Williams Controls Announces Plan to Sell Subsidiary
14 December 1998
Williams Controls Announces Plan to Sell Agriculture Equipment Subsidiary; Reports Fiscal Year End Results; Net Earnings From Continuing Operations Increased 83%
PORTLAND, Ore., Dec. 14 -- Williams Controls, Inc.
reported its results for the fourth quarter and full year ended
September 30, 1998 and announced a plan of disposal for its Agriculture
Equipment segment, as the Company continues to focus on growth opportunities
in its core transportation and communication business.
The Company reported net earnings from continuing operations for the
fiscal year ended September 30, 1998 of $4,611,000, an increase of 83%
compared to $2,515,000 for the year ended September 30, 1997. Diluted net
earnings per share from continuing operations were $.23 for the fiscal year
ended September 30, 1998, an increase of 64% compared to $.14 diluted earnings
per share for the year ended September 30, 1997 on higher weighted diluted
shares outstanding. Sales from continuing operations for the fiscal year
ended September 30, 1998 were $57,646,000 a 24% increase compared to sales
from continuing operations of $46,671,000 in the twelve months ended
September 30, 1997.
The Company benefited from an improved gross margin of 30% during fiscal
1998 compared to a gross margin of 27% in the prior year. The Company's
effective tax rate improved to 34% in 1998 compared to 47% in 1997 because of
lower state tax rates and expected state tax refunds from prior years.
For the fourth quarter, the Company reported net earnings from continuing
operations of $902,000, an increase of 14% compared to net income from
continuing operations of $791,000 in the same period one year ago. Diluted
earnings per share from continuing operations were $.04 in the fourth quarter
of 1998 and 1997 based on higher weighted average common shares in the 1998
period. Sales from continuing operations in the fourth quarter were
$14,568,000, an increase of 19% compared to sales from continuing operations
of $12,232,000 in the same period one year ago.
The Company reported a net loss from discontinued operations of $4,299,000
and $4,552,000 in 1998 and 1997 respectively. The 1998 loss from discontinued
operations included a net loss on the disposal of the Agriculture Equipment
segment of $2,674,000 that includes an estimated net loss on disposal and
estimated net losses until disposal of $1,403,000. The 1998 loss from
discontinued operations also included a net loss of $1,625,000 on the
previously reported disposal of the Automotive Accessories segment.
The Company adopted a plan of disposal for the Agriculture Equipment
segment in the fourth quarter of 1998. Williams Controls retained the
national investment banking firm of JWGenesis Capital Markets, LLC as
financial advisers to maximize the value to the Company of the disposal in a
manner that seeks to preserve the value of the operation as a going concern
for the benefit of the employees, customers, suppliers and future owners.
JWGenesis' New York-based corporate finance operation will be seeking buyers
for the unit, which consists of Hardee, a manufacturer of agricultural and
landscape maintenance equipment, Agrotec, a manufacturer of agriculture and
nursery sprayers and Waccamaw Wheel, a manufacturer of wheel products
primarily used in the agriculture market. JWGenesis is a publicly-traded,
full-service investment bank and a national leader in middle market
divestitures and financings.
The additional loss on the Automotive Accessories segment resulted
primarily from a fourth quarter adjustment to the estimated value of non-
voting preferred stock that the Company had received as partial consideration
for the sale and from additional estimated retained liabilities related to the
sale. The reduction in the estimated value of the preferred stock did not
affect the rights and preferences of the preferred shares.
The Company reported net income of $312,000, or $.00 per diluted share for
the year ended September 30, 1998 compared to a net loss of $2,037,000, or
$.12 per diluted share in the prior year. The Company reported a net loss of
$2,598,000, or $.15 per diluted share for the quarter ended September 30, 1998
compared to net income of $173,000 or $.01 per diluted share in the prior year
quarter.
Williams Controls Chairman and CEO Thomas W. Itin stated, "Over the past
eighteen months, we expended significant financial and management resources in
an attempt to reach a profitable level of operations in the Agriculture
Equipment segment. With the assistance of managers from around the Williams
Controls organization, we recently completed a strategic and operational
review of this business. Our conclusion was that, with time and additional
financial commitments, we could complete our turnaround plan and achieve
profitability. However, with the substantial commitments we are making to new
product and market development in our core transportation and communication
business, and the more immediate payback that should result in these areas,
management made the decision to sell the Agriculture operations in order to
strengthen our focus on transportation and related initiatives."
Mr. Itin continued, "In addition to serving our traditional truck market,
we continue to make significant investments in new product development focused
on the automotive market. Our integrated approach to this market, which is
many times the size of our traditional markets, is beginning to show results.
We are pleased with the reception given to our team approach to the automotive
and light truck market, combining our proven throttle control technology with
an automotive-experienced management team that we have assembled over the past
fifteen months. We believe there are a number of niche opportunities in this
huge market where our technology can be applied in the near term, and we
intend to actively pursue them, while using these advances to further
strengthen our presence in the heavy truck market."
