Williams Controls Reports Second Quarter 2003 Results
PORTLAND, Ore., May 13, 2003 -- Williams Controls, Inc. today announced its results for the second fiscal quarter of 2003 ended March 31, 2003. Net sales of $13,173,000 for the second quarter ended March 31, 2003 were 2.5% higher than the net sales of $12,848,000 recorded for the corresponding quarter last year. Net sales for the six months ended March 31, 2003 increased $1,018,000 or 4.2% to $25,285,000 from $24,267,000 for the comparable period in fiscal 2002. The Company reported a net loss allocable to common shareholders of $37,000 or $0.00 per share (basic and diluted) for the second quarter 2003 compared to a net loss allocable to common shareholders of $3,676,000 or ($0.18) per share for the corresponding 2002 quarter. For the six months ended March 31, 2003, net income allocable to common shareholders was $209,000 or $0.01 per share, compared to a net loss of $4,582,000 or ($0.23) per share for the six months ended March 31, 2002.
The sales increases for both the second quarter 2003 and six months ended March 31, 2003 were the direct result of higher unit sales volume in the heavy truck business, offset by lower sales volumes in the automotive business over the sales reported in the corresponding quarters of the prior year. Gross margins for both the second quarter and six months of 2003 were negatively impacted by a $985,000 charge for higher than normal anticipated warranty claims with one heavy truck customer and significantly lower margins in the automotive business due to higher than anticipated startup and associated yield issues and costs associated with some of our new product launches. These startup costs are expected to decrease in coming periods, and the yields are increasing steadily. Gross margin in 2003's second quarter declined from the 2002 second quarter to $2,257,000 from $3,490,000 and for the six months ended March 31, 2003 declined to $5,253,000 from $6,181,000 for the comparable six months in fiscal 2002.
In the second quarter of fiscal 2003 income from continuing operations improved to $592,000 compared to a loss of $2,766,000 for the same quarter of 2002. Income from continuing operations for the second quarter of 2003 includes a $951,000 gain related to a settlement with a former automotive customer. Reflected in the loss from continuing operations for the second quarter of fiscal 2002 is a loss on impairment of a former investment with Ajay for $3,565,000. Excluding these items, the loss from continuing operations for the second quarter of fiscal 2003 was $359,000 compared to income of $799,000 for the second quarter in 2002. This decrease is due to the warranty reserve and automotive product launches described above.
Income from continuing operations for the six months ended March 31, 2003 was $1,265,000 compared to a loss of $2,937,000 for the comparable period in fiscal 2002. Also included in these amounts are the $951,000 gain related to a settlement with a former automotive customer and the loss on impairment of former investment in Ajay of $3,565,000. Excluding these items, income from continuing operations for the first six months of fiscal 2003 was $314,000 compared to income of $628,000 for the first six months of fiscal 2002. The decrease between periods is directly related to lower margins in the current year, which is offset by an overall reduction in administrative costs.
Net income allocable to common shareholders included a charge for dividends and accretion on preferred stock of $662,000, or ($.03) per diluted share, for the second quarter ended March 31, 2003 compared to $293,000, or ($.01) per diluted share, for the corresponding quarter in fiscal 2002. For the six months ended March 31, 2003, net income (loss) allocable to common shareholders included a charge for dividends and accretion on preferred stock of $1,311,000, or ($.04) per diluted share compared to $534,000 or ($.03) per diluted share for the corresponding period in fiscal 2002.
During the six months ended March 31, 2003, the Company recorded an income tax benefit of $300,000. The three and six months ended March 31, 2003 also included a gain of $120,000 from discontinued operations related to a settlement of a lease obligation. In the six months ended March 31, 2002, a gain of $417,000 was recorded related to discontinued operations from an exchange of an agricultural equipment segment building for debt.
Williams Controls' Board Chairman Gene Goodson stated, "We were very disappointed to learn of the warranty problem, which arose from a raw material quality problem. We have improved the design with a stronger material to rectify this problem." He continued, "This warranty issue is in no way related to the UAW strike at our Portland facility. We continue to meet our customers' delivery schedules, maintain our quality with permanent replacement workers and bargain in good faith during the UAW strike, which is in its ninth month." Mr. Goodson concluded, "Even with the warranty issue and higher than expected automotive launch costs, we continue to show positive net income before considering preferred dividends and continue to be financially stronger than we have been in several years. We appreciate the confidence our customers and suppliers have shown us as Williams positions itself for growth."
