<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 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 0-18083
Williams Controls, Inc.
(Exact name of registrant as specified in its charter)
Delaware 84-1099587
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14100 SW 72nd Avenue
Portland, Oregon 97224
(Address of principal executive office) (zip code)
Registrant's telephone number, including area code:
(503) 684-8600
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
The number of shares outstanding of the registrant's common stock as of August
2, 1996: 17,674,787.
<PAGE>
Williams Controls, Inc.
Index
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets, June 30, 1996 (unaudited)
and September 30, 1995 1
Unaudited Consolidated Statement of Stockholders' Equity,
nine months ended June 30, 1996 2
Unaudited Consolidated Statements of Operations,
three and nine months ended June 30, 1996 and 1995 3
Unaudited Consolidated Statements of Cash Flows,
nine months ended June 30, 1996 and 1995 4
Notes to Unaudited Consolidated Financial Statements 5-8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 9-12
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signature Page 14
</TABLE>
<PAGE>
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts) Williams Controls, Inc.
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
-------- -------------
(unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash $ 1,627 $ 1,653
Accounts receivable, net 12,880 10,521
Inventories 17,304 12,987
Other 956 627
------- -------
Total current assets 32,767 25,788
------- -------
Investment in affiliate 1,043 1,118
Property, plant and equipment 25,018 22,529
Less accumulated depreciation and amortization 4,709 3,731
------- -------
20,309 18,798
Other assets 1,071 1,478
------- -------
$55,190 $47,182
====== ======
Liabilities and Stockholders' Equity
Current Liabilities:
Current portion of long-term debt $ 373 $ 462
Accounts payable and accrued expenses 9,030 7,419
------- -------
Total current liabilities 9,403 7,881
------- -------
Long-term debt 23,794 17,946
Other liabilities 2,493 2,298
Commitments and contingencies - -
Minority interest in consolidated subsidiaries 854 764
Stockholders' equity:
Preferred stock of $.01 par value, 50,000,000 shares authorized - -
Common stock of $.01 par value, 50,000,000 shares authorized,
17,719,987 and 17,264,987 shares issued 177 173
Additional paid-in capital 9,383 9,023
Unearned ESOP shares (511) (630)
Pension liability adjustment (273) (273)
Retained earnings 10,410 10,000
Treasury shares (195,200 shares at cost) (540) -
------- -------
18,646 18,293
------- -------
$55,190 $47,182
====== ======
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
Unaudited Consolidated Statement of Stockholders' Equity
(Dollars in thousands, except per share amounts) Williams Controls, Inc.
<TABLE>
<CAPTION>
Number of Additional Unearned Pension
Shares Common Paid-in ESOP Liability Retained Treasury Stockholders'
Issued Stock Capital Shares Adjustment Earnings Shares Equity
--------- ------ ---------- -------- ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1995 17,264,987 $173 $9,023 $(630) $(273) $10,000 $ -- $18,293
Issuance of shares upon exercise
of stock options and warrants 455,000 4 231 -- -- -- -- 235
Reduction of unallocated -- -- 129 119 -- -- -- 248
ESOP shares
Cost of shares acquired(195,200) -- -- -- -- -- -- (540) (540)
Net earnings -- -- -- -- -- 410 -- 410
---------- ---- ------ ---- ---- ------ ----- ------
Balance, June 30, 1996 17,719,987 $177 $9,383 $(511) $(273) $10,410 $(540) $18,646
========== ==== ====== ==== ==== ====== ===== ======
</TABLE>
The accompanying notes are an integral part of these satements.
<PAGE>
Unaudited Consolidated Statements of Operations
(Dollars in thousands, except per share amounts) Williams Controls, Inc.
