03101 FORMER COMPANY: FORMER CONFORMED NAME: WALKER POWER INC DATE OF NAME CHANGE: 19930328 10-Q 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 December 27, 1998 / /TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 For the transition period from to . ---------- ---------- Commission File Number: 0-19717 WPI GROUP, INC. --------------- (Exact name of registrant as specified in its charter) NEW HAMPSHIRE 02-0218767 ------------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1155 Elm Street, Manchester, New Hampshire 03101 - ------------------------------------------ ----- (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 Exchange Act 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 --- --- 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 Exchange Act after the distribution of securities under a plan confirmed by the court. Yes No --- --- 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 January 26,1999 ----- --------------------------------- Common Stock, par value $.01 6,044,090 shares WPI GROUP, INC. INDEX ----- Page No. -------- PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Consolidated Balance Sheets 3 - December 27,1998 and September 27,1998 Consolidated Statements of Income 4 - Three months ended December 27,1998 and December 28,1997 Consolidated Statements of Cash Flows 5 - Three months ended December 27,1998 and December 28,1997 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 8 SIGNATURES 9 -2- WPI GROUP, INC. CONSOLIDATED BALANCE SHEETS
September 27, December 27, 1998 1998 ------------- ------------ (unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 159,518 $ 47,300 Accounts receivable - net of allowance for doubtful accounts of $1,283,000 and $1,302,000, respectively 21,123,792 20,176,582 Accounts receivable - other 270,611 279,906 Inventories 14,188,286 15,210,104 Prepaid expenses and other current assets 1,562,048 2,014,097 Prepaid income taxes 2,551,616 2,551,459 Refundable income taxes 620,578 713,750 ------------- ------------ Total current assets 40,476,449 40,993,198 PROPERTY, PLANT AND EQUIPMENT at cost, less accumulated depreciation 15,514,291 15,440,814 OTHER ASSETS 54,132,417 53,811,143 ------------- ------------ $ 110,123,157 $110,245,155 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt $ 3,715,748 $ 3,715,748 Accounts payable 7,776,470 6,685,453 Accrued expenses 5,985,304 4,980,552 Accrued income taxes 1,672,166 1,601,421 ------------- ------------ Total current liabilities 19,149,688 16,983,174 ------------- ------------ LONG-TERM DEBT 62,638,964 65,436,249 ------------- ------------ DEFERRED INCOME TAXES 3,091,995 3,100,135 ------------- ------------ COMMITMENTS STOCKHOLDERS' EQUITY: Common stock, $.01 par value; authorized 20,000,000 shares; issued and outstanding 6,028,204 and 6,037,024, respectively. 60,282 60,370 Additional paid-in capital 14,169,771 14,201,882 Retained earnings 10,418,044 10,142,566 Cumulative foreign currency translation adjustments 594,413 320,779 ------------- ------------ Total stockholders' equity 25,242,510 24,725,597 ------------- ------------ $ 110,123,157 $110,245,155 ============= ============
See notes to financial statements -3- WPI GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME (unaudited)
Three Months Ended December 28, December 27, 1997 1998 ------------- ------------- NET SALES $ 21,970,619 $ 24,198,004 COST OF GOODS SOLD 13,171,676 13,900,846 ------------- ------------ GROSS PROFIT 8,798,943 10,297,158 ------------- ------------ OPERATING EXPENSES: Research and new product development 1,182,467 1,423,444 Selling, general and administration 5,418,610 7,267,678 Restructuring costs - 422,697 ------------- ------------ Total operating expenses 6,601,077 9,113,819 ------------- ------------ OPERATING INCOME 2,197,866 1,183,339 OTHER INCOME (EXPENSE): Interest expense (849,516) (1,451,367) Default interest expense - (327,695) Foreign currency exchange gain (loss) (22,162) 146,796 Other, net 14,458 18,449 ------------- ------------ INCOME (LOSS)BEFORE PROVISION FOR INCOME TAXES 1,340,646 (430,478) PROVISION (BENEFIT) FOR INCOME TAXES 429,000 (155,000) ------------- ------------ NET INCOME (LOSS) $ 911,646 $ (275,478) ============= ============ BASIC EARNINGS (LOSS) PER SHARE: $ 0.15 $ (0.05) ============= ============ DILUTED EARNINGS (LOSS) PER SHARE: $ 0.15 $ (0.05) ============= ============ Weighted Average Common Shares 6,006,298 6,030,804 Effect of dilutive options 247,848 88,796 ------------- ------------ Adjusted Weighted Average Common Shares 6,254,146 6,119,780 ============= ============
See notes to financial statements - 4 - WPI GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Three Months Ended December 28, December 27, 1997 1998 ------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 911,646 $ (275,478) ------------- ------------ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,238,627 1,594,409 Deferred income taxes - 9,815 Changes in current assets and liabilities net of assets acquired: Accounts receivable (3,941,883) 753,362 Accounts receivable - other (97,366) (9,137) Inventories 169,875 (1,116,733) Prepaid expenses, other current assets, and refundable income taxes 566,568 (562,691) Accounts payable (240,864) (1,013,029) Accrued expenses (168,886) (728,050) Accrued income taxes 348,445 (36,743) ------------- ------------ Total adjustments (2,125,484) (1,108,797) ------------- ------------ Net cash used in operating activities (1,213,838) (1,384,275) ------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Increase in long-term debt 1,335,000 2,797,285 Proceeds from issuance of common stock 33,855 25,799 Proceeds from exercise of stock options 47,844 6,400 ------------- ------------ Net cash provided by financial activities 1,416,699 2,829,484 ------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (243,651) (712,529) Additions to other assets (619,239) (620,628) Payments of accrued acquisition costs - (211,041) ------------- ------------ Net cash used in investing activities (862,890) (1,544,198) ------------- ------------ EFFECT OF FOREIGN CURRENCY TRANSLATION ON CASH 34,262 (13,229) ------------- ------------ NET DECREASE IN CASH AND CASH EQUIVALENTS (625,767) (112,218) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 678,799 159,518 ------------- ------------ CASH AND CASH EQUIVALENTS, END OF PERIOD $ 53,032 $ 47,300 ============= ============ SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION: Income taxes paid - 55,000 Interest paid 804,558 1,325,605
