-----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, G7iZyUO8EcN76Dm4BgWoMlhUIshUcq5hGnzZfRhwJbv3ySHSK/JEPowEPBxSklRt MHI8mBTV4AE4rCXKzKSJBA== 0000910647-00-000069.txt : 20000307 0000910647-00-000069.hdr.sgml : 20000307 ACCESSION NUMBER: 0000910647-00-000069 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000122 FILED AS OF DATE: 20000306 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTERBEKE CORP CENTRAL INDEX KEY: 0000796502 STANDARD INDUSTRIAL CLASSIFICATION: MOTORS & GENERATORS [3621] IRS NUMBER: 041925880 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15046 FILM NUMBER: 561357 BUSINESS ADDRESS: STREET 1: AVON INDUSTRIAL PARK STREET 2: 41 LEDIN DRIVE CITY: AVON STATE: MA ZIP: 02322 BUSINESS PHONE: 5085887700 MAIL ADDRESS: STREET 1: AVON INDUSTRIAL PARK CITY: AVON STATE: MA ZIP: 02322 10-Q 1 BODY OF 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: January 22, 2000 ---------------- 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 number 0-15046 ------- Westerbeke Corporation ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 04-1925880 -------------------------------------------------------- (State or other jurisdiction of (I.R.S. employer incorporation or organization) Identification No.) Avon Industrial Park, Avon, Massachusetts 02322 ------------------------------------------------------ (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code (508) 588-7700 -------------- No Change ----------------------------------------- (Former name, former 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 to file such reports.) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] ----- ----- 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. Outstanding at Class March 1, 2000 ---------------------------- -------------- Common Stock, $.01 par value 1,917,812 WESTERBEKE CORPORATION AND SUBSIDIARY INDEX Page Part I - Financial Information Item 1 - Consolidated Financial Statements Consolidated Balance Sheets as of January 22, 2000 and October 23, 1999 3 Consolidated Statements of Operations for the three months ended January 22, 2000 and January 23, 1999 4 Consolidated Statements of Cash Flows for the three months ended January 22, 2000 and January 23, 1999 5 Notes to Consolidated Financial Statements 6-8 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 9-11 Item 3 - Quantitative and Qualitative Disclosures About Market Risk 12 Part II - Other Information 13 Signatures 14 WESTERBEKE CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
January 22, October 23, 2000 1999 -------------------------- (Unaudited) Audited ASSETS Current assets: Cash and cash equivalents $ 177,200 $ 1,739,300 Accounts receivable, net of allowance for doubtful accounts of $59,200 3,680,400 2,502,100 Inventories (Note 2) 7,875,100 5,640,200 Prepaid expenses and other assets 593,100 476,900 Prepaid income taxes - 35,600 Deferred income taxes 577,900 577,900 -------------------------- Total current assets 12,903,700 10,972,000 -------------------------- Property, plant and equipment, net 2,180,900 2,027,300 Other assets, net 2,198,500 2,199,400 Investments in marketable securities 88,400 91,400 Note receivable - related party 87,800 93,400 -------------------------- $17,459,300 $15,383,500 ========================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 193,400 $ 192,900 Revolving demand note payable 400,000 - Accounts payable 3,216,600 2,248,700 Accrued income taxes 146,700 - Accrued expenses and other liabilities 1,175,600 914,000 -------------------------- Total current liabilities 5,132,300 3,355,600 -------------------------- Deferred income taxes 4,300 13,600 Deferred compensation 424,500 409,200 Long-term debt, net of current portion 177,900 224,500 -------------------------- Total liabilities 5,739,000 4,002,900 -------------------------- Stockholders' equity: Common stock, $.01 par value; authorized 5,000,000 shares; issued 2,185,950 shares 21,900 21,900 Additional paid-in-capital 6,025,300 6,025,300 Accumulated other comprehensive income (Note 3) 3,200 16,900 Retained earnings 6,425,900 6,072,500 -------------------------- 12,476,300 12,136,600 Less - Treasury shares 268,138 at cost 756,000 756,000 -------------------------- Total stockholders' equity 11,720,300 11,380,600 -------------------------- $17,459,300 $15,383,500 ==========================