<TABLE>
<CAPTION>
Three months Three months Nine months Nine months
ended ended ended ended
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------- ------------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 17,475 $ 18,088 $ 50,038 $ 44,902
Cost of sales 13,668 12,879 38,123 31,916
-------- -------- -------- --------
Gross margin 3,807 5,209 11,915 12,986
-------- -------- -------- --------
Operating expenses:
Research and development 467 472 1,466 1,040
Selling 875 930 2,293 2,140
Administrative 1,382 985 3,559 2,360
Restructuring charge 2,250 -- 2,250 --
-------- -------- -------- --------
4,974 2,387 9,568 5,540
-------- -------- -------- --------
Earnings (loss) from operations (1,167) 2,822 2,347 7,446
Other (income) expense:
Interest income, affiliate -- (209) -- (539)
Interest expense 546 745 1,492 1,652
Equity interest in loss of affiliate -- -- 75 222
-------- -------- -------- --------
546 536 1,567 1,335
-------- -------- -------- --------
Earnings (loss) before income taxes (1,713) 2,286 780 6,111
Income taxes (669) 840 280 2,245
-------- -------- -------- --------
Earnings (loss) before minority interest (1,044) 1,446 500 3,866
Minority interest in net earnings
of consolidated subsidiaries 50 25 90 42
-------- -------- -------- --------
Net earnings (loss) $ (1,094) $ 1,421 $ 410 $ 3,824
======== ======== ======== ========
Earnings (loss) per common share $ (.06) $ .08 $ .02 $ .22
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Unaudited Consolidated Statements of Cash Flows
(Dollars in thousands) Williams Controls, Inc.
<TABLE>
<CAPTION>
Nine months Nine months
ended ended
June 30, 1996 June 30, 1995
------------- -------------
<S> <C> <C>
Cash flows from operations:
Net earnings $ 410 $ 3,824
Non-cash adjustments to net earnings:
Depreciation and amortization 1,655 1,178
Restructuring charge 2,250 -
Minority interest in earnings of consolidated subsidiaries 90 -
Equity interest in loss of affiliate 75 264
Changes in working capital items net of the effects of acquisitions:
Receivables, net (2,861) (2,222)
Inventories (4,817) (2,420)
Other (329) (744)
Accounts payable and accrued expenses 461 1,149
Note receivable, affiliate - (1,773)
-------- --------
Net cash used for operations (3,066) (744)
-------- --------
Cash flows from investing:
Payment for acquisitions (1,200) (6,323)
Payment for equipment (1,139) (934)
-------- --------
Net cash used for investing (2,339) (7,257)
-------- --------
Cash flows from financing:
Net borrowings (repayments) under revolving loan - (4,108)
Payments of long-term debt - (1,178)
Proceeds from long-term debt 5,759 13,511
Payments of capital leases (75) (93)
Repurchase of common stock (540) -
Proceeds from stock issuance 235 -
Debt costs - (159)
-------- --------
Net cash provided by financing 5,379 7,973
-------- --------
Net decrease in cash (26) (28)
Cash at beginning of period 1,653 242
-------- --------
Cash at end of period $1,627 $ 214
======== ========
</TABLE>
Interest paid in 1996 and 1995 was approximately $1,500 and $1,650 for the nine
months ended June 30. Income taxes paid in 1996 and 1995 were approximately
$1,000 and $2,250 for the nine months ended June 30.
The accompanying notes are an integral part of these statements.
<PAGE>
Notes to Unaudited Consolidated Financial Statements
Three and Nine Months ended June 30, 1996 and 1995
(Dollars in thousands, except per share amounts) Williams Controls, Inc.
1. Organization
The Company includes its wholly-owned subsidiaries, Williams Controls
Industries, Inc.; Kenco Williams, Inc.; NESC Williams, Inc.; Williams
Technologies, Inc.; Williams World Trade, Inc.; Williams Automotive,
Inc.; Aptek Williams, Inc.; Agrotec Williams, Inc.; Techwood Williams,
Inc.; Premier Plastic Technologies, Inc. and its 80% owned subsidiaries
Hardee Williams, Inc. and Waccamaw Wheel Williams, Inc.
2. The Interim Consolidated Financial Statements
The interim consolidated financial statements have been prepared by the
Company and, in the opinion of management, reflect all material
adjustments which are necessary to a fair statement of results for the
interim periods presented. Certain information and footnote disclosure
made in the last annual report on Form 10-K have been condensed or
omitted for the interim consolidated statements. Certain costs are
estimated for the full year and allocated to interim periods based on
activity associated with the interim period. Accordingly, such costs are
subject to year-end adjustment. It is the Company's opinion that, when
the interim consolidated statements are read in conjunction with the
September 30, 1995 annual report on Form 10-K, the disclosures are
adequate to make the information presented not misleading. The interim
consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany accounts and transactions
have been eliminated.
3. Earnings (loss) per Share
Earnings (loss) per share are based on the weighted average number of
shares and common stock equivalent shares outstanding during the period
assuming proceeds therefrom are used to purchase common stock at the
average market price during the period (treasury stock method). The
weighted average number of common shares used in computation of earnings
(loss) per share were 17,600,000 for the three and nine months ended June
30, 1996 and 18,000,000 and 17,600,000 for the three and nine months
ended June 30, 1995. Common stock equivalents which are antidilutive are
not included in the earnings (loss) per share calculation.