Williams Controls is a designer, manufacturer and integrator of sensors and controls for the motor vehicle industry. For more information, you can find Williams Controls on the Internet at www.wmco.com.
Williams Controls, Inc.
Consolidated Statements of Operations
(Dollars in thousands, except share and per share amounts)
Three months Three months Six months Six months
ended ended ended ended
3/31/03 3/31/02 3/31/03 3/31/02
(unaudited) (unaudited) (unaudited) (unaudited)
Net sales $13,173 $12,848 $25,285 $24,267
Cost of sales 10,916 9,358 20,032 18,086
Gross margin 2,257 3,490 5,253 6,181
Research and
development expense 978 695 1,751 1,659
Selling expense 361 360 707 602
Administration expense 1,277 1,636 2,481 3,292
Gain on settlement
with customer (951) -- (951) --
Loss on impairment of
investment - Ajay -- 3,565 -- 3,565
Income (loss) from
continuing operations 592 (2,766) 1,265 (2,937)
Interest and other
(income) expenses, net 87 617 165 1,528
Income (loss) from
continuing operations
before income taxes 505 (3,383) 1,100 (4,465)
Income tax benefit -- -- 300 --
Net income (loss)
from continuing
operations 505 (3,383) 1,400 (4,465)
Discontinued Operations
- Gain from settlement
of obligations 120 -- 120 417
Net income (loss) 625 (3,383) 1,520 (4,048)
Preferred dividends and
accretion for Series
B Preferred Stock (662) (293) (1,311) (534)
Net income (loss)
allocable to common
shareholders $(37) $(3,676) $209 $(4,582)
Earnings per share
information:
Income (loss) per
common share from
continuing operations
- basic $(0.01) $(0.18) $0.00 $(0.25)
Income per common
share from
discontinued
operations - basic 0.01 -- 0.01 0.02
Net income (loss)
per common share
- basic $0.00 $(0.18) $0.01 $(0.23)
Weighted common
shares outstanding
- basic 20,125,492 19,928,522 20,091,942 19,926,935
Income (loss) per
common share from
continuing
operations
- diluted $(0.01) $(0.18) $0.00 $(0.25)
Income per common
share from
discontinued
operations - diluted 0.01 -- 0.01 0.02
Net income (loss)
per common share
- diluted $0.00 $(0.18) $0.01 $(0.23)
Weighted common
shares outstanding
-diluted 20,125,492 19,928,522 33,914,669 19,926,935
Williams Controls, Inc.
Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
March 31, September 30,
2003 2002
Assets
Current Assets:
Cash and cash equivalents $159 $829
Trade and other accounts receivable, net 8,227 8,764
Inventories, net 5,123 4,940
Prepaid expenses and other current assets 716 624
Total current assets 14,225 15,157
Property, plant and equipment, net 10,336 10,530
Other assets, net 355 635
Total assets $24,916 $26,322
Liabilities and Stockholders' Deficit
Current Liabilities:
Accounts payable $4,111 $5,326
Accrued expenses 6,329 6,856
Current portion of long-term debt and
capital leases 2,483 4,084
Total current liabilities 12,923 16,266
Long-term debt and capital lease obligations 1,122 1,483
Employee benefit obligations 7,217 6,293
Subordinated debt 1,989 2,139
Mandatory redeemable Convertible Series B
Preferred Stock, net 14,294 13,109
Shareholders' Deficit:
Preferred stock (Series A and A-1) 1 1
Common stock 201 199
Additional paid-in capital 23,687 23,559
Accumulated deficit (32,116) (32,325)
Treasury Stock (377) (377)
Other Comprehensive Loss - Pension
liability adjustment (4,025) (4,025)
Total shareholders' deficit (12,629) (12,968)
Total liabilities and shareholders'
deficit $24,916 $26,322