The accompanying notes are an integral part of the consolidated financial statements. WESTERBEKE CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended ------------------------- January 22, January 23, 2000 1999 ------------------------- (Unaudited) Net sales $8,791,100 $5,446,800 Cost of sales 6,641,500 4,490,800 ------------------------ Gross profit 2,149,600 956,000 Selling, general and administrative expense 1,203,700 818,300 Research and development expense 348,500 327,400 ------------------------ Income (loss) from operations 597,400 (189,700) Interest and dividend income, net 8,900 36,200 Other expenses, net 10,400 30,700 ------------------------ Income (loss) before income taxes 595,900 (184,200) Provision for income taxes (benefit) 242,500 (73,700) ------------------------ Net income (loss) $ 353,400 $ (110,500) ======================== Income (loss) per common share, basic $ .18 $ (.06) ======================== Income (loss) per common share, diluted $ .17 $ (.06) ======================== Weighted average common shares, basic 1,917,812 1,917,812 ======================== Weighted average common shares, diluted 2,049,559 1,917,812 ========================
The accompanying notes are an integral part of the consolidated financial statements. WESTERBEKE CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended -------------------------- January 22, January 23, 2000 1999 -------------------------- (Unaudited) Cash flows from operating activities: Net income (loss) $ 353,400 $ (110,500) Reconciliation of net income (loss) to net cash used by operating activities: Depreciation and amortization 109,800 114,800 Deferred income taxes (9,300) 65,900 Changes in operating assets and liabilities: Accounts receivable (1,178,300) (49,900) Inventories (2,234,900) (969,100) Prepaid expenses and other assets (116,200) (39,700) Other assets (1,700) (23,700) Accounts payable 967,900 138,900 Accrued expenses and other liabilities 261,600 161,800 Deferred compensation 15,300 17,500 Income taxes 182,300 (185,200) ------------------------- Net cash used by operating activities (1,650,100) (879,200) ------------------------- Cash flows used in investing activities: Purchase of property, plant and equipment (260,800) (80,900) Proceeds from payment of note receivable - related party 5,600 2,600 Proceeds from sale of marketable securities (10,700) (108,300) ------------------------- Net cash used in investing activities (265,900) (186,600) ------------------------- Cash flows from financing activities: Net borrowings under revolving demand note 400,000 1,050,000 Principal payments on long-term debt and capital lease obligations (46,100) (48,400) ------------------------- Net cash provided in financing activities 353,900 1,001,600 ------------------------- Decrease in cash and cash equivalents (1,562,100) (64,200) Cash and cash equivalents, beginning of period 1,739,300 101,900 ------------------------- Cash and cash equivalents, end of period $ 177,200 $ 37,700 ========================= Supplemental cash flow disclosures: Interest paid $ 7,700 $ 25,500 Income taxes paid $ 60,400 $ 111,500 Supplemental disclosures of non-cash items: Increase (decrease) in unrealized gains on marketable securities, net of income taxes $ (13,700) $ 97,700
The accompanying notes are an integral part of the consolidated financial statements. WESTERBEKE CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Summary of Significant Accounting Policies: - ----------------------------------------------- A. Financial Statements The condensed consolidated financial statements included herein have been prepared by Westerbeke Corporation (the "Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. While certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, the Company believes that the disclosures made herein are adequate to make the information presented not misleading. It is recommended that these condensed statements are read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended October 23, 1999. In the opinion of the Company, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of Westerbeke Corporation and Subsidiary as of January 22, 2000, the results of their operations and the cash flows, have been included. B. Basis of Presentation The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Westerbeke International, Inc. (a Foreign Sales Corporation). All significant intercompany transactions and accounts have been eliminated. In June 1998, the Financial Accounting Standards Board issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). The statement requires companies to recognize all derivatives as either assets or liabilities with the instruments measured at fair value. The accounting for changes in fair value gains and losses depends on the intended use of the derivative and its resulting designation. The statement is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. The Company does not believe the adoption of SFAS 133 will have a material impact on the financial statements. C. Earnings per Share Basic income per common share is computed by dividing income available to common stockholders by the weighted average number of shares outstanding for the period. Diluted income per share reflects the maximum dilution that would have resulted from the exercise of stock options. Diluted income per share is computed by dividing net income by the weighted average number of common shares and all dilutive securities, except when the effect would be antidilutive.