<PAGE>
Notes to Unaudited Consolidated Financial Statements
Three and Nine Months ended June 30, 1996 and 1995
(Dollars in thousands, except per share amounts) Williams Controls, Inc.
4. Inventories
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
-------- -------------
<S> <C> <C>
Raw material $ 6,104 $ 6,401
Work-in-process 1,677 1,031
Finished goods 9,523 5,555
------ -------
$17,304 $12,987
------ -------
</TABLE>
Inventories are valued at the lower of cost (first-in, first out) or
market. Finished goods include component parts and finished product ready
for shipment.
5. Investment in Affiliate
The Company owns 4,117,647 shares of Ajay Sports, Inc. ("Ajay") common
stock, approximately 18% of Ajay's outstanding common stock. Ajay
manufactures and distributes golf and billiard accessories primarily to
retailers throughout the United States. The investment in Ajay is
recorded as an investment in affiliate in the Consolidated Balance Sheets
net of the Company's equity interest of $357 in Ajay's losses since
acquiring the investment. The Company is required to account for the
investment in Ajay on the equity method due to common ownership by the
Chairman and President of the Company who is also Chairman and President
of Ajay. In addition, the Company has guaranteed Ajay's $13,500 credit
facility and is charging Ajay a fee of 1/2 of 1% per annum of the
outstanding loan amount for providing this guaranty.
6. Debt
The Company maintains a $30,000 revolving loan which carries an interest
rate at the option of the Company of either the bank's prime rate or the
Interbank Offering Rate (IBOR) plus 2% to 3% depending upon certain
financial ratios. At June 30, 1996 the Company had borrowed approximately
$21,000 under this credit facility with interest at 7.8% which is IBOR
plus 2%. Under the loan availability calculation contained in the credit
facility, the Company has approximately $1,500 available under its credit
facility at June 30, 1996. The Company has pledged substantially all of
its assets as collateral for the credit facility which expires in 1998.
The Company is required to maintain a minimum net worth and certain
financial ratios. The loan agreement also contains certain restrictions
that limit investments, payment of dividends, capital expenditures and
significant acquisitions.
<PAGE>
Notes to Unaudited Consolidated Financial Statements
Three and Nine Months ended June 30, 1996 and 1995
(Dollars in thousands, except per share amounts) Williams Controls, Inc.
7. Restructuring Charge - Automotive Accessories Business
In July 1996, after a study and analysis of its automotive accessories
business, the Company has implemented a restructuring plan to improve its
automotive accessories operations. The restructuring plan was implemented
in conjunction with a new management team for the business which
initiated a cost reduction program that includes the elimination of
certain product lines and advertising programs and redesign of certain
other product lines. The estimated cost of the restructuring plan of
$2,250 is reflected in the financial statements as a one-time charge to
operations.
8. Stock Repurchase Program
In January 1996 the Company initiated a stock repurchase program of up to
1,000,000 shares of its common stock. Under this program the Company has
acquired approximately 195,200 shares at an average price of $2.77 per
share, which include 100,000 shares of common stock at $2.75 per share
representing the market price on the date purchased from Enercorp, Inc.,
a publicly-held business development company which beneficially owns
approximately 11% of the Company's stock.
9. Acquisitions
In April 1996, the Company acquired the assets of the Burda Group of
Companies located in West Linn, Oregon, a manufacturer and distributor of
a commercial chipper. This company is being operated as Techwood
Williams, Inc.
In April 1996, the Company acquired the assets of Neumann Manufacturing
and Engineering, Inc. located in Madison Heights, Michigan, a
manufacturer of plastic components for the automotive industry. This
company is being operated as Premier Plastics Technologies, Inc.
In July 1996, the Company completed the acquisition of GeoFocus, Inc.
located in Gainsville Florida. GeoFocus provides geographical information
systems consulting services and develops mobile computing, mapping and
tracking software for private industry and government agencies.
These acquisitions were accounted for as purchases and the results of
operations of these businesses have been included in the results of
operations of the Company from the acquisition dates. The purchase prices
for these businesses and the results of operations of these businesses
prior to acquisition were not material to the consolidated financial
statements.
