UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended November 26, 1995
---------------------------------------
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 0-619
Washington Scientific Industries, Inc.
(Exact name of registrant, as specified in its charter)
Minnesota 41-0691607
(State or other jurisdiction of (I. R. S. Employer
incorporation of organization) Identification No.)
Long Lake, Minnesota 55356
(Address of principal executive offices) (Zip Code)
(612) 473-1271
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __X___ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
2,414,850 Common Shares were outstanding as of December 20, 1995.
WASHINGTON SCIENTIFIC INDUSTRIES, INC.
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
PART I. FINANCIAL INFORMATION:
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets November 26, 1995 (Unaudited)
and August 27, 1995 3
Consolidated Statements of Operations
Thirteen weeks ended November 26, 1995 and November 27, 1994
(unaudited) 4
Consolidated Statements of Cash Flows
Thirteen weeks ended November 26, 1995 and November 27, 1994
(unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7, 8
PART II. OTHER INFORMATION:
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WASHINGTON SCIENTIFIC INDUSTRIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
November 26, August 27,
Assets 1995 1995
------------ -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,844,238 $ 1,260,053
Accounts receivable 2,933,522 3,735,457
Inventories - work-in-process 612,892 624,237
Prepaid and other current assets 450,909 411,430
----------- -----------
Total Current Assets 5,841,561 6,031,177
Property, Plant and Equipment 7,262,157 7,233,324
Other Long Term Assets 525 525
----------- -----------
$13,104,243 $13,265,026
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable $ 0 $ 0
Trade accounts payable 980,354 1,280,368
Salaries, wages, and withholdings 575,061 728,946
Miscellaneous accrued expenses 437,291 442,701
Current portion of long-term debt 880,809 838,750
----------- -----------
Total Current Liabilities 2,873,515 3,290,765
Long-term Debt, less current portion 5,027,365 4,852,216
Long-term Pension Liability 411,213 411,213
Stockholders' Equity:
Common stock issued, 2,392,976 and
2,384,651 shares respectively 239,298 238,465
Capital in excess of par value 1,432,523 1,406,299
Retained earnings 3,120,329 3,066,068
----------- -----------
Total Stockholders' Equity 4,792,150 4,710,832
----------- -----------
$13,104,243 $13,265,026
=========== ===========
</TABLE>
See notes to consolidated financial statements.
WASHINGTON SCIENTIFIC INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
13 weeks ended
-------------------------------
November 26, November 27,
1995 1994
------------ ------------
Net Sales $ 5,342,474 $ 7,820,899
Cost of products sold 4,685,244 7,465,583
----------- -----------
Gross margin 657,230 355,316
Selling and administrative expense 517,920 546,657
Pension curtailment (gain) -- (254,419)
Interest and other income (70,716) (43,535)
Interest and other expense 149,965 176,832
----------- -----------
Earning (loss) from operations
before income taxes 60,061 (70,219)
Income taxes 5,800 --
----------- -----------
Net earnings (loss) $ 54,261 ($ 70,219)
=========== ===========
Net earnings (loss) per common and
common equivalent share $ 0.02 ($ 0.03)
=========== ===========
Weighted average number of common and
common equivalent shares outstanding 2,466,513 2,382,401
=========== ===========
See notes to consolidated financial statements.
WASHINGTON SCIENTIFIC INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
13 weeks ended
------------------------------
November 26, November 27,
1995 1994
----------- -----------
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 54,261 ($ 70,219)
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Gain on sale of property, plant & equipment (9,500) (19,161)
Depreciation and amortization 458,662 636,355
Pension curtailment (gain) -- (254,419)
Changes in assets and liabilities:
Decrease in accounts receivable 801,935 609,537
Decrease in inventories 11,346 387,466
(Increase) decrease in prepaid expenses (39,479) 126,189
Decrease in accounts payable and accrued
expenses (459,308) (1,732,207)
Other -- --
----------- -----------
Net cash provided by (used in) operating activities 817,917 (316,459)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment 9,500 75,400
Purchases of property, plant & equipment (45,196) (37,993)
----------- -----------
Net cash provided by (used in) investing activities (35,696) 37,407
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt (225,092) (91,750)
Increase in notes payable -- 493,739
Issuance of common stock 27,056 --
----------- -----------
Net cash provided by (used in) financing activities (198,036) 401,989
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 584,185 122,937
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,260,053 208,014
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF REPORTING PERIOD $ 1,844,238 $ 330,951
=========== ===========
Supplemental cash flow information: Cash paid during the period for:
Interest $ 151,923 $ 169,493
Income taxes $ 1,000 $ 0
Noncash investing and financing activities:
Aquisition of machinery through capital lease $ 442,300 $ 420,000
</TABLE>
See notes to consolidated financial statements
WASHINGTON SCIENTIFIC INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS:
The consolidated balance sheet as of November 26, 1995, the
consolidated statements of earnings for the thirteen weeks ended
November 26, 1995 and November 27, 1994 and the consolidated statements
of cash flows for the thirteen weeks then ended, respectively, have
been prepared by the Company without audit. In the opinion of
management, all adjustments (which include normal recurring
adjustments) necessary to present fairly the financial position,
results of operations and cash flows for all periods presented have
been made.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. Therefore, these
condensed consolidated financial statements should be read in
conjunction with the financial statements and notes thereto included in
the Company's 1995 annual report to shareholders. The results of
operations for interim periods are not necessarily indicative of the
operating results for the full year.
