-----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, QP21SXm4yJm6N7aR7uUznTnJ6GXPKNuEHewYaKWyy3+cC+r0wHTkEfBdmkGBJsCE 8dRZe04wgz3wgeGa85HZig== 0000897101-98-000413.txt : 19980413 0000897101-98-000413.hdr.sgml : 19980413 ACCESSION NUMBER: 0000897101-98-000413 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980301 FILED AS OF DATE: 19980410 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WASHINGTON SCIENTIFIC INDUSTRIES INC CENTRAL INDEX KEY: 0000104897 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 410691607 STATE OF INCORPORATION: MN FISCAL YEAR END: 0828 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-00619 FILM NUMBER: 98591534 BUSINESS ADDRESS: STREET 1: 2605 W WAYZATA BLVD STREET 2: BOX 340 CITY: LONG LAKE STATE: MN ZIP: 55356-0340 BUSINESS PHONE: 6124731271 MAIL ADDRESS: STREET 1: 2605 W WAYZATA BLVD BOX 340 STREET 2: 2605 W WAYZATA BLVD BOX 340 CITY: LONG LAKE STATE: MN ZIP: 55356-0340 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (Mark One) _X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 1, 1998 ----------------------------------- 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 0-619 ----------------------------- Washington Scientific Industries, Inc. (Exact name of registrant, as specified in its charter) Minnesota 41-0691607 (State or other jurisdiction of (I. R. S. Employer incorporation of organization) Identification No.) Long Lake, Minnesota 55356 (Address of principal executive offices) (Zip Code) (612) 473-1271 (Registrant's telephone number, including area code) Not Applicable (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 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 CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 2,435,466 Common Shares were outstanding as of March 31, 1998. WASHINGTON SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARY INDEX Page No. -------- PART I. FINANCIAL INFORMATION: Item 1. Financial Statements Consolidated Balance Sheets March 1, 1998 (Unaudited) and August 31, 1997 3 Consolidated Statements of Operations Thirteen and Twenty-Six weeks ended March 1, 1998 and Thirteen and Twenty-Six weeks ended February 23, 1997 (Unaudited) 4 Consolidated Statements of Cash Flows Twenty-Six weeks ended March 1, 1998 and Twenty-Six weeks ended February 23, 1997 (Unaudited) 5 Notes to Consolidated Financial Statements (Unaudited) 6, 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8, 9 PART II. OTHER INFORMATION: Item 5. Exhibits and Reports on Form 8-K 10 Signatures 10 PART I. FINANCIAL INFORMATION Item 1. Financial Statements WASHINGTON SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) March 1, August 31, Assets 1998 1997 - ------ ----------- ----------- Current Assets: Cash and cash equivalents $ 3,673,071 $ 2,847,598 Accounts receivable 2,822,385 2,545,318 Inventories - work-in-process 1,297,089 1,356,438 Prepaid and other current assets 78,910 89,155 ----------- ----------- Total Current Assets 7,871,455 6,838,509 Property, Plant and Equipment 6,335,802 5,952,023 Other Long Term Assets 425 525 ----------- ----------- $14,207,682 $12,791,057 =========== =========== Liabilities and Stockholders' Equity - ------------------------------------ Current Liabilities: Notes payable $ 0 $ 0 Trade accounts payable 1,682,369 1,153,995 Salaries, wages, and withholdings 444,298 411,102 Miscellaneous accrued expenses 1,249,794 1,031,931 Current portion of long-term debt 1,076,402 1,000,679 ----------- ----------- Total Current Liabilities 4,452,863 3,597,707 Long-term Debt, less current portion 2,517,108 2,671,153 Long-term Pension Liability 423,573 467,073 Stockholders' Equity: Common stock issued, 2,435,466 and 2,428,980 shares respectively 243,547 242,898 Capital in excess of par value 1,542,386 1,528,785 Retained earnings 5,028,205 4,283,441 ----------- ----------- Total Stockholders' Equity 6,814,138 6,055,124 ----------- ----------- $14,207,682 $12,791,057 =========== =========== See notes to consolidated financial statements. WASHINGTON SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