<PAGE>
Notes to Unaudited Consolidated Financial Statements
Three and Nine Months ended June 30, 1996 and 1995
(Dollars in thousands, except per share amounts) Williams Controls, Inc.
10. Segment Information
<TABLE>
<CAPTION>
Three months Three months Nine months Nine months
ended ended ended ended
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales by classes of similar products
Heavy vehicle components $ 7,927 $ 9,488 $25,097 $26,434
Automotive accessories 5,407 4,685 13,328 12,915
Agricultural equipment 3,251 2,404 8,277 4,042
Electrical components 890 1,511 3,336 1,511
------ ------ ------ ------
17,475 18,088 50,038 44,902
====== ====== ====== ======
Earnings (loss) from operations
Heavy vehicle components 1,261 2,290 4,715 6,199
Automotive accessories (2,800) 11 (3,234) 561
Agricultural equipment 489 374 1,013 539
Electrical components (117) 147 (147) 147
------ ------ ------ ------
(1,167) 2,822 2,347 7,446
====== ====== ====== ======
Capital expenditures
Heavy vehicle components 26 125 268 446
Automotive accessories 125 114 285 399
Agricultural equipment 22 35 373 64
Electrical components 3 25 213 25
------ ------ ------ ------
176 299 1,139 934
====== ====== ====== ======
Depreciation and amortization
Heavy vehicle components 231 260 1,084 909
Automotive accessories 85 50 213 137
Agricultural equipment 80 29 178 57
Electrical components 63 75 180 75
------ ------ ------ ------
$ 459 $ 414 $ 1,655 $ 1,178
====== ====== ====== ======
June 30, 1996 June 30, 1995
Identifiable assets
Heavy vehicle components 17,055 24,190
Automotive accessories 16,904 13,706
Agricultural equipment 13,678 7,198
Electrical components 7,553 8,075
------ ------
Total assets 55,190 53,169
====== ======
</TABLE>
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Dollars in thousands, except per share amounts) Williams Controls, Inc.
Financial Condition, Liquidity and Capital Resources
On June 30, 1996 the Company had working capital of $23,364 compared to $17,907
at September 30, 1995. The current ratio on June 30, 1996 was 3.5 compared with
3.3 at September 30, 1995. During the nine months ended June 30, 1996, the
Company's accounts receivable increased by $2,359 and inventories increased by
$4,317. The increase in accounts receivable and inventories was funded primarily
by debt financing and income from operations.
The Company's $30,000 credit facility carries an interest rate at the option of
the Company of either the bank's prime rate or the Interbank Offering Rate
(IBOR) plus 2% to 3% depending upon certain financial ratios and expires in
1998. At June 30, 1996 the Company had borrowed approximately $21,000 under the
credit facility with interest at 7.8% which is IBOR plus 2.5%. Under the loan
availability calculation contained in the credit facility, the Company has
approximately $1,500 available under its credit facility at June 30, 1996. The
decrease in loan availability is due to the decrease in earnings from operations
which is the primary factor in determining loan availability. The Company has
pledged substantially all of its assets as collateral for the credit facility
and is required to maintain a minimum net worth and certain financial ratios.
The loan agreement also contains certain restrictions that limit investments,
payment of dividends, capital expenditures and significant acquisitions. The
Company anticipates that cash generated from operations and debt financing will
be sufficient to satisfy working capital and capital expenditures for internal
growth.
The Company owns 4,117,647 shares of Ajay Sports, Inc. ("Ajay") common stock,
approximately 18% of Ajay's outstanding common stock. The investment in Ajay is
recorded as an investment in affiliate in the Consolidated Balance Sheets net of
the Company's equity interest of $357 in Ajay's losses since acquiring the
investment. The Company is required to account for the investment in Ajay on the
equity method due to common ownership by the Chairman and President of the
Company who is also Chairman and President of Ajay. In addition, the Company has
guaranteed Ajay's $13,500 credit facility and is charging Ajay a fee of 1/2 of
1% per annum of the outstanding loan amount for providing this guaranty. Ajay
manufactures and distributes golf and billiard accessories primarily to
retailers throughout the United States.
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Dollars in thousands, except per share amounts) Williams Controls, Inc.
Results of Operations
Three and nine months ended June 30, 1996 compared to the three and nine months
ended June 30, 1995.
