WSI Reports First Quarter Earnings
6 January 2000
WSI Reports First Quarter Earnings, Including Expenses Related To Plant Consolidation Initiative; Plant Consolidation Proceeding Toward Completion on Planned Schedule
LONG LAKE, Minn.--Jan. 6, 2000--WSI Industries, Inc. (Nasdaq NMS: WSCI) today reported sales of $7,295,000 for the first quarter of fiscal 2000 ended November 28, an increase of 29% from $5,641,000 in the year-earlier period. Including plant consolidation costs, net income came to $57,000 or $.02 per diluted share, compared to $277,000 or $.11 per diluted share in the first quarter of fiscal 1999.The Company announced last fall it was closing its Long Lake facility and consolidating all manufacturing at two other plants.In the first quarter of fiscal 2000, severance, relocation and other expenses related to the consolidation were partially offset by one-time gains on the termination of the Long Lake defined benefit pension plan and on the sale of excess manufacturing equipment.
The manufacturing consolidation strategy, which is proceeding toward scheduled completion by the end of this year's second quarter, will significantly reduce operating overhead and place manufacturing operations in closer proximity to customers. Through this effort, all manufacturing has been consolidated into facilities in Rochester, Minnesota (Bowman Tool and Machining, Inc. subsidiary) and Osseo, Minnesota (Taurus Numeric Tool, Inc. subsidiary). The 176,000-square-foot Long Lake facility has been listed for sale. Proceeds from this pending sale will be used to reduce the long-term debt supporting the Taurus and Bowman acquisitions.
The Company's 29% first quarter sales growth was generated by the Taurus and Bowman subsidiaries, whose combined sales more than offset the year-over-year decline in agriculture-related sales due to continued weakness in the nation's farm economy. Acquired in fiscal 1999, the Taurus and Bowman units were accretive to first quarter operations. The first quarter gross margin remained constant at 14% with the year-earlier period, despite a significant impact from consolidation-related equipment moving costs, in addition to hiring, training and startup expenses at the Bowman and Taurus facilities.
Michael J. Pudil, president and chief executive officer, said he is very encouraged by the solid first quarter performances of the Taurus and Bowman units, which made positive earnings contributions. By acquiring these units in fiscal 1999, he continued, the Company has developed its most diversified and balanced base of business in recent history. In the first quarter, no single industry accounted for more than 30% of total sales. Pudil added that the profitability of the Taurus and Bowman operations greatly minimized the decline in the gross margin resulting from consolidation-related costs.
Pudil said the Company's fiscal 2000 outlook appears very positive, with WSI remaining on track toward posting significantly improved sales and earnings for the full year. Second quarter profitability will be affected by the remaining consolidation expenses. However, bottom line results for this period are expected to be significantly stronger in comparison to the sizeable net loss posted in the second quarter of fiscal 1999. At this time, Pudil continued, the second half of fiscal 2000 is shaping up as a much stronger period for WSI, reflecting the outlook for continued sales growth and the positive impact of the streamlined cost structure and enhanced operating efficiencies.
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 29, 1999.
WSI INDUSTRIES, INC.
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CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
In thousands, except per share amounts
First quarter ended
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November 28, November 29,
1999 1998
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Net Sales $7,295 $5,641
Cost of products sold 6,267 4,816
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Gross margin 1,028 825
Selling and administrative expense 979 544
Pension curtailment (232) -
Gain on sale of equipment (269) -
Severance costs 249 -
Interest and other income (7) (67)
Interest and other expense 254 59
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Profit from operations
before income taxes 54 289
Income taxes 3 12
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Net earnings $51 $277
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Basic earnings per share $0.02 $0.11
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Diluted earnings per share $0.02 $0.11
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Weighted average number of
common shares outstanding 2,455 2,449
Weighted average number of
common and dilutive potential
common shares 2,504 2,552
CONDENSED BALANCE SHEETS (Unaudited)
In thousands
November 28, November 29,
1999 1998
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Assets:
Total Current Assets $6,484 $6,224
Property, Plant, and
Equipment, net 11,453 7,569
Intangible Assets, net 5,616
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Total Assets $23,553 $13,793
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Liabilities and Shareholders'
Equity:
Total current liabilities $4,740 $2,772
Long-term debt 10,359 2,375
Long-term pension liability 121 374
Shareholders' equity 8,333 8,272
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Total Liabilities and
Shareholders' Equity $23,553 $13,793
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