13 weeks ended 26 weeks ended ---------------------------- ---------------------------- March 1, February 23, March 1, February 23, 1998 1997 1998 1997 ------------ ------------ ------------ ------------ Net sales $ 5,677,479 $ 5,770,920 $ 10,991,179 $ 11,361,508 Cost of products sold 4,551,569 4,882,217 9,060,193 9,695,937 ------------ ------------ ------------ ------------ Gross margin 1,125,910 888,703 1,930,986 1,665,571 Selling and administrative expense 604,352 655,817 1,130,491 1,174,004 Interest and other income (24,859) (66,431) (46,315) (522,911) Interest and other expense 40,646 80,269 85,246 172,842 ------------ ------------ ------------ ------------ Earnings from operations before income taxes 505,771 219,048 761,564 841,636 Income taxes 7,800 -- 16,800 5,800 ------------ ------------ ------------ ------------ Earnings from operations $ 497,971 $ 219,048 $ 744,764 $ 835,836 ============ ============ ============ ============ Basic earnings per share $ 0.20 $ 0.09 $ 0.31 $ 0.34 ============ ============ ============ ============ Diluted earnings per share $ 0.20 $ 0.09 $ 0.29 $ 0.34 ============ ============ ============ ============ Weighted average number of common shares outstanding 2,432,483 2,424,509 2,430,732 2,422,751 ============ ============ ============ ============ Weighted average number of common and dilutive potential common shares 2,527,257 2,472,617 2,535,742 2,465,678 ============ ============ ============ ============
See notes to consolidated financial statements. WASHINGTON SCIENTIFIC INDUSTRIES,INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
26 weeks ended -------------------------- March 1, February 23, 1998 1997 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 744,764 $ 835,836 Adjustments to reconcile net earnings to net cash provided by operating activities: Gain on sale of property, plant & equipment -- (432,445) Depreciation and amortization 559,000 747,713 Increase (decrease) in pension liability (43,500) 4,286 Changes in assets and liabilities: (Increase) in accounts receivable (277,067) (949,830) (Increase) decrease in inventories 59,349 243,174 (Increase) decrease in prepaid expenses 10,345 51,420 Increase (decrease) in accounts payable and accrued expenses 855,156 841,753 ----------- ----------- Net cash provided by operating activities 1,908,047 1,341,907 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of equipment -- 448,000 Purchases of property, plant & equipment (942,779) (104,059) ----------- ----------- Net cash provided by (used in) investing activities (942,779) 343,941 CASH FLOWS FROM FINANCING ACTIVITIES: Payments of long-term debt (586,537) (955,636) Placement of Capital Lease Financing 432,492 -- Issuance of common stock 14,250 10,000 ----------- ----------- Net cash provided by (used in) financing activities (139,795) (945,636) ----------- ----------- NET INCREASE IN CASH AND CASH EQUIVALENTS 825,473 740,212 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,847,598 1,642,739 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF REPORTING PERIOD $ 3,673,071 $ 2,382,951 =========== =========== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 86,145 $ 177,456 Income taxes $ 28,500 $ 3,300
See notes to consolidated financial statements. WASHINGTON SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. CONSOLIDATED FINANCIAL STATEMENTS: The consolidated balance sheet as of March 1, 1998, the consolidated statements of operations for the thirteen weeks and twenty-six weeks ended March 1, 1998 and February 23, 1997 and the consolidated statements of cash flows for the twenty-six weeks then ended, respectively, have been prepared by the Company without audit. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. The balance sheet at August 31, 1997, is derived from the audited balance sheet as of that date. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Therefore, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's 1997 annual report to shareholders. The results of operations for interim periods are not necessarily indicative of the operating results for the full year. 2 DEBT AND LINE OF CREDIT: On April 30, 1997, the Company amended its agreement with the bank for its debt and its line of credit. The agreement requires principal payments of $37,500 per month with the loan balance due at March 31, 2000. The fair value of the term debt is estimated to be its carrying value since the debt has a variable interest rate. At March 1, 1998, and February 23, 1997 there was no balance outstanding on the line of credit under this agreement. 3. EARNINGS PER SHARE In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128 EARNINGS PER SHARE. Statement 128 replaced the previously reported primary and fully diluted earnings per share with basic and diluted earning per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts for all period have been presented, and where necessary, restated to conform to the Statement 128 requirements. The following table sets forth the computation of basic and diluted earnings per share:
13 weeks ended 26 weeks ended ---------------------- ----------------------- March 1, February 23, March 1, February 23, 1998 1997 1998 1997 ---- ---- ---- ---- Numerator for basic and diluted earnings per share: Net Earnings 497,971 219,048 744,764 835,836 ========= ========= ========= ========= Denominator: Denominator for basic earnings per share - weighed average shares 2,432,483 2,424,509 2,430,732 2,422,751 Effect of dilutive securities: Employee/Director stock options 94,744 48,108 105,010 42,927 Dilutive potential common shares Denominator for diluted earnings per share-adjusted weighted shares and assumed conversions 2,527,257 2,472,617 2,535,742 2,465,678 ========= ========= ========= ========= Basic earnings per share 0.20 0.09 0.31 0.34 ========= ========= ========= ========= Diluted earnings per share 0.20 0.09 0.29 0.34 ========= ========= ========= =========
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION and RESULTS OF OPERATIONS Results of Operations: Net sales of $5,677,000 for the quarter ending March 1, 1998 decreased $93,000 or 1.6% from the second quarter of the prior year. Primary changes in sales included a decrease in the automotive components market of $410,000 a decrease in the small engines market of $339,000, an increase in the agribusiness market of $531,000 and an increase in the marine market of $175,000. Net sales for the twenty six weeks ended March 1, 1998 decreased $370,000 or 3.3% from the first half of fiscal 1997. Sales reductions occurred in the automotive components market of $568,000, the small engines market of $561,000 and in the industrial component market of $120,000. The agribusiness market increased by $670,000 and the computer market increased $172,000. Gross margin improved to 19.8% of sales in the second quarter of fiscal 1998 compared to 15.4% in the prior year's second quarter. The first half of fiscal 1998 gross margin improved to 17.6% compared to the prior year's first half gross margin of 14.7%. The improved gross margins resulted primarily from cost reductions related to lower headcount, reduced depreciation expense and increased manufacturing efficiencies. Selling and administrative expense of $604,000 was $51,000 lower than the second quarter of the prior year and the first half's $1,130,000 was $44,000 lower due to lower compensation and fringe benefit costs. Interest and other income was $42,000 lower than the comparable quarter of the prior year. The second quarter of fiscal 1997 included $32,000 net gain from the sale of miscellaneous equipment. The first half of fiscal 1998 was $477,000 lower than the first half of fiscal 1997. The first quarter of fiscal 1997 included $410,000 net gain from the disposition of excess equipment related to completed or discontinued manufacturing programs. Interest and other expense decreased $40,000 in the second quarter of fiscal 1998 and $88,000 in the first half of fiscal 1998 than in the comparable periods of the prior year due to lower term debt balances. In the first quarter of fiscal 1998, the Company recorded $7,800 of mandatory state income taxes and was able to recognize the benefit of a portion of its net operating loss carry-forwards. The Company has not recorded the benefit of net operating losses and other net deductible temporary differences in the consolidated statement of operations due to the fact that the Company has not been able to establish that it is more likely than not that the tax benefits will be realized. Liquidity and Capital Resources: On March 1, 1998 working capital was $3,419,000 compared to $3,241,000 at August 31, 1997, an increase of $554,000, due primarily to improvement in operations. The ratio of current assets to current liabilities at March 1, 1998 and August 31, 1997 was 1.77 to 1.0 and 1.90 to 1.0, respectively. On March 1, 1998, the Company did not have an outstanding balance on the line of credit with the bank. As of that date the Company had cash and cash equivalents of $3,673,000. Company debt of $2,517,000 on March 1, 1998 was $154,000 lower than on August 31, 1997. Term debt owed the bank on March 1, 1998 was $1,150,000 and obligations under capital leases were $1,367,000. Regular monthly payments of $587,000 in the first six months were offset by the placement of capital lease financing of $432,000 in the second quarter of fiscal 1998. It is management's belief that its internally generated funds combined with the line of credit will be sufficient to enable the Company to meet its financial requirements during fiscal 1998. The Company is aware of the issues associated with the programming code in existing computer systems as the year 2000 approaches. The Company has evaluated