Sales
Sales for the three months ended June 30, 1996 were $17,475 compared to $18,088
for the three months ending June 30, 1995, a decrease of 3%. Sales were
comprised of four segments, heavy vehicle components, auto accessories,
agricultural equipment, and electrical components which accounted for 45%, 31%,
19% and 5% for the three months ended June 30, 1996 compared to 53%, 26%, 13%
and 8% for the same period in the prior year. Agricultural equipment and
electrical components sales were the result of acquisitions completed in
February 1995 and April 1995. Heavy vehicle components sales were $7,927 for the
three months ended June 30, 1996 compared to $9,488 for the same period in the
prior year, a decrease of 17%. Sales of automotive accessories were $5,407 for
the three months ended June 30, 1996 compared to $4,685 for the same period in
the prior year, an increase of 15%. Agricultural equipment sales were $3,251 for
the three months ended June 30, 1996 compared to $2,404 for the same period in
the prior year, an increase of 35%. Electrical components sales were $890 for
the three months ended June 30, 1996 compared to $1,511 the same period in the
prior year, a decrease of 41%.
Sales for the nine months ended June 30, 1996 increased 11% to $50,038 compared
to $44,902 for the same period in the prior year. Sales of heavy vehicle
components, auto accessories, agricultural equipment, and electrical components
accounted for 50%, 26%, 17% and 7% for the nine months ended June 30, 1996
compared to 59%, 29%, 9% and 3% for the same period in the prior year. Heavy
vehicle sales were $25,097 for the nine months ended June 30, 1996 compared to
$26,434 for the same period in the prior year, a decrease of 5%. Automotive
accessories sales were 13,328 for the nine months ended June 30, 1996 compared
to $12,915 for the same period in the prior year, an increase of 3%.
Agricultural equipment sales were $8,277 for the nine months ended June 30, 1996
compared to $4,042 for the same period in the prior year, an increase of over
100%. Sales of electrical components were $3,336 for the nine months ended June
30, 1996 compared to $1,511 for the same period in the prior year..
Heavy vehicle component sales have decreased for the first nine months of the
year as retail sales of class 8 trucks, the primary market for the Company's
electronic throttle product line, declined over 20% compared to the prior year.
The decrease in the class 8 truck market has been offset by an increase in sales
to the midrange truck market which continues to introduce electronic throttles
to new truck models as this technology becomes more acceptable to this market
segment. The Company anticipates this trend to continue for approximately 12 to
18 months. Sales of automotive accessories were down 19% for the quarter and 4%
for the nine months ending June 30, 1996 excluding sales from the recent
acquisition of Premier Plastic Technologies in April 1996. The decrease in
automotive accessories sales was due primarily to the unusually bad winter
weather which hampered retail sales, and a change in product mix as the Company
continues to redesign its product lines in an effort to achieve more profitable
sales. In the first quarter, the Company introduced an automotive accessories
product line targeted for a different market segment to reduce its reliance on
mass merchant retail sales. Agricultural equipment and electrical component
sales are the results of acquisitions and, therefore, comparison to the prior
period is not meaningful. The agricultural equipment segment has been successful
at integrating small product line acquisitions into its primary dealer network
resulting in increased sales without significant increases in overhead. The
Company expects that a significant portion of its agricultural equipment sales
will occur in the third and fourth fiscal quarters. Sales in the electrical
component segment sales were sluggish during the first nine months of the year
due to slow sales to two primary customers. The Company is continuing to focus
on development of new products to increase future sales. In addition, the
acquisition of GeoFocus in July will provide opportunities for new product
development for this segment.
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
(Dollars in thousands, except per share amounts) Williams Controls, Inc.
Results of Operations
Three and nine months ended June 30, 1996 compared to the three and nine months
ended June 30, 1995.
Earnings (loss) from Operations
Earnings (loss) from operations for the three months ended June 30, 1996 were
($1,671) compared to $2,822 for the three months ended June 30, 1995, a decrease
of 141%. Earnings from operations for the nine months ended June 30, 1996 were
$2,347 compared to $7,446 for the nine months ended June 30, 1995, a decrease of
68%. Earnings (loss) from operations as a percentage of sales for the three and
nine months ended June 30, 1996 were (6%) and 9% compared to 16% and 17% for the
three and nine months ended June 30, 1995. The decrease in earnings from
operations is due to a combination of lower gross margins and increased
operating expenses. In addition, the Company recorded a restructuring charge of
$2,250 related to its automotive accessories operations. The restructuring plan
was implemented in conjunction with a new management team for the automotive
accessories business which initiated a cost reduction program and the
elimination of certain product lines.
