WSI Industries Reports Q4 and Full-Year Fiscal 1999 Operating Results
21 October 1999
WSI Industries Reports Fourth Quarter and Full-Year Fiscal 1999 Operating Results; Sales and Earnings Benefit from Two Strategic Acquisitions
LONG LAKE, Minn.--Oct. 21, 1999--WSI Industries, Inc. (Nasdaq NMS: WSCI) today reported consolidated sales of $6,191,000 for the fourth quarter of fiscal 1999 ended August 29, down modestly from $6,322,000 in the year-earlier quarter. Fourth quarter consolidated earnings came to $348,000 or $.14 per diluted share, compared to $560,000 or $.22 per diluted share in the fourth quarter of fiscal 1998.For full-year fiscal 1999, consolidated net sales totaled $21,550,000, compared to $23,948,000 in fiscal 1998. Consolidated net income for fiscal 1999 came to $261,000 or $.10 per diluted share, compared to $1,874,000 or $.73 per diluted share a year earlier.
Michael J. Pudil, president and chief executive officer, said the fourth quarter, as anticipated, was the Company's strongest three-month period of fiscal 1999. During the quarter, the continued slowdown in sales to Deere & Co.'s agricultural operations was largely offset by the contribution of Taurus Numeric Tool, a specialized precision machining company acquired in February 1999, as well as by increased sales to other customers served by the Company's Long Lake facility. Fourth quarter sales also benefited from the addition of Bowman Tool and Machining, Inc., a precision machining company acquired in early August.
Both Bowman and Taurus were accretive to the Company's consolidated fiscal 1999 earnings.
In addition to the year's lower sales volume, other factors that affected the Company's fiscal 1999 earnings included: a volume-driven reduction in the gross margin at the Long Lake plant, increased selling and administrative expense due to the two acquisitions, and higher interest expense on debt supporting the Bowman and Taurus transactions.
As previously announced, the Company is closing its Long Lake plant and consolidating all manufacturing operations at its Bowman (Rochester, MN) and Taurus (Osseo, MN) facilities. This strategic initiative, which should be completed by the end of calendar year 1999, will place the Company in closer proximity to its customers and significantly reduce overhead expense by consolidating operations in the Company's most efficient facilities. As a result, the Company believes its consolidation initiative will improve customer value while, strengthening its competitive capabilities.
As part of the consolidation effort, the Company is in the process of selling its Long Lake plant. The anticipated gain from this sale, along with gains on sales of excess manufacturing equipment, are expected to largely offset consolidation and relocation costs. Sale proceeds will be used to pay down long-term debt.
Pudil said the Company expects to report significantly improved sales for the first quarter of fiscal 2000, with profitability affected by consolidation and relocation expenses as well as by the timing of sales of excess equipment. Since the great majority of the consolidation expenses will be incurred during the first three months of the fiscal year, Pudil added, the Company expects to post improved earnings starting in the second quarter. During the coming fiscal year, he said, the Company expects to benefit from growing contributions from Bowman and Taurus, as well as the positive impact of WSI's streamlined cost structure and enhanced operating efficiencies.
The Company said it intends to pursue additional acquisition opportunities once the process of consolidating its manufacturing operations is completed later this fiscal year..
WSI Industries, Inc. is a leading contract manufacturer that specializes in the machining of complex, high-precision parts for a wide range of industries, including agriculture, construction, aerospace and avionics, recreational vehicles and computers.
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 30, 1998.
WSI INDUSTRIES, INC.
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CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
In thousands, except per share amounts
Quarter Ended Year ended
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August 29, August 30, August 29, August 30,
1999 1998 1999 1998
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Net Sales $6,191 $6,322 $21,550 $23,948
Cost of products
sold 4,867 5,155 18,279 19,547
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Gross margin 1,324 1,167 3,271 4,401
Selling and
administrative
expense 809 618 2,661 2,453
Interest and
other income (20) (79) (158) (162)
Interest and
other expense 177 53 481 190
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Profit from
operations before
income taxes 358 575 287 1,920
Income taxes 10 15 26 46
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Net earnings $348 $560 $261 $1,874
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Basic earnings
per share $0.14 $0.23 $0.11 $0.77
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Diluted earnings
per share $0.14 $0.22 $0.10 $0.73
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Weighted average
number of common
shares outstanding 2,453 2,440 2,452 2,434
Weighted average
number of common and
dilutive potential
common shares 2,506 2,581 2,527 2,555
CONDENSED BALANCE SHEETS (Unaudited)
In thousands
August 29, August 30,
1999 1998
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Assets:
Total Current Assets $6,658 $6,676
Property, Plant, and Equipment, net 12,182 6,939
Intangible Assets 5,685 0
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Total Assets $24,525 $13,615
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Liabilities and Shareholders' Equity:
Total current liabilities $5,247 $3,438
Long-term debt 10,666 1,802
Long-term pension liability 348 380
Shareholders' equity 8,264 7,995
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Total Liabilities and
Shareholders' Equity $24,525 $13,615
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