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 24, 1996
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.
2,424,980 Common Shares were outstanding as of December 20, 1996.
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WASHINGTON SCIENTIFIC INDUSTRIES, INC.
AND SUBSIDIARIES
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION:
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets November 24, 1996 (Unaudited)
and August 25, 1996 3
Consolidated Statements of Operations
Thirteen weeks ended November 24, 1996 and November 26, 1995
(unaudited) 4
Consolidated Statements of Cash Flows
Thirteen weeks ended November 24, 1996 and November 26, 1995
(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
Signatures 9
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WASHINGTON SCIENTIFIC INDUSTRIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
Assets November 24, August 25,
------ 1996 1996
----------- -----------
Current Assets:
Cash and cash equivalents $ 1,856,165 $ 1,642,739
Accounts receivable 2,821,854 1,868,942
Inventories - work-in-process 987,764 1,098,613
Prepaid and other current assets 131,133 123,186
----------- -----------
Total Current Assets 5,796,916 4,733,480
Property, Plant and Equipment 6,487,711 6,839,239
Other Long Term Assets 525 525
----------- -----------
$12,285,152 $11,573,244
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable $ 0 $ 0
Trade accounts payable 1,173,833 785,602
Salaries, wages, and withholdings 416,624 474,107
Miscellaneous accrued expenses 336,276 324,214
Current portion of long-term debt 966,361 953,570
----------- -----------
Total Current Liabilities 2,893,094 2,537,493
Long-term Debt, less current portion 3,859,064 4,124,188
Long-term Pension Liability 460,645 458,502
Stockholders' Equity:
Common stock issued, 2,421,850 and
2,420,850 shares respectively 242,185 242,085
Capital in excess of par value 1,513,998 1,511,598
Retained earnings 3,316,166 2,699,378
----------- -----------
Total Stockholders' Equity 5,072,349 4,453,061
----------- -----------
$12,285,152 $11,573,244
=========== ===========
See notes to consolidated financial statements.
WASHINGTON SCIENTIFIC INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
13 weeks ended
----------------------------
November 24, November 26,
1996 1995
----------- -----------
Net sales $ 5,590,588 $ 5,342,474
Cost of products sold 4,813,720 4,685,244
----------- -----------
Gross margin 776,868 657,230
Selling and administrative expense 518,187 517,920
Interest and other income (456,480) (70,716)
Interest and other expense 92,573 149,965
----------- -----------
Earnings from operations
before income taxes 622,588 60,061
Income taxes 5,800 5,800
----------- -----------
Earnings from operations $ 616,788 $ 54,261
=========== ===========
Net earnings per share $ 0.25 $ 0.02
=========== ===========
Weighted average number of common and
common equivalent shares outstanding 2,458,738 2,466,513
=========== ===========
See notes to consolidated financial statements.
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WASHINGTON SCIENTIFIC INDUSTRIES,INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
13 weeks ended
----------------------------
November 24, November 26,
1996 1995
----------- -----------
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 616,788 $ 54,261
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Gain on sale of property, plant & equipment (432,445) (9,500)
Depreciation and amortization 426,961 458,662
Increase in pension liability 2,143 0
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (952,912) 801,935
Decrease in inventories 110,847 11,346
(Increase) decrease in prepaid expenses (7,945) (39,479)
Increase (decrease) in accounts payable and
accrued expenses 355,600 (459,308)
----------- -----------
Net cash provided by operating activities 119,037 817,917
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment 448,000 9,500
Purchases of property, plant & equipment (90,988) (45,196)
----------- -----------
Net cash provided by (used in) investing activities 357,012 (35,696)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt (265,123) (225,092)
Issuance of common stock 2,500 27,056
----------- -----------
Net cash provided by (used in) financing activities (262,623) (198,036)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 213,426 584,185
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,642,739 1,260,053
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF REPORTING PERIOD $ 1,856,165 $ 1,844,238
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for:
Interest $ 94,187 $ 151,923
Income taxes $ 2,050 $ 1,000
Noncash investing and financing activities:
Aquisition of machinery through capital lease 0 $ 442,300
See notes to consolidated financial statements.
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WASHINGTON SCIENTIFIC INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS:
The consolidated balance sheet as of November 24, 1996, the
consolidated statements of earnings for the thirteen weeks ended
November 24, 1996 and November 26, 1995 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 1996 annual report to shareholders. The results of
operations for interim periods are not necessarily indicative of the
operating results for the full year.
2 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 $5,591,000 for the quarter ending November 24,
1996 increased $248,000 or 4.6% from the first quarter of the prior
year. Primary changes in sales included a decrease in the computer
market of $814,000, a decrease in the industrial compressor market of
$638,000 and an increase in the agricultural market of $1,720,000.
Gross margin improved to 13.9% of sales in the first quarter
of fiscal 1997 compared to 12.3% in the prior year's first quarter. The
improved gross margin resulted primarily from cost reductions and
improved manufacturing efficiencies.
Selling and administrative expense of $518,000 was comparable
to the first quarter of the prior year.
Interest and other income was $386,000 higher than the
comparable quarter of the prior year. The increase included $410,000
net gain from the disposition of excess equipment related to completed
or discontinued manufacturing programs.
Interest and other expense of $93,000 decreased $57,000 from
the prior year's first quarter because of lower term debt balances.
In the first quarter of fiscal 1997, 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. The
Company has not recorded the benefit of net operating losses and other
net deductible temporary differences in the consolidated statement of
operations due to the fact that the Company has not been able to
establish that it is more likely than not that the tax benefits will be
realized.
Liquidity and Capital Resources:
On November 24, 1996, working capital was $2,904,000 compared
to $2,196,000 at August 25, 1996, an increase of $708,000, due
primarily to an increase in accounts receivable. The ratio of current
assets to current liabilities at November 24, 1996 and August 25, 1996
was 2.0 to 1.0 and 1.87 to 1.0, respectively.
On November 24, 1996, the Company did not have an outstanding
bank notes payable balance. As of that date the Company had cash and
cash equivalents of $1,856,000.
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 1997.
Cautionary Statement:
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 25, 1996.
PART II. OTHER INFORMATION:
Item 5. Other Information:
On December 2, 1996, the State of Texas issued a Certificate
of Dissolution for WSI South, Inc., a wholly owned subsidiary
of the Company which was formerly engaged in plastic injection
molding and discontinued in June, 1993.
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 24, 1996.
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 3, 1997 /s/ Michael J. Pudil
--------------- ---------------------------------------
Michael J. Pudil, President & CEO
Date: January 3, 1997 /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-31-1997
<PERIOD-END> NOV-24-1996
<CASH> 1,856,165
<SECURITIES> 0
<RECEIVABLES> 2,871,854
<ALLOWANCES> 50,000
<INVENTORY> 987,764
<CURRENT-ASSETS> 5,796,916
<PP&E> 25,457,629
<DEPRECIATION> 18,969,918
<TOTAL-ASSETS> 12,285,152
<CURRENT-LIABILITIES> 2,893,094
<BONDS> 3,859,064
0
0
<COMMON> 242,185
<OTHER-SE> 4,830,164
<TOTAL-LIABILITY-AND-EQUITY> 12,285,152
<SALES> 5,590,588
<TOTAL-REVENUES> 5,590,588
<CGS> 4,813,720
<TOTAL-COSTS> 4,813,720
<OTHER-EXPENSES> 61,707
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 92,573
<INCOME-PRETAX> 622,588
<INCOME-TAX> 5,800
<INCOME-CONTINUING> 616,788
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 616,788
<EPS-PRIMARY> .25
<EPS-DILUTED> .00
</TABLE>