Williams Controls Chief Financial Officer Gerard A. Herlihy stated, "The
results from our continuing operations over the last year continue to reflect
the strength in our core transportation business, especially in the
manufacture of controls for the heavy truck and equipment market. We continue
to see widespread acceptance of Williams' throttle control technologies in our
traditional markets, as we have maintained or enhanced our market position
throughout the heavy truck industry. Our automotive plastics and lighting
operation has also had some important gains in the market, as it had its first
full quarter of operations from its new state-of-the-art facility in the
Detroit area, and our sensors and communications business in South Florida
made similar progress during the quarter. In addition, this operation has
nearly completed its QS-9000 quality certification process."
Mr. Herlihy continued, "We believe the sale of the Agriculture Equipment
segment will have a number of benefits for Williams Controls. Principally, it
will permit the redirection of capital into businesses that have the best
chance for short and long term returns to our shareholders. Williams Controls
is the preeminent producer of electronic throttle controls ("ETC") in the
truck markets because of our strong engineering design team, high quality
manufacturing and customer service. We are actively bidding on our first
commercial automotive ETC and are receiving excellent feedback about our deep
knowledge of ETC and our creative engineering design approach. The automotive
ETC will involve higher volume manufacturing processes in the future which our
new automotive-experienced management team is fully capable of implementing.
Our research and development expenditures increased 51% in 1998 and we plan to
increase R&D spending further in 1999."
Williams Controls is a leading manufacturer and integrator of innovative
sensors, controls, and communications systems for the transportation and
communication industries. For more information, you can reach the Company at
http://www.wmco.com on the World Wide Web.
Forward-looking statements in this news release, if any, are made under
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Certain important factors could cause results to differ materially from
those anticipated by the statements, including the impact of changing economic
or business conditions, the impact of competition, the availability of
financing, the success of products in the marketplace, the success of its
Internet selling efforts, other factors inherent in the industry and other
factors discussed from time to time in reports filed by the company with the
Securities and Exchange Commission.
Williams Controls, Inc.
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
Three months ended Twelve months ended
9/30/98 9/30/97 9/30/98 9/30/97
Net sales $ 14,568 $ 12,232 $ 57,646 $ 46,671
Cost of sales 10,707 8,437 40,129 33,974
Gross margin 3,861 3,795 17,517 12,697
Operating expenses 1,911 1,738 8,526 6,305
Earnings before interest
and taxes 1,950 2,057 8,991 6,392
Interest and other
expenses 742 444 2,014 1,635
Earnings before income
taxes 1,208 1,613 6,977 4,757
Income tax expense 306 822 2,366 2,242
Net earnings from
continuing operations 902 791 4,611 2,515
Net loss from discontinued
operations - Agriculture
Equipment (2,035) (618) (2,674) (1,380)
Net loss from discontinued
operations - Automotive
Accessories (1,465) - (1,625) (3,172)
Net earnings (loss) (2,598) 173 312 (2,037)
Preferred dividends 150 - 270 -
Net earnings (loss)
allocable to common
shareholders $ (2,748) $ 173 $ 42 $ (2,037)
Earnings per share information:
Earnings per share from
continuing operations
- basic $.04 $.04 $.24 $.14
Loss per share from
discontinued operations -
- basic (.19) (.03) (.24) (.26)
Net earnings (loss) per
share - basic (.15) .01 .00 (.12)
Earnings per share from
continuing operations -
- diluted .04 .04 .23 .14
Loss per share from
discontinued operations
- diluted (.19) (.03) (.23) (.26)
Net earnings (loss) per
share - diluted $(.15) $.01 $.00 $(.12)
Weighted common shares
outstanding
- basic 18,124,037 17,642,040 17,922,558 17,656,900
Weighted common shares
outstanding
- diluted 21,287,294 18,354,908 19,808,460 18,001,799
The earnings per share computation for 1997 has been restated to reflect
the adoption of SFAS 128.
Williams Controls, Inc.
Consolidated Balance Sheets
(Dollars in thousands)
Sept. 30, 1998 Sept. 30, 1997
Assets
Current Assets:
Cash $ 1,281 $ 700
Accounts receivable, net 11,765 6,726
Inventories 10,693 11,186
Deferred taxes and other 2,231 1,539
Net assets held for disposition 5,117 5,005
Total current assets 31,087 25,156
Property, plant and equipment, net 20,013 14,533
Investment in and note receivable from
affiliate 6,140 4,204
Note receivable 3,200 -
Net assets held for disposition 1,847 3,112
Other assets 4,072 1,308
Total assets $ 66,359 $ 48,313
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 4,771 $ 4,619
Accrued expenses 3,399 2,482
Current portion of long-term debt
and leases 1,181 1,427
Estimated loss on disposal 2,550 500
Total current liabilities 11,901 9,028
Other liabilities 2,201 1,215
Long-term debt and capital leases 27,846 21,235
Stockholders' Equity:
Preferred stock 1 -
Common stock 183 179
Additional paid-in capital 17,917 9,822
Retained earnings 7,444 7,402
Unearned ESOP shares (73) (191)
Treasury stock (130,200 shares) (377) (377)
Note Receivable (500) -
Pension liability adjustment (184) -
Total stockholders' equity 24,411 16,835
Total liabilities and stockholders'
equity $ 66,359 $ 48,313
The consolidated balance sheet as of September 30, 1997 has been restated
to reflect the Agriculture Equipment segment as a discontinued operation.