See notes to financial statements - 5 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The financial statements for the three months ended December 27, 1998 and December 28,1997 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-K filed with the Securities and Exchange Commission (File No. 0-19717), which included financial statements for the years ended September 27,1998 and September 28,1997. Certain prior year amounts have been reclassified to conform with current year presentation. 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
September 27, December 27, Inventory consists of: 1998 1998 ------------- ------------ Raw Materials $ 7,684,405 $ 7,571,425 Work in Process 4,758,535 5,502,320 Finished Goods 1,745,346 2,136,359 ------------- ------------ Total $ 14,188,286 $ 15,210,104 ============= ============
- 6 - 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 $24.2 million for the first quarter of fiscal 1999 increased 10% from sales of $22.0 million for the first quarter of fiscal 1998. The increase was due to the acquisition of WPI Instruments. Cost of sales of $13.9 million for the first quarter of fiscal 1999 resulted in a gross profit of 43%, compared to a gross profit of 40% for the same period of fiscal 1998. The increase in the Company's gross profit percentage in fiscal 1999 was primarily attributable to a change in the mix of products sold and increased software licenses revenue. Research and new product development expenses increased to $1.4 million, compared to $1.2 million for the same three month period in fiscal 1998. The increase was attributed to the acquisition discussed above. Research and new product development expenses were 6% and 5% of net sales for the quarters ended December 27, 1998 and December 28, 1997, respectively. As a percentage of net sales, selling, general and administrative expenditures were 30% and 25% for the quarters ended December 27, 1998 and December 28, 1997, respectively. Actual expenditures increased to $7.4 million from $5.4 million for the first quarter of fiscal 1998. The increase in selling, general and administrative expenses as a percentage of sales in fiscal 1999 was primarily attributable to the acquisition discussed above and higher payroll related expenses. Operating income for the first quarter of fiscal 1999 decreased 46% to $1.2 million from $2.2 millon for the first quarter of fiscal 1998. The decrease in operating income was primarily due to the increase in selling, general and administration expenses discussed above and the restructuring costs incurred to date in connection with the Company's reorganization of its Information Solutions and Information Technology Groups. The Company recorded a loss before provision for income taxes of ($.4) million for the three months ended December 27, 1998 compared to income of $1.3 million for the three months ended December 28, 1997. The decrease was primarily due to weaker sales for the Industrial Technology Group and in Europe and the Company's reorganization discussed above. The Company's estimated effective combined federal and state income tax rates, as a percentage of pre-tax income, were 36% and 32% for the three months ended December 27, 1998 and December 28,1997, respectively. The increase in the Company's fiscal 1999 estimated effective tax rates reflects a reduction in anticipated foreign tax benefits. LIQUIDITY AND CAPITAL RESOURCES The Company had working capital of $24.0 million at December 27, 1998 compared to $21.3 million at September 27, 1998. The Company's management believes it has sufficient working capital to meet its liquidity needs. As of December 27, 1998, the Company had no material commitments for capital expenditures. - 7 - SEGMENT INFORMATION The Company's business segments are: Information Solutions: rugged, handheld passive and programmable terminals and computers, vehicle diagnostic information systems and decision support systems. Industrial Technology: power systems, electronics, solenoids, avionic components, inertial sensors and panel meters. Summarized below are the Company's segment sales and operating income by business segment for the three months ended December 27, 1998 and December 28, 1997 in thousands.
Three Months Ended December 28, December 27, 1997 1998 ------------ ------------ Net Sales Information Solutions $ 16,277 $ 15,160 Industrial Technology 5,694 9,038 ------------ ------------ $ 21,971 $ 24,198 ============ ============ Operating Income Information Solutions $ 2,671 $ 2,414 Industrial Technology 793 902 Corporate (a) (1,266) (2,133) ------------ ------------ $ 2,198 $ 1,183 ============ ============ (a) Includes corporate expenses, amortization of goodwill, and restructuring costs.
- 8 - WPI GROUP, INC. PART II - Other Information Item 6. Exhibits and Reports on Form 8-K A. Exhibits 27 Financial Data Schedule. B. Reports on Form 8-K None - 9 - 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: February 10,1999 By:/s/John R. Allard ------------------- John R. Allard President and Chief Operating Officer Date: February 10,1999 By:/s/John W. Powers ----------------- John W. Powers Vice President and Chief Financial Officer - 10 - EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF WPI GROUP, INC. FOR THE THREE MONTHS ENDED DECEMBER 27, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS SEP-26-1999 DEC-27-1998 47,300 0 21,478,582 1,302,000 15,210,104 40,993,198 21,667,018 6,226,204 110,245,155 16,983,174 0 0 0 60,370 24,665,227 110,245,155 24,198,004 24,198,004 13,900,846 13,900,846 8,948,574 0 1,779,062 (430,478) (155,000) (275,478) 0 0 0 (275,478) (.05) (.05)
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