For the three months ended: January 22, 2000 January 23, 1999 -------------------------------------------------------------------- Income Net Income Net per share Shares Income per share Shares Loss -------------------------------------------------------------------- Basic $ .18 1,917,812 $353,400 $(.06) 1,917,812 $(110,500) Effect of Stock options (.01) 131,747 - - - - -------------------------------------------------------------------- Diluted $ .17 2,049,559 $353,400 $(.06) 1,917,812 $(110,500)
2. Inventories - --------------- The Company uses the last-in, first-out (LIFO) method to value inventory. Inventories are comprised of the following:
January 22, October 23, 2000 1999 ------------------------- Raw materials $6,111,600 $4,539,800 Work-in-process 694,500 762,400 Finished goods 1,069,000 338,000 ------------------------ $7,875,100 $5,640,200 ========================
The Company has estimated both the year-end inventory levels and the inflation/deflation that will occur during the fiscal year. The Company anticipates an increase in its LIFO valuation account as of October 21, 2000. Accordingly, the Company has recorded an increase of $22,500, on a pro rata basis, in the LIFO reserve during the first three months of fiscal 2000. During the first three months of 1999, the Company recorded, on a pro rata basis, an increase of $22,500 in the LIFO reserve. Inventories would have been $1,101,100 higher at January 22, 2000 and $1,078,600 higher as of October 23, 1999, if the first- in, first-out (FIFO) method had been used. Inventory cost determination on the FIFO method approximates replacement or current cost. 3. Comprehensive Income - ------------------------ Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. The components of total comprehensive loss resulting from unrealized gains or losses on marketable securities for the three months ended January 22, 2000 and January 23, 1999 are as follows:
2000 1999 ---------------------- Net income (loss) $353,400 $(110,500) Other comprehensive income (loss) (13,700) 97,700 ---------------------- Comprehensive income (loss) $339,700 $ (12,800) ======================
Item 2 - Management's Discussion and Analysis Of Financial - ---------------------------------------------------------- Condition and Results Of Operations ------------------------------------------------- Results of Operations - - ----------------------- Net sales increased by $3,344,300 or 61%, during the first quarter of fiscal 2000 as compared to the same period in fiscal 1999. The increase in net sales is primarily attributable to higher unit volume of the Company's product line. Gross profit increased $1,193,600 or 125% during the first quarter of fiscal 2000 as compared to the same period in fiscal 1999. As a percentage of net sales, gross profit was 24% during the first quarter of fiscal 2000, as compared to 18% during the first quarter of fiscal 1999. The increase in the gross profit percentage is primarily attributable to the increase in net sales attributable to favorable market conditions and a decrease in manufacturing costs as a result of manufacturing efficiencies. Operating expenses increased $406,500 or 35% for the first quarter of fiscal 2000 as compared to the same period in fiscal 1999. The increase is primarily attributable to the hiring of additional personnel and related costs to support the increase in net sales. As a percentage of net sales, operating expenses were 18% during the first quarter of fiscal 2000, as compared to 21% during the first quarter of fiscal 1999. Net interest and dividend income decreased $27,300 during the first quarter of fiscal 2000 as compared to the same period in fiscal 1999. The decrease in interest is primarily due to a decrease in dividends earned on marketable securities. Other expense decreased $20,300 during the first quarter of fiscal 2000 as compared to the same period in fiscal 1999. Other expense in both periods is comprised of the realized loss from the sale of certain marketable securities. For the quarter ended January 22, 2000, the Company reported a net income of $353,400, compared to a net loss of $110,500 for the same period in fiscal 1999. The increase in the net income is primarily attributable to the increase in net sales and improved gross profit margins during the quarter. WESTERBEKE CORPORATION AND SUBSIDIARY Liquidity and Capital Resources - ------------------------------- During the first three months of fiscal 2000, net cash used by operations was $1,650,100, compared to $879,200 for the first three months in fiscal 1999. Net accounts receivable increased $1,178,300 during the first quarter of fiscal 2000, as compared to an increase of $49,900 in the same period in fiscal 1999, primarily from the increase in net sales. Net inventory increased $1,265,800 during the first quarter of fiscal 2000, as compared to the same period in fiscal 1999, primarily from the timing of inventory purchases. During the three months ended January 22, 2000, the Company purchased machinery and equipment of $260,800. The Company plans to spend approximately $500,000 more on equipment during the remainder of the year. In addition, the Company has entered into an agreement to purchase a 110,000 square foot facility located in Taunton, Massachusetts. This facility will enable the Company to consolidate its current operations into one location. The MassDevelopment Financing Agency has approved the Company for a $5,000,000 tax-exempt industrial revenue bond, which will be financed through GE Capital Public Finance. The term of the loan is fifteen years at a fixed rate of 6.46%. The purchase of the facility is scheduled for mid April and is subject to the fulfillment of customary closing conditions. The aggregate cost of the facility and related improvements is estimated to be $5,000,000. The Company does not anticipate any material disruption to its normal operation during this transition period. It is anticipated that by the fall of 2000 the Company will be fully operating from its new location, although there can be no assurance that delays or disruptions to operations will not occur. The Company has a $4,000,000 Credit Agreement with