the risks associated with the "Year 2000" problem and has determined that the cost of addressing the Year 2000 issue will be an immaterial event for the Company and will not affect the Company's financial position or results of operations. Cautionary Statement: The statements included herein which are not historical or current facts are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995. There are certain important factors which could cause actual results to differ materially from those anticipated by some of the statements made herein, including the Company's ability to obtain additional manufacturing programs and retain current programs and other factors detailed from time to time in the Company's SEC reports, including the report on Form 10-K for the year ended August 31, 1997. PART II. OTHER INFORMATION: Item 4. Submission of Matters to a Vote of Security Holders. A. The Annual Meeting of the Company Stockholders was held on January 8, 1998. B. Directors elected at that meeting were: Paul Baszucki For 2,022,467 Against 331 Melvin L. Katten For 2,022,242 Against 556 Gerald E. Magnuson For 2,022,242 Against 556 George J. Martin For 2,022,467 Against 331 Eugene J. Mora For 2,022,467 Against 331 Michael J. Pudil For 2,022,398 Against 400 Item 5. Exhibits and Reports on Form 8-K: A. Exhibit 27.1 Financial Data Schedule, Q2, Fiscal 1998 Exhibit 27.2 Restated Financial Data Schedule, Q1, Fiscal 1998 Exhibit 27.3 Restated Financial Data Schedule, Q1, Q2, Q3 and Year-end, Fiscal 1997 Exhibit 27.4 Restated Financial Data Schedule, Q2, Q3 and Year-end, Fiscal 1996 B. There were no reports on Form 8-K for the thirteen weeks ended March 1, 1998. 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. WASHINGTON SCIENTIFIC INDUSTRIES, INC. Date: April 9, 1998 /s/ Michael J. Pudil ------------- -------------------------------------- Michael J. Pudil, President & CEO Date: April 9, 1998 /s/ James J. Valento ------------- -------------------------------------- James J. Valento, Vice President & CFO EX-27.1 2 FINANCIAL DATA SCHEDULE
5 3-MOS AUG-30-1998 MAR-01-1998 3,673,071 0 2,872,385 50,000 1,297,089 7,871,455 22,472,431 16,136,629 14,207,682 3,642,458 2,517,108 0 0 243,547 6,570,591 14,207,682 5,677,479 5,677,479 4,551,569 4,551,569 579,493 0 40,646 505,771 7,800 497,971 0 0 0 497,971 0.20 0.20
EX-27.2 3 FINANCIAL DATA SCHEDULE
5 3-MOS AUG-30-1998 NOV-30-1997 2,820,202 0 2,763,621 50,000 1,368,147 6,973,224 22,178,761 16,018,582 13,133,928 3,642,458 2,744,230 0 0 242,898 6,059,019 13,133,928 5,313,700 5,313,700 4,508,624 4,508,624 504,683 0 44,600 255,793 9,000 246,793 0 0 0 246,793 0.10 0.10
EX-27.3 4 FINANCIAL DATA SCHEDULE
5 3-MOS 3-MOS 3-MOS 12-MOS AUG-31-1997 AUG-31-1997 AUG-31-1997 AUG-31-1997 NOV-24-1996 FEB-23-1997 MAY-25-1997 AUG-31-1997 1,856,165 2,382,951 2,544,018 2,847,598 0 0 0 0 2,871,854 2,868,772 3,110,290 2,595,318 50,000 50,000 50,000 50,000 987,764 855,437 1,049,076 1,356,438 5,796,916 6,128,928 6,719,327 6,838,509 25,457,629 25,470,700 25,711,530 21,691,605 18,969,918 19,290,670 19,618,650 15,739,582 12,285,152 12,309,483 12,812,732 12,791,057 2,893,094 3,379,247 3,775,474 3,775,474 3,859,064 3,168,551 2,913,405 2,671,153 0 0 0 0 0 0 0 0 242,185 242,498 242,498 242,498 4,830,164 5,056,399 5,416,425 5,812,626 12,285,152 12,309,483 12,812,732 12,791,057 5,590,588 5,770,920 6,673,338 24,153,089 5,590,588 5,770,920 6,673,338 24,153,089 4,813,720 4,882,217 5,636,488 20,494,767 4,813,720 4,882,217 5,636,488 20,494,767 61,707 589,386 610,308 1,745,752 0 0 0 0 92,573 80,269 66,516 286,707 622,588 219,048 360,026 424,201 5,800 0 0 41,800 616,788 219,048 360,026 1,584,063 0 0 0 0 0 0 0 0 0 0 0 0 616,788 219,048 360,026 1,584,063 0.25 0.09 0.15 0.65 0.25 0.09 0.15 0.64
EX-27.4 5 FINANCIAL DATA SCHEDULE
5 3-MOS 3-MOS 12-MOS AUG-25-1996 AUG-25-1996 AUG-25-1996 FEB-25-1996 MAY-26-1996 AUG-25-1996 1,947,011 1,554,220 1,642,739 0 0 0 2,811,610 2,663,169 1,918,942 0 0 50,000 693,086 776,710 1,098,613 5,737,875 5,391,369 4,733,480 26,558,044 26,914,366 26,856,405 19,589,876 19,598,524 20,017,166 12,706,568 12,707,735 11,573,244 3,177,057 2,914,169 2,537,493 4,206,081 4,364,381 4,124,188 241,485 242,085 242,085 0 0 0 0 0 0 4,912,217 4,742,696 4,210,976 12,706,568 12,707,735 11,573,244 5,175,844 5,492,811 20,173,508 5,175,844 5,492,811 20,173,508 4,911,106 4,868,158 18,555,266 4,911,106 4,868,158 18,555,266 83,607 454,049 1,486,804 0 0 0 129,925 111,040 492,328 51,206 59,564 (360,890) 0 0 5,800 51,206 59,564 (366,690) 0 0 0 0 0 0 0 0 0 51,206 59,564 (366,690) 0.02 0.02 (0.15) 0.02 0.02 (0.15)
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