2. SALE OF REAL ESTATE:
On January 4, 1995 the Company sold its Owatonna, Minnesota
real estate to OTC, a division of SPX Corporation, for a total cash
consideration of $1,534,000.
3. PENSION CURTAILMENT:
A pension curtailment gain was recorded in the first quarter
of fiscal 1995. As part of the Owatonna plant closing, all of the
Owatonna employees who were members of the non-union pension plan were
either terminated or transferred to the Long Lake facility. As a
result, during the first quarter of fiscal 1995, a curtailment of the
non-union employee plan occurred as defined in SFAS No. 88, Employers
Accounting for Settlements and Curtailments of Defined Benefit Pension
Plans and Termination Benefits.
4. DEBT AND LINE OF CREDIT:
On March 31, 1995, the Company amended its line of credit
agreement and refinanced its term debt. The Agreement, which combines
the line of credit and term debt, will expire on March 31, 1998 and is
with the same bank with which the Company previously had its line of
credit.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
and
RESULTS OF OPERATIONS
Results of Operations:
Net sales of $5,342,000 for the quarter ending November 26,
1995 decreased $2,478,000 or 31.7% from the first quarter of the prior
year. The sales decline resulted from reductions in business with
several customers. Primary changes in sales included a decrease in the
computer market of $1,909,000 and an increase in the agricultural
market of $746,000. Based on information received from customers and
recent trends, the Company's outlook is for lower sales in fiscal 1996
compared to fiscal 1995.
Gross margin improved to 12.3% of sales in the first quarter
of fiscal 1996 compared to 4.5% in the prior year's first quarter. The
improved gross margin resulted primarily from improved manufacturing
efficiencies as a result of the consolidation of the Company's
manufacturing plants and the favorable impact, in the amount of
$163,000, from a negotiated settlement with a customer for end of
program charges and reversal of an allowance for obsolete inventory
established for that program.
Selling and administrative expense decreased $29,000 when
compared to the first quarter of the prior year. This reduction was
primarily the result of lower expenditures for services contracted
outside of the Company.
Interest and other income was $27,000 higher than the
comparable quarter of the prior year. The increase was primarily the
result of interest income from higher cash balances.
Interest and other expense of $150,000 decreased $27,000 from
the prior year's first quarter because of lower notes payable and term
debt balances.
Income Taxes - In the first quarter of fiscal 1995, the
Company was unable to record the benefit of net operating losses and
most other net deductible temporary differences in the consolidated
statement of operations due to the fact that the likelihood of
realization of the tax benefits could not be established. In the first
quarter of fiscal 1996, the Company recorded $5,800 of mandatory state
income taxes and was able to recognize the benefit of a portion of its
net operating loss carryforwards.
Liquidity and Capital Resources:
On November 26, 1995, working capital was $2,968,000 compared
to $2,740,000 at August 27, 1995, an increase of $228,000. The ratio of
current assets to current liabilities at November 26, 1995 and August
27, 1995 was 2.03 to 1.0 and 1.83 to 1.0, respectively.
On November 27, 1995, the Company did not have an outstanding
bank loan balance. On that date the Company reported cash and cash
equivalents of $1,844,000.
It is management's belief that its internally generated funds
combined with the line of credit will be sufficient to enable the
Company to meet its financial requirements during fiscal 1996.
PART II. OTHER INFORMATION;
Item 6. Exhibits and Reports on Form 8-K:
a. Exhibit 27. Financial Data Schedule
b. There were no reports on Form 8-K filed for the thirteen
weeks ended November 26, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WASHINGTON SCIENTIFIC INDUSTRIES, INC.
Date: January 9, 1996 /s/ Michael J. Pudil
Michael J. Pudil, President & CEO
Date: January 9, 1996 /s/ W. J. Lucke
W. J. Lucke, Vice President & Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-25-1996
<PERIOD-END> NOV-26-1995
<CASH> 1,844,238
<SECURITIES> 0
<RECEIVABLES> 2,933,523
<ALLOWANCES> 0
<INVENTORY> 612,892
<CURRENT-ASSETS> 450,908
<PP&E> 28,539,534
<DEPRECIATION> 21,277,377
<TOTAL-ASSETS> 13,104,243
<CURRENT-LIABILITIES> 2,873,517
<BONDS> 5,027,365
0
0
<COMMON> 239,298
<OTHER-SE> 4,792,150
<TOTAL-LIABILITY-AND-EQUITY> 13,104,243
<SALES> 5,342,474
<TOTAL-REVENUES> 5,342,474
<CGS> 4,685,244
<TOTAL-COSTS> 4,685,244
<OTHER-EXPENSES> 447,204
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 149,965
<INCOME-PRETAX> 60,061
<INCOME-TAX> 5,800
<INCOME-CONTINUING> 54,261
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,261
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.00
</TABLE>
