Williams Controls Reports Third Quarter 2005 Results
PORTLAND, Ore., Aug. 9, 2005 -- Williams Controls, Inc. (the "Company") today announced results for its 2005 third quarter ended June 30, 2005. Net sales of $17,192,000 were up 13.7% from the $15,127,000 reported in the third quarter last year. Net sales for the nine months ended June 30, 2005 increased $7,786,000, or 18.5%, to $49,928,000 from $42,142,000 for the comparable period last year. Net income for the third quarter was $1,610,000, or $.03 per diluted share, compared to $1,472,000, or $.04 per diluted share, for the corresponding quarter in 2004. Net income for the nine months ended June 30, 2005 was $5,099,000, or $.11 per diluted share, compared to $3,724,000, or $.11 per diluted share, for the nine months ended June 30, 2004. The lower earnings per share in the fiscal 2005 third quarter as compared to the fiscal 2004 third quarter and the unchanged nine months earnings per share despite the higher earnings in both fiscal 2005 periods is primarily due to the increase in the number of basic and diluted shares outstanding in fiscal 2005 from converting Series B preferred shares into common shares as part of the 2004 recapitalization which occurred on September 30, 2004.
The increase in 2005 sales for both the third quarter and nine months was primarily due to higher unit volumes related to our heavy truck, bus and off-road customers in North America, Europe and Asia.
The higher sales volume in fiscal 2005 was the primary contributor to gross profits improving for both the current quarter and nine months. Gross profit improved to $5,844,000 in the current quarter, a 16.2% increase from the $5,029,000 in the 2004 third fiscal quarter. For the first nine months of fiscal 2005 gross profit improved to $17,027,000 from $13,332,000, a 27.7% increase from the comparable period in the prior year.
Investments in our strategic growth plans, which include the establishment of sales and manufacturing operations in China earlier this year, the opening in February of a sales and technical office in Europe, and the licensing and development of non-contacting sensors for use in our electronic product lines resulted in higher operating expenses for both the quarter and the nine months ended June 30, 2005. Selling and administrative costs contributed to higher operating expenses for the quarter and nine months ended June 30, 2005. Operating expenses increased $413,000 in the third quarter of 2005 compared to the third quarter of 2004 and increased $1,317,000 for the nine months ended June 30, 2005.
Interest expense on debt for both the third quarter and nine months of fiscal 2005 of $312,000 and $1,134,000, respectively, is related to the new bank debt drawn on September 30, 2004 in conjunction with the 2004 recapitalization. The Company had minimal bank debt in fiscal 2004. In the third quarter and first nine months of fiscal 2004, the Company recorded $822,000 and $2,382,000, respectively, of interest expense related to dividends and accretion on the Series B Preferred Stock. The 2004 recapitalization transaction included the elimination of all outstanding Series B Preferred Stock and the associated dividends. The other (income) expense reported in both the third quarter and nine months of fiscal 2005 is due in large part to the revaluation of the Put and Call Option agreement between the Company and American Industrial Partners, which was entered into as part of the 2004 recapitalization on September 30, 2004.
Tax expense of $1,079,000 was recorded during the third quarter of fiscal 2005 at an effective rate of 40.1%. For the nine months ended June 30, 2005, the Company recorded tax expense of $3,357,000 at an effective tax rate of 39.7%. Prior to the beginning of fiscal 2005, the Company had provided for a full valuation allowance on its deferred tax assets, resulting in a minimal tax provision related to the income in the third quarter and first nine months of fiscal 2004. The Company reduced the valuation allowance during the fourth quarter of fiscal 2004.
Williams Controls' President and Chief Executive Officer, Patrick W. Cavanagh stated, "Continuing strong demand for our products at our major OEM customers combined with strengthening aftermarket sales worldwide were the primary drivers for the higher sales and earnings levels for the quarter. He concluded, "We have made significant progress in positioning the company closer to our customers to take advantage of future growth opportunities around the world."
ABOUT WILLIAMS CONTROLS
Williams Controls is a leading designer and manufacturer of Electronic Throttle Control Systems for the heavy truck and off-road markets. For more information, you can find Williams Controls on the Internet at www.wmco.com.
Williams Controls, Inc.
Unaudited Condensed Consolidated Statements of Operations
(Dollars in thousands, except share and per share amounts)
Three month Three month Nine month Nine month
period ended period ended period ended period ended
6/30/05 6/30/04 6/30/05 6/30/04
Net sales $17,192 $15,127 $49,928 $42,142
Cost of sales 11,348 10,098 32,901 28,810
Gross profit 5,844 5,029 17,027 13,332
Research and
development expense 855 858 2,445 2,236
Selling expense 364 339 974 901
Administration expense 1,577 1,186 4,397 3,362
Operating income from
continuing operations 3,048 2,646 9,211 6,833
Interest income (13) (1) (33) (2)
Interest expense - Debt 312 17 1,134 56
Interest expense -
Series B Preferred
Stock dividends
and accretion -- 822 -- 2,382
Other (income)
expense, net 60 253 (346) 248
Income from continuing
operations before
income taxes 2,689 1,555 8,456 4,149
Income tax expense 1,079 42 3,357 136
Net income from
continuing operations 1,610 1,513 5,099 4,013
Discontinued operations -- 41 -- 289
Net income 1,610 1,472 5,099 3,724
Earnings per share
information:
Income per common
share from
continuing operations
- basic and diluted $0.03 $0.04 $0.11 $0.12
Income (loss) per
common share from
discontinued
operations - basic
and diluted 0.00 0.00 0.00 (0.01)
Net income per common
share - basic and
diluted $0.03 $0.04 $0.11 $0.11
Weighted average
shares used in per
share calculation
- basic 46,644,348 34,769,175 46,634,390 33,144,151
Weighted average
shares used in per
share calculation
- diluted 47,906,190 35,046,063 47,756,848 33,234,307
Williams Controls, Inc.
Unaudited Condensed Consolidated Balance Sheets
(Dollars in thousands)
June 30, September 30,
2005 2004
Assets
Current Assets:
Cash and cash equivalents $4,054 $2,482
Trade accounts receivable, net 8,401 8,193
Other accounts receivable 349 424
Inventories 3,957 3,777
Deferred income taxes 2,116 2,116
Prepaid expenses and other current assets 393 290
Total current assets 19,270 17,282
Property, plant and equipment, net 7,052 5,402
Deferred income taxes 4,200 7,247
Other assets, net 1,252 1,194
Total assets $31,774 $31,125
Liabilities and Stockholders' Deficit
Current Liabilities:
Accounts payable $5,172 $4,084
Accrued expenses 5,166 4,969
Current portion of employee benefit
obligations 1,592 1,240
Current portion of long-term debt and
capital lease obligations 3,443 3,454
Total current liabilities 15,373 13,747
Long-term debt and capital lease obligations 11,050 16,640
Employee benefit obligations 7,158 7,440
Other long-term liabilities 10 333
Stockholders' Deficit:
Preferred stock (Series C) -- --
Common stock 467 466
Additional paid-in capital 36,078 35,960
Accumulated deficit (32,359) (37,458)
Treasury Stock (377) (377)
Other comprehensive loss - Pension
liability adjustment (5,626) (5,626)
Total stockholders' deficit (1,817) (7,035)
Total liabilities and
stockholders' deficit $31,774 $31,125