Gross margin as a percentage of sales for the three months ended June 30, 1996
was 22% compared to 29% for the three months ended June 30, 1995. Gross margin
as a percentage of sales for the nine months ended June 30, 1996 was 24%
compared to 29% for the same period in the prior year. The decrease in gross
margin results from a larger percentage of the Company's operations being in
business segments with lower gross margins. In addition, the automotive
accessories segment gross margins were down significantly due to the competitive
environment in that segment. Operating expenses for the three months ended June
30, 1996 were $2,724 or 16% of sales compared to $2,387 or 13% of sales for the
same period in the prior year and for the nine months ended June 30, 1996 were
$7,318 or 15% of sales compared to $5,540 or 12 % of sales for the same period
in the prior year excluding the one-time restructuring charge of $2,250.
Additional costs associated with the companies that have been acquired in the
agricultural equipment and electrical component segments were the primary cause
for the increase in operating expense.
Earnings from operations of the heavy vehicle component segment decreased 45%
and 24% for the three and nine months ended June 30, 1996 compared to the same
periods in the prior year. The decrease in earnings from operations in this
segment is due to the shift in product mix to products used in midrange truck
applications which typically have lower margins than heavy-duty truck
applications. In addition, due to the downturn in the class 8 truck market
segment, the Company's customers are faced with increased price pressure to
compete in this cyclical market. Therefore, the Company is working with its
customers to maintain or reduce selling prices while absorbing the increased
cost of raw materials.
The automotive accessories segment had losses from operations of $2,800 and
$3,234 for the three and nine months ended June 30, 1996 compared to earnings
from operations of $11 and $561 for the same period in the prior year. The
primary reason for the decrease is due to a one-time restructuring charge of
$2,250 recognized during the three months ended June 30, 1996. The Company has
implemented a plan to improve its automotive accessories operations and has
strengthened its management team to return the automotive accessories segment to
profitability. The restructuring plan includes a cost reduction program through
redesign of products to use alternative sources of raw material and value-added
manufacturing. In addition, the Company is identifying new markets and sales
programs to increase sales.
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
(Dollars in thousands, except per share amounts) Williams Controls, Inc.
Results of Operations
Three and nine months ended June 30, 1996 compared to the three and nine months
ended June 30, 1995.
The electrical components segment had losses from operations of $117 and $147
for the three and nine months ended June 30, 1996 due primarily to decreased
sales to two of its major customers in the telecommunication industry. The
electrical components segment was added through an acquisition completed in
April of 1995. The Company is optimistic that the sales decline was temporary
and sales will return to normal levels during the remainder of the year. The
electrical components segment continues to focus on product development efforts
to enhance future sales opportunities.
The agricultural equipment segment had earnings from operations of $489 and
$1,013 for the three and nine months ended June 30, 1996 compared to $374 and
$539 for the same periods in the prior year. The agricultural equipment segment
resulted from acquisitions in February 1995, and has been successful at
integrating several small subsequently acquired product line into its operations
without significantly increasing the cost of operations. The Company believes
that the agricultural equipment segment is well positioned to meet its seasonal
demands which increase during the second half of the fiscal year.
Other Expenses
Interest expense for the three and nine months ended June 30, 1996 was $546 and
$1,567 compared to $745 and $1,652 for the three and nine months ended June 30,
1995. The decrease in interest expense is due primarily to lower interest rates.
Interest income, affiliate for the three and nine months ended June 30, 1995
relates to the loan provided to Ajay which was repaid in July of 1995.
Net Earnings (Loss)
The net loss for the three months ended June 30, 1996 was $1,094 or $.06 per
share compared to net earnings of $1,421 or $.08 per share for the same period
in the prior year. Net earnings for the nine months ended June 30, 1996
decreased to $410 or $.02 per share compared to $3,824 or $.22 per share for the
same period in the prior year. The decrease in earnings was due primarily to the
restructuring charge of $2,250 ($.08 per share) related to the automotive
accessories business.
<PAGE>
Part II
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
<PAGE>
Williams Controls, Inc.
Signature
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.
WILLIAMS CONTROLS, INC.
/s/ Thomas W. Itin
--------------------------------------------
Thomas W. Itin, Chairman, President and CEO
/s/ Dale J. Nelson
--------------------------------------------
Dale J. Nelson, Chief Financial Officer
Date: August 9, 1996
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0
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