Citizens Bank of Massachusetts, collateralized by inventory, accounts receivable and general intangibles. The Credit Agreement was renewed on March 31, 1999, and will expire on March 31, 2000. At January 22, 2000, the Company had $400,000 in outstanding borrowings under the Credit Agreement and approximately $558,500 committed to cover the Company's reimbursement obligations under certain letters of credit and bankers' acceptances. Management is in the process of renewing the Credit Agreement and anticipates bank approval, although there can be no assurance that the facility will be renewed. The company's two term loans with a bank aggregate of $295,900, will be paid in monthly installments to 2001-2002. Management believes cash flow from operations and borrowings available under the Credit Agreement will provide for working capital needs, principal payments on long-term debt, and capital and operating leases through fiscal 2000. Domestic inflation is not expected to have a material impact on the Company's operations. The cost of engine blocks and other components is subject to foreign currency fluctuations (primarily the Japanese yen). The value of the U.S. dollar relative to the yen had no material effect on the cost of the Company's products during the first quarter of fiscal 2000. Year 2000 Compliance - -------------------- In fiscal years 1998 and 1999 the Company had developed a plan to reduce the probability of operational difficulties due to Year 2000 related failures. The components of the Company's plan included an assessment of internal systems for modification and/or replacement, communication with vendors to determine their state of readiness to maintain an uninterrupted supply of goods and services to the Company; an evaluation of the Company's production equipment as to its ability to function properly after the turn of the century; an evaluation of facility related issues; and the development of a contingency plan. As of March 1, 2000 the Company has not experienced any Year 2000 issues. This Quarterly Report on Form 10-Q may contain forward-looking information about the Company. The Company is hereby setting forth statements identifying important factors that may cause the Company's actual results to differ materially from those set forth in any forward-looking statements made by the Company. Some of the most significant factors include: an unanticipated down-turn in the recreational boating industry resulting in lower demand for the Company's products; the unanticipated loss of, or decline in sales to, a major customer; the unanticipated loss of a major supplier; the inability of the Company to effect required modifications of its products to meet governmental regulations with respect to emission standards; foreign currency fluctuations resulting in cost increases to the Company for its foreign supplied components; and any unforeseen inefficiencies arising from the transition to the new facility. Accordingly, there can be no assurances that any anticipated future results will be achieved. Item 3 - Quantitative and Qualitative Disclosures About Market Risk ---------------------------------------------------------- Market risk represents the risk of changes in the value of short-term investments and financial instruments caused by fluctuations in investment prices and interest rates. The Company addresses market risks in accordance with established policies. The Company's risk-management activities involve risk and uncertainties and accordingly, results could differ materially from those projected. Investment Price Risk - --------------------- The value of the Company's investment portfolio at January 22, 2000 is stated at market value. Interest Rate Risk - ------------------ Due to the fact that the long-term debt will mature within three years, management has determined that the fair value would not be materially different from the carrying value at January 22, 2000. Part II. Other Information Item 1 Legal Proceedings ------------------------- The Company has initiated arbitration with the American Arbitration Association in New York against Daihatsu Motor Company, Ltd. ("Daihatsu") for breach of contract and other claims. The Company is seeking damages based on Daihatsu's breach of a Component Sales Agreement which also granted the Company rights to certain engines including an engine Daihatsu began marketing in 1993 through a joint venture with Briggs & Stratton Corporation. In a separate but related case pending in the Federal District Court for the District of Massachusetts, the Company is seeking damages from Briggs & Stratton Corporation for tortious interference with the Company's Agreement with Daihatsu and other related claims. Item 2 Changes in Securities ----------------------------- None to report Item 3 Default Upon Senior Securities -------------------------------------- None to report Item 4 Submissions of Matters to a Vote of Security Holders ------------------------------------------------------------ None to report Item 5 Other Information ------------------------- None to report Item 6 Exhibits and Reports on Form 8-K ---------------------------------------- (a) Exhibits 27 Financial Data Schedule for the three months ended January 22, 2000 (b) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the period covered by this report. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WESTERBEKE CORPORATION (Registrant) Dated March 6, 2000 By /s/ John H. Westerbeke, Jr. ------------- --------------------------- John H. Westerbeke, Jr. Chairman of the Board, President and Principal Executive Officer Dated March 6, 2000 By /s/ Carleton F. Bryant III ------------- -------------------------- Carleton F. Bryant III Executive Vice President, Chief Operating Officer and Principal Financial and Accounting Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 1 3-MOS OCT-21-2000 JAN-22-2000 177,200 0 3,680,400 59,200 7,875,100 12,903,700 6,348,600 4,167,700 17,459,300 5,132,300 0 0 0 21,900 11,698,400 17,459,300 8,791,100 8,791,100 6,641,500 6,641,500 1,552,200 0 (8,900) 595,900 242,500 353,400 0 0 0 353,